Penske Automotive (PAG) 27 Oct 212021 Q3 Earnings call transcript

Good afternoon, ladies and gentlemen. Welcome to the Penske Automotive Group Third Quarter 2021 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately 1 hour after completion through November 3, 2021, on the company's website under the Investors tab at www.penskeautomotive.com. I will now introduce Anthony Pordon, the company's Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead.

Jerome. you, Thank and everyone, for us joining Good thank today. again afternoon, you on Group's detailing this quarter posted understanding with the release you press to record presentation morning website designed the Penske is company's issued A in was Automotive third assist along results XXXX and results. our financial

e-mail phone any I'm questions follow-up always, As or that available by for you have. may

President Hulgrave, Tony today's our Chair and Vice Shelley Penske, Facioni, call and and Officer; Roger our Corporate are for Financial me Joining Chief Controller. and our CEO;

discussion today EBITDA. forward-looking earnings conditions. as non-GAAP include assessment plans, may earnings certain potential, statements such or business operations, Our liquidity before about interest, outlook, We of growth discuss measures, our may taxes, also future depreciation events, financial amortization and and

GAAP which are directly on the prominently have this comparable the and GAAP in measures to have reconciled available presentation, press non-GAAP presented release investor measures. most morning's comparable measures our website and the We

in and now could results may the differ expectations. actual Our to that call actual I for results including Form to additional direct factors Roger cause materially. our materially differ XX-K, outlined vary to release, and discussion to from our you results of will risks which Penske. may filings, the SEC cause uncertainties I today's because over press turn

best I'm the Thank right. including report to pleased all-time company. today. in you you, for record of us PAG, the All Tony. quarter joining Good thank afternoon, the and for third results history everyone, quarter

income and XX% per operations XX% $X.XX. total increased from million, increased and to continuing continuing income increased to operations increased $X.X and taxes to million XX% share related billion $XXX Our before $XXX to earnings revenue X% from

and a in interest point impacted gross in in also with truck in increase a increase retail of profit trucks, by retail increase XXX demonstrated increase commercial X% a and service commercial XX% were and by SG&A in our gross profit growth lower earnings Transportation both profit in earnings sales costs, coupled to of retailed, benefit increase parts per and commercial million by our was in automotive an strength retail the our XXX% EBT automotive shortages driven unit provided Penske and Although dealership operations, continued diversified automotive business supply from basis gross This an Solutions. XX% dealership in the reduction investment XXX% and and model. $XX truck unit

for point XX%, X%; increased Looking units at retail increase QX on basis 'XX, our revenue a basis including our versus however, XXX in gross automotive increased profit Gross declined operations QX margin. same-store 'XX X%.

profit gross variable Our increased per XX% last unit compared $X,XXX $X,XXX to to year.

and to opened Looking U.K. operate XX X Scottsdale we the expect and Buzzard of by now We and year. Leighton this Wolverhampton at the open in recently week. added location locations end in locations CarShop, additional location the our

During the per to unit XX% increased $XXX X% $X,XXX. million CarShop to profit units. approximately improved gross increased quarter, XX% sales Revenue unit to and XX,XXX

revenue EBT million run $XX annualized million. approximately rate to an of representing current and $X.X XX,XXX $XX units, Our between XX,XXX and billion is

businesses. dealership truck retail Turning to commercial the

leasing million sales Class taxes revenue XX% X.X%. Premier retail basis, represented a on was XX%, Group profit quarter. to over forecast, Truck increased and third expected commercial before and the retail the truck provide the the a X X XX%, orders our gross including increase our backlog sales to XXX% in increased to The strong. commercial current of truck increased XXX% on X increased On in the and during And units, North same-store same-store Retail increased Our including XX% basis. return a Earnings revenue parts. service a total X% $XX tailwinds approximately truck increase market quarter, on years remains representing are a XX%, the supply. XXX,XXX to Class American XX-month and very next and Based net third industry businesses.

income, Solutions, PTS, provides vehicles. which Transportation own Penske equity currently us with and of which over fleet to cash XX.X% distribution operates tax cash XXX,XXX a Turning of we savings. PTS

the PTS return and income in ended PTS September XX, $X.X in million a revenue or $X.X In in return generated sales. income revenue sales. XX% on months on billion or million generated billion X For XX% $XXX of QX, and $XXX a

up earnings were million, $XXX XX% As and up on a rental sales X%, units revenue in to our result, our hit our additional XX,XXX utilization XX%, contract rent. full-service with leasing was equity increased XX%, while and commercial an QX

