PENSKE AUTOMOTIVE GROUP, INC. Q2 FY2025 earnings call

• Business performance: Second - quarter revenue was $7.7 billion, EBT increased 4%, net income increased 4%, earnings per share increased 5%, representing the third consecutive quarter of year - over - year earnings growth. Gross profit increased to $1.3 billion, gross profit margin increased 50 basis points to 16.9%. - Cost control: Focus on controlling costs such as advertising, with selling, general and administrative expenses as a percentage of gross profit improving by 30 basis points to 69.9%. - Market situation: Encouraged by recent trade agreements, especially the EU agreement providing benefits to partners. OEMs have varying price actions, and the situation remains fluid. - International business: U.K. market faced challenges from macro - environment factors and vehicle - related changes, while Australia operations showed positive performance with Porsche dealerships and diversified commercial vehicle business. - PTS: Operating revenue was $2.8 billion in Q2, efforts to optimize costs, improve utilization rates and hold pricing led to increased PTS income, with equity earnings from PTS investment up to $53.5 million.

Penske Automotive Group's second - quarter revenue was $7.7 billion, consistent with Q2 last year. Approximately 61% of revenue is generated in North America, 29% in the U.K. and 10% from other international markets. In North American operations, automotive retail business saw elevated traffic in April and May, new units in the U.S. were up 1% in Q2, used vehicle sales declined 3% but used truck grosses increased over 50%. Service and parts revenue and gross profit were at record levels. Premier Truck Group sold 5,339 new and used units in Q2, with new up 4% and used down 8%. Penske Transportation Solutions had operating revenue of $2.8 billion in Q2, equity earnings from PTS investment were $53.5 million. International operations represent approximately 40% of total consolidated revenue, with international revenue in Q2 being $2.9 billion. The U.K. market faced challenges due to macro - environment factors, new unit deliveries declined 16%, same - store used units declined 23% but gross profit per unit increased. Australia operations saw Porsche dealerships retailing 1,136 new and used units and generating $128 million in revenue in the first half of 2025, and the commercial vehicle and power systems business in Australia was diversified with revenue and gross profit split approximately 50 - 50 between on - and off - highway markets.

• Continue to focus on the impact of recent trade agreements and maintain close contact with OEM partners. - In PTS, continue efforts in cost optimization, utilization rate improvement and pricing management. - Remain active in considering acquisition opportunities, being prudent and looking for markets where scale can be achieved.

• Uncertainty in market environment, such as changing OEM prices and unclear trade agreement impacts. - Macro - economic factors in the U.K. like inflation, interest rates, higher taxes affecting the market. - Tariff changes and related short - term impacts on unit sales and business operations.

Q: I wonder if you can quantify a few of the moving pieces that affected your unit sales in the U.S. and the U.K.?

A: Shelley Hulgrave said approximately $200 million of revenue in the quarter in 2024 was not present in 2025 due to divestitures and store closures. New units related to divested stores were approximately 2,000 units, mini brand transfer to agency impacted new units by approximately 1,300. Used units divested or closed stores attributed to about 4,400 used units. Roger Penske also mentioned mobility in the U.K. was slowed by premium brands during the quarter.

Q: Just before my questions, I wanted to say congratulations, Roger, on the Centennial Award recognition last month.

A: Roger Penske thanked and said it was a byproduct of the 74,000 employees working daily.

Q: I was wondering if we can maybe double - click on service and parts. We're starting to get into the -- lapping the BMW stop sales and other pretty big warranty items. Just curious how you see that playing out?

A: Richard P. Shearing said no adjustment from OEMs on warranty claims, but car park age and mileage will keep fixed operations strong. Roger Penske mentioned complexity of premium cars driving them back to dealerships, and Tony Pordon talked about using AI in service departments for efficiency.

Q: Just wanted to follow up on PTL. It looks like if we exclude the gain on sale, PTL income was up year - over - year overall. Should we expect that kind of cadence to continue here in the second half?

A: Roger Penske said gain on sale will be a trigger up or down based on market pricing, and they dropped 14,000 units from the fleet during the quarter.

Q: I wanted to stick on the M&A topic actually because if I remember correctly, you've talked in the past about wanting to acquire $1.5 billion in annual revenue, and you've just done the prior deal so far. So even if you do end up closing some of these deals in your pipeline, do you think the $1.5 billion acquired number for '25 is still on the table?

A: Roger Penske said it's not realistic to think about annualized basis yet, but they are definitely looking at acquisitions, being prudent and considering market opportunities.