Q4 2019 Earnings Call
[music].
Good afternoon, ladies and gentleman welcome to the Penske Automotive group fourth quarter 2019 earnings Conference call today's call will be recorded and will be available for replay approximately one hour after completion.
Through February 12 on the company's website or to the investors tab at Www Penske automotive Dotcom Oh, no introducing after reporting companies executive Vice President Investor Relations, a corporate development. Sir. Please go ahead.
Thank you Paul Good afternoon, everyone and also thank you for joining US a press release detailing Penske automotive group's fourth quarter 2019 financial results was issued this morning and is posted on our website along with a presentation designed to assist you in understanding our performance in our strategy as always I'm available by email or phone.
For any follow up questions. You may have joining me for today's call is Roger Penske, Our chairman JT Carlson, our Chief Financial Officer, and Shelley Hulgrave, our corporate controller.
On this call we will be discussing certain non-GAAP financial measures such as adjusted income from continuing operations adjusted earnings per share from continuing operations and earnings before interest taxes, depreciation and amortization or EBITDA and adjusted EBITDA, we prominently presented the comparable GAAP measures and have reconciled the non-GAAP.
Measures in this mornings press release on Investor presentation, which is available on our website to the most directly comparable GAAP measures.
Also we may make forward looking statements about our operations earnings potential and outlook on the call today.
Our actual results may vary because of risks and uncertainties outlined in today's press release, which may cause the actual results to differ materially from expectations I direct you to our SEC filings, including our form 10-K for additional discussion in factors that could cause results to differ materially at this time I'll now turn the call over to Roger Penske.
Thank you Tony a good afternoon, everyone I'm pleased to report another strong quarter results for P.G.. We reported this morning record Q4 revenues, which were up 8.1%.
10.2% increase in earnings before taxes and improvement in Q4, SGN eight a gross profit up 70 basis points.
Our 110 basis points when compared to adjusted 2018.
The 3.9% increase in Q4 income from continuing operations to 101 point Sixmillion and related earnings per share increase of 8.7% to $1.25.
When compared to an adjusted Q4 2018 record income from continuing operations was up 7.1% and related earnings per share was up 12.6.
A shift in mix of earnings to be heavily weighted to the U.S. increase the effective tax rate in Q4 from 27.4 this year compared to 23 point for the same period in 2000 at 18.
Before discussing our results for Q4 today I'd like to highlight some of the achievements we had.
2019.
We retailed more than 500000, new and used units.
And increased our annuity used to new rates show from 1.28 to 1.28 from 1.2 all.
We generated over 23 billion in revenue and we earned 435.5 million an income from continuing operations.
And $5.28 in related earnings per share, which includes a net 42 million headwind in the UK, representing 51 cents per share.
Open to a greenfield supercenters, we generated nearly 700 million and cash flow, allowing us to increase our dividend four times.
Currently yields 3.4%.
Repurchased 4 million shares of stock for 174 million, representing approximately 5% of total shares outstanding at the beginning of the year.
We have a 200 million dollar share repurchase authorization from our board at this time.
We invested 226 million a net capex.
Which includes 42 million in land for future development.
Also acquired 1.1 billion.
Estimated annualized revenues.
In total we returned 305 million or 70%.
Our income to shareholders through share repurchase and dividends.
We returned 8% to shareholders when compared to our market cap.
We had 33.
Hey, Jude dealerships or were named best dealerships to work for out of 100.
And this year's automotive news.
We had the number one dealership in 2018, we had the number one dealership.
In 2019.
Since 2010, we've grown our revenue at a 10% CAGR from 9.7 million to 23.2 billion.
Income from continuing operations, a 16% CAGR from $119 million today's reported earnings of 435.5.
I think our results continue to highlight our business at our diversification strategy.
Let me now turn to the details of the fourth quarter.
Our retail auto business represented 88% of our revenue at approximately 87% of our gross profit.
The good news is total automotive units retail were up 2% on a same store basis, new was up 1%.
Same store used was up 3%.
We outperformed the market both in the U.S. and the UK during the quarter.
In the fourth quarter, our CPR sales in the U.S. increased 12%.