XX%. Our consumer rental was up our logistics increased revenue XX%, and

and XXX% to is turn as on up Shelley? Financial environment used shortage to demand now a the gain Hulgrave, for sale used of is certainly I like freight the over supply Chief call driving Officer. our strong Our Shelley a would of trucks vehicles. trucks new

Thank afternoon, you, Roger. everyone. Good

we maintained strong support Capital investments third Looking the balance September we strategy, to flow, truck growth, delivering in to capital our quarter in whenever dividend $X.X At at over shape. that great have sheet XX, shareholders, opportunistic possible million focuses looking liquidity. at remains a in PAG on expenditures both and our and the retail repurchases. cash, and cash including balance our approach with the our allocation, When sheet billion commercial businesses, and a share $XXX ended automotive reducing we disciplined growth debt across CarShop

X% was long-term million from September, generated of we for CapEx we including expansion. representing future $XX Year-to-date, At to approximately million Net land shares billion. million. invested in CarShop capital expenditures, billion We the in In operations. end million fact, $X.X $XX debt $XXX $X.X outstanding. cash total have was our year-to-date, acquire of shares, repurchased X.X flow the

of the $XXX end since long-term have million debt XXXX. of We repaid

lowered XXXX. expense of December this compared far repaid to capitalization XX to have take rates terms at so the lower advantage XX.X% debt reduction to These year. which our lengthening or current XX% have we have in total debt XX.X% to either while to interest initiatives our senior end the to conditions, at addition, a and refinanced subordinated million In market $XX of contributed

billion, at million X.Xx, the at At year. down X.Xx is automotive which is sits December inventory from the last ratio from was improvement Retail XXXX. of billion. of end $XXX leverage $X $X.X end our total September, inventory an Our

have XX-day new of We a vehicles. supply

supply XX Our premium days is is foreign X. and of volume

current with levels. XX-day new but challenges, strong to vehicle supply At this inventory the is I supply. Used a turn our at coupled to expect low good We with over supply vehicle demand will back manageable keep in Roger. time, the call shape

Shelley. you, Thank

our Moving digital on to initiatives.

on footprint, combination deliver the tools of We will a including directly purchase to enhance customers customers. or by offer introduction grow, of hybrid either Depending new fully vehicles our preferences, customers we expand any our a and continue also digital can to X, model. desired in-store, the customer-driven their online, shopping to technologies our and location

leader As we star in reputation, part customer of reviews to and be online strive experience, on our a including online Google. ratings omnichannel customer

customers our in Looking X.X% and Using the GBP our at apply online. our other pay unit XX% car a vehicles X,XXX XX, tools, customer obtain instant of of U.S. approval, reserve preferred receive in for digital price and sales buy-on journey. their a or we guaranteed U.K., buying purchase a for use retailed tool credit Sytner the financing,

part visit the available the to using of our at we this quarter, all any of these online platform. tools, technology dealership. tools you transaction may may combine perform the new or digital CarShop, including units shorten sold a our use customer When During X,XXX to

add completed totaling will September the premium million million revenue revenue. annualized In XX% corporate automotive $XXX in brands, year-to-date $XXX acquisitions of of in consolidated repurchases, addition acquired development, luxury share to $XXX at which October, joint in the XX. our of Japanese Looking we annual space remaining we through venture million

deals in expect We quarter we have another to of in our revenue $XXX pipeline annualized XXXX. the either or in million close in early that fourth

by total bringing in of in also portion locations. earn -- construction. remain We to other locations billion revenue year, We We open have expect points generate on our $X.X to a to by track to earlier open year, to X XX additional of billion opened we X in this X D.C. XXXX. end the sales and $X up recall the increased million dealership EBT total with $XXX,XXX end of by and CarShop new $XXX the CarShop Washington, location and unit retail and our under

and continue to organic and well of efficiencies continue grow As we operating diverse as to we as target businesses, businesses. further our portfolio look across expand our growth acquisition to

close, the XXX XX I to Automotive the congratulate the dealerships ranking. to top best list like automotive the of the of XXXX I'd U.S. top Before XX work XX, listing. News the named by dealerships We other XX than for retailer, were dealerships that that on including X in any more had

