Penske Automotive Group, Inc.

good afternoon and welcome to the penske automotive group first quarter 2023 earnings conference call today's call is being recorded and will be available for replay approximately one hour after completion through may 3rd 2023 on the company's website under the investors tab at www.penskeautomotive.com i would now like to introduce anthony perdon the company's Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead.

Thank you, Lois. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's first quarter 2023 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, our 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 more commonly referred to as EBITDA, our leverage ratio, free cash flow, and cash flow yields. 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 future results may vary from our expectations because of risks and uncertainties outlined in today's press release under forward-looking statements. 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 future events to differ materially from expectations. At this time, 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 a strong first quarter as our performance continues to demonstrate the benefits of the company's diversification. During the first quarter, total units delivered increased 8% to 122,431 units. Our revenue increased 5% to $7.3 billion. And our SG as a percentage of gross profit was 67.5% and declined 140 basis points sequentially. Looking at net income, it was $298 million, and earnings per share were $4.31. If we exclude FX, revenue increased 9% to $7.6 billion, and earnings per share would have been $4.42. During the quarter, we repurchased 900,000 shares for $110 million. Let's turn to our automotive operations. Demand for new vehicles remains strong, and vehicle availability is improving. However, we expect supply constraints to remain during 2023 for most of our brands that we represent. We continue to take forward orders. In fact, in the UK, our forward order bank is 8% higher than it was this time last year and represents 32,000 units. Grosses on these forward orders are 130 million compared to 83 million at the same time last year. The US is approximately 40 to 50% for allocation remains forward sold. Beginning in the first quarter of 2023, we transitioned certain brands the uk to an agency model for new vehicle sales under agency receive a fee from the manufacturer of the sale and delivery of each new vehicle we do not record revenue the price of the vehicle however a delivery fee is included in our new vehicle gross profit beginning in 2023 we've broken out these agency units separately there's no impact to our used business or service in part Looking at our retail automotive operations on a same-store basis for the quarter versus last year, new units increased 15%. Used units declined slightly at 2%, largely due to the challenges in acquiring affordable inventories. Retail automotive rentals increased 2%. However, when excluding FX, our retail automotive revenue increased 6%. New vehicle gross profit declined $483, or 7%. to $6,383, used vehicle growth declined $482 or 21% to $1,821. When compared to Q1 of last year, variable growth profit declined 10% or $580 to $5,483. However, when we exclude FX, our variable growth only declined $374. If you look on a sequential basis, excluding FX, variable vehicle gross profit per unit only declined $156. Variable gross profit remains strong and higher than historical levels. If we take an example, variable gross profit per unit of $5,483 is more than $2,000 more per unit, higher than 2,000, 219, Q1, or 66%. Our fixed operations business continues to perform well. Revenue increased 10% or 14% when excluding FX as being driven by customer pay, warranty, and collision repair. Looking at car shop, car shop unit sales decreased 2% to just under 20,000, 19,165 units. Revenue decreased 5% to $489 million. and variable gross profit per unit declined 5%. Its vehicle acquisition prices along with reconditioning costs and logistics continue to impact customer affordability and our profitability. Excluding FX, revenue increased 3% and variable gross profit per unit would have increased 3%. We continue to focus on vehicle sourcing and cost improvement programs to improve car shop profitability. I'm pleased to report car shops profitability improves sequentially. Turning to retail commercial truck dealership business, our premium truck dealership business represents 39 locations in North America. It is an important part of our diversification and continues to perform well. New commercial truck demand remains solid as being driven by replacement demand associated with supply constraints over the last several years. In fact, our entire allocation of Class 8 product for 2023 is essentially sold out. The current industry Class 8 backlog is 218,000 units, representing seven months of sales. During the quarter, total unit sales increased 10% to 5,172 units. The same-store sales increased 7,474 units. Our total revenue increased 13% to just under $900 million. and our gross profit increased 4% to 147 million. Looking at same-store revenue, it increased 10%, including 11% increase in service and parts. Service and parts represented 67% of the total gross profit and covered 136% of our fixed costs. EBT was 57 million compared to 58 in the first quarter of last year. Turning to Penske Transportation Solutions, PAG owns 28.9% of PTS, which provides us with equity income, cash distributions, and cash tax savings. PTS currently manages a fleet of over 419,000 trucks, tractors, and trailers, with a goal of increasing its fleet to 500,000 units by 2025. During the first quarter, PTS had another strong performance, generating 3.3 billion in revenue, and 280 million in income. Full service contract revenue increased 30% to a first quarter record while logistics increased 10%. We believe demand remains strong for PTS that has 550,000 trucks on order. However, over the last two years, PTS has extended the contracts on 41,000 units simply due to supply challenges. As a result, our maintenance costs increased 73 million in the first quarter. The rise in maintenance costs coupled with higher interest costs associated with rising interest rates and high debt levels, lower utilization of our rental fleet from 81% to 77, and a lower gain on sale compared to the record level gain on sale of 22. Compared to the record performance of last year, the income we record at PTS declined 38 million. I'd like to now turn it over to Shelly Holgrave, our Chief Financial Officer. Shelly?