Q4 2021 Penske Automotive Group Inc Earnings Call
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Today's conference call will begin momentarily. Please continue to standby. Thank you for your patience.
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Speaker 1: Good afternoon. Welcome to the Penske Automotive Group fourth quarter and full year 2021 earnings conference call. Today's call is being recorded and will be available for replay approximately 1 hour after completion through February 16th, 2022 on the company's website under the investors tab at www.penskeautomotive.com. I will now introduce Anthony Porton, the company's Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead.
Good afternoon, and welcome to the Penske automotive group fourth quarter and full year 'twenty 'twenty. One earnings conference call. Today's call is being recorded and will be available for replay approximately one hour. After completion through February 16th 2022 on the Companys website under the investors tab at Www Dot.
Ski automotive Dot Com I will now introduce Anthony ported the company's executive Vice President of Investor Relations and corporate development. Sir. Please go ahead.
Speaker 3: Thank you. Good afternoon everyone and thank you for joining us today. A press release detailing Penske Automotive Group's record fourth quarter and record full year 2021 financial results was issued this morning and is posted on our website along with a presentation designed to assist you in understanding the company's results. As always, I am available by email or phone for any follow-up questions you may have.
Thank you good afternoon, everyone and thank you for joining US today, a press release detailing Penske automotive group's record fourth quarter and record full year 'twenty 'twenty. One financial results was issued this morning and is posted on our website along with a presentation designed to assist you in understanding the company's results as always I am available by email.
Our phone for any follow up questions you may have joined.
Speaker 3: Joining me for today's call are Roger Penske, our chair and CEO , Shelley Hulgrave, Chief Financial Officer, and Tony to Tony Vice President and Corporate Controller.
Joining me for today's call are Roger Penske, our chair and CEO , Shelly Hull grave, Chief Financial Officer, and Tony for Tony Vice President and corporate controller.
Speaker 3: Our discussion today may include forward-looking statements about our operations, earnings potential, outlook, future events, growth plans, liquidity and assessment of business conditions. We may also discuss 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 are EBITDAF and adjusted EBITDAF.
Our discussion today may include forward looking statements about our operations earnings potential outlook future events growth plans liquidity and assessment of business conditions. We may also discuss certain non-GAAP financial measures such as adjusted income from continuing operations adjusted earnings per share from continuing operations and earnings.
For interest taxes, depreciation and amortization or EBITDA and adjusted EBITDA.
Speaker 3: We have prominently presented the comparable GAAP measures and have reconciled the non- GAAP measures in this morning's press release and investor presentation, which are available on our website to the most directly comparable GAAP measures .
We have prominently presented the comparable GAAP measures and have reconciled the non-GAAP measures in this morning's press release and Investor presentation, which are available on our website to the most directly comparable GAAP measures are actual results may vary materially because of risks and uncertainties outlined in today's press release, which may cause the actual.
Speaker 3: Our actual results may vary materially because of risk and uncertainties outlined in today's press release which may cause the actual results to differ materially from expectation.
Results to differ materially from expectations I direct you to our SEC filings, including our Form 10-K for additional discussion and factors that could cause results to differ materially I will now call. The turn the call over to Roger Penske. Thank you Tony Good afternoon, everyone and thank you for joining us today I'm pleased.
Speaker 3: I direct you to our SEC filings, including our Form 10K, for additional discussion and factors that could cause results to differ materially. I will now turn the call over to Roger Penske. Thank you, Tony. Good afternoon, everyone, and thank you for joining us today. I'm pleased to report all-time record fourth quarter results, as there are no first-of-the-biz business.
To report all time record fourth quarter results as our diversified business and.
Speaker 4: and strong execution produced record revenue, earnings before taxes, net income, and earnings per share for PAG.
Strong execution produced.
Record revenue earnings before taxes, net income and earnings per share for pag.
Speaker 4: A revenue increased 8% to 6.3 billion. Our earnings before taxes increased 60% to 420 million. And our income from continuing operations increased.
Our revenue increased 8%.