ranked country. Our in one Audi of number stores Turnersville the

back be proud extremely and and by Penske top inclusion. Additionally, the including Automotive in in turn producing time, passion thank X call record one outstanding the XXXX top again joining PAG. for these that X the commitment working confidence demonstrates was dealerships here business PAG of the this their record for our our best. Automotive the diversity, efforts U.S. all-time announce to published Report places At your in to our for performance the of to very results and In Automotive the diversification. nationally, the in also promote I'm Public it you XX remains to for Group. the honored We're equity Teams and continued and the drive Thank team on on accomplishments pleased team for to Penske like for together strong, today Reputation to listing reputation.com. are Dealerships us first operator. I'll our by over of I'd closing, their the our efforts ranked rank of Group benefit

comes Inc. Rick Instructions] from [Operator question Nelson Stephens first Your with

Your line is open.

to for landscape M&A PAG balance deals your has active, major -- the I'm been curious announced quite we've less environment PAG. bit. a I and the of have start, less strengthening some has guess, recently. PAG the and view pipeline the sheet the multiples been seen been across

there's place marketplace, it's with some is been deals know XX,XXX across space automotive think I the franchises. Well, retail large and we an taking Rick, XX,XXX active dealerships certainly,

it's big sandbox So a obviously.

for consolidation. provides think I fragmentation opportunity

today, a available. I that will smaller With become number there's of think dealerships the investment required

are I with think the framework think would you've looked contract. we've completed many I the $XXX some months, And balance XX provide also under organically. of to as looked input the that growing last think we've the and basically, then buy today over at require we bigger our standpoint million them deals seen see, agreements that revenue with manufacturers. of another CarShop deals And opportunistically from XX roughly could in. that I And with we We're CapEx of at the and of expensive. sheet. invest XXX things We've that the

will have We X added locations.

a standpoint billion And XX next probably to I the and the We when remarks, moment, XX would the new OEM, earlier businesses not a we looking have, about see quite are on multiples under we're acquisition. points. go the less is XX%. of looking same-store on opportunity that That's and our X auto, at I do forward $X commercial at at advantage retail only basis, with are as are think mentioned a returning construction over in we months we'll but year truck Freightliner growing that sales. lead taking consolidation, the And who's my over in at bit these dealerships as that at look that divided, in be from what also you're X%

CarShop sure. for our to end at our getting Shelly units So be we're a certainly But key dividends we'll out business, we opportunistic. of reach auto And mentioned grow have day, XXX,XXX to We capital are to that, think that I repurchases. I that is to the from our -- share end with CapEx of I the the think and by the going not XXXX. mission of commitment allocation, continue think, retail

are are to I So profitability deals great you and the And just it this done in our business. the me, opportunity think peers. shows the for

visibility future Also, kind at watermark or into to of supply, Do we're think flows. here any decline? inventory XX I'd you like days, start inventory with to a new, low ask all at

as yesterday Well, we to number. the our conversations here get XX going had together as add total were days international, talking at to as about it And out. inventory all you I've look in U.S. late the

we're there's margin look that fixed. luxury they not not I the the small get to XX% next supply demand. And prioritizing market at in December. And the side, the to make we'll where you comes into get or months. we'll I are some see models, pipeline. think building that off those. it's because think it's the that, the in But the sold more is think smaller they premium lately. don't cars most not coming selling going I the is everything for the We in money. on there amount. is XX a for vehicles honestly, see the the when OEMs see because They're chain that don't truck was And which see And people November, going opportunity U.K., down just quite

our the there's can We're inventory. companies and order when the But I All leasing being our to with levers think business sustain be leases at customers. available. this all us to groups point. usual we OEMs different able forward So are at extend going as looking companies as we they're go that to keep I here. finance we dealer can it's them to and customers the so pulling cars ways are for Tight think stickier looking

building that -- the they're premium everyone that really would overall, looking the down So supply the -- here, luxury the at at people and some I moment, market the of are else we were we outperformed we on normally focused additions and have and accessories was have. don't maybe and market down chain only the cars XX%, But think X%.

feel market be while. we will where certainly and for I the that little here we a choppy a So think good are,

