Penske Automotive Group, Inc. (PAG) Earnings

Management highlights

### Overall Financial Performance - Total Q2 2026 revenue increased 6% year-over-year to $8.5 billion - 125,000 new and used passenger vehicles and 5,400+ new and used commercial trucks were retailed during the quarter - Earnings before taxes were $354 million, net income was $260 million, and earnings per share was $3.96; results include a $30 million gain from dealership portfolio optimization - Same-store retail new and used units increased 5% year-over-year; new vehicle gross profit per retail unit was $4,782, used vehicle gross profit per unit was $2,095 - Service and parts same-store revenue increased 2%, gross profit increased 3%, and gross margin increased 60 basis points year-over-year ### North American Operations Highlights - 24% of new U.S. passenger vehicles sold were at MSRP, consistent with Q1 2026; U.S. technician count is up 2% year-over-year with 84% bay utilization - North American Class 8 orders increased 170% year-over-year in Q2 2026, growing industry backlog 105% to 186,000 units; Premier Truck Group holds a backlog of ~10,400 units - PTS continued right-sizing its fleet, reducing total fleet size from 414,000 units (Q2 2025) to just under 380,000 units (Q2 2026); higher fleet utilization, lower operating costs, and lower interest expense offset lower gains on truck sales to drive higher equity earnings ### International Operations Highlights - UK new vehicle deliveries increased 14% year-over-year, in line with the overall UK market gain of 13%; gross profit per new unit increased $303 sequentially from Q1 2026 - Australia's three Melbourne Porsche dealerships achieved top customer satisfaction scores following implementation of the company's one ecosystem customer process; new unit sales were impacted by the Macan BEV transition, but 10% used unit growth offset this impact - The Australian off-highway/power systems business holds over 75% market share in the 1250+ kilowatt high horsepower backup power segment for data centers, with strong demand driven by Australia's growing AI data center export industry ### Balance Sheet & Capital Allocation - For H1 2026, the company generated $418 million in operating cash flow and $829 million in EBITDA; capital expenditures totaled $134 million, down from $147 million in H1 2025 - The company acquired two Lexus dealerships with $450 million in estimated annualized revenue, increased the quarterly cash dividend from $1.40 to $1.44 per share (12th consecutive annual increase, 22nd and 23rd consecutive quarterly increase), and repurchased 265,000 shares for $43 million - End-of-Q2 non-vehicle long-term debt was $2.5 billion with a leverage ratio of 1.7x; long-term debt was reduced by $141 million during the quarter; total liquidity was approximately $1.4 billion

Guidance

- The majority of the current Class 8 order backlog is expected to convert to retail sales in the second half of 2026, with only a small portion spilling into early 2027; Premier Truck Group expects ~10,000 retail truck deliveries in H2 2026, up from ~6,000 in H1 2026, with margins expected to remain consistent - Australian energy solutions (power systems for data centers) is on track to hit 1 billion Australian dollars in annual revenue by 2030, supported by strong current demand and the company's leading 75%+ market share - SG&A as a percentage of gross profit is expected to remain in the low 70% range post-COVID, consistent with prior guidance - Penske Transportation Solutions is expected to grow its fleet size going forward, aligned with growth in its core lease and logistics business lines after completing planned fleet downsizing - New Class 8 order intake is expected to moderate slightly in H2 2026 as manufacturers publish 2027 model year pricing, which will keep used truck demand elevated through the end of the year

Segment performance

1. U.S. Retail Automotive: Same-store new and used unit sales increased 3% year-over-year; same-store service and parts revenue and gross profit increased 2.5%. Total revenue contribution for all North American retail automotive is not explicitly broken out as a standalone absolute figure separate from commercial truck, but combined North American operations excluding Penske Transportation Solutions (PTS) generated Premier Truck Group revenue of $928 million with $143 million in gross profit, representing 10.9% of total company Q2 revenue. 2. Premier Truck Group (North American Commercial Truck Retail): Retailed 5,431 new and used units; same-store new units declined 8% while used units increased 65% year-over-year. Generated $928 million in revenue and $143 million in gross profit, with gross margin expanding 20 basis points. Service and parts revenue increased 5% year-over-year. 3. Penske Transportation Solutions (PTS): Q2 operating revenue was flat year-over-year; lease revenue increased 1%, rental revenue declined 12%, and logistics revenue declined 2%. Equity income increased 7% to $57 million, with total PTS earnings of $207 million for the quarter. 4. International Retail Automotive: Total Q2 revenue was $3.2 billion, up 10% year-over-year, representing 37.6% of total company revenue. Same-store new units increased 8%, used units increased 7%, same-store revenue increased 10%, and same-store gross profit increased 6% year-over-year. Same-store service and parts gross profit increased 5%. 5. Australian Commercial Vehicle & Power Systems: Two-thirds of revenue comes from off-highway/energy solutions, one-third from on-highway. Off-highway revenue increased 63% year-over-year in Q2; secured $300 million in new orders during the quarter, bringing the 2026 full-year secured order book to nearly $660 million. Fixed operations gross profit increased 11% year-over-year.