To $6 3 billion or earnings before taxes increased 60% to $420 million.
And our income from continuing operations increased 55% to 312 million earnings per share increased 59% to $3 97.
Speaker 4: 55% to 312 million earnings per share increased 59% the $3.97.
Speaker 4: excluding the Q4 charges of 10.1 million reconciled in our press release and earnings presentations, adjusted earnings before taxes increase 64%.
Excluding the Q4 charges of $10 1 million reconciled in our press release and earnings presentation.
Adjusted earnings before taxes increased 64%.
Speaker 4: 431 million are adjusted income from continuing operations increased 60% the 320.5 million and adjusted earnings per share increased 65% the $4.10
431 million, our adjusted income from continuing operations increased 60%.
$325 million and.
And adjusted earnings per share increased 65% to $4.10.
Speaker 4: Our Q4 performance is driven by strong retail automotive.
Our Q4 performance was driven by strong retail automotive.
Speaker 4: commercial truck vehicle margins, a 26% increase, and same-store gross profit, and strong performance from Penske Transportation Solutions, which increased 60%
And commercial truck vehicle margins of 26% increase in same store gross profit and strong performance from Penske transportation solutions, which increased.
62%.
Speaker 4: Looking at our retail automotive operations on a same-store basis, Q421 versus Q420, unit sales continue to be impacted by supply shortages and decline 9.45%, including a 19% on new and 1% on used. A revenue increased 4%, gross profit increased 20%.
Looking at our retail automotive operations on a same store basis Q4, 'twenty one versus Q4 'twenty.
Unit sales continue to be impacted by supply shortages and declined $9, four 5%, including a 19% on new.
And 1% on used revenue increased 4%.
Gross profit increased 26% include.
Speaker 4: including a 320 basis point increase in gross margin. Unit gross profit increase 48%, the $6,550 from $4,420.
Including a 320 basis point increase in gross margin unit gross profit increased 48% to $6550 from 4420.
Speaker 4: Looking at car shop, we had a six car shop locations during 2021.
Looking at car shop, we added six car shop locations during 2021.
Speaker 4: including three in the fourth quarter, and we now operate 23 locations.
Including three in the fourth quarter and we now operate 23 locations.
Speaker 4: During the fourth quarter, car shop unit sales increased 24% to almost 15,000 units.
During the fourth quarter car shop unit sales increased 24% to almost 15000 units revenue improved 61% to approximately $400 million and same store unit sales increased 7% and same store revenue increased 38%.
Speaker 4: Revenue improves 61% to approximately 400 million and same-store unit sales increase 7% and same-store revenue increased 38%.
Speaker 4: Our gross profit per unit at car shop retail increased 14%. The $2655.
Our gross profit per unit at car shop, retailed increased 14% to 2600 $55. Our current annualized run rate is approximately 65000 to 75000 units.
Speaker 4: Our current annualized run rate is approximately 65,000 to 75,000 units.
Speaker 4: and revenue of 1.6 billion, EBT of 35 to 40 million.
And revenue of $1 6 billion EBT of 35 to 40 million let.
Speaker 4: Let me now turn to the retail commercial truck dealership business. During 2021, we added seven new dealerships.
Let me now turn to the retail commercial truck dealership business. During 2021, we added seven new dealerships and five parts and service locations through acquisition, adding $650 million in annualized revenue when.
Speaker 4: five parts in service locations through acquisition, adding 650 million in annualized revenues.
Speaker 4: We now operate 37 commercial truck locations in the US and in Canada. And during the fourth quarter revenue increased to approximately 19%. Same store was flat. Gross profit increased 51%.
Now operate 37 commercial truck locations in the U S and in Canada and during the fourth quarter revenue increased approximately 19% same store was flat gross profit increased 51%.
Speaker 4: including a 35% increase in service in parts. Same star growth profit increased 29%. Service in parts represented 59% of our total gross profit and covered 121% of our fixed costs in the fourth quarter. Earnings before taxes increase 69%.
<unk> of 35% increase in service and parts same store gross profit increased 29%.
Service and parts represented 59%.