Merrill from next John of Bank question comes your with Lynch. And Murphy America

Your open. is line

you Shelley, the thank here. Roger, Tony comments for and

first question aggressive I down on you're dealer question right of following a repaying groups being more Just by debt, you're leverage. and And towards taking some but Rick's first much actually and cap other capital on up allocating leverage the on now, are mean, taking growth. allocation.

you kind more mean thought the you mean, we a it that it summation, of up are sheet, to same-store growth, cover the that would is balance the think if I is give how loading consider much what's on of And us out or if maybe quick doing two, wanting versus curious you kind the a to And just if opportunity? you be goal balance put laying XX-month I and of get for that that, allocated? are curious, other something bigger where capital better revenue to just aggressive XX- process that here sheet of dealers that XX% how you I'm So much with acquisition? lightly. can decided of

diversified. Well, this. let say me We're

a on see we our certainly acquisitions. truck mentioned got capital of So now, we number apply for from commercial that looking it the I side, earlier cost of we've There's opportunity And areas that a no I the actually capital. perspective, allocation right is think an question the we're as positive can us. growing. side, at that Freightliner about us

from I $XXX $X.X at think a it about, million standpoint growth to there's in you just our I I And we've cash. XX% liquidity, when got at look at billion that question you look XX-XX, talked we're about no think keep the in simple. plus

out the on the lines in at we're quarter. So great a Nothing our position. end credit of

roughly We have is $X.X years. are X our bonds, X which Those billion.

and off hundred. of of they're mortgages couple X.XX have before the paid good. think are some I And a we rates

don't from looking at supply we're and think interruptions I day, looking the I at in deals when are you're chain of looking at at with XX, in biggest a probably of some these a because knowing end market right great the and I'm profitable the multiples go trailing years. think market most to where pricing you're going the market now we've many had looking at standpoint, these So not shape. But

areas going I this nothing right to we've mode. be number. with if we're market the patient say to that But a we months. where to would But front very passed, lever if we'll past, we're understand X.X to want that look what move And to I on, is try big X us, over think to be take at and chance we think moment, we'll scale we we stay the selective. opportunities I the deal. a at have we think my we get now next have going can these. us But down where in I away. So leverage I to of to In a consolidate, -- and my And up in keep big a right bring add look wanted for XX we can have and there that and could in

mean follow-up we you redeployment XX months and proving think being the or opportunities conservative next to as I think you've about revenue themselves, a the acquired beyond taking of may acquisitions about that kind we you're going down, in forward might because mean up conservative that if end I sheet just forward? over growth to And think the that. somewhat got balance avail is way something about them, via Or would a growth go be so. time be going think firepower should that leverage after somewhat to that over that?

Yes, And our to into down we have at say looking towards realistic I and if would I and revenue conservative. what from year-to-date acquisition store think what and when I that's And looking we from standpoint. same put XXXX -- a look, work then number looking it's is potentially you're number. have a think an

that's think new exactly a if hand, got same-store. deal the built that on. opening. what's early a opportunity of the And other CarShop buying out perspective points us. these do I Remember, available to to from big were much there, And a what we realistic. I think company. is that's mode got on in there's pretty the we'll we We We've see grow how just

we the over have it's CarShop. to with you less. front to have I in grow we ability of framework think with don't at many lot look have that that now, of us We the and times OEMs, structure and with the when the a -- CarShop, the right areas deal some capital,

here internationally. has really brand both off domestically and the think I taken

going to be that's So a certainly focus.

on SG&A. second a just question then And

you because in just where of go. SG&A a you how percent out. You've talk going the know hard I'm think about terms heads I should don't of I lot forward? I do lot absolute think that's or taken about of But if a know in of costs mean, costs gross. curious there's SG&A will kind can or I total mean, gross SG&A to you think moving pieces. a you

the at think taken it's When since where overall, from X,XXX during up variable comp of Well, interesting comp overall X% I almost, was have. SG&A, was about quarter. down about people don't out our and basically people. at that look anybody. XXs. quarter, based the during just pre-COVID and our you margins we'll an mislead was from I our But look to we've want than that -- at looked almost XX. SG&A, I standpoint SG&A, the we and the That better be on $XXX We've low We're we come that today. But million in probably and

the low I might a basis. much think better driving is looking on say going-forward XXs. I number gross than But it would a be

