PAG Penske Automotive Group Inc

Record Quarterly Revenue Increased 8% to $7.5 Billion

Retail Automotive Same-Store Revenue Increased 6%, Including an 11% Increase in Service & Parts

Retail Commercial Truck Same-Store Revenue Increased 19%, Including a 4% Increase in Service & Parts

Net Income of $300.8 Million; Earnings Per Share of $4.41

Repurchased 2.6 Million Shares of Common Stock for $350.4 Million Through Second Quarter

BLOOMFIELD HILLS, Mich., July 26, 2023 /PRNewswire/ -- Penske Automotive Group, Inc. (NYSE: PAG), a diversified international transportation services company and one of the world's premier automotive and commercial truck retailers, today announced quarterly results for the second quarter of 2023. For the quarter, revenue increased 8% to $7.5 billion, a quarterly record. Net income attributable to common stockholders decreased 20% to $300.8 million from $374.0 million, and related earnings per share decreased 11% to $4.41 from $4.93 when compared to the same period last year. The Company's results for the second quarter of 2023 were driven by strong performance from its automotive and commercial truck operations which partially offset higher interest expense and lower equity earnings from its investment in Penske Transportation Solutions. Foreign currency exchange negatively impacted revenue by $23.7 million, net income attributable to common stockholders by $0.5 million, and earnings per share by $0.01.

Second Quarter 2023 Operating Highlights Compared to Second Quarter 2022

• Retail Automotive Same-Store Revenue – increased 6%
• • New Vehicle +15%; Used Vehicle -4%; Finance & Insurance -4%; Service & Parts +11%
• Retail Automotive Same-Store Gross Profit – increased 1%
• • New Vehicle +4%; Used Vehicle -21%; Finance & Insurance -4%; Service & Parts +10%
• Retail Commercial Truck Same-Store Revenue – increased 19%
• • New Vehicle +37%; Used Vehicle -34%; Finance & Insurance +11%; Service & Parts +4%

Commenting on the Company's financial results, Chair and CEO Roger Penske said, "I am pleased to report strong second quarter performance from our diversified business model. Automotive retail and commercial truck retail demand for new vehicles remains strong while same store service & parts revenue increased 11% from retail automotive operations and increased 4% from commercial truck operations. Retail automotive same-store variable gross profit per unit retailed increased $163 when compared to the first quarter of 2023 to $5,646. In addition, I am pleased that strong expense control produced a ratio of SG&A to gross profit of 67.4%, including a sequential decline of ten basis points when compared to the first quarter of 2023."

For the six months ended June 30, 2023, revenue increased 7% to $14.8 billion. When compared to the same period last year, net income attributable to common stockholders decreased 19% to $599.1 million from $741.9 million, and related earnings per share decreased 10% to $8.72. Foreign currency exchange negatively impacted revenue by $322.0 million, net income attributable to common stockholders by $8.3 million, and earnings per share by $0.12. Excluding the impact from foreign currency exchange, revenue increased 9%, net income attributable to common stockholders decreased 18%, and earnings per share decreased approximately 9%.

Retail Automotive Dealerships

For the three months ended June 30, 2023, total retail automotive revenue increased 7% to $6.4 billion. Same-store revenue increased 6%, including an 11% increase in service and parts revenue. Total retail automotive gross profit increased 2.4% to $1.1 billion, including a 1% increase on a same-store basis. Same-store service and parts gross profit increased 10%.

Beginning in the first quarter of 2023, we transitioned certain brands in the U.K. to an agency model for new vehicle sales under which these dealerships receive a fee for facilitating the sale of a new vehicle by the manufacturer. We do not record revenue for the price of the vehicle. As shown in the following schedules, the units facilitated under the agency model are shown separately as Agency units while the fee we received to facilitate the sale is included in new vehicle revenue and gross profit.

Retail Commercial Truck Dealerships

As of June 30, 2023, Premier Truck Group operated 44 North American retail commercial truck locations, including five locations in the greater Winnipeg, Manitoba market acquired during the second quarter of 2023. For the three months ended June 30, 2023, revenue increased 20% to $919.2 million while same-store revenue increased 19%, including a 4% increase in service and parts revenue when compared to the same period last year. Earnings before taxes increased 6% to $55.5 million when compared to the same period in 2022. For the six months ended June 30, 2023, revenue increased 16% to $1.8 billion while same-store revenue increased 14%, including a 7% increase in service and parts revenue when compared to the same period last year. Earnings before taxes increased 2% to $112.6 million when compared to the same period last year.

Penske Transportation Solutions Investment

Penske Transportation Solutions ("PTS") is a leading provider of full-service truck leasing, truck rental, contract maintenance, and logistics services. PTS operates a managed fleet with over 431,000 trucks, tractors, and trailers under lease, rental and/or maintenance contracts. Penske Automotive Group has a 28.9% ownership interest in PTS and accounts for its ownership interest using the equity method of accounting. For the three and six months ended June 30, 2023, the Company recorded $73.3 million and $154.1 million in earnings compared to $136.6 million and $255.1 million for the same periods in 2022. The year-over-year declines are due to higher interest costs of $47 million for the three months and $91 million for the six months ended June 30, 2023, higher maintenance expenses of $65 million for the three months and $148 million for the six months ended June 30, 2023, a decrease in commercial and consumer rental utilization, and a decrease in the gain on sales of vehicles.

Corporate Development and Capital Allocation

Based on the Company's strong earnings and cash flow, the Board of Directors has increased the quarterly dividend three times in 2023 from $0.57 per share to $0.72 per share, representing an increase of 26%. During the six months ended June 30, 2023, we repurchased 2.4 million shares of common stock for approximately $328.0 million under our securities repurchase program and also acquired 162,174 shares of our common stock for $22.4 million from employees in connection with a net share settlement feature of employee equity awards. As of June 30, 2023, $246.3 million remained available under the company's existing repurchase authority.

