Penske Automotive Group, Inc.

Good afternoon. Welcome to the Penske Automotive Group fourth quarter and full year 2021 earnings conference call. Today's call is being recorded and will be available for replay approximately one hour after completion through February 16th, 2022 on the company's website under the investors tab at www.penskeautomotive.com. I will now introduce Anthony Porton, the company's executive vice president of investor relations and corporate development. Sir, please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's record fourth quarter and record full year 2021 financial results was issued this morning and is posted on our website along with a presentation designed to assist you in understanding the company's results. As always, I am available by email or phone for any follow-up questions you may have. Joining me for today's call are Roger Penske, our chair and CEO, Shelley Holgrave, Chief Financial Officer, and Tony Piccioni, Vice President and Corporate Controller. Our discussion today may include forward-looking statements about our operations, earnings potential, outlook, future events, growth plans, liquidity, and assessment of business conditions. We may also discuss certain non-GAAP financial measures, such as adjusted income from continuing operations, adjusted earnings per share from continuing operations, and earnings before interest, taxes, depreciation, and amortization, or EBITDA, and adjusted EBITDA. We have prominently presented the comparable gap measures and have reconciled the non-gap measures in this morning's press release and investor presentation, which are available on our website to the most directly comparable gap measures. Our actual results may vary materially because of risks and uncertainties outlined in today's press release, which may cause the actual results to differ materially from expectations. I direct you to our SEC filings, including our Form 10-K, for additional discussion and factors that could cause results to differ materially. I will now turn the call over to Roger Penske.

Roger Penske Thank you, Tony. Good afternoon, everyone, and thank you for joining us today. I'm pleased to report all-time record fourth quarter results as our diversified business and strong execution produced record revenue, earnings before taxes, net income, and earnings per share for revenue increased 8 percent to $6.3 billion. Our earnings before taxes increased 60% to $420 million, and our income from continuing operations increased 55% to $312 million. Earnings per share increased 59% to $3.97. Excluding the Q4 charges of $10.1 million reconciled in our press release and earnings presentations, Adjusted earnings before taxes increased 64% to $431 million. Our adjusted income from continuing operations increased 60% to $320.5 million. And adjusted earnings per share increased 65% to $4.10. Our Q4 performance was driven by strong retail automotive and commercial truck vehicle margins, a 26% increase and same-store gross profit and strong performance from Penske Transportation Solutions, which increased 62%. Looking at our retail automotive operations on a same-store basis, Q4-21 versus Q4-20, unit sales continue to be impacted by supply shortages and decline 9.45%, including a 19% on new and 1% on used. Revenue increased 4%, gross profit increased 26%, including a 320 basis point increase in gross margin. Unit gross profit increased 48% to $6,550 from 4,420. Looking at car shop, we added six car shop locations during 2021, including three in the fourth quarter, and we now operate 23 locations. During the fourth quarter, car shop unit sales increased 24% to almost 15,000 units. Revenue improved 61% to approximately 400 million and same store unit sales increased 7% and same store revenue increased 38%. Our gross profit per unit at car shop retailed increased 14% to $2,655. Our current annualized run rate is approximately 65,000 to 75,000 units and revenue of 1.6 billion, EBT of 35 to 40 million. Let me now turn to the retail commercial truck dealership business. During 2021, we added seven new dealerships and five parts and service locations to our acquisition, adding 650 million in annualized revenue. We now operate 37 commercial truck locations in the U.S. and in Canada. And during the fourth quarter, revenue increased approximately 19%. Same store was flat. Gross profit increased 51%, including a 35% increase in service and parts. Same store gross profit increased 29%. Service and parts represented 59% of our total gross profit and covered 121% of our fixed costs in the fourth quarter. Earnings before taxes increased 69 percent to $45 million and represented 11 percent of PAG's total revenue and EBT. For the full year, our commercial truck business generated $160 million in EBT, a 6.4 percent return on sales. Approximately 75 to 80 percent of unit sales are Class VIII commercial trucks. And that market really remains very strong. Class 8 retail sales increased 16% to 270,000 units, and the backlog increased 46% to 261,000 at the end of the year. Freight rates ended up last year at record levels, and ship shortages are creating pent-up demand in the market. Based on current industry forecasts, Class 8 retail sales are expected to increase over the next two years, and certainly will provide tailwinds to our commercial truck and truck leasing businesses. Let me now turn to Penske Transportation Solutions. As you know, we own 28.9 percent of PTS, which provides us with equity income, cash distributions, and cash tax savings. Since making our first investment, PTS has generated over $1.1 billion in equity earnings, paid nearly $600 million in dividend distributions, and generated nearly $800 million in cash tax savings. Currently, PTS is operating a fleet of 360,000 vehicles. In 2021, a stronger economy, industry capacity constraints, improving rental demand, and a move by fleets to more leasing drove our record profitability. This drove record revenue and profitability of $11.2 billion and $1.3 billion respectively. And Q4 PTS generated $3 billion in revenue and $316 million in profit. As a result, our equity earnings increased 62% to $91 million. Our leasing business was up 4.9%. Our commercial rental business was up at 48.6%. And key to our profitability was utilization was over 85%. Our consumer rental was up 29%. and our logistics increased 30%. Let me now turn over the call to Shelly Hullgrave, our Chief Financial Officer.