Earnings call transcript Q1 2023

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Operator

Good afternoon and welcome to the Penske Automotive Group First Quarter 2023 Earnings Conference Call. Today’s call is being recorded and will be available for replay approximately 1 hour after completion through May 3, 2023 on the company’s website under the Investors tab at www.penskeautomotive.com. I would now like to introduce Anthony Pordon, the company’s Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead.

Anthony Pordon

Thank you, Lois. thank joining and today. everyone afternoon, you us for Good website, first Penske financial and A company’s presentation results. our understanding detailing you Group’s to is with quarter assist designed on morning press release the this Automotive XXXX in a issued results posted along was

any As am for e-mail may you or by I questions have. always, phone available follow-up

Corporate Financial Joining Controller. Vice Hulgrave, our Shelley Chair and me CEO; our for today’s Facione, and call Officer; Chief are President Tony Roger and Penske, our and EVP

may assessment Our about also operations, cash ratio, leverage conditions. to today depreciation measures, statements discussion include growth flow amortization flow cash taxes, our yield. free interest, financial may and earnings referred forward-looking as events, such or future EBITDA, plans, We before commonly and as discuss non-GAAP our potential, of outlook, certain liquidity earnings and business more

the website and in presentation, have GAAP our on this We most measures. press reconciled measures which release morning’s comparable presented and investor directly comparable to the available non-GAAP GAAP prominently measures the are have

may from outlined forward-looking our uncertainties of and release risks press today’s in future vary statements. Our expectations because results under

I additional cause you time, and XX-Qs and Form previously that to for now turn expectations. will Form I to filings, differ our Penske. filed our over direct including could materially to Roger future XX-K this events factors from discussion SEC At call the

Roger Penske

thank for of first us joining benefits you and diversification. today. to everyone, demonstrate afternoon, our as quarter strong Good performance report company’s pleased Tony. a you, continues Thank the the I’m to

XXX,XXX quarter, increased to units. units delivered first the total During X%

sequentially. gross profit SG our billion XXX of increased was basis percentage X% declined revenue Our $X.X a and to XX.X% and points as

If have share FX, $XXX earnings $X.XX. per we increased would to share and earnings it million Looking X% been at were income, billion was $X.X exclude net per revenue and $X.XX.

the for we million. quarter, XXX,XXX repurchased $XXX During shares

Demand is improving. vehicles and for turn automotive remained Let’s new strong, our operations. to vehicle availability

we that our XXXX remain represent. for most expect brands we during supply constraints to However, of

We continue to orders. take forward

last year. represents In than UK, units. compared and are on year million same Grosses last in quarter new bank we forward of to to X% for at the forward the first allocation million this approximately remains transitioned The our XX% the orders time in order U.S. is an Beginning XX,XXX $XXX agency to the certain higher $XX for to forward fact, time XXXX, it was sold. vehicle these XX% brands is UK sales. model

agency, price manufacturer do new Under of received sale vehicle. each of We we and of the vehicle. the the from revenue, record a delivery fee the not

is in service used vehicle in fee included our out is profit. no There to business new delivery our gross broken impact Beginning in part. these or a units However, XXXX, agency we’ve separately.

on Looking slightly used increased same-store the X% due basis, declined at our to new a largely retail units automotive quarter year, XX%, affordable for units in last challenges acquiring versus operations the at inventories.

Retail X%. automotive revenues increased

FX, However, retail excluding X%. revenue automotive increased our when

New variable or of to XX% $XXX declined to When gross vehicle or vehicle $XXX QX gross profit XX% Used $X,XXX. profit $XXX to compared gross declined $X,XXX. last X% $X,XXX. to or year, declined

$XXX. declined only gross variable our FX, exclude we when However,

only you a on per look profit gross excluding vehicle basis, unit declined If sequential variable FX, $XXX.

more remained per XXXX, profit profit is unit If gross of gross example, an than Variable variable than more and or XX%. historical we QX higher than take strong $X,XXX $X,XXX unit levels. per higher

when XX% warranty perform collision repair. customer driven to continues business and operations well. increased by excluding been FX, fixed pay, has Revenue Our XX% or

and impact gross logistics million and continue to Looking X% variable our to sales at profit X% Revenue vehicle CarShop, XX,XXX, profitability. declined costs decreased CarShop under X% units. as affordability customer reconditioning unit per along and $XXX XX,XXX to with acquisition unit decreased prices, just