Of our total gross profit and covered 121%.
Of our fixed costs in the fourth quarter earnings before taxes increased 69%.
Speaker 4: 45 million and represented 11% of PAG's total revenue and EBT. For the full year, our commercial truck business generated a 160 million in EBT, a 6.4% return on sales. Approximately 75 to 80% of unit sales are class eight commercial trucks.
The 45 million and represented 11%.
<unk> total revenue.
And E T.
For the full year, our commercial truck business generated $116 million and EBT, a six 4% return on sales approximately 75% to 80% of unit sales or class eight commercial trucks.
Speaker 4: And that market really remains very strong. Classade retail sales increased 16% to 270,000 units. And the backlog increased 46% to 261,000 at the end of the year. Freight rates ended up last year at record levels. And ship shortages are creating pent-up demand in the market.
And that market really remains very strong class eight retail sales increased 16% to two.
270000 units and the backlog increased 46% 261000 at the end of the year freight rates ended up last year at record levels and ship charges are creating pent up demand in the market.
Speaker 4: Based on current industry forecasts, class aid retail sales are expected to increase over the next two years.
Based on current industry forecasts class eight retail sales are expected to increase over the next two years and certainly we'll provide tailwind to our commercial truck and truck leasing businesses.
Speaker 4: certainly will provide tailwinds to our commercial truck and truck leasing businesses. Let me now turn to Penske Transportation Solutions. As you know, we own 28.9% of PTSD provides us with equity income, cash distributions, and cash tax savings.
Let me now turn to Penske Transportation solutions as you know we own 28, 9%.
T S, which provides us with equity income cash distributions and cash tax savings since making our first investment P. T. S has generated over $1 1 billion in equity earnings paid nearly $600 million in dividend distributions and generated nearly $800 million in cash tax savings.
Speaker 4: making our first investment, PTS is generated over 1.1 billion in equity earnings, paid nearly 600 million in dividend distributions, and generated nearly 800 million in cash tax savings. Currently, PTS is operating a fleet of 360,000 vehicles. In 2021, a stronger economy.
Currently Pts's operating a fleet of 360000 vehicles in 2021, a stronger economy.
Speaker 4: Industry capacity constraints improving rental demand and it moved by fleets to more leasing drove our record profitability.
Industry capacity constraints, improving rental demand and a move by fleets to more leasing drove our record profitability.
This drove record revenue and profitability of $11 2 billion and $1 3 billion respectively.
Speaker 4: This drove record revenue and profitability of 11.2 billion and 1.3 billion respectively.
Speaker 4: The Q4PTS generated 3 billion in revenue and 316 million in profit. As a result, our equity earnings increased 62% to 91 million.
In Q4 P. T S generated $3 billion in revenue and $316 million in profit as a result, our equity earnings increased 62% to $91 million, our leasing business was up four 9% our commercial rental business was up at $48 six and key to our profitability.
Speaker 4: Our leasing business was up 4.9%. Our commercial rental business was up at 48.6. And key to our profitability was utilization was over 85%. Our consumer rental was up 29% and our logistics increased 30%. Let me now turn over the call to Shelley Hulgrave or Chief Financial Officer.
He was a utilization was over 85% are consumer rental was up 29% and our logistics increased 30%. Let me now turn over the call to Shelley Hollow grave, our Chief Financial Officer.
Speaker 5: Thank you, Roger. Good afternoon, everyone. Our capital allocation strategy continues to leave our balance sheet in great shape. At December 31st, we have $101 million in cash and over 1.1 billion in liquidity.
Thank you Roger good afternoon, everyone. Our capital allocation strategy continues to leave our balance sheet in great shape.
At December 31st we have $101 million in cash and over $1 1 billion in liquidity.
Speaker 5: In 2021, we generated 1.3 billion in cash flow from operations.
In 2020 , one we generated $1 3 billion in cash flow from operations, we invested that cash flow as follows at least.
Speaker 5: We invested that cash flow as follows. We spent 249 million in capital expenditures, including 53 million to acquire land for future expansion. Our acquisitions were 403 million.