the and trying of create helpful. are almost will doing about as or what initiative. to then digital just a your are that efforts I lot you investing in other a with And consumer, kind lastly, appreciate because ultimately newer overlay analogous to of That's some of with the newer think efforts But Cox the how with dealers you initiatives. could a you're in. of just they curious and And which mean, similar now a digital is interaction dovetail automakers on bit the also little -- it's if much what I details a that talk about

you're near compete they're what heavily some to ultimately one these term, in automakers doing term how because maybe their are pretty extent with Cox; X, doing efforts. and think invested getting digital you the interact with systems or way well how curious Just interface, do as longer

when looking of We've at But look it. Well, third-party in using And sites about That's with We away moving have that product excellent. got We've gotten Cox think them they're at the end the getting also partner the end media. see you other the I then important From the Cox. good perspective, the sites. I all from and very very think They're off we XXX anybody got think units and kind on now know that it's at hybrid really lots or look our if I with do It's these of it's Cox have But stages, are CSI I've got right watching complements dealership because digital this we've to issue. cautioned with approach of that all -- use on sales. to little a we that the we piece, probably OEM point, the so the of because early and or a rolling has social to units you site e-commerce into we it's platform. is spent the people, And day X,XXX opportunities. you about the which it. and end, they're out directly most OEMs things I a at the But start both at on year only at hand, successful. of . the it. people done platform we've either one all that is platform. thing an a want all --

to your is going like floor like it's relationship financing. of plan, your some So of your part be it's

use has has has you anywhere. Lexus many their to think don't I path platform. monogram a smart And and today, want Toyota and

take of got up position we're a at. are those these we signing we the I good think in as to that And today for all go a forward. in So look process

selling key, going kick we still for we're sales me, are tires vehicles. going and be come that's to sure. I but the So going have have to And the brands think certainly key. people think in are just is be luxury the But the because Internet premium to that to I not going of omni-channel to think I

payments, you in service look continue over that today, quarter. online We And grow. between our about and appointments payments service key. at is when our appointments, had online think BDCs the to this You online the $XXX,XXX

$XX almost collected we think during payments. I the online million quarter on

the is because this $X,XXX. me, payment to key average is So almost

used for vehicles. new and we're more using online this obviously, than just selling channel, So

with comes Moore next Truist. question Your Stephanie from

talk to little a bit. wanted I

side, we're bit truck your supply speak did the these a trends what auto on on benefit there's a commercial JV touch the But and maybe seeing you what retail just the little well on having disruption. to longevity seeing underlying side retail freight as on obviously, as expect the whether could chain environment, both from You nice now. trends truck you these business as might of as environment, But some attributes commercial you used the well maybe as shop right result of anything out maybe about on market the talk of or pricing it's a come the or positive some that [indiscernible] like we're that?

I got a little go bit. back Well, we've to think

As to and most the and of for drive goods you without move moved the of was XX the driving running X we their ago. And know, the that's logs business what and XX-month here shortage that what's truck next that's here maybe backlog, there's a XXX,XXX requirements, position trucks going and to a XX can't people my certainly now. units a has log instituted have this that, that able yet for not XX, right that's almost with are months. from because do where get prices now by at to are fleets at the day, hours books for electronic standpoint point. to drivers, And OEMs, the months heavy the even And now that XX perspective, is truck core. today, now. more That's the new happens up And what run they're maybe from goods. And to being see in you this used And right created breaks XX% demand can't done. with that's driver U.S. we the get able truck a of When in look duty business we drivers several

right big on So And know having down. that's their the to been that's these also focus take value, it is biggest months. that this delivering And -- first think delivered running hearing, OEMs number But right don't to sitting we're maybe now, are on the some old see at trucks trucks, trucks to trucks And I us. that which have the should parts. we're help is that drive based but end now me, a the another will up the And on I quarter, of in ground, without this the down. of are X completing issue used I be Freightliner quarter. X backlog slowing to going making they're truck fourth probably going helping what

to going chain out, where should from supply been. have XXX XX at that's this So whole least push late it to days

that's business I a So being extra obviously on the in, rental of equipment, people from because standpoint it see side need commercial leasing the our for us business truck positive and the we're it's rental.