X% increased and would have unit per increased revenue X%. variable FX, Excluding profit gross

to report improved to programs focus and am sequentially. pleased sourcing vehicle improve profitability. We CarShop’s on improvement profitability cost continue I to CarShop

to dealership Turning commercial retail truck business.

truck continues is and diversification perform an premium part important business well. XX of and Our our America represents to North in locations dealership

several demand constraints truck remains last supply commercial demand being solid, New years. is associated driven by the over replacement with

entire backlog fact, for XXXX The X current our products sold allocation of units, Class essentially of XXX,XXX industry Class is is out. sales. months X In representing X

total to the sales quarter, During unit units. Same-store increased units. XX% $X,XXX, increased sales X,XXX X,XXX

and under revenue to total increased just XX% X% to profit Our increased million, $XXX our million. $XXX gross

of at the including covered million in of year. cost. of in was quarter Service EBT profit Service and the Parts represented XX% same-store XX%, increase & revenue XXX% our total to million increase first Looking fixed Parts. & last $XX gross $XX compared XX%

with Transportation fleet PTS, PTS a of with XX.X% Penske PAG and over trailers distributions cash to and Turning equity of XXX,XXX cash owns fleet tractors goal trucks, currently of XXX,XXX units to its manages us Solutions. income, savings. which by increasing provides a XXXX. tax

XX% generating another demand the billion million contract increased XX%. performance, strong During PTS first quarter, increased strong to XXX,XXX PTS in logistics while quarter first on and We that service a trucks $X.X had record, revenue for in income. Full believe order. remains revenue $XXX has

X to the over challenges. units contracts supply years, PTS XX,XXX has the extended last and However, simply due

the raising gain PTS sale lower from our costs the XX% and high $XX year, record and lower coupled fleet declined – on levels, rising record million. utilization record ‘XX. rental increased As last million the costs, maintenance at maintenance our first gain with higher of costs level in of compared in interest rise associated debt interest result, XX% quarter. sale of a The of with the income to on we to $XX performance a to Compared rates

Shelley? our to Chief over it Hulgrave, turn now to Officer. Financial like I’d Shelley

Shelley Hulgrave

Thank you, Roger. afternoon, Good everyone.

had strong diversification. quarter, indicated, Roger by driven another our As we

prior and XXXX in to to was quarter achieve to maintain gained continues through to other levels and improvements SG&A the basis of implementation operational of AI In commitment cost points the the the to us lower and our growth is in reductions, below averages. efficiencies maintain gross historical XX.X% addition, help profit pandemic. first than X,XXX automation SG&A XX.X%

points of XXX XXXX. QX Most declined to compared a sequentially important, percentage SG&A as gross when basis by profit

As XXs. we we future, to ratio in profit of continue SG&A to gross expect the to the the to be look low

in share dividends repurchased XXX basis, X% represented and dividends return shares and $XXX most per We million During a to and recently returned to repurchases by million $XX dividend our shareholders. shareholders. QX, in $X.XX combined cash million in share to the increased on

We continue to maintain a disciplined capital approach to allocation.

our and For X% growth from operations XX% example, XX% to expansion. to in dividends XXXX, CapEx funded cash acquisitions, of and repurchases flow share for XX% future to

in the over Our XX nearly and to billion on continue in environment months, is of debt. being secure EBITDA $X focus rate we and terms current the safe last

Approximately March. long-term debt was the XX, leverage billion, year, our XX%, Debt $XX On interest notes of March related was our notes representing XX% $X to X.Xx rate capitalization total of to represents and property. that an these at increase increase in compared in with long-term XXXX. matures in on XXXX, The to mortgages $X.X of matures subordinated sits XX% billion debt last is remaining an largely December average while on at the end X.X%. million

revolving credit for facility $XXX have working other purposes. mortgages of capital, under million. Last for U.S. corporate increase and automotive agreement expenditures, The also million provides our up credit businesses. borrowing we borrowings in at $XX in lines million week, in capacity loans We to acquisitions, amended $XXX other by $X.X the and billion agreement amended capital investments to our Australia and

us through ability We flex grow to representing cash, billion, Xx, our under shareholders. agreement. our increase an in Total $X.X million business to December vehicle million and $X to opportunity our plenty $XXX credit capital XX, $XXX billion to $XXX million leaving leverage inventory up acquisitions and continue At XX. we of to have from was equity March over had in the in availability returning of

