- Revenue: $7.7 billion, highest quarterly revenue in the company's history, a 3% increase.
- Income Before Taxes: $326 million.
- Net Income: $241 million.
- Income Per Share: $3.61.
- Service and Parts Revenue: $753 million, a 10% increase.
- Retail Automotive Gross Profit: New vehicle retail improved $73 sequentially.
- Selling and General Administrative Expenses: Declined by 50 basis points to 70.2% of gross profit.
- Equity Earnings from Penske Transportation Solutions: Increased 63% sequentially to $52.9 million.
- Total Automotive Units Delivered: 126,653 units, a 2% increase.
- New Units Delivered: Increased 3%.
- Used Units Delivered: Flat.
- Average New Vehicle Transaction Prices: Increased 3% to $58,400.
- Average Used Vehicle Transaction Prices: Declined 3% to $34,700.
- Same-Store Retail Automotive Revenue: Increased 1%.
- Service and Parts Same-Store Revenue: Increased 5%.
- Customer Pay: Up 3%.
- Warranty: Increased 12%.
- Collision Repair: Up 5%.
- PTS Revenue: Increased 3% to $2.8 billion.
- PTS Full-Service Contract Revenue: Increased 11%.
- PTS Logistics Revenue: Increased 2%.
- PTS Rental Revenue: Declined 13%.
- PTS Utilization of Rental Fleet: Increased to 79.2%.
- PTS Earnings: $183 million, a sequential increase of $71 million.
- New Units on Order: Down 50% to 21,700.
- Cash Flow from Operations: $691 million for the first six months.
- Trailing 12 Months EBITDA: $1.5 billion.
- Cash Dividend: Increased 11% to $1.07 per share.
- Share Repurchases: 511,000 shares for $76 million in 2024.
- Return to Shareholders: Approximately $271 million so far in 2024.
- Acquisitions: Representing $2 billion in estimated annualized revenues.
- Long-Term Debt: $1.77 billion.
- Debt to Total Capitalization: 26.2%.
- Leverage: 1.2 times.
- Total Inventory: $4.7 billion.
- Floor Plan Debt: $4.1 billion.
- New Vehicle Inventory: Increased $251 million from the end of December.
- Days Supply of New Vehicles: 52 days.
- Days Supply of Used Vehicles: 40 days.
- Days Supply of New Battery Electric Vehicles in the US: 89 days.
Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Penske Automotive Group Inc (PAG, Financial) achieved record total quarterly revenue of $7.7 billion, the highest in the company's history.
- Service and parts revenue increased by 10% to a record $753 million.
- Equity earnings from Penske Transportation Solutions increased 63% sequentially.
- The company successfully integrated 16 new dealerships in the UK, adding $1 billion in estimated annualized revenues.
- PAG increased its dividend three times in 2024, resulting in a 35% increase in cash payout to $1.07 per share.
Negative Points
- Used vehicle transaction prices declined by 3% to $34,700.
- Rental revenue for Penske Transportation Solutions declined by 13%.
- The company faced a $43 million increase in interest expense due to higher rates and bond refinancing.
- A weaker freight market reduced demand for tractors and medium-duty trucks, impacting the gain on the sale of used trucks.
- The Premier Truck business was temporarily impacted by a cybersecurity incident, although the financial impact was not material.
Q & A Highlights
Q: Roger, just a first question on this very large acquisition of Bill Brown. It's a little bit different because it's a Ford dealership and it's the largest Ford dealership in the country. I'm just curious what you see in this, obviously, it's opportunity. And if this could be potentially sort of a change in direction or a new opportunity, particularly as is focus much more on commercial vehicles and through its Pro division?