At our CPL represented 43% a reos vehicle unit sales.
Same store gross profit per unit retailed was strong increasing sequentially quarter over quarter.
In Q4, our new vehicle gross profit was up $245 or 8%.
Used vehicle was down $25 or 2%, our finance and insurance was up $95 or 8%.
Our total vehicle gross profit per vehicle retailed increased $187 to $3519 are up 6%.
Our service and parts revenue same store increased 2.7% or 2.9% ex foreign exchange customer pay was up 4.2.
Ex FX already was down 1.1, and our collision repair was up 5.2.
As we said before business conditions remain challenging in the UK. During Q4, however, we've seen improved business conditions and 2020 with an increase in order inquiry and we expect the market has some pent up demand.
Let me move onto our used vehicle Super Center business, we operate 16 dealerships.
Six in the us and tenant in the UK, we expect to grow the supercenter business through a combination of ecommerce initiatives and Greenfield sites. We opened two locations in 2019, one in the us and one in the UK both locations, but had successful openings and outperformed our initial experience.
And at our profitable.
We remain on track because the develop a four new large supercenter sites, we expect to open two of these in 2020 and another in early two more in early 2021.
In Q4, retailed 15400 units up 3.1%.
Generated almost 300 million in revenue.
The average gross transaction price was 15700 and the average gross per unit retail increased 3%. The 1900 51 dollar for our gross margin of 12.4%.
Looking at our retail commercial truck dealership business in the fourth quarter.
Our commercial truck business retail.
3728, new and used trucks and generated 600 million of revenue and had a return on sales of 3.5%.
Service and parts represented 69% of our total gross profit and covered 120% of our fixed cost.
Due to the acquisition of Werner trucks, we've made in July our new and used truck sales increased 41%. However, our same store unit sales declined 29%, mainly due to the timing of deliveries and bankruptcies of two of our largest customers and the fourth quarter.
In 2019 class eight retail sales in North America increased 6%. The 334000 units at the end of December the backlog was 123000.
Act research is forecasting a return to more normal demand environment in 2020, which May result in a potential decline for the class eight truck sales approximately 20% to 30%.
However, with our recent acquisition Governor trucks that it was last July the strength of service and parts.
And a positive trade cycle at many of our OEM customers that will come up next year, we expect our business still perform well next year.
Turning to our commercial truck distribution and power system business.
We are combining the two entities to operate under a single structure called Penske Australia.
In Q4, we generated 120 million in revenue and 4.8 million in ABT, an increase of 1.9 million compared to Q4 last year for our return on sales of 4%.
Turning to Penske transportation solutions.
Our 28% ownership provides Phd with equity earnings.
Quarterly cash distribution and tax benefits generally associated.
With accelerated depreciation.
For the three months ended December 30, Onest 2019.
Yes generated 2.3 billion, an operating revenue and income of 126 million.
Accordingly, we recognized 36.4 million of equity earnings.
Over the past 12 months, our investment in Pts is provided cash benefits of $90 million through distribution and cash tax savings Pts is now managing a fleet of over 320000 vehicles, although the class eight heavy duty truck market is expected decline in 2020.
The longer term nature of truck leases, along with solid rental logistics businesses is expected drive another strong year performance in 2020.
We continue to improve our digital and enhance our capabilities and customer tools today, we have over 58000 vehicles online and ready for purchase in the fourth quarter over 40% of our new and used unit sales in the us originated from digital sources.
For the first time.
We saw an increase in traffic, an 18% increase and leads at a 40% increase by customers engaging and our Google business listings.
We also completed the rollout of dock your pad technology to all of our us locations, which allows us to engage customers digitally by creating and processing securing funding of the transaction electronically, while improving efficiencies providing cost savings at our back offices.
Customer satisfaction with our self service tools, such as ability to pay online make appointments and online estimating for our collision centers continue to improve the customer experience.
Their success has encouraged us to pilot new technologies, such as videos and digital pictures for service updates and by your car now.
We continue to enhance our proprietary online close bit wholesale auction site in the UK were approximately 4000 active online bidders and we sold 21000 vehicles to that source last year.