Floor days days in the plan of new the supply and XX billion. $X.X XX-day debt a UK. We was including U.S. vehicles, XX in had

the However, this at was week. U.S. beginning inventory XX days of

supply U.S. a new As XX. days. days had XX, point, for day of a vehicles vehicle XX was was the premium in our volume supply new XX form electric vehicles data Used inventory supply. is battery Days of

the time, to over call Roger. will turn this At back I

Roger Penske

Shelley. you, Thank Yes.

we we’re As a improvements, operational Shelley lower committed structure. to will lead mentioned, implementing cost to which believe

waste and sustainability, footprint to seek organization. continuously our embracing modern carbon we our eliminating ways applying recycling throughout building to committed and reduce and We’re practices, energy efficiency operating by materials

offering from video signing on remote customer experience XXX% include offered meet These superior to side in digital photo to test service store. to and sales on committed We’re our options and side. traditionally options digital as This well drives, online customers virtual scheduling, ranges the needs. their shopping hybrid solutions, as approvals the collision our shopping online estimation

both initiatives efficiency leveraging is on our intelligence of and artificial Additionally, business. sales our side service one key of

and total our appointments XX% appointments QX, service interactions for and to BDC The automated represent AI we in and our natural service inquiries, employment. XX% with AI a customer of booked using answer set online total appointments year-over-year basic allows over increase sales language. In conversional customers saw service online us

made service RO addition, In online X%. payments increased

PAG. your to across to capital forward. strategy. today, from opportunity our and automotive and control appreciate a confidence demonstrate in benefit see about continued and commercial I our disciplined In and cost industries, our drive remain business closing, the the model our us personally results in Thanks allocation we diversification the continue our confident I truck continue retail for businesses joining

At I’ll Thanks. back questions. this operator for time, it turn the to

Operator

[Operator our Instructions] And ahead. you. John go from Bank is Please Thank America. from Murphy question of first

Roger Penske

John. Hey,

John Murphy

Shelley. Hey, afternoon. Hey, Good Roger. Hey, Tony.

around in that what a some staying on on trying because Because the the what a folks some their agency lot comment first in seems business the you this changes is have UK the that Mercedes direction, is and And at fears ways, economics. more like partners. And it you maybe your just motivations favor changing but after particularly are expand Just question if this. point? they like actually But of Roger, what is stronger some I’m funnel here, are are on are, going a to in for if curious automakers the same? there this in could have some of there

and you of what’s what’s same if are? highlight actually could changing, the what kind staying think you the motivations So

Roger Penske

Well, talk income. first, let’s about

national get dealer, And elimination targets. of For a fixed the pricing. It’s we X% Mercedes, we from commission. no fixed as a us, it’s are volume There brokers. got today,

of are the no vehicles. All under The exactly So on the financing get the F&I come sales is our would We manner. standpoint there same. commissions paid the OEM. new that things fleet we still is by add-ons handled discounting the can from have on

no sales we’re free. is allocation costs. based new X,XXX-unit supplied site training a No are is online dealing is car of process we again, what marketing basically floor vehicle from planning stock codes probably transaction really at on sales have. obviously. There costs. of The better leads the for standpoint from really, costs, has And understanding brand an handling all inventory is to out no – the Internet. There than through free. the a We The is on person really that transitioning And the is the ZIP demonstration. customer the of capability inventory look allocating the we a brand. that’s current force have obviously have of the come a from They in really no perspective, who I and

a expert. it’s So product probably

a then actually this I on was month the vehicles would to higher I at we go was impact, our – it F&I. $X,XXX the And average the I what’s was the When guess, think in call of the I pre-pandemic. it if March look point. them delivery standpoint than profit includes of it’s in XXXX, and back that specialist, from gross

it. we a from perspective gross about quite feel good on So new,

point. some Now number at OEM X% change again, the could that of

this will go forward. I think at have time. we as we that But we at commitment look X-year I’m a both particular sure

which it key. slow the I has to it think PDI and gone time The started. to it’s at from looking in dealers XX of so car take we’re to to is pool, the trying X it’s get days days, to we been out – deliver probably delivery can get to X, now get maybe the obviously

would that in – have When at retail market we of motivation units the MB sold them have confidence from From benefit had number from stores the to they the you perspective clear residual It cost the month that to consumer perspective direct of of brand. UK. ability a a a be transparency having by would – obviously, and customer be get the the at the for think of retail March, the from I and looked ability for prices. and the consultants in market And the would supports setting a OEMs, a the line that XX channel. the look with probably we XX% incentives with those

customer So I only negative you’d the negotiate. that guess to thing say still the wants

more by you’re online an that’s On the dealing person a we’re other that But complicated is happen and probably product. the I the if transparency I little what is a specialist to required have right hand, than cost we that the would or today’s – think admin of F&I Internet with seeing motivation world, customer is work clear And at delivery in to own think it’s the a dealership. the customer. –

with So to been quite me, it we’ve I at the satisfied think, overall, moment.