Spent $249 million in capital expenditures, including $53 million to acquire land for future expansion.
Acquisitions were $456 million.
Speaker 5: And we spent 294 million on share repurchases and paid 142 million in dividends, returning $436 million to our shareholders.
And we spent 294 million on share repurchases and paid $142 million in dividend returning $436 million to our shareholders.
Speaker 5: For the period of January 1st through February 8th, we repurchase 0.4 million shares for an aggregate amount of $36 million. Our existing repurchase authorization of $194 million remains.
For the period of January 1st through February eight, we repurchased 4 million shares for an aggregate amount of $36 million, our existing repurchase authorization is $194 million remaining.
Speaker 5: When looking at our future capital allocation, we maintain a disciplined approach that focuses on opportunistic investment across our retail automotive and commercial trust businesses. Capital expenditures to support growth, including our car shop growth strategy, delivering a strong dividend to our shareholders, reducing debt and share repercussions.
When looking at our future capital allocation, we maintain a disciplined approach that focuses on opportunistic investment across our retail automotive and commercial truck businesses capital expenditures to support growth, including our car shop growth strategy.
Delivering a strong dividend to our shareholders, reducing debt and share repurchases.
Speaker 5: We have repaid approximately 900 million of long-term debt since the end of 2019.
We have repaid approximately 900 million of long term debt since the end of 2019.
Speaker 5: In addition, we have either repaid or refinanced our senior subordinated debt to lower rates while lengthening the terms to take advantage of current market condition, which has contributed to a 42-
In addition, we have either repaid or refinanced our senior subordinated debt to lower rates, while lengthening the terms to take advantage of current market condition, which has contributed to a 42 million dollar <unk>.
Speaker 5: reduction in other inter-six months in 2021.
<unk> and other interest expense in 2021.
Speaker 5: These initiatives lowered our debt to total capitalization to 26% compared to 34% at December 31st, 2020, and 46% at the end of 2019.
These initiatives lowered our debt to total capitalization to 26% compared to 34% at December 31 2020.
And 46% at the end of 2019.
Speaker 5: At the end of December , our long-term debt was 1.47 billion, which consists of 1 billion of subordinated notes, 350 million in mortgages, and 100 million in other items.
At the end of December our long term debt was 147 billion, which consists of $1 billion of subordinated note $350 million in mortgages and $100 million in other items.
Speaker 5: Our leverage ratio sits at 0.8x compared to 2.9x at the end of 2019.
Our leverage ratio sits at 0.8, <unk> compared to $2 nine X at the end of 2019.
Speaker 5: At the end of December 2021, total inventory was 3.1 billion, down 300 million from December of 2020.
At the end of December 2021, total inventory was $3 1 billion down 300 million from December of 2020.
Speaker 5: Retail Automotive Inventory was 2.4 billion, which is down 533 million from December of last year.
Retail automotive inventory was $2 4 billion, which is down $533 million from December of last year.
Speaker 5: We have a 17 day supply of new vehicles. Our day supply of premium is 19, and volume 4 and is seven.
We have a 17 day supply of new vehicles, our days supply of premium is 19 and volume foreign is seven weeks.
Speaker 5: We continue to sell into our future pipeline. We expect the current supply challenges coupled with strong demand to keep our new vehicle supply at low but manageable levels at least through the first half of 2022.
We continue to sell into our future pipeline, we expect the current supply challenges coupled with strong demand to keep our new vehicle supply at low, but manageable levels at least through the first half of 2020 to.
Speaker 5: Use the Oculinventory is in good shape with 60 days to fly. At this time, I will turn the callback over to Rod.
Used vehicle inventory is in good shape with 60 days supply at this time I will turn the call back over to Roger. Thank you Shelly moving on to our digital initiatives, we continue to grow expand it enhance our digital footprint as part of our omni channel customer experience, we focus on increasing engagement.
Speaker 4: Thank you, Shelley. Moving on to our digital initiatives, we continue to grow, expand and enhance our digital footprint.