Finally, I'm pleased to announce the initial pilot or new digital dealership on retail sales platform in UK, we're testing with our Infinity partners is performing very well and we continue to rollout enhancements that will resolve and a full digital transactions.
Looking at our balance sheet at the ended the year, we had 28 million a cash our inventory was 4.26 billion compared to $4 billion for last year.
This increase is all related to the Warner truck acquisition, our supply new vehicles, a 71 days compared to 72 last year. Our use was 52 days this year compared to 57 last year. Our floor plan was 4 billion at our non vehicle debt was 2.4 billion, which 33%.
Is that fixed rates.
Our non vehicle debt increased $144 million of which 134 main was mortgages to take advantage of low long term interest rates.
Our debt to capitalization was 46% consistent with the end of 2018 capital expenditures were 245 million, which included.
42 million Atlanta acquisition for future development at the ended December we had 700 million and liquidity.
In closing I'm very pleased with our performance in the fourth quarter and almost recently completed year and remain optimistic about the coming year, we remain committed to our diversified model.
As you can see generates significant cash flow, providing us the opportunity to make acquisitions and return capital to shareholders.
Our service and parts operation throughout the organization provide recurring revenue, which generates 46% of our company gross profit.
We continue to demonstrate that Phs business model is much more than a monthly new vehicle sales are they are the SAR.
In total we returned 305 million or 70% of our income to shareholders through share repurchases and dividends.
Thanks for joining us on our call today I'd like to open it up the operator for questions. Thank you.
Ladies and gentlemen, if you wish to ask your question. Please press one and then zero on your Touchtone phone erosional acuity time depressing the one in zero and if you're using the speakerphone. Please pick up the answer before pressing the numbers what's going if you have a question. Please press one then zero at this time.
One moment please for the first question.
Thanks.
First question today.
Well come from line the push out group, though with JP Morgan. Please go ahead.
Hey, good afternoon. Thanks for taking my question congrats on the quarter.
Just had a question on the you.
Supercenter plan for 2020 looks like you plan to do new stores.
One question was our loading build going to be in the last and then.
On the Supercenter side.
Any discussion around potentially approaching the market differently.
Perhaps in lines of what Sonic Intuniv, Echopark and I'll follow up thanks.
Well.
Thanks for the question I think number one.
We will be opening.
We have to really points, we're in the process of.
Completing one will be in new Jersey, and one will be in the Phoenix market.
And they would they would be operational hopefully both of them from one for sure by the end of 2010 20.
In the in the UK in Nottingham, we have a site that is probably 75% completed we would expect that would open mid year and we have another piece of land and Stoke which that we will be working on following the completion of the Nottingham site. So to me well continue to build bricks and mortar.
From the standpoint of of the Super centers from a sonic perspective, they have a different model probably higher volume lower margins because when you look at our margins today, where in the 12% to 13% and you compare that to the traditional used car business, which I think we were at 4.7%. So we see this.
This is a is the way we want to continue on the other hand is there an opportunity to have electronic opportunity to do the same thing where we don't have units.
Ill and intend dealerships data for the customers to view, so thats an opportunity in the future, but I would say that we're going to be going to be on the same track. We are and we can see that to profitability of these stores that we've opened at least in 2019 at probably took 60 to 90 days and they were profit.
Double.
Got it.
No. That's that's helpful.
And now.
On the U.S side in the us looks like.
The fourth quarter.
Gross per unit was down substantially roughly 9% I mean is that just a function of.
The new still ramping up are you just rely then or is it just no just trying to drive more volume and sacrificing some some of the new there well I think if you're talking about to use supercenter gross.
Obviously in Q4, we had the opening of the stores and we don't have mature salespeople at that point. So we would tend not does tend to get full margin from the customers, but I think thats. The same thing you would've seen in any and Bristol in the UK. So I think it's a mature salesforce and again, there's pressures I think we have a little bit higher costs.
Cost of acquisition to get the right cars, we want where probably spending a little bit more in reconditioning and that would take takeaway from some of that gross.
