PENSKE AUTOMOTIVE GROUP, INC. Q4 FY2024 earnings call

• Yearly Performance: In 2024, PAG delivered 491,000 new/used vehicles and over 20,500 commercial trucks, revenue $30.5 billion, net income $919 million, and 17th consecutive quarterly dividend increase.
• Fourth Quarter Results: Revenue $7.7 billion (up 6%), gross margin 16.3% (sixth consecutive quarter), income before taxes $315 million, net income $236 million.
• Retail Auto Details: New units up 11%, average new vehicle transaction price up 5%, used units declined but gross profit per vehicle increased, service and parts revenue up 13%.
• US Commercial Truck: New/used units sold down 18% y-o-y but gross profit per unit up 21%, return on sales 5.8%.
• PTS Performance: Operating revenue up 3%, operating profit increased but offset by higher costs, PAG's share of earnings $52.3 million.
• UK and Australia Operations: UK same-store new units up, used units declined due to transition but gross profit increased, Australia acquired Porsche locations, record revenue in on/off-highway markets.
• Cost Controls: Selling, general, and administrative expenses as % of gross profit reduced 70 basis points y-o-y and 90 basis points sequentially.

Retail Auto Business

• Fourth quarter revenue reached $7.7 billion, up 6% from prior year. Delivered 120,530 units, with new units up nearly 3%, average new vehicle transaction price $60,288, gross profit per new vehicle retailed $5,146. Used units declined 6% but gross profit per vehicle retailed increased $349 quarter over quarter. Service and parts revenue increased 13% to $771 million, with technician count up 7% and effective labor rate in US up 6%.

US Retail Commercial Truck

• Q4 revenue $774 million, sold 4,432 new and used units, down 18% y-o-y, but gross profit per unit retailed up 21%, return on sales 5.8%.

Penske Transportation Solutions (PTS)

• Q4 operating revenue $2.8 billion, up 3%. Operating profit increased $32 million but offset by higher interest costs ($9 million) and lower gain on sale ($25 million). PAG's share of PTS earnings $52.3 million.

UK Retail Automotive

• Same-store new units delivered up 1.5%, new vehicle gross per unit resilient. Same-store used units declined 18% due to transition to Sytner Select, but used vehicle same-store gross profit increased $542 per unit. Service and parts same-store revenue up 8.6%.

Australia

• Acquired three Porsche locations, retailed 468 new and used units, generating $53 million in revenue with 4.5% return on sales. On and off-highway markets had record revenue, SG&A to gross profit reduced 630 basis points, service and parts ~65% of total gross profit.

• Acquisition Strategy: Aim to grow 5% through acquisition and 5% internally, acquired $2.1 billion in annualized revenue in 2024, target 5% revenue growth via acquisitions in 2025/2026.
• Dividends: 17th consecutive quarterly dividend increase, dividend per share $1.22, payout ratio 36%, $150 million authorization for share repurchases.
• 2025 Outlook: Expect replacement demand to continue in commercial trucks, freight market recovery could drive higher retail sales, focus on SG&A control, low seventies guidance for SG&A to gross profit ratio.

• Market Uncertainties: Impact of interest rates, freight recession affecting rental utilization, uncertainties around emission regulations and their impact on commercial truck demand.
• Inventory and Supply: Day supply of new/used vehicles, potential downward pressure from Toyota on used vehicle pricing, challenges in UK used vehicle market due to transition.
• Regulatory Changes: Uncertainties around emission regulations in 2027 and their impact on commercial truck pre-buying.

Q: Asked about acquisition opportunities and capital allocation strategy.

A: Shelley Hulgrave responded on 5% growth target via acquisition and 5% internal growth, $150 million share repurchase authorization.

Q: Asked about auto business inflection point and BEV impact.

A: Roger Penske discussed brand mix, gross profit potential, BEV inventory reduction, and used vehicle gross profit strength.

Q: Asked about commercial truck demand pre-emission changes and SG&A improvement.

A: Rich Shearing discussed uncertainty around emission regulations and Shelley Hulgrave discussed SG&A control efforts.

Q: Asked about truck leasing outlook and used car business in UK.

A: Roger Penske and Randall Seymore discussed interest costs, lease returns, and UK used vehicle market challenges.

Q: Asked about negative equity and Cupra deal.

A: Roger Penske discussed low subprime exposure and ongoing discussions with Cupra with no tangible updates.