Speaker 4: Part of our Omni Channel customer experience, we focus on increasing engagement with our customer base in service through online service appointments, online payment, and the use of videos. Online payments have increased 76 percent since the fourth quarter of 19. Our online BDC appointments increase 49 percent to 475,000 when compared to the fourth quarter of 2019.
With our customer base and service through online service appointments online payment and the use of videos online payments have increased 76% since the fourth quarter of 19, our online BDC appointments increased 49% to 475001 compare.
To the fourth quarter of 2019.
Speaker 4: We also strive to be a leader in online reputation, including online customer views and star ratings on Google.
We also strive to be a leader in online reputation, including online customer reviews and star ratings on Google.
Speaker 4: 94% of our Q4 Google reviews were positive. In addition to these items, we generate clicks by providing flexible buying options.
94% of our Q4, Google reviews were positive. In addition to these items, we generate clicks by providing flexible buying options that allow customers to proceed at their own pace and buying their next vehicle.
Speaker 4: that allow customers to proceed at their own pace in buying their next vehicle.
Speaker 4: In 2021, we retail 10,500 units or 4% of our US unit sales via the preferred purchase tool and 14% of our customers use the tool to initiate their buying journey.
In 2021, we retailed 10500 units or 4%.
Our U S unit sales via the preferred purchase tool and 14% of our customers use the tool to initiate their buying journey.
Speaker 4: We also sold 3,000 vehicles using our buy online tool in the UK during the quarter. We're also piloting...
We also sold 3000 vehicles using our buy online tool in the UK during the quarter. We're also piloting many BMW Nissan Lincoln and Porsche retailing tools at this time and we expect to launch a pilot with Toyota and Lexus with air programs in Q2.
Speaker 4: many BMW, Nissan, Lincoln, and Porsche retailing tools at this time, and we expect to launch a pilot with Toyota and Lexus with their programs in Q2. We feel aligning with our OEM partners allows us to provide a consistent look and feel, participate in joint marketing efforts, and benefit from the future development of these integrations.
We feel aligning with our OEM partners allows us to provide a consistent look and feel participate in joint marketing efforts and benefit from the future development of these integrations.
Speaker 4: Before closing, I'd like to highlight our record performance for the recently completed year.
Before closing I'd like to highlight our record performance for the recently completed.
Speaker 4: 2021. We retailed 460,000 new and used units while increasing our new to use ratio or use the new ratio to 1.35 to 1.
<unk> and.
In 2021.
We retailed 460000, new unusual risks, while increasing our new to use ratio our used to new ratio.
At 135 to one.
Speaker 4: We completed acquisitions representing $1.3 billion in expected annual revenue, and we increased our revenue by 25%, to $25.6 billion, including a 23% increase on a same store basis.
We completed acquisitions, representing $1 3 billion in expected annual revenue and we increased our revenue by 25% to $25 6 billion, including a 23% increase on a same store basis more.
Speaker 4: more than double earnings before taxes to an all-time record of $1.6 billion. We increased income from maternity operations by 119% to $1.2 billion. We used selling and GA expenses as a percent of gross profit by 760 basis points. And we generated strong cash flow from operations of $1.3 billion and reduced long-term debt by $216 million.
More than double earnings before taxes to an all time record of $1 $6 billion, we increased income from with tuning operations by 119% to $1 2 billion.
Reduced selling and G&A expenses as a percent of gross profit by 760 basis points and we generated strong cash flow from operations of $1 3 billion and reduce long term debt by $216 million.
Speaker 4: We returned $436 million to shareholders to dividend and stock repurchasing.
We returned $436 million to shareholders through dividends and stock repurchases.
Speaker 4: Also, 35 Penske U.S. dealerships were named by Automotive News to be the best 100 dealerships to work for, including six of the top 10 dealerships, 12 of the top 25, and Audi of Turnersville was ranked number one in the country. Penske had more dealerships on this list than any other automotive retailer.
So 35 Penske U S dealerships were named by automotive news to be the best 100 dealerships to work for including six of the top 10 dealerships 12 of the top 25, and Audi Turnersville was ranked number one in the country.
