Penske Automotive Group, Inc.

Welcome to the Pinsky Automotive Group second quarter 2022 earnings conference call. Today's call is being recorded and will be available for replay approximately one hour after completion through August 3rd, 2022 on the company's website under the investors tab at www.pinskyautomotive.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, Brittany. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's record second quarter 2022 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, EVP, Chief Financial Officer, and Tony Ficcioni, our Vice President and Corporate Controller. Our discussion today may include forward-looking statements about 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 earnings before interest, taxes, depreciation amortization, or EBITDA, and our leverage ratio. We have prominently presented the comparable GAAP measures and have reconciled the non-GAAP measures in this morning's press release and investor presentation, which are available on our website to the most directly comparable GAAP measures. Our actual results may vary 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 and previously filed Form 10-Qs, for additional discussion and factors that could cause results to differ materially. I will now turn the call over to Roger Penske.

Thank you, Tony. Good afternoon, everyone, and thank you for joining us today. I'm pleased to report that our diversified business delivered an all-time record quarter results, second quarter for earnings before taxes, net income, and earnings per share compared to the second quarter last year. While revenue declined 1% to $6.9 billion, foreign exchange negatively impacted revenue by $245 billion, excluding FX, our revenue increased 2%. Earnings before taxes increased 8% to $500 million. Net income from continuing operations increased 10% to $374 million. And earnings per share increased 17% to $4.93. If you exclude FX, EBT was up 10% to $511 million. Net income increased by 13%, up to $383 million. and earnings per share increased 20% up to $5.04. Additionally, when we compare the first quarter of 2022 earnings before taxes, our net income and earnings per share all increased sequentially. Looking at our retail automotive operations on the same store basis, Q2 22 versus Q1, despite the supply constraints that continue to impact new vehicle inventory and availability, Demand remains strong, and our pipeline of vehicles remains forward sold. Supply shortages impacted total unit sales, which declined 17% during the quarter. Our automotive revenue declined 8%, and our gross profit declined 3%. However, if we exclude FX, revenue only decreased 3%, and our gross profit increased 2%. Our service and parts revenue increased 4%, and without FX it was up 8%. and our variable profit per gross vehicle was up $841, or 16%, to $5,999 from $5,158. Looking at car shop during the second quarter, car shop unit sales increased 7% to 20,000 units, and our revenue increased 15% to $468 million, and our same-store unit sales were flat, and our same-store revenue increased 6%. Same-store variable gross profit per unit retail was $21.45 compared to $27.14 in the second quarter last year. Vehicle acquisition prices, our reconditioning costs, along with logistics continue to impact our profitability at CarShop. In response to the current market conditions, we closed two satellite operations in the UK and are focused on improving their reconditioning efficiency, our logistics, and improving our cost structure overall. Let's turn now to the retail commercial truck dealership business. Our premier truck dealership business remains very strong, and during the second quarter, our unit sales increased to 4,174 units, up from 4,146 in the second quarter last year. When looking at total revenue, we increased 23% to $769 million, and gross profit increased 32% to $136 million. Our same-store revenue increased 11%, and that included a 23% increase in our service and parts business. Service and parts represented 68% of the total gross profit and covered 133% of our fixed cost in the second quarter. Earnings for poor taxes increased 32% to $52 million. The new Class A truck market remains strong, and the backlog continues. is 222,000 units as of June 30th. Approximately 75% to 80% of new Class 8 sales are commercial trucks, and that market remains strong. In fact, our entire allocation for Class 8 product is sold out for 2022, and 23 orders will open up sometime in the September to October timeframe. Let's turn now to Penske Transportation Solutions. As you know, we own 28.9% of PTS, which provides us with equity income, cash distributions, and cash savings. PTS currently operates a fleet of over 387,000 units, an increase of 21,000 compared to the end of last year. PTS produced a record quarter driven by strong performance from contract, commercial rental, or logistics business and remarketing. Revenue increased 20% to $3.3 billion, and profit increased 33% to $472 million. As a result, our equity earnings increased $34 million to $137 million year-to-date. We've also received $105 million in cash distributions. Now let me turn it over to Shelly, our Chief Financial Officer.