Our next question is from Rick Nelson with Stephens. Please go ahead.
Correct.
Hi.
Roger Tony.
So I know you've met.
Okay caused to 51 cents year over year.
Like I forgot your crystal ball, there and be thanks.
It's possible that you could recover that.
Decline in 2020.
Well I think I think we really when you look at the UK would we really got to go back and think about Brexit and what happened to us.
During really is the last 18 months, but it really became really.
It really tougher when there was no decision mid year in the UK. So when UK exited the EU in January at the end of January obviously lots of things happened and they have a year now to negotiate trade agreements with you and other countries and if and I think they have a pause maybe in six months, where they could push that out but boris.
Johnson My understanding is.
To be sure. They completed at the ended the year. So what we've seen at this point a much better business condition, and we think theres consumer confidence and there's no question that.
People have a better understanding where they are and there is no more uncertainty as we looked at.
As January our inquiry rates were up our margins are up on I think generally people feel a lot better with consumer confidence where it is so there's no question that we're going to see it all us back hopefully back to a strong.
March which is is really a registration months. So that will give you a pretty good idea. We also have to look at Q1 of last year still was a pretty good year for us in the UK, because we really hadn't seen the impact of W. LTP.
As a world light vehicle testing procedures, particularly on diesel and you've seen diesel probably dropped 25 or 30 basis points. During the year net really confuse the marketplace not only on new but also on U.S. So I think thats pretty much.
Through the process, we had R&D, which is a real driving emissions and I think that.
The Brexit uncertainty really started in March so I think when we look at Q2 Q3 in Q4, we're going to really see some benefit and quite honestly, we've probably got FX and are you in our favor as we go into into 2020.
Okay.
That sounds kind of.
Helpful.
I know the used car superstar Bozos UK there were some management.
Changes there.
Im curious, what what putting new team.
Hello someone to change whose.
Hey, Matt.
We will improve the performance.
Yes, when we bought Carshop, we had a three year earnout and the existing management team obviously.
Took the role at that particular point, we made the decision.
Towards the end of Q4 to move on with our own internal team and that team obviously the person Nigel Hurley who's running that today.
Spent almost 15 years and our BMW brand and did a terrific job, our leading brand in the UK and he's brought over a team of people that understand the purchasing side of the business the pricing and also with big.
Big impact and focus on on parts and service I think stock managed but will bring our own people in on that because as we've grown now it's no longer one or two locations. When you look at what where we're going to be 10 or 12 as we go forward and I think that that will make makeup make a big difference and to me focusing on procurement.
So right pricing in the right vehicles and then one other opportunity is we have sitting in our net which is a close bid auction that we have about 4000 people I mentioned that on the call and this is a great source for vehicles now for.
For Carshop they'll probably by this year 20000 vehicles out of say 50 that they'll sell so this is a great resource along with buying from customers at home and then the normal auction. So remember when we bought this business. There was no buying of any any source of purchased from from sitting there. So when we couple that.
Together I think we're going to see.
Really good year for us as we enter into Q2 Q3 in Q4.
That's great.
Thanks Roger.
Good luck.
Thanks, Thanks rack scale.
We have a question from remittance with Morgan Stanley. Please go ahead.
Great. Thank you for taking the question.
When we look at the.
The used truck Gpus that came down from something around 5000 to something around 500, effectively an order of magnitude.
I should we be thinking about that on a go forward basis, given the the increase in used trucks supply.
Well I think I mentioned before at least in some conversations I've had here recently that.
With a 330000 new trucks.
Being sold obviously, they're probably not a market growing too much but those structure robbery, replacing.
Which are now used trucks, which has got to put real pressure on the marketplace as they come in and we're going to see that probably now for the next I'd say 12 to 14 months, so thats going to have an impact on our gross profit. However, we still have the ability of our finance and insurance products that really recap where that and I think that at the.
We ended the day.
Availability of that is going to be supply and demand and thats going to drive that but to me at the end of the day, it's part of the cycle and we got to deal with it and we did that before but still overall our used business as a key part of the overall overall sales process, because we have certain trades, we got buys.
Backs and other things that we're obligated to as we go forward.