<unk> had more dealerships on this list than any other automotive retailer.
Speaker 4: We issued our inaugural ESG report demonstrating our efforts towards sustainability. In closing, we had a terrific year. I'd like to thank our team for their outstanding contribution and our success in 2021.
We issued our inaugural ESG report demonstrating our efforts towards sustainability in closing we had a terrific year.
Like to thank our team for their outstanding contribution and our success in 2021.
Speaker 4: As I look forward to the future, I remain confident about the opportunities they see across our diversified enterprise driven by our strong balance sheet.
I look forward to the future I remain confident about the opportunities I see across our diversified enterprise driven by our strong balance sheet diligent capital allocation, our priorities and our human capital I want to thank you all for joining the call today and I'll turn it now back over to the operator. Thank you.
Speaker 4: diligent capital allocation, our priorities, and our human capital.
Speaker 1: I want to thank you all for joining the call today, and I'll turn it now back over to the operator. Thank you. We will now begin our Q&A session. At this time, if you have a question, please press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key.
We will now begin our Q&A session. At this time if you have a question. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question press the pound key.
Speaker 1: Our first question will come from Rick Nelson with Stevens. Please proceed with your question.
Our first question will come from Rick Nelson with Stephens. Please proceed with your question.
Speaker 6: Thanks a lot, good afternoon Roger, Tony. So the balance sheet is in great shape. I'm curious how we should think about capital allocation. You've done a combination of acquisitions, buybacks, debt pay down.
Thanks, a lot good afternoon, Roger Tony.
Hi.
Our balance sheet.
In great shape.
I'm curious.
How we should think about capital allocation when he was done a combination of the acquisitions buybacks debt pay down.
Speaker 6: How should we think about that as we push forward into 2022? Rick, let me have Shelley answer that. Okay, Shelley, go ahead.
How shall we think about that so as we push forward into 2020 two.
Rick Let me have Shelley answer that Okay. Shirley go ahead Sir.
Speaker 5: Rick, so when we look at our capital allocation...
You know when we look at our capital allocation, we spent approximately 50% this year and growth either between Capex and our acquisitions.
Speaker 5: We've spent approximately 50% this year on growth, either between CapEx and our acquisitions.
Speaker 5: We spent another 15% reducing our debt. We talked many times about how we are a disciplined buyer and we're waiting for the right opportunities. So while we sat there, we repaid $216 million of our debt and then returned about 35% of that cash flow to our shareholders through dividends and share repurchases, as we mentioned. So our approach remains disciplined. We wait for the right opportunities and...
And then another 15%.
Reducing our debt we've talked many times about how we are a disciplined buyer and what we're waiting for the right opportunities, though we sat there we repaid $216 million of our debt and then returned about 35% of that cash flow to our shareholders through dividends and share repurchases as we mentioned so you know.
Our approach remains disciplined we wait for the right opportunities and.
Speaker 5: We had a lot of them this year and we've got more in the pipeline coming up for next year.
We had a lot of them this year and we've got more in the pipeline coming up for next year.
Speaker 4: I think we're going to continue to focus on our diversification, obviously, through our acquisitions, whether it be retail, auto, it will be Australia, PTS, PTG, and certainly, as Shelley said, our top priority is shareholder return.
Yes, that'd be cool.
We're going to continue to focus on our diversification, obviously through our acquisitions, whether it would be retail auto will be Australia.
P T S. P T G and certainly as Shelly said, our top priority is shareholder return.
Speaker 6: Great. So you're coming off record 2020, a new record in 2021. I'm curious how you see the drivers for growth in 2022 and can you in fact grow on top of 2021?
Great.
So youre coming off record 2020, a new record.
2020 one.
Just curious how are you.
You will see the drivers.
For growth in 'twenty to 'twenty two.
In fact, our growth.
Carl on top of a 20.
2020 one.
Speaker 4: Well, I think when you think about growth, let's just talk about the new and used car side, I think supply is going to generate, you know, the amount of growth we can get from, you know, from new and used car volume, I think the because of the short supply, and when you look at our business today, Rick, go back a year ago, we had 18,000 new cars in stock.