John Murphy

ability right? changed part Roger, as take that’s either? There And in or used to... want occurring, the the to just trade you process that maintain vehicle trade-in I is So with of the transaction nothing – the is the

Roger Penske

There our own trade is from the perspective, option declaration no as used far no an the one or Parts trade customer, business. cars & We from involved in really or as is a are to both changes or correct. Service take There the concerned. OEM, in buy used factory the demand

John Murphy

on quarter normalized in seem I’m lastly or much the you were be expecting. than curious a may over as XX% seeing what X? or you’re might good, range like the SG&A, gives Roger be cost better year other pretty grosses next your there over time like then just in Great. the industry. was for just low that in can this Shelley, Doesn’t in reinflation the folks some XX.X% we keep the you confidence And

Shelley Hulgrave

Hey, that. can I John, take

it’s of things. I think a number

continue if talked gained one, Parts, about, to our AI. & we like look of the more implementation you We’ve think, efficient. I a with Service at lot, we be

better. We’re

We’re scheduling better.

overall, our just of and Parts better & scheduling enabling profit use adds to We’re And line. up, our is to time with which Service more tech. it’s different efficient, our that gross be to us with periods

you look XXXX. our was of absorption That If XXX%. cost PTG, at in to XXX% fixed QX compares

to for – Parts, control. is So excuse certainly & cost an our continue our We’ve taken terms at a supply or for we in strict hard me, improvement there, really but and costs, look the margin really Service be of huge.

up the X% down attract business of cheaper work keep really we’re that look pandemic, whoever the an comp employee. and still that know basis to of ways: also are at hard number We’re us X% cost. during we the add folks to the we that to But focus to folks They we one, train sets than people keeping pie, hard they the to took out a in we going down that retain really a to a points of happier. quarter-over-quarter. up. But have. are is We as it’s employee XXX piece And are their new it to growth our and up get our is about bigger comp overall, as

factor big So a that’s too. it, of

Roger Penske

John, Well and dollars in about said, look Shelley. you at million. up – Also, real $X think our overall when is compensation XX,XXX employees

$XXX,XXX. marketing cost increase some big, up in you So and at look rent was only – a etcetera, number. When controls big we had our but taxes, and

So those are things very watching that not just we’re carefully, globally.

it at right looking store We’re now level. the at

John Murphy

you, helpful. guys. Thank Very

Roger Penske

John. Thanks, Yes.

Operator

Daniel from go from is Please question next The Imbro ahead. Stephens.

Roger Penske

Hey, Daniel.

Daniel Imbro

the on ask Good starting one, demand. side, for I taking Thanks questions. our afternoon, automotive on to wanted everybody. just

maybe inventory data, look different percent And Sorry it, new could of by today? true How that consumer out but what tell is color, today? that the prefilled some you on marketplace Roger, vehicle vehicle at demand the about OEMs? you what new missed there if does the when for then provide you I that is

Roger Penske

demand Well, last to look, the be of availability because some over is several pent-up months. got there

at talked we primarily difference. presold to to a a to we’re we’re Remember, our from the inventory premium, perspective, think XX% prior call. And which I really looking makes guys XX%.

a So nice to in XX% the probably gives I’d say which us U.S., XX% tailwind.

units book, ago. order XX,XXX UK year the to got in internationally XX,XXX compared we’ve at a Looking

gross months tailwind I of UK. think the be should So million X And in $XX X key. which is in to that probably profit, almost more

look our BMW. premium is this So biggest side, we’re the days When – day single sit would you low. when overall very Lexus XX you And our we’re at think look supply, at is about our it, very, morning. think again, different Toyota digit. and – brand I But be you we as

We’re sitting at XX days.

is the from standpoint availability us of for again, our So business. key

month. sales new the yesterday was over for up of our business vehicle as vehicle our and Looking X% flat used morning, year, was last

a the So we solid least off here at that again, indicating into quarter. base leading have