Okay, and then profitability on the the light vehicle side, both on new end use were quite strong.
How much of that was maybe on the new side based on the exposure to luxury versus emphasis on profitability and some other drivers on the use I'd be helpful as well.
Well I think when you look at new from our perspective.
Our margin actually went up.
From 7.3% to 7.5 and luxury went from seven five to seven seven so overall, our only place where we lost any margin was on domestic and it's a very small part part of our business and I think our team I said at the beginning exiting the ending the third quarter that I wanted to beat same.
Sure and I wanted to maintain the gross and I think that we've always had strong gross is in the fourth quarter on the luxury side, because it's a big lease market, probably 60% to 65% and we are able to get our strong gross margin at that time and I think thats one of the things that we saw during during the year again, we had we had some divest.
Matures during the year that had low gross profit, which also probably helped us in the quarter and you look at Audi up almost 17% Mercedes was up 13 in our BMW business was up 7%, so and remember Porsche headwinds down.
For almost a year because the w. LTP. So we had the benefit of Porsche margins.
During the fourth quarter, because that that volume picked up both in domestically and internationally.
So thinking about it going forward as this is a run rate adjusting for seasonality going forward then.
Well I think we got to look at Q4 and and so we go into 2020 and will relate sequentially maybe.
To Q4 tick.
19 into Q1, I'm sure, we'll be down some because Q4 as always higher because this the ended the year.
Sorry, the mix.
Appreciate it Roger yes, great. Thanks.
Our next question is from John Morris.
America. Please go ahead.
Hi, good afternoon Roger.
Just wanted to follow up on on on the truck business. I mean, obviously everybody is expecting it to be some some pressure there on the volume side. This year is you have the pit stops the will offset that but what we also see opportunities availed themselves to make some really good accretive acquisitions or maybe some of the so the dealers come under some distress or are more motivated to sell.
[music].
Well when you look at our capital allocation, obviously, we're looking for contiguous.
Right brands on the car side. There's no question you know were were limited to freightliner through our to our agreement with them.
But we see that as a real opportunity and we will be looking to make acquisitions. As you know we built this business from almost nowhere here for years ago and returns have been great. So I would say, it's a positive but again this is a cycle.
We don't we're not burdened with a high capex.
It's mainly truck inventory and I think the fixed cost coverage at 120% and in some cases some of our location cover 100% or their cost.
Sure there parts and service and remember units in operation when you look at Freightliner Western Star and look at.
At Thomas bus, which we represent through the dealerships Theyve got almost 41%.
Of the heavy duty and medium duty truck markets, So thats all parts and service.
And operation, which will help drive our fixed coverage and Thats why when you look at our overall business, 46% of all of our gross profit comes from parts and service and in this business. It's 65%. So I think it's a good at really a good thing for us from the standpoint of support we have some weakness in used trucks.
Okay.
Okay and then just the second question on parts and service on the on the light on the light vehicle side.
You mean, you put up almost I think it was about 3% in the quarter. So is it good quarter Im just curious how we should think about growth going forward and some other dealers have been talking about sort of mid single digit.
Growth and they had to do some backflips on on getting human capital, where there is that the tax in I'm just curious if theres an opportunity maybe accelerate the growth there and what might be the gating factor for you.
Well look I've seen some of the numbers coming out.
The other players in the market we're.
Screaming exchange around 3% I think one of the areas that impacted us this year.
Two of our key BMW stores Big stores, we had to do open points, which obviously one in Austin and one one in Phoenix, which had certainly an impact for us and also BMW.
Which is our largest brand reduce their maintenance planned with a customer from free maintenance from four years to three years. So obviously that had some impact on us from a parts and service, but I think that.
Our plan really is to be single digit some somewhere 4% to 5%, which I think we'll be normal in the market, but again I am not unhappy with the results. When you look at the gross from a tech perspective Theres No question that we're all looking for the same individual.
Same thing on the sale side, Ironically, and certainly body shop, we see our technician.
The age of our technicians and the body shop is growing so were really entering into an apprentice program im trying to build that because it's a very profitable part of our business.