Well I think when you think about growth, let's just talk about the new and used car side I think supply is going to generate the amount of growth we can get from.
New and used car volume I think because of the short supply and when you look at our business today, Rick go back a year ago, We had 18000, new cars and stock a year ago today and today, we have half 2000, and I think that it.
Speaker 4: a year ago today, and today we have 2,000. And I think that, you know, that just shows you the pivot that's taken place as far as supply. And we don't know when that's really going to slow us down. I think right now we're delivering everything that's on the truck, but we're even down 500 units from December 31st at the end of the year. As we see growth, we think we'll have acquisitions.
That just shows you the the pivot that's taken place as far as supply and we don't know when that's really going to slow us down I think right now we're delivering everything thats on the truck, but we're even down 500 units from from December 30, <unk> at the end of the year as we see growth. We think we'll have acquisition somewhere around five.
Speaker 4: somewhere around 5% of our 2021 total revenue of $26 billion. So that would equate to about $1.3 billion. And we're hoping that our same store growth will be somewhat between 4 and 5%, that's what it was in the fourth quarter. I think overall, right now, we're seeing the tightest market on new than what's happened.
Percent of our 2021 total revenue of 26 billion, so that would equate to about $1 3 billion and we're hoping that our same store growth will be somewhat between four and 5% that's what it was.
In the fourth quarter I think overall right now.
We're seeing the tightest market on new and then what's happened.
Speaker 4: when you think about the last two years from the SAR perspective.
When you think about the last two years from a Saar perspective, we've had about 4 million units come out of the marketplace, which probably would generate another 50% maybe more of used vehicles. So we've had to pivot to buy cars from customers in their drive throughs call customers buy cars on the curve and I think that's going to be.
Speaker 4: We've had about 4 million units come out of the marketplace, which probably would generate another 50%, maybe more, of used vehicles. So we've had to pivot to buy cars from customers. And the drive-throughs call customers, buy cars on the curb. And I think that's going to be something we're going to have to continue to do. But I'm not sure how deep that well is. I think parts and service. And I think that's going to be something we're going to have to continue to do.
Be something we're going to have to continue to do but I'm not sure how deep that that well is I think parts and service are going to continue to grow because theres more miles driven and I think thats. It.
Speaker 4: are going to continue to grow because there's more miles driven and I think that's, I think that'll be key. One thing that is good news is we're seeing a spring back.
There'll be key one thing that is good news is we're seeing a spring back in the UK because you remember they were shut down between January 1st in the Middle of April last year. So we're going to see some benefit out of that when we look at it. So I think the order book.
Speaker 4: in the UK because remember they were shut down between January 1st and the middle of April last year so we're going to see some benefit out of that when we look at it. So I think the order book
Speaker 4: When we look at it for March, which is the registration month, it's up about 25% from last year. That should give us some good runway here in Q1.
When we look at it for March.
Which is a registration month.
It's up about 25% from last year, so that should give us some good runway here in Q1.
That's that's great all right. Thanks.
Speaker 6: That's a great thing. Thanks for the color and good luck
Thanks for the color and good luck thanks Rod.
Speaker 1: Your next question will come from John Murphy with Bank of America. Please proceed with your questions.
Your next question will come from John Murphy with Bank of America. Please proceed with your question.
Speaker 3: page i could have been larger showing or you great John how are you
Hey, Jay Good afternoon, Roger show you Tony how are you great John how are you.
Speaker 7: Good. Um, you know, Roger said a similar question.
Good.
Roger.
A similar question.
Speaker 7: through Rick kind of posed to you. I mean, you know, we get this often from folks that, you know, that you may be over-earning in the light vehicle business, the commercial dealership business as an NN PTS. I'm just curious if you can give us your view on that. I mean, I certainly don't think you are, and I think there's opportunity to grow the business structures over time. And, but maybe not thinking about just 2022 outlook, just, you know, the, the puts and takes and grows.