Daniel Imbro

Got it.

pre-sold. I given surprised of year, around strong just into expect? luxury that guess XX%, are coming the Roger the issues, that So headlines you behaving this premium how some consumer backdrop consumer XX% is or and demand affordability as would you is

Roger Penske

I think the than is think customer. X-year And from have that the affecting it our and as the the market, rather a And a to they that middle demand would pent-up contracts much customers X-year many there. still interest not luxury luxury rates perspective. are maybe leases the are premium side, on of person in the I X, X financing me, as

we those market. the people see So coming into back

to we’ve we of some have vehicles. Now extend those had because didn’t

dropped convert that to current to into we us start think as forward residuals again as forward. our go and were think when XXs. that’s OEMs increase. to we get that’s into an be to XX% that’s I support as our the So about they And these for in leasing mid mix vehicle. company, to the leasing numbers XXXX opportunity to to a XX%, we back they payments going it, these down think go those in to I on sales When And low want you expect grow going line

Daniel Imbro

could I the on Got one following agency it. more And squeeze up just model. on if in, question John’s

work relationship under the getting and upfront you finance that how sell car in dealership? a the the the attachment? have non-captive I see consumer similar You finance a on model? products. the captive offered mentioned I of think, to you guess are F&I then full Mercedes directly F&I UK, buys the financing guys when they sell, does website ability Do you from Or agency

Roger Penske

with the on we’re now and the all the on, are think this deals website. is the things OEM I working that

there So Audi. out the now. they are BMW a at website competitive. at there we’re excuse that – seeing Mercedes They If have is – on deal ability or the me,

the any we So dealer. as have level the ability product insurance to at and during the sell transaction

Daniel Imbro

attachment And there? difference noticeable financing on over Great. no

Roger Penske

early. the look, it’s moment of. Not at we that But know

cars having But the I has online. go to we’ve think after we’re instead get answer think excellent, probably of months, been once that the say – I’ll overall, for that you got it X will, team better ability every but plan would XXX and we to us here, about overall mature. another day we business we’ve X – agency when question partner a the as or got learning XXX fact X,XXX online, I

you So can you the a where really pond $XXX clear. try And walk customer post to and big directly he’s in – you code. really down get us, – that. fish customer the of a a £XXX we are as get now off, from comes the really, can’t That inquiry going that do road really or it’s to to benefit to

it the have trade doesn’t trading, that product So everyone and complete to becomes cost us then out will people we have the we But in who that know down that will I capability. will vehicle. the price specialists be to used enough big we taking being handle have sophisticated understand the in. to change But think be can have

big we our business mix, customers, some I customer in that And sales a you cost which better people kind we’re fleet customer, we hopefully, call will can should cut already. in which forward. down changing for – tell in unit half specialist be of go we a a meaning informed business, as our what with of on out product experience the process. better So have the take

real some got we’ve opportunity. think I So

that locations in have also location in our our the of in are we’re advantage our we order These one take service We’re West UK, to London. already scale doing big that in our and consolidating things technology. of

Daniel Imbro

all forward. appreciate and I going Great. color best really of the luck

Roger Penske

Thanks.

Operator

go The next Please Mike Ward from question ahead. is Benchmark. from

Roger Penske

Hey Mike.

Mike Ward

set it pretty Thanks the brands, agency Good the it’s less seems other everyone. itself if up expands initial and does afternoon Shelley, effective and very things. become Two it well, business model the much. capital UK intensive? to if and it works, in is like

Shelley Hulgrave

to and change mentioned, Roger service. used is no to there as Well,

of continue business our So, service there. big to will over be portion a

expected beautiful think maintain are a I site. to we still delivery

standpoint, But there premium. But space are for were So, think at to I in all mentioned a see from terms from new would allocation lot of times, such prices costs a here, the is certainly we that UK, becoming capital a we as not over things change transport we [ph] If less. and anyway are have don’t over at sites. of several away and look property in I it cars there as the smaller there.

changes. think off any you from long ways So, seeing are significant I

Roger Penske

thing would say, Yes. I Shelley, have requirement. don’t The is floor only a we plan

plan, look follow So, you overall that you including me, when debt, be eliminated from would our floor at total our debt.

does So, million difference several a it make it’s because dollars.