Got it Okay, and then just lastly on X gene and I apologize I missed the early part of the call, but it was a great performance in the quarter. I mean is there opportunity to take these you to take the ratio lower below both below where it is right now at 79%.
Would that be just a function of business mix or is there were things you could do inside the new vehicle dealerships themselves.
Well I think one in one of the key things.
We'll be when you look at the UK remember we had I think we've talked to you folks about a $20 million cost reduction in the UK, we'll probably see 3 million to that in in Q1 there'll be some increases in costs through rent and some facility increases in depreciation, but we'll see that we also.
Got to maintain our gross profit I think our gross profit increase also when you look at the calculation supported that but for us, particularly as we've looked at different areas of the business docket pad has allowed us to decrease some of our SJ overhead as we do our financing do our financing across.
Across the network and overall when you look if.
We got more mortgages now when you look at our business remember we had a lot of sale leasebacks as we returned to maybe out of that particular mode into more mortgages that will help us from an SGN at probably probably impacts us about five to 600 points today, just when you compared with the other payers we have.
Loaner cars is a big focus of ours also when you start looking at our loaner cars at 10% of our parts and service gross we think Theres, a big opportunity there and also from the standpoint, a collision repairs. When we look at our we look at that surrounding those cars, we loaned out and we got certainly back office efficiencies money.
Look at docket pad. This is an asset that we really never knew how good it wasnt until we started using it.
End up with little or no paper in the offices, we can access information from anywhere in the country with your phone and to me that's got to be the future of the business.
Hello.
Maybe just to follow up right is that as I recall I think yes unit gross in the commercial truck dealership businesses in the in the mid to low 60% range is that correct. Then is that business grows over time. It mean that would sort of naturally dragged down the total or is that is that fair statement, yes, 62.8%, So and I think I don't know exactly.
What it is and Carsense, but I think it's probably in the sixties also in car sense. So to me that those will be good things when we look at them when we start to bring all that together. So at the end of the day weekend with Tony just said at 67%. So again at sixties start averaging that that's going to give us.
Benefit to reduce that overall.
Great. Thank you very much.
Thanks James.
Thanks next question will be from Kristine with Buckingham Research before we take that question. If you wish to ask a question. Please press one and then zero Midstreams. Please go ahead.
Hey, good afternoon rabbit congrats on the corridor.
Hey, Chris.
If I can just touch on the auto asinine looks like gross profit same store was up about 10% could you just.
Bucket the components of that Chris I know you asked one of those internal initiatives and just kind of what what what's driving that and also can you touch on what would be where you think is this sustainable growth rate going forward and Tony.
I missed the question you said fun I.
Same store.
Yes.
Well I think.
One of the initiatives is certainly the commitment we've had with docket pad because this is a digital process now where the customer it's much more formal we have less mistakes.
Other thing as our contracts in transit have been reduced significantly which gets us capital to fund our floor planning and on top of that I'd said, we've taken out certainly CMS DNA and we think as we rollout across the country.
We'll see that even better when you look at ETF when you look at our.
And I penetration only 38% of its really finance the balances product and with the dot keep at it helps us drive that penetration much better and I think that's that's key for US as we go forward I see us continuing to grow that with the efficiencies that we have and remember today that the more so.
Our business is done with a captives when you look at that overall, probably about 67% overall or with a captives and.
And we do very little subprime only about six about 6% this year was subprime.
Okay very helpful.
And then secondly, just a follow up on what you're discussing them as being opportunistic and.
The commercial vehicle market and the Danya.
Can you can you briefly talked to kind of how big of a runway you have to grow within the brands that you saw right now.
Well I think that we have a ceiling I think 10% of their business and thats. When we acquire something I think our runway probably has 30% to 35% still available if we take those calculations at this point. So there's plenty of plenty enrollment I think was however, they put that on when you start I think the goal of.
Freightliner is to have less less owners and have a bigger scope. So they can invest and I think that our with our track record hopefully to date that would give us that opportunity, but thats always a question when you get towards the top of that cap they've given us.
Great. Thank you.