We're kind of posed to you I mean, we get this often from folks that that you may be overwriting, the light vehicle business, the commercial dealership businesses and and in Pts I'm. Just curious if you could give us your view on that I mean, I. Certainly don't think you are and think there's opportunity to grow the business structures over time, but maybe not thinking about just 2020.
Two.
Outlook.
The puts and takes in gross.
Speaker 7: particularly around new, in the new vehicle business, what's going on in the commercial and the PTS side. I mean, how do you think about where, how to answer that question, are you over earning at the moment or is there the potential to structurally grow over time?
Particularly around new.
New vehicle business, what's going on in Portugal, and the Pts side I mean, how do you think about where.
You know how to answer that question are you old warning at the moment or is there the potential to structurally grow over time.
Speaker 4: Well, I think one of the things that we have in PTS, that's the truck route leasing and logistics businesses.
Well I think what are the things that we.
We have in Pts, that's a truck leasing and logistics businesses.
Speaker 4: You know, we have a backlog of vehicles that are on order of over 54,000. Now all of those aren't really for new customers, but a lot of them are.
We have a backlog of vehicles that are on order of over 54000, and now all of those aren't really for new customers, but a lot of them are and I think we're short of a rental vehicles. When you run at 87% Euro <unk>, 85% to 87% utilization. So that's certainly going to drive more business and we're seeing more mileage driven on our P. T.
Speaker 4: And I think we're short of rental vehicles when you run at 87 percent, 85 to 87 percent utilization. So that's certainly going to drive more business. And we're seeing more mileage driven on our PTS lease and rental units, which obviously is a variable revenue piece for us, which will also drive profitability. The only thing that I see that might impair maybe some of the bottom line might be is used truck sales. We just don't have the volume of trucks.
Lease and rental units, which obviously is a variable revenue piece for us, which will also drive profitability. The only thing that I see.
There might impair maybe some of the bottom line might be as used truck sales. We just don't have the volume of trucks that we're going to sell off until we get this backlog of new vehicles come in and we were up a 100 million during <unk>.
Speaker 4: that we're going to sell off until we get this backlog of new vehicles come in. And we were up 100 million.
Speaker 4: during 2021 and we expect that to come back during 2022 based on just availability of trucks to market.
2021, and we expect that to come back during 2022 based on just availability of trucks. The market is still very hot on these types of vehicles, especially the vehicles that we put into the market as you. So we see our rental and leasing business continuing to grow.
Speaker 4: still very hot on these types of vehicles, especially the vehicles that we put into the market is used. So we see our rental leasing business continuing to grow. There's no question that our commercial rental is really off the charts when you look at it. It was up 49%. I think the CPI adjustment.
No question that our commercial rental is really off the charts. When you look at it was up 49% and I think the CPI adjustments that we make on all of our leasing businesses in logistics as you know we have economic escalators on an annual basis, and I think that'll be key and I think on the other hand, when you think about premier truck.
Speaker 4: that we make on all of our leasing businesses and logistic, as you know, we have economic escalators on an annual basis, and I think that will be key. And I think on the other hand, when you think about Premier Truck, you know, that's our Freightliner business, John , you asked about that also. They're sold out.
Our Freightliner business. John you asked about that also there are sold out for 'twenty 2022, and with the acquisitions that we've made and the growth that we've made during the year, that's going to drive considerable revenue for us in 'twenty and 2022 and when you look at act, which <unk>.
Speaker 4: for 2022. And with the acquisitions that we've made, and the growth that we've made during the year, that's going to drive considerable revenue for us in 2020.
Speaker 4: in 2022. And when you look at ACT, which represents the marketplace for the heavy trucking business, they say that really, we don't see any any lift from the standpoint of someone lifting off the gas and less business during 2022 and 2023. So we see that business strong.
Presents to the marketplace for the heavy trucking business. They say that really we don't see any any lift from the standpoint of our Selma lifted off the gas and less business. During 'twenty two 'twenty three so we see that business strong used truck prices. There are also at all time levels. So you could maybe see some backