Penske Automotive Group, Inc.

Your conference will begin momentarily please continue to hold. Good afternoon. Welcome to the Penske Automotive Group fourth quarter 2023 earnings conference call. Today's call is being recorded and will be available for replay approximately one hour after completion through February 14, 2024 on the company's website under the Investors tab at www.penskeautomotive.com. I will now introduce Tony Pardon, the company's Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead.

Thank you, Brad. Good afternoon, everyone, and thank you for joining us today. As you know, a press release detailing Penske Automotive Group's fourth 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 Hulgrave, our EVP and chief financial officer, Rich Shearing, North American Operations, Randall Seymour, International Operations, 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, adjusted EBITDA, adjusted earnings before taxes, adjusted income from continuing operations, adjusted earnings per share, and our leverage ratio. We have prominently presented the comparable gap measures and have reconciled the non-gap measures to the most directly comparable gap measures in the press release and investor presentation, which are available on our website. Our future results may vary from our expectation because of risks and uncertainties, outlined in today's press release under forward-looking statements. 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 future results to differ materially from expectations. I'll now turn the call over to Roger.

All right, Tony, thank you, and good afternoon, everyone, and appreciate everyone joining us today. 2023 was a strong year for PAG. and reflected our third best year of net income in our company's history. Our performance is driven by resilient new car market, our premium brand mix, the performance of our retail commercial truck dealerships, and our capital allocation. During 2023, we delivered 486,000 new and used vehicles and over 21,000 commercial trucks. We increased our revenue 6% to almost $30 billion. We generated $1.4 billion in earnings before taxes and nearly $1.1 billion of net income and earnings per share of $15.50. We continue to grow our business, announcing acquisitions of $1.3 billion in expected annualized revenue, including Rybrook in the UK, which closed early in January, 2024. We repurchased 2.8 million shares or approximately 4% of the shares outstanding at the beginning of the year. We increased our cash dividend paid to shareholders by 53% since the end of 2022 and from 57 cents to our current dividend of 87 cents. We maintained a strong balance sheet and debt to capitalization ratio of 26% and a leverage ratio of one time. Now let's turn our attention to the fourth quarter that we announced earlier today. Excluding a non-cash impairment charges and noted in our press release adjusted EBT was just under 300 million at 297. Adjusted income from continuing operations was 231 million and related adjusted earnings per share for $3.45. In our automotive operation, we believe demand for new vehicles remains solid and inventory availability continues to improve. We continue to take forward orders with pre-sold activity averaging between 10 and 20% in the US, depending on brand and the region. The UK forward order book is healthy at 20,300 units. Although the order book is slightly less than last year, UK new vehicle registrations increased 18% in 2023, and the availability of inventory improvement compared to the same time last year. During the quarter, total automotive units delivered increased 8% to 117,000 units, which includes 8,113 agency units. Same-store retail automotive revenue increased 4%, including a 7% increase in our service and parts business. Same-store gross profit only declined 1%. Same-store retail commercial truck gross profit only declined 1%, and earnings before taxes in Q4 was a record of over $51 million. Unfortunately, our profitability was impacted by $21 million in additional interest costs, resulting from higher interest rates from greater inventory levels combined with lower equity earnings for our investment in Penske Transportation Solutions. Turning to PTS, December 31st, PTS managed a fleet of over 439,000 vehicles. That includes trucks, tractors, and trailers. In 2023, PTS operating revenue increased 6% and produced the third highest EBT of all time just over $1 billion. In Q4, PTS operating revenue increased 3% to $2.7 billion. Full service lease and contract revenue increased 13%. Logistics revenue increased 5%. But our rental business declined 13%. PTS generated $177 million in net income. Our share of PTS earnings was $51 million, which declined by 48%. or $48 million compared to Q4 of last year. A decline in PTS earnings over the year period was impacted by the following. A $57 million increase in interest expense from higher rates related to bond refinancings and higher outstanding debt. A $58 million decline in gain on sale of used trucks when compared to the record performance. In 2022, as used truck values continued to be impacted, by the lower freight demand. We sold nearly 36,000 trucks used in 2023, an increase of 60%. Rental revenue fell 13%, including 400 basis points decline in commercial utilization rates at 82%. Higher depreciation and holding costs on older vehicles we had because we were holding to replace the fleet. As we look into Q1 2024, PTS continues to be impacted by similar headwinds. We expect PTS earnings to decline at least 50% in the first quarter due to higher interest costs, lower gain on sale of used trucks, and higher depreciation. Units on order now are at 29,000 compared to 71,000 at the start of last year and continue to trend lower. We have nearly 18,000 units currently available for sale. In January, we sold 3,900 units, which was 27%. percent higher than January 2023 and similar to the pace of Q4. I'd now like to turn it over to Rich Shearing.