Penske Automotive Group, Inc.

Good afternoon. Welcome to the Penske Automotive Group second quarter 2024 earnings conference call. Today's call is being recorded and will be available for replay approximately one hour after completion through August 7th, 2024 on the company's website under the Investors tab at www.penskeautomotive.com. If you would like to ask a question, you may press 1 then 0 on your telephone keypad. You will hear acknowledgement that your line has been placed in queue. To remove yourself from queue, please repeat the same one zero command. I will now introduce Tony Porden, the company's Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead.

Thank you, Leah. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's second quarter 2024 financial results was issued this morning. And it's posted on our website, along with the 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, Rich Shearing from North American Operations, Randall Seymour from International Operations, and Tony Piccioni, vice president and corporate controller. Our discussion today may include forward-looking statements about our operations, earnings potential, outlook, acquisitions, 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 GAAP measures and have reconciled the non-GAAP measures to their most directly comparable GAAP measure in this morning's press release and investor presentation, both of which are available on our website. Our future results may vary from our expectations because of risks and uncertainties outlined in today's press release under forward-looking statements. I also 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. At this time, I now turn the call over to Roger Penske. Thank you, Tony.

Good afternoon, everyone, and thank you for joining us today. In the second quarter of 2024, PEG generated $326 million in income before taxes and $241 million in net income and $3.61 of income per share. Our revenues grew 3% to $7.7 billion and were the highest quarterly revenues in the company's history. The company's financial performance for the three months ended June 30, 2024, again was driven by its diversification, which included continued strong performance of our retail automotive and our commercial truck business. Highlights during the second quarter include record total quarterly revenue of $7.7 billion and a 10% increase in service and parts revenue to a record $753 million. When compared to the first quarter, retail automotive gross profit for new vehicle retail improved $73, while our focus on efficiency and controlling costs drove a sequential decline in selling, and general administrative expenses as a percentage of gross profit by 50 basis points to 70.2%. Also, our equity earnings from Penske Transportation Solutions increased 63% sequentially. As a result, earnings before taxes increased 10% and earnings per share increased 12% when compared to the first quarter of 2024. Let me now turn our attention to the automotive operations during the second quarter. Total automotive units delivered increased 2% to 126,653 units, which includes 10,221 agency units. New units increased 3%, and used units were flat. Average new vehicle transaction prices increased 3%, The $58,400 while used transaction prices declined 3% to $34,700. We continue to take forward orders with pre-sold activity averaging between 10 and 20% in the U.S. depending on brand and region. 35% of the new vehicles sold in the U.S. were at MSRP. Well, approximately 90% of the beds were sold in the U.S. during the quarter, required significant discounting. Same-store retail automotive revenue increased 1%. However, service and parts increased 5%. Our customer pay was up 3%, warranty increased 12%, and collision repair is up 5%. As previously mentioned, gross profit per new unit retailed increased $73 sequentially, demonstrating the strength of our premium mix, while gross profit for used unit retail only declined $54 sequentially, representing the stability that we see in the used vehicle market right now. Let me turn to transportation solutions at this point. I'm pleased to report another sequential increase in earnings for PTS. During the second quarter, revenue increased 3% to $2.8 billion. Full service contract revenue increased 11%. Logistics revenue increased 2%, but rental declined 13%. However, utilization of the rental fleet increased 50 basis points to 79.2% versus 78.7 in Q2 last year. and utilization increased 480 basis points sequentially when compared to the first quarter of 2024. PTS earnings of 183 million in Q2 increased sequentially by 71 million, but we're down 28% when you still compare it to the second quarter of last year. Our share of PTS earnings was 52.9 million, up from 32.5 million in the first quarter representing a 20.4 million sequential increase, or as noted, 63%. Decline in PGS earnings over the period mainly to a $43 million increase in interest expense from higher rates related to bonds refinancing and higher outstanding debt. Also, a $40 million decline in gain on sale of used trucks. We sold 10,000 330 used trucks in Q2 2024, which is 28% more than we did last year in the second quarter. However, a weaker freight market has reduced demand for tractors and medium-duty trucks, resulting in lower values, which obviously contributed to the reduction in gain. New units on order with various OEMs is down 50% to 21,700 comparative 41,500 in June of 2023 and 60,000 in March of 2023. We currently have 12,000 units for sale compared to 10,500 in June last year. We now turn the call over to Rich Shearing.