During June 2023, the company acquired Transolutions Truck Centres ("TSTC"), a retailer of medium and heavy-duty commercial trucks and buses, located in the greater Winnipeg, Manitoba market. The acquisition is expected to generate approximately $180 million in annualized revenue.

Conference Call

Penske Automotive Group will host a conference call discussing financial results relating to the second quarter of 2023 on Wednesday, July 26, 2023, at 2:00 p.m. Eastern Daylight Time. To listen to the conference call, participants must dial (877) 692-8955 [International, please dial (234) 720-6979] using access code 4310165. The call will also be simultaneously broadcast over the Internet, available through the Investors section of the Penske Automotive Group website. Additionally, an investor presentation relating to the second quarter 2023 financial results has been posted to the Investors section of the Company's website. To access the presentation or to listen to the Company's webcast, please refer to www.penskeautomotive.com.

About Penske Automotive

Penske Automotive Group, Inc., (NYSE: PAG) headquartered in Bloomfield Hills, Michigan, is a diversified international transportation services company and one of the world's premier automotive and commercial truck retailers. PAG operates dealerships in the United States, the United Kingdom, Canada, Germany, Italy, and Japan and is one of the largest retailers of commercial trucks in North America for Freightliner. PAG also distributes and retails commercial vehicles, diesel and gas engines, power systems, and related parts and services principally in Australia and New Zealand. PAG employs over 27,000 people worldwide. Additionally, PAG owns 28.9% of Penske Transportation Solutions ("PTS"), a business that employs over 43,000 people worldwide, manages one of the largest, most comprehensive and modern trucking fleets in North America with over 431,000 trucks, tractors, and trailers under lease, rental, and/or maintenance contracts and provides innovative transportation, supply chain, and technology solutions to its customers. PAG is a member of the Fortune 500, Russell 1000, and Russell 3000 indexes. For additional information, including the Company's 2022 ESG Report highlighting its ESG strategies, activities, and certain metrics, visit the Company's website at www.penskeautomotive.com.

Non-GAAP Financial Measures

This release contains certain non-GAAP financial measures as defined under SEC rules, such as earnings before interest, taxes, depreciation, and amortization ("EBITDA") and leverage ratio. The Company has reconciled these measures to the most directly comparable GAAP measures in the release. The Company believes that these widely accepted measures of operating profitability improve the transparency of the Company's disclosures and provide a meaningful presentation of the Company's results from its core business operations excluding the impact of items not related to the Company's ongoing core business operations and improve the period-to-period comparability of the Company's results from its core business operations. These non-GAAP financial measures are not substitutes for GAAP financial results and should only be considered in conjunction with the Company's financial information that is presented in accordance with GAAP.

Caution Concerning Forward Looking Statements

Statements in this press release may involve forward-looking statements, including forward-looking statements regarding Penske Automotive Group, Inc.'s financial performance and future plans. Actual results may vary materially because of risks and uncertainties that are difficult to predict. These risks and uncertainties include, among others, those related to macro-economic, geo-political and industry conditions and events, including their impact on new and used vehicle sales, the availability of consumer credit, changes in consumer demand, consumer confidence levels, fuel prices, personal discretionary spending levels, interest rates, and unemployment rates; our ability to obtain vehicles and parts from our manufacturers, especially in light of supply chain disruptions due to natural disasters, the shortage of vehicle components, the war in Ukraine, challenges in sourcing labor, or labor strikes or work stoppages, or other disruptions; changes in the retail model either from direct sales by manufacturers, a transition to an agency model of sales, sales by online competitors, or from the expansion of electric vehicles; the effects of a pandemic on the global economy, including our ability to react effectively to changing business conditions in light of any pandemic; the rate of inflation, including its impact on vehicle affordability; changes in interest rates and foreign currency exchange rates; our ability to consummate and integrate acquisitions; with respect to PTS, changes in the financial health of its customers, labor strikes or work stoppages by its employees, a reduction in PTS' asset utilization rates, continued availability from truck manufacturers and suppliers of vehicles and parts for its fleet, potential decreases in the resale value of used vehicles which may affect PTS' ability to sell its used vehicles after the expiration of its customers' leases or at the end of its holding period for rental vehicles, which may affect PTS' profitability and regulatory risks and related compliance costs; our ability to realize returns on our significant capital investment in new and upgraded dealership facilities; our ability to navigate a rapidly changing automotive and truck landscape; our ability to respond to new or enhanced regulations in both our domestic and international markets relating to automotive and commercial truck dealerships and vehicles sales, including those related to the sales process or emissions standards, as well as changes in consumer sentiment relating to commercial truck sales that may hinder our or PTS' ability to maintain, acquire, sell, or operate trucks; the success of our distribution of commercial vehicles, engines, and power systems; natural disasters; recall initiatives or other disruptions that interrupt the supply of vehicles or parts to us; the outcome of legal and administrative matters, and other factors over which management has limited control. These forward-looking statements should be evaluated together with additional information about Penske Automotive Group's business, markets, conditions, risks, and other uncertainties, which could affect Penske Automotive Group's future performance. The risks and uncertainties discussed above are not exhaustive and additional risk and uncertainties are addressed in Penske Automotive Group's Form 10-K for the year ended December 31, 2022, its Form 10-Q for the quarterly period ended March 31, 2023, and its other filings with the Securities and Exchange Commission. This press release speaks only as of its date, and Penske Automotive Group disclaims any duty to update the information herein.