whether Absolutely. strength, dividend, obviously, -- really allocation, through really the last down. helpful. in over it's And then year, I the purchasing the capital think That's have seen whether shares, raising the debt pay

but share terms repurchases think where debt come on up stand in of do paydown, months? I we out look already for opportunistic As as XX you forward, has next you this call, look M&A the continued

got repurchase can I now going base. we XXX that would. -- something have dividend a that's we that's pay will from moved the debt July. share of dividends, from debt downward to continue mortgage have $XX perspective, really have that of perspective, And Well, the that grow be million back a which we to Board, we've which authorization we think just we a variable and that we really in right to paydown And we that some from

forward. allocation So Board we'll we'll look with and going December, that at in sit our

we're got we've we develop our maybe and about perspective, opportunistically, a CarShop strategically, absolutely So and We M&A, side, certainly automotive to of which going part invest buyback. we've when look truck commercial from talked got retail share the in then at business. the

areas we the to then up, So we're a market where go use going I capital. our is. again, for step to big need we And don't But deal, to to can if think there's our it plenty extra there's keep of leverage capital.

book billion only value have about assets. $X.X leverage estate any to We any and now available moment. the $X.X billion XX% -- credit of standpoint being other of our that's got right in at of lines, from merged other without We real the our the

next Ward Mike question comes Benchmark with from Company. Your

the way way capital these as a low requirements at there or rank you far capital you to a when there is requirements whether from points, they're rank look low M&A, Is when high distribution, open CarShop, truck investments, to to those? high growth as to do ones are either which

Well, to going I'm just perspective, as to come from take it a it CarShop mind.

be significantly place. investment. had the When from in But $XX store Brunswick the between I build one you probably return returns, look just to would and in opening opened in same CarShop lower X% commercial a somewhere locations truck over on return about you I and which greater about the, much retail a they're truck sales, think on And at one less investment if say, million the luxury have just perspective, same. those they think was X% a New in this it's X%, location. investment X%, think premium looking the is We the we're at in is we one than when X% total. at side, We're sales. Phoenix, look week, on the I And

a us. also become would certainly for that priority So

that that gen about grow much defense, we in start power to big the So we -- haven't have is talked to business which there. Australia, grow as also, opportunity we have as we capabilities continue

out contract and with today, have our single -- some we and we And forward. on-highway defense our going We continue source certainly to invest government is the facilities And there. on have business in there. have equipment mining

contracts, some an to government more on X- certainly profitable be vertical have long-term with the also. quite will area get are in we there capability to spend and those order would those XX-year and money our So

open and does with up bringing ventures, Japan So them Japan, from opportunities with partners? your that additional joint in in -- your

There's We're ours. Mitsui of and -- wanted now a big no to with Honda. partner question. Toyota is really We a player

a We're risk. perspective, dealer years. BMW in about We've So the for do was Alpina from requirements we Japan. be that did of and that all And accounting from a or in what probably X wanted now X ago. to joint We're operated the feet We distributor and there there. big [Indiscernible] for a controls our business wanted years we number what venture was of a understand wet get there market. to

think team do that Ferrari, us have number along the times place. platform, it, to wanting I us and expect in many. management we have to would OEMs to add look have at our of and to with and come you the with we And We when Rolls-Royce a

former partner Chairman. to nonexecutive moved has Our

some an So done really job. learning a years, from has a oversight we learned we OEM really still have Japanese great side, business, with have and Japanese, that's American the who's the wife now he's been came But X there him. for a gentleman

area the now with place So we're go will that us. in we'll we forward position be and a for a controls and growth in think

you A couple the off benefit it of your questions on is at of investment for Shelley. Shelley, Is cusp Or When investment and does Or your right irrelevant? maybe look plan? grade. up first. grade? moved to debt ratings get that there starting you any just to

No.

in upgraded Moody's, us of May, sheet, have grade to our investment can with it those for Yes. said, never we the below It's for hurts a those now. so we're and but Like priority us BB+ strength rating discussions. with certainly have to agencies. Given us, S&P right not just balance you BAX discussions the

leverage Our X. ratio is at adjusted requirement the Xx when lease is now

evaluating had We're as do perspective, just have about on restrictions. from mentioned we upside XXX cushion, earlier. basis potential policy an Roger future the there's some bond rate interest probably points Clearly, So offerings.

want at look a downgrade, we we significant allocation wouldn't as strategy, want up potential to capital pass a So to opportunity but we risk our wouldn't either.

over inventories flow as on year What or is next cash impact the X? the replenished

the our Well, of inventory purchases we floor majority like.

