Penske Automotive Group, Inc.

good afternoon welcome to the penske automotive group fourth quarter 2022 earnings conference call today's call is being recorded and will be available for replay approximately one hour after completion through february 15 2022 on the company's website under the investors tab at www.penskeautomotive.com i will now introduce anthony borden the company's Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead.

Thank you, Alan. 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 2022 financial results was issued this morning, and it's 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 by phone for any follow-up questions you may have. Joining me for today's call are Roger Penske, our chair and chief executive officer, Shelley Holgrave, EVP and chief financial officer, and Tony Ficione, 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 the assessment of business conditions. We may also discuss certain non-GAAP financial measures, such as earnings before interest, taxes, depreciation and amortization, or EBITDA, our leverage ratio, and free cash flow. 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. At this time, I'll now turn the call over to Roger.

All right. Thank you, Tony. Good afternoon, everyone, and thank you for joining us today. 2022 was a record year for PAG. It was driven by our diversification, certainly our premium brand mix, and our capital allocation. During 2022, we increased our revenue by 9%, almost $28 billion. We increased our earnings before taxes 16% to $1.9 billion. We increased our income from continuing operations by 16% to $1.4 billion. And we grew our earnings per share by 25%. to $18.55. We completed acquisitions representing approximately $1.3 billion in expected annualized revenue. And during the year, we repurchased 8.2 million shares, or 11% of our shares outstanding at the beginning of the year. We returned $1 billion to shareholders through dividends and stock repurchases. Now let me turn to the fourth quarter, and I'm pleased to report record revenue and earnings per share, which was driven by our diversified business model. Revenue increased 11% to $7 billion. Earnings per share increased 6% to $4.21. Excluding FX, revenue increased 17% to $7.4 billion, and earnings per share increased 8% to $4.30. Again, during the fourth quarter, we repurchased approximately 2.5 million shares of SOC for $284 million. Looking at our retail automotive operations, and this is on a same-store basis, Q4-22 versus Q4-21, our new units increased 11%. Demand for new vehicles remains strong, and vehicle availability is improving. However, we do expect supply constraints to remain during 2023 for most of the brands in the premium side that we represent. We continue to take forward orders. In fact, in the UK, our forward order bank is 23% higher than it was at the same time last year, representing 31,800 units or 100 million pounds of forward gross profits. Used units declined 4%, largely due to the challenges in acquiring affordable inventory to meet our customer expectations. Retail automotive revenue increased 4%. However, on excluding FX, revenue increased 10%. Variable gross profit remained strong and higher than historical levels. When compared to Q4 last year, variable gross profit declined 11% to $740. Excluding FX, variable growth only declined 7%. If you really look at that on a sequential basis, excluding FX, variable growth profit per unit only declined $33. Our service and parts revenue increased 6%. However, when excluding FX, service and parts revenue increased 11%, driven by increases in customer pay, warranty, and our closing and repair business. Looking at car shop during 2022, car shop unit sales increased 12% to 71,242 units. Revenue increased 16% to 1.7 billion. However, our variable gross profit per unit declined 19% to 2108 as vehicle acquisition prices, reconditioning costs, and logistics continue to impact customer affordability and certainly our profitability. We continue to focus on vehicle sourcing and cost improvement programs to improve car shop profitability. Car shop self-sourced 73% of its inventory in the U.S. and only 37% in the U.K. Let me now turn to our retail truck business. As you know, our premier truck dealership business represents 39 locations in North America and is a very important part of our diversification. In 2022, this business generated $3.5 billion in revenue and contributed $215 million in earnings of four taxes and had a return on sales of 6%. New commercial truck demand remains very solid and is being driven by replacement demand associated with supply constraints over the last several years. During the fourth quarter, our unit sales increased 28% to 5,704. Same-star unit sales increased 22%. to 5,287 units. We outperformed the Class A market in the fourth quarter, growing our sales by 36% compared to the market, which increased 30%. Total revenue increased 40% to $1 billion, and gross profit increased 16% to $138 million. Our same-store revenue increased 33%, including a 16% increase in our service and parts business. Service and parts represented 65% of our total gross profit and covered 128% of our fixed cost. EBT increased 14% in a quarter to 51 million, and approximately 75% of our new unit sales are Class 8 commercial trucks. In fact, when I look at 2023, our entire allocation is sold out. The Class 8 truck market remains strong with retail sales of over 309,000 units in 2022. And as we look at the forecast for North American sales for 2023, it's 294,000. And the backlog today sits at 244,000 units, which represents 10 months of sales. Turning to Penske Transportation Solutions, our leasing, rental, and logistics business, PAG owns 28% of PTS, which provides us with equity income, cash distributions, and cash tax savings. PTS currently manages a fleet of over 414,000 units, and the goal is increasing it to 500,000 by 2025. PTS produced a record fourth quarter revenue increase, 13%, 3.3 billion on the strength of its long-term contracts, and commercial revenue. Profit increased 9% to a record of $344 million. As a result, our fourth quarter equity earnings increased 9% to $99.4 million, and year to date, we've received $357 million in cash distributions. For the entire year, PTS earnings before taxes were $1.7 billion. We expect the current business environment for lease, Our maintenance, our commercial rental, and logistics remain strong in 2023. It's expected to continue increasing the size of our PTS fleet. Now let me turn the call over to Shelly Holgrave, our Chief Financial Officer. Shelly?