Mike Ward

I acquisition over truck the Yes. still the on that case? calls, then, more the And distribution opportunities of talked front, last have there you side. Roger, on think the being about couple Is

Roger Penske

yes. I fit say and would would because would feel that geographical I that are rational from ones ones a say, that pricing of standpoint of into a location, we us

I rest we think and on potential between into we at somewhere $XXX close million quarter, automotive, as would between this million – we of opportunities. – $XXX and look into close would truck the look

side on So, automotive more certainly moment. the are at versus again, I the that probably multiples the think realistic truck

there but on we changes, really safe we going of at. still what go looking lots are activity and to being that where we are Now forward on. is are secure But

Mike Ward

very you Thank much.

Roger Penske

Thanks Mike.

Operator

question next from – Our Instructions] disconnected. [Operator Rajat he is one second,

ahead. to Rajat go We JPMorgan. Please Gupta will from go

Rajat Gupta

We or to thoughts on more year? the updated the the you the year-over-year be gain related you was question question. some had sale If interest year. trends and for sale? what entity could on taking just for $XXX a drivers Would for the expense bit utilization, you even to million on full that able you believe last PTO. gain I Thanks on that us to for it quantify to and of on expect unpack be any close a saw

the of I thoughts had should any the through that’s updated we am about think on And And still I like you maybe remainder last if case. mentioned PTO just the curious have follow-up. think down a I year? how maybe XX%. time

Roger Penske

look Well, cost, secured two interest basis bonds I the probably and weeks, think at over we we the when XXX basis the rates to points had those were points. in last marketplace several you interest XXX I up think

of interest in that $XX of took was was our one balance the decrease in interest. million piece profit the the we $XX So, cost million into quarter, that $XX our PAG’s sheet million.

So, to which us, annualize million. be that would $XX – is roughly

So, if the it’s $XXX standpoint, interest look look, into at And looked model XX%. year. baked you would you your million utilization of I cost, a at of rental the balance from think

We’re our days we we that we fleet down tremendous from XX,XXX around And about million. because to quarter, down for utilization very were XX% think somewhere probably rent, flex million is $XX had the down easily. that on able was $XX that units revenue to are I was but

to sale. So, think $XXX at around and going on can probably gain annualize a straight-lined see sale, you you take are million on look you somewhere that, gain I off we And and then say and it.

more I values is down, think We there units, market, vehicles. prices trucks, in spot is drivers availability just by the utilization will the more and for sell but the on market –

were because maintenance on to when costs, of delivery at customer offset get meaning we before look XX,XXX to was from some extend the units. didn’t So, we What had more I look We no it initial our didn’t offset the in over are at cost months we late $XXX – about of be probably to of extend that units of it or I extended, six probably X we to and have our mentioned years the again, lately I leases, probably and year. But think that costs. the revenue maintenance these million. another you a I get – would we had These these when or X-years-old. delivery think maintenance to gain some that had this conversation OEMs,

that the returning that been that normal back really see we through down look once we has will to fleet. and delivered, this levels rationalize equipment maintenance – at you when So,

to the So, of look leasing X first again, quarter. I at be day, back. billion, add-on the of renewals did of And would some new growth, see But And at the you $X.X year that’s ability sits in looking of pull that that million when business, and at was it, that $XXX we sales business at of a record. rate all-time revenue. the and an that end

and business the the is think obviously, interest So, OEMs, on by is strong, utilization based I rates, delivery market. overall,

consideration, think taking guys for a into those I are So, the us. running great business

Rajat Gupta

Got it. quarter stuff. very seeing just you the strong new in the year, the so of the should on That’s maybe non-agency for then here remainder side helpful. second develop on supply GPU think Any we thoughts And How the maybe in about the GPUs, result are in how first how here quarter far? trajectory that updated you expect...?

Roger Penske

I because we the hold to able but premium the you XX.X%, have if been think vehicles, changing that on somewhere side, I new XX.X% think. see look, to sequentially don’t we on I been have gross. in the

overall, vehicle, on look are I about if ago, down we a the at gross you at year profit F&I. unit including gross the look variable you per think new from when $XXX

on has deterioration been as running mid-Xs. other quarter. next we at that I big a low to the over hand the would on in probably see as that. looked look don’t I So, Used, a out number And the

Tony Facione

I Tony. mean, is Rajat, this

quarter new fourth it first think look only So, down you a quarter $XXX. was at basis, vehicle mentioned comments, prepared to in sequential compare as we the growth and about you on the I overall

that And see And to about were forward of units sold XX We are orders. XX%. the U.S. in when think we our remains about still talk see our you demand, the when that days still in I right So, that advance strong. of that you being supply XX% forward supply out think days there now. allocation at

I demand think remains strong. So,

job and come we quickly, It’s the good a was, the are it are across are growth of than We very maintaining inventory seeing industry. higher we turning it in. but doing

So, pretty is I the think that the setup we towards look good as future.