So quick if return at not really a all, levels. to eliminated the as we're prior inventory to Roger mentioned, and expecting, is impact

demand, So off lease to we the starting seen years. returns tariff those with we've pent-up continue And as the production come a of stronger be buildup particularly see will to returns gradual.

very minimal So impact.

one just one. And last

Some of your finance the business. to are into get peers starting

into similar it plus 'XX, the Or Given the cash, it's you so going all? levels, you're be arm? looked of that through and at of it have a minuses much at and like looks least you starting are generating finance at end considering

Mike. acquisitions. store We our we've great PTG of The experiencing some returns that And April. those capital. comes in recent PTL acquired the and Mercedes have, or to pros time, on from to decision time even pretty about, down typically And cons, we talked evaluated here return we're as

transactions our we with penetration majority leasing luxury of side, have our the are XX% sales. new the So rate an on side plus and premium on vehicle the

So our I'm when finance makes company a really now. business, a subprime small at you starting look right that and sure not of sense lot

Mike, Yes, we've looked at it.

In borrow fact, strategy money like at can. We latest can't item it our was the a discussion meeting. banks

And to XX us or balance credit can securitize want, XX And it the to be the in over the in have returns able order we kind of lease sheet, months there want. we're XX starts over have certainly, we time. go to to months So burden your term of months, take we the going to the attract or of in get in on contract. down that we to for depending the accounting then requirements income to rating the account kind return order

business, at would X%. I right only our say, So when look now, subprime you

So We've to at. take I I people we and seen different, business It's that probably look, this think on. think we're in getting we'll that be a other time. we're continue something not that particular position. good And at into look

And earlier. that we about think talk Just open U.S., points. you more you something these see Europe a expect open well? right, I as and not have to Is X can of? When it's that's just points, follow-up

which Right. designate Well, obviously, we in those got open ourself. we points can CarShop, to

got points the points points X open OEMs of the open open Porsche. had course, we've We the -- We, [indiscernible] some in get in got been we've Austin. to in U.K. Now

good and scale But successful. I be those, say every we a where and to apply we have been we've opportunity, So proven where we've we've had for this wouldn't X you're to going X operator, or year. get

as to bunch So We're build into the new. not identity a good stores we jump corporate to a way way want. of and see able brand you're to CI grow. much We're buying when are that we growing have a not that the meet those facilities purpose-built

as So a obviously positive. that we see

Rajat JPMorgan. comes Gupta with from next question Your

once you leverage. profile. on generating or margin retail side multiples doesn't ask I the flow to you're next Sorry It the again given here on attractive. significant going a automotive look like free to year capital allocation, amount seem this elevated sheet cash so balance over M&A of be just the mean,

some You which CarShop, committed kind well understood. capital for already have is of

like have cash so in this generating $X big are billion, do to you flow. like a or like buyback, to $XXX leverage maybe million more [indiscernible] you're consider close longer, add you we of don't like even like like free would than even to given Given a of ton

it would your you big what's cash I free doing the in have of then curious that? on excess interim, And a And take a consider this buyback Just level of given flow? follow-ups. couple

increasing forward the we've quarter. our And had our with is during dividend many have when something much share discussed And authority. that buyback capital $X.XX looking in that was quarters. we $XXX shares buyback And that think million the of been I as meeting. always a gone last buyback that We've of us our we'll start for options over share on thought for We pretty option an that I Well, earlier, prudent said December Board. we you certainly discussion at going-forward consistent, that's basis.

that future, same could and be those Now we'd in by that Board, time. decisions and take reviewed conditions at those make the the would place

GPUs. Got it. to gears And just shifting

a vehicle new average. through rate run the of likely than the that side, you're assuming absolute the to exiting the get your better I'm quarter, course On continue GPU higher the third quarter

quarter from do more to sustain think learning kind -- number peak normal, year X,XXX you? the of more do for normal see the quarters? but based Just can Or like back for you're few this coming not third OEMs, you high you this the on we is what a supply,

the the Well, up grosses entering And our quarter I new I've that up. had vehicle quarter, at there also and no -- went went think August I that was month-to-month. before. look July, question grosses question September, exiting when and use then

the think above at price, end who that's MSRP, price, of sales day, selling the I suggested when are at people you the look where sales manufacturer that. some

dangerous it territory that's that of think a time, customer you long a because what I does period to your know. really over very don't now right

you're to ground on the good that And the and think car pipeline, we're margins. on the used the So side, because I close into to we nothing you're hold selling have to continue probably going top.

