Penske Automotive Group, Inc.

Good afternoon. Welcome to the Penske Automotive Group first quarter 2025 earnings conference call. Today's call is being recorded and will be available for replay approximately one hour after completion through May 7th, 2025 on the company's website under the investors tab at www.penskeautomotive.com. I will now introduce Tony Porton, the company's executive vice president of investor relations and corporate development. Sir, please go ahead.

Thank you, Julianne. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's first quarter 2025 financial results was issued this morning and is posted on our website, along with a presentation designed to assist you in understanding the company 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, Chair and CEO, Shelley Halgrave, EVP and Chief Financial Officer, Rich Shearing, North American Operations, Randall Seymour, International Operations, and Tony Ficcione, 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 as defined under FCC rules such as adjusted net earnings before taxes, adjusted net income, adjusted earnings per share, adjusted selling general and administrative expenses, earnings before interest, taxes, depreciation, and amortization, or EBITDA, and adjusted EBITDA and our leverage ratio. We've prominently presented the comparable gap measures and have reconciled the non-gap measures to their most directly. comparable gap measures in this morning's press release, and investor presentation, both of which 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 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 results to differ materially from expectations. I will now turn the call over to Roger.

Thank you, Tony. Good afternoon, everyone, and thank you for joining us today. I'm pleased with the results of our first quarter. Our diversified international transportation service business generated record first quarter revenue, the seventh consecutive quarter of stable gross margin, and a 70 basis point improvement of adjusted selling, general and administrative expenses, as a percentage of gross profit when compared to the first quarter of last year. During the quarter, revenue increased 2% to a record of $7.6 billion. Same-store retail automotive revenue also increased 2%, while related gross profit was up 3%. Same-store retail automotive service and parts revenue increased 4%, Our related gross profit was up 6%. Service and parts gross margin increased 60 basis points to 58.6%. Our business generated $337 million in earnings before taxes, $244 million in net income, and earnings per share of $3.66 each, which increased by 14%. On an adjusted basis, earnings before taxes increased 5% to $310 million, and net income increased 5% to $226 million, and our earnings per share increased 6% to $3.39. As we look at the automotive and commercial truck markets, the current environment remains very fluid. We believe the administration is encouraging companies and individual countries to come to the table to discuss their plans. We remain in close contact with our OEM partners. Many OEMs who announced their intent to hold current prices while tariff negotiations continue, and we believe most brands are evaluating their individual geographic footprint, including production capacity, model mix, suppliers, vehicle content, among others. As we look to the future, the diversification of PHE will be a key differentiator. The diversification provided by a premium brand mix are present in international automotive markets, our retail commercial truck dealerships, and our investment in Penske Transportation Solutions, coupled with our highly variable cost structure, provide us with opportunities to flex our businesses to meet the changing landscape. Approximately 59% of our revenue is generated in North America, 31% in the UK, and 9% in other international markets. Our profitability is also diversified with 64% of our earnings in 2024 coming from our automotive retail operations and 36% from our non-automotive operations as we generate that profitability across multiple sources, such as new, used, service and parts, and finance and insurance. In fact, only 26% of our total gross profit in 2024 was generated from new vehicle sales. So now let's turn our attention to a few additional details of the first quarter results. During the first quarter, we delivered 120,000 new and used automotive units and over 4,700 commercial trucks. New automotive units delivered increased 6% and 8% on a same store basis. Used automotive units declined 16% and 11% on a same store basis. The decline is associated with a realignment of our UK used-only dealerships to Sittner Select, which took place in the last half of 2024. We sold or closed four locations, realigned the cost base, changed the focus to retailing fewer units at higher margins. Excluding the performance of Sittner Select in both periods, used units delivered only decreased 1% in total on the same store basis. Average new transaction price increased 4% to $59,202, while average used vehicle transaction price increased 12% to $37,624. New and used vehicle gross profit per unit retailed remained strong. New vehicle gross was $5,059, only $87 when compared to the fourth quarter of last year. Used vehicle growth increased $352 per unit when compared to the fourth quarter of 2024, largely due to our efforts with Sitner Select and the overall improvement in used vehicle inventory management. Variable vehicle profit, which includes new used and F&I was $5,281 per unit, representing a $38 unit decline when compared to the fourth quarter of last year. In the quarter, service and parts revenue increased 6% to $789 million, including a 4% on a same-store basis, with customer pay up 1% and warranty up 17%. Warranty continues to be driven by recall activity across several brands. fixed absorption in the U.S. automotive business increased 310 basis points to 87.1%. It was 117.5% for our North American retail commercial truck business. As we look to continue growing this important part of our business, we've increased our technician head count by 5% since March of 2024. and the effective labor rate increased 5% in the U.S. and 6% in the U.K. Lastly, I remain pleased with our efforts to control costs. On an adjusted basis, our SG&A to gross profit declined by 70 basis points to 70.0 when compared to the first quarter last year and declined by 30 basis points to Questly when compared to the fourth quarter of 2024. Now let me turn the call over to Rich to discuss our North American operations.