Good question from Stephanie Benjamin with Suntrust Robinson Humphrey. Please go ahead.
Hi, Stephanie.
Hi, Good afternoon, I was hoping you could just maybe provide a little bit an outlet for the.
Penske, Jeff services business, some nice growth that we saw over the last couple of years, maybe what you're looking at as you kind of move through 2020, Onee any color there would be helpful. Thank you.
Well number one we had a great year I think our profitability went from 448 I think to 492 from.
T perspective, which was a great increase year over year, we obviously had some slowdown in Q4 in the rental business because most of these new vehicles in the Saar of 330000 trucks got delivered so the requirement to utilize our trucks probably was down we also deflated knowing.
But this was going to happen we took out about 5000 trucks in Q4, and we had some lower gain on sale of those shows that had some impact on our percentage of the profit we were down about 1.6 million. When you look at it but overall you've got to look at all the components are full service lease and.
And maintenance contracts that we have contract maintenance you can see we're up in the quarter were up 12% in the quarter.
In full service lease contract maintenance was up five and we had logistics that had a very good increase on all of those all of those businesses have economic Inc. escalators and typically are three to five year contracts. So we see that really strong or the growth we have more customers and we will have that as we roll into.
2020, which hopefully will offset any smaller reduction we might have on the rental side, but one thing we're seeing with all this mode of transportation everybody wants to be in overnight delivery business or same day, we're seeing a lot of interest at mid range and light vehicle that would be class five plus six and seven.
That would be mid range. So we see that really is an opportunity and during when you look at.
The last three months from the standpoint of six and seven midrange they were up about 1.3% and the class five five and six were up probably about five and even the heavy duty was only down 13%. So again I see this business normalizing still have the opportunity from our retail.
Truck perspective to be very positive for us because the mix of product that Freightliner has our Daimler has in their portfolio and certainly you know with 41% to market share the repeat and referral should be should be very good.
Got it. Thank you so much for the color.
Thanks.
We have time for one more question thing that will come from the line of Glynn with consumer edge Research. Please go ahead.
Hey, guys good afternoon.
Just a follow up on the Standalone use is you further scale that business is there any need or appetite to establish around captive financing units in lieu of Carmax has.
So you could sit in the meetings with us if we've talked about this once we've talked about it 20 times and we just don't have the scale at this point to me to securitize the way Carmax does in the marketplace and we think that depth staying with our captive providers that we have today in the banks.
And the people, we have as our premium providers for financing and leasing.
Really what we have at the moment this might change as we get real scale on the used car side can we carve that business out and become a have a finance company, but at this point I'll be honest with you I don't see a lot of traction our that within our board right now a lot of the people of AD experience in this area and I think Carmax has done a terrific job setting.
That up and of course or scale drives that everyday but I think it might be hard just to start from scratch right now it might not be a focus we might want to Porter, our capital into something else.
Got it and then Roger just want to get your posts on the auto credit environment broadly if you've seen any changes in credit availability or any irrational behavior from lenders.
Well as you as you know.
We're utilizing our captive finance companies, but I've seen no weakness.
At the moment from from the sources will use credit credit really remains strong and there's really very very competitive pricing at all levels and to me.
We've seen no reason not to extend credit I think because of our.
At least when we look at the demographics and the credit scoring of our of our premium customer that we see almost 90% approval rate as we as we go forward. Obviously the captives are are very important and to me I don't see much zero financing at this point right now I think.
We see more rebates and well ahead, we have less five only 5% of our volume is 84 months, so our customer because the leasing in the premium side. We see that is if say, maybe a 24 to 36 months, but right now.
We don't see any reason.
For pulling back the captive plus we got unemployment lower people have got their jobs Theyve got income and I think theres, a very very very much the residual values. If they are putting on these quite honestly, we're very very aggressive in some cases that make it very attractive to buy a vehicle today. So I'd.
Outstanding right now that I would be concerned about at least right now what maybe see something later at the end of the year.
Got it thanks guys.
Thank you.
I'll turn it back to the company for closing comments at this time.
I just want to thank everybody for being on and thanks for the sport and we'll see after the next quarter. Thank you.
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