Roger Penske

like they driving XX% starting grosses premium ability think of maybe have right our brand is the Big looks more probably discount. to versus to deals maintain some now, will our drive – probably which availability U.S. these mix are some which I these at Three,

Rajat Gupta

helpful. Thanks go Got it. will That’s in so and back I much queue.

Roger Penske

Thanks.

Operator

Morningstar. the ahead. next the David from question Whiston line go And Please of is from

Roger Penske

David, hi.

David Whiston

Hi everyone. I whatever guess that portion to goes in money Mercedes, to who or the associate the first of on you guys Penske it, agency, want or once commission does customer get store? help you payout from call the your

Roger Penske

we we a compensation. Well, have variable have – a

honestly, get involved delivery moment. would plus forward, more new we might at think – But as is salesperson, people Now think I but we salaried go a that. in of a will for how works too he who quite on read be depending go the he to some model that the it’s would piece, we the commission to F&I

David Whiston

And you are getting…

Roger Penske

comp plan, probably the anyhow in more fixed it been. has is UK, David, always The

David Whiston

for F&I you vehicle, business guys? that goes to The the

Roger Penske

Remember, earlier think fee Tony the for it the I new we the a stays same. said car, Yes. I that sale said or everything of get else delivery

F&I bottom have that. service, parts the line gross get We normal. income. We all drops is of the the that and benefit profit All our to

Tony Facione

on the the what about or you you the same if go the the at David, the in a compare back to first you did quarter, UK. before for agency, and we F&I basis – was in units look And normal – agency that

that that product the the I products and stores selling the the shows very effectively. So, think at positive that’s people insurance are or

Roger Penske

than we you the most are to XXXX due and and and also has Yes. targets getting today, and certain back pre-COVID margin then was back higher actually volume, when go cases, quite X% – at because in were is we we at stores, mix somewhat it chasing honestly, look look plans. if ‘XX, Well,

Tony Facione

business. had we the of our brokers in And middle

Shelley Hulgrave

you at And to MB new X% historically, gross total agency their and of was in look gross remember, last at our height profit in XXXX all when look only important in particular, David, the I of think you it’s it. year, profit of

higher there So, our so used we that so in Service businesses in particularly line, with make Parts keep is to bottom total much for in still perspective. these opportunity margins and impact to their important where &

David Whiston

to in market Okay. in perhaps of And number M&A UK, U.S. fearful either – seeing is coming soon? the coming a are of you. on Thank recession any the surge there you sellers the environment, or

Roger Penske

know brokers would any a these got I with or us deals, number I to but any say more have We coming of it’s less. that don’t

of we bigger I seeing. are the some not deals think

that ask when themselves it’s would take ones are SG&A to brand, we don’t a But on is can – that. I brokers speed see the think our up premium basket. that these over which capability have on we glue focusing not but to we some, being are selective. where at We lower fits phone we we we one, I and have this things around a have on being higher it am I getting say country. would are ringing, are very moving just know the our I you

David Whiston

was that increase. one credit And over grown as just is more are and/or the line to I curious, has company buyback? the to facility time, more M&A or on Okay. looking just be the just grow aggressive you in

Roger Penske

I credit of expires our capital. place want the I what use because And it at this of evergreen standpoint line the the put in results. guess, We think would our of evergreen. does, over flexibility gives I the And we ‘XX say in next look because now of to business me, it and us important. as to – our that’s from is – it

aggressive. are We

We to are months. load environment, X cautious want here think months I forward think next risk. the we XX for gun, I that But we we willing go do in today’s when our certainly business to that. to I can be to take But want as

David Whiston

Okay. Thank you everyone.

Roger Penske

Great.

Operator

questions no there are this Thank you. queue. time, at in And further

Roger Penske

Thank everybody All the see next you quarter. you will Alright. and best. we

Operator

that you and for for does And using your service. Thank gentlemen, our Thank participation AT&T ladies today. conference teleconference conclude you. and

You may now disconnect.

Penske Automotive (PAG) 26 Apr 232023 Q1 Earnings call transcript