A: Well, you mentioned we're opportunistic. I'd have to say that we were contacted by the family that owned that business -- and initially, I didn't think we'd be interested, but -- we signed an NDA. We went through the numbers. We saw the volume and the fact that they we're a port pro dealer, which is a commercial -- really a commercial truck year also was really important because that gave us, able to leverage our business knowledge and capabilities within the truck leasing and rental business, obviously, now in the sales business. The business is located near a majority of the Ford support plants and also the world headquarters. So almost 80% of the business that goes through that is employee business and family. So obviously, that's a great sustained opportunity for continued doing business. We felt that the used car business had a real upside when we were probably six new to one used because that's part of our sweet spot in the business. and basically, had a great management team. I think the opportunity there, obviously, will be for us to grow the facilities. I think we need to make an investment there. But the bottom line is people ask us, what are the multiples, what are you paying for the businesses in premium luxury or internationally domestically? And I would say this transaction was -- and the goodwill is 50% of what we normally would pay for premium -- so again, I think it's an opportunity for us. It's in our hometown. And I think that as part of our $2 billion of acquisitions that we've done so far for the year, again, 75% of that new volumes is going to be premium. So we're still on track there. Obviously, you saw where we purchased two for stores in Australia.
Q: Pricing remains very strong. GPUs were up. Our new GPs were up sequentially, everybody kind of seems to keep doing this, but maybe forgetting that all this strength is happening in a much higher interest rate environment up almost 400 basis points over the last two years. So what is your take and the potential maybe for you to sustain these higher GPUs and we might be stabilizing it at these levels, just given your business mix, how you operate the business and just sustainability is really the big question here.
A: Well, I think, number one, you look at our SG&A, you look at our comp to gross on sales, what we've been able to do is reduce the number of salespeople that we have has given most of our better sales team an opportunity to have more business and make more money. So they're focused. And I think one of the other things, because of the premium of our Q2 sales were at MSRP versus 57% last year. That will come down. We realize that. Our presold business is about 20% depending on the brand or the region. More importantly, when you think about our brand mix, 32% of all of our business was leased. And that's back to where it was over the last couple of years, which is powerful. It gives us these lease returns, which help us to feed our used car apartment. And I think when you look at it on the premium luxury side, it's probably 50%. So to me, that helps us stabilize our margins as we go forward. So to me, the only thing that would be a negative, and I don't think that there's hundreds of dollars up or down that we're going to see over the next couple of quarters. The only thing would be that the BEV vehicles has the highest discount right now, probably about $6,000 under MSRP. And if you look at a normal ICE vehicle, it's somewhere between 2,500 and 3,000. So I think overall, when you look at the gross profit and you compare it, I went back -- Tony, that he went back from me, and we looked at 2019. And when you look at this, the selling price, obviously, is up almost 14,000. When you look at back to '19 to where it is today and you look at the gross margin that we have today, it's up 2,000. So we're holding the growth. Some of that has to be the increase in the MSRP. But sequentially, we think we're in good shape. But again, it's deal by deal. We're not in a volume race -- and I think depending on the mix of our business, we don't have a lot of volume for them. We don't have -- we have very little of the big three. They could pull down your -- obviously, your grosses. But because our inventory is in such good shape, and we're going to keep it there. Chile, we're sitting with 11 days, one of our bigger volume foreign. And certainly, when we look at the premium side, we're managing that quite well, still waiting for vehicles that are on stop sale around the world with portion, some of the other key vehicles, which are going to help drive some better results, hopefully, in --
Q: When I look at the dividend increase year to date, you're up 35% and you compare that to the increase in share repurchase. Should I read anything into that as a shift in how you're allocating capital? Or is that -- what is your thinking there?
A: Go ahead, Shelly, why don't you take that one.
Michelle Hulgrave: Sure. So Mike, our favorite word around here on capital allocation is opportunistic, and Roger talked a bit about the Bill Brown Board acquisition and -- it's one of those lifetime opportunities. We've really had a lot of those opportunities. And so to be able to acquire $2 billion in revenue and do it internationally, do it with the top and expand and get a new presence in Australia, that was our key focus in terms of dividends versus share purchases. We had said all along when the multiples on the stock were less than the multiples on the Street for an acquisition that was where we were going to focus have seen those level out a bit. but dividends have always been a high priority for us. We've looked across what is it, five, six on our presentation, and we've hovered around a 60-40 split in terms of growth versus acquisition, a little bit higher than that this year, year to date, but the dividends remain a key part of our strategy.
Q: Randall, has the rebranding been completed with the car shop stores? And what was the thinking behind keeping the nine and getting rid of three? What was kind of the dividing line with that?
A: Yes. So we did the first one in April, the last one we just finished last week, six of the
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
