Penske Automotive Group, Inc.

Welcome to the Penske Automotive Group third quarter 2022 earnings conference call. Today's call is being recorded and will be available for replay approximately one hour after completion through November 2nd, 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, Hannah. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's record third 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'm 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 and Chief Financial Officer, and Tony Ficcione, our 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 earnings before interest, taxes, depreciation, and amortization, or EBITDA and our leverage ratio. 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 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 FCC filings, including our Form 10-K and previously filed Form 10-Qs for additional discussion and factors that could cause results to differ materially. At this time, I would now like to turn the call over to Roger Penske.

Good afternoon, everyone. Thank you, Tony, and all of you for joining us today. I'm pleased to report record revenue and earnings per share in the third quarter, which was driven by our diversified business model. Our revenue increased 7% to $6.9 billion. EBT decreased 2% to $467 million. And net income declined 4% to $340 million. Earnings per share increased 3% to $4.61. Our third quarter results were negatively impacted by foreign exchange, excluding FX. Revenue increased 12% to $7.3 billion. EBT increased 1% to $481 million. That income decreased 1% to $351. And our earnings per share increased 7% to $4.75. Looking at our retail automotive operations on a same-store basis for Q3 22 versus Q3 21, new units declined 6% as we saw supply constraints continue to impact new inventory availability. We expect the current supply to remain at these general levels for the next nine to 12 months. However, demand for new vehicles remains strong and our pipeline of vehicles remains forward sold. For example, in the UK, our forward order bank is over 60% higher than it was the same time last year and represents 36,000 units. and $101 million worth of gross profit. Used units declined 11%, largely due to the challenges in acquiring affordable inventory to meet customer expectations. Retail automotive revenue declined 3%. However, when we exclude FX, our revenue increased 4%. Variable gross profit increased $70 per unit to $5,830, If you exclude the FX, variable growth profit increased $427 from the third quarter of last year. Our service and parts revenue increased 4%, driven by increases in both customer pay and warranty. However, excluding FX, service and parts revenue increased 10%. Looking at car shop during the third quarter, car shop unit sales were $16,400, and our revenue was $380 million. On a same-store basis, variable gross profit per unit retailed was $2,127. Vehicle acquisition prices, reconditioning costs, and logistics continue to impact our profitability at CarShop. In response to the current market conditions, we've implemented cost improvement programs focused on improving retail sales execution and our overall cost structure. Let me now turn to our retail commercial truck dealership business. As you know, premier truck dealership business presents a strategic advantage for PAG. It's an important part of our diversification, and the business remains strong. During the third quarter, total unit sales increased 25% to 6,031, and same-store unit sales increased 14%. Our revenue increased 42% to $1 billion, and gross profit increased 21% to $140 million. Same store revenue increased 29%, including a 23% increase in our service and parts business. Service and parts represented 68% of the total gross profit and covered 135% of all of our fixed costs in the third quarter. EBT increased 9% to $53 million. Approximately 75% to 80% of our new unit sales are Class 8 commercial trucks. In fact, our entire allocation of Class 8 product for 2023 is sold out. The new Class 8 truck market remains strong, and the backlog is 220,000 units as of September 30th, and the industry cancellation rates remain very low. During the third quarter, retail sales increased 27%. to almost 80,000 units as currently forecasting North American sales with approximately 300,000 units in 22 and 287,000 for 2023. Turning to Penske Transportation Solutions, we own 28.9% of PTS, which provides us with equity income, cash distributions, and cash savings. PTS currently operates a fleet of over 400,000 trucks and tractors and trailers, excuse me, with a goal of increasing its fleet to 500,000 by 2025. PTS has over 70,000 trucks currently in order to meet expected customer demands across its various business areas. PTS produced record quarter driven by strong performance from full service leasing or commercial rental business logistics and remarketing. Revenue increased 19% to $3.5 billion, and profit increased 15% to a record $468 million. In the third quarter, equity earnings increased 15% to $136 million, and year-to-date, we've received $173 million in cash distributions from PTS. Let me now turn the call over to Shelly Holgrave, our Chief Financial Officer. Shelly?