Risks & headwinds

- The UK automotive market remains challenging due to higher consumer taxes, affordability constraints, reduced mobility programs, and mandated zero-emission vehicle (ZEV) requirements that create regulatory uncertainty; Chinese low-cost vehicle brands have doubled their UK market share to over 15%, though this has limited impact on Penske's 90% premium luxury brand portfolio - Supply of new Class 8 trucks is constrained by manufacturer production capacity for 2026, leaving manufacturers sold out for the year; sourcing enough late-model, low-mileage used trucks to meet current elevated demand is an ongoing challenge for commercial truck retail - Engine supply constraints limit near-term growth of the Australian high horsepower power systems business, though the company is working with partners to mitigate this issue - The Japanese earthquake impacting Lexus production may cause minor volume disruption, though management expects the impact to be immaterial as the plant shutdown is expected to be short-lived - Negative equity among consumers returning leased vehicles, combined with current high interest rates, can create challenges converting lease returns into new vehicle sales, though captive finance partners are supporting the business to mitigate this risk - Chinese new vehicle brands in the UK lack established captive finance companies and after-sales service networks, creating long-term uncertainty around their market stability, even as Penske tests the market with a small, strategic footprint

Analyst Q&A

• Q: With the massive growth in Class 8 order backlogs, how quickly will orders convert to retail sales, and what is the trend in order growth? /

  A: The standard timeline from order placement to dealership delivery is 45 to 60 days, dependent on manufacturer production slot availability. Of Premier Truck Group's 10,400 unit backlog, the majority will convert to retail sales in H2 2026, with a small portion spilling into early 2027. Order growth started building in December 2025, with Q2 2026 orders up 170% year-over-year, and June 2026 orders up 231% year-over-year. Most manufacturers are already sold out of 2026 production capacity, so order intake is expected to moderate in H2 2026, keeping used truck demand elevated through the end of the year. (361 chars)

• Q: The UK had a strong Q2 but you noted ongoing market headwinds: is the market stabilized at a new normal, and how are you approaching Chinese brand growth there? /

  A: Uncontrollable macro factors, including ZEV mandates, regulatory uncertainty from a recent government change, and growing competition from Chinese low-cost brands have created a turbulent new normal for the UK market, though Penske has proven it can operate profitably in this environment. Chinese brands have doubled their market share, but this is primarily in low-cost segments, and Penske's portfolio is 90%+ premium luxury, limiting direct competition. Penske is strategically adding Chinese brands to underutilized existing facilities with a pragmatic, incremental approach, and current margins for these locations are acceptable. (397 chars)

• Q: How large can the Australia New Zealand energy solutions business scale, and what are the key growth drivers? /

  A: The Australian commercial power business is split one-third on-highway truck retail and two-thirds off-highway, which includes mining, defense, marine, and energy solutions. Penske holds over 75% market share in the 1250+ kV high horsepower backup power segment for data centers, and Australia is the world's second largest AI token exporter, driving strong ongoing demand for data center power capacity. The company reaffirms guidance to hit 1 billion Australian dollars in annual data center power revenue by 2030, with engine supply being the primary constraint on near-term growth. (354 chars)

• Q: How strong is current used commercial truck demand, and what is the outlook for gross margins through H2 2026? /

  A: Used commercial truck demand has strengthened significantly driven by 40% to 50% year-over-year increases in spot freight rates, the highest levels since 2021. Higher rates attract small owner-operator buyers, who are the primary purchasers of used trucks, and many buyers prefer late-model used trucks to avoid higher new truck prices. Used gross profit per unit is up almost $2,000 both sequentially and year-over-year, and management expects this strong demand and elevated margins to continue through H2 2026. The primary challenge is sourcing enough used inventory to meet current demand. (340 chars)