it's whether supply. what sustainability of today, will the right Now we within have think be that $XXX grosses dependent now I on the

Instructions] Morningstar. next Whiston from David comes [Operator with Your question

taking space. too you on just earlier new it's talked Roger, First, orders truck long about for the -- there's trucks just [Indiscernible].

there -- a of there are chain more the supply that purely that, that on are issues top is So some chip Or shortage? is of problem?

than the don't people lots Listen, side. chips freighting tires they're other Yes. of realize truck on things now, air heavy-duty just

be requirements said, the human again. the and key look -- manufacturing workforce. meeting. at their businesses are at be look think one other I the could to is to And crank they up they're capital they people down people. losing some X I again, So trying that to plants here day, their we They've OEM you they of XX% back thing talked it. When have and There's and lost trained. day, any

up you do morning. how plant Monday So your show on run your don't on quarter people a

seen this honestly, we've But quite much isn't marketplace. trucks. supply demand is and the for And there's down our So at business heavy but the impact Transportation Penske rate that with in because you pretty the XX,XXX you'd units, look it's utilization a on I'm up is of we our And saying that any Solutions now, total what truck And slowing on tractor right amazing. see OEM, this not particular when our see base, don't medium-duty XX% is really. which there. big

on are come deliveries the But think I and which focus don't pushed probably strictly QX. to have those Some that's all just And the when the units before consumer the of way, space. you're they've sitting on to tens going overall, of in XX% of that lots finished, got of will They is they QX. back out the to trucks. be components. of new to availability QX build have heavies XX% aren't starting just the thousands of the you more rental, into one And OEMs see

people of particularly terms a helpful. causing wanting then at havoc with U.K., are not to even a of of vehicle? that in in your stores Is a That's dealing And the lot fuel. consumers lot buy shortages,

We that. I see -- don't don't

electrified think I up. have vehicles gone

do issue there these drive a big bigger Eastern front of of them electrification. demand a that you But COVID still I right don't of question is have lot Europe the hit me, Western, has -- come drivers movement some rigs If back. big been some of number with but in to is to when the and to to there's the there's fuel. because back look no haven't shortage of movement Maybe and strong, a -- here went that

In -- you Los places as sector and most standpoint vehicle. fact, if no Birmingham they Birmingham issue. which with big the the Hybrids to you drivers pay now like in because some a hybrid that's And vehicle, what London taxes. has the have I from company ICE think pick. Johnson like the pay they hottest And And when this right a an and buy you that's of people electric cities people into -- certainly come X,XXX tax was had giving a engine. an cars, in in factor Angeles have to an be in seem the what's to equipment, to some in order U.K. drive for gives of opportunity go into permits to that

So that's driving electrification. also

Okay. those cited release expense reductions, coming are where operating the primarily And from? press PTS,

Say that again, PTS?

that the Yes. was or expense There's release. reduction. moves from headcount operating coming reduction curious if just press was side in operational I

business. X%, about It's got it was or wasn't It X,XXX our efficiency business. to We've across PTS. David, people specific -- we're our to down not and mentioned, X%, -- It's headcount business. our Headcount. specific across Roger overall just

a I'm desperate? question, any saying, wait fed or are to until shortages people few use, new consumers this. a get up the the and just not on it's going ago, CarShop to conversely, change traditional everybody asking compared inventory, Are Okay. more getting to or I'm side, are And you have last just months I'm with a going whether more you seeing

the things almost of but It's one new course, they're buy high. sticker car, the can the on available. so use side think getting of are that I almost a like is not prices shock

too, and they people see the of another in pricing order I be vehicles, option. right might side to have new now. So right get some then on what sitting availability That's

back call no are There at this Instructions] Penske. further Roger I'll hand [Operator to time. questions the

us see and quarter. Jerome, joining everyone, next you, thanks, today. Thank for you We'll

you. Thank Thank that conference. you for today's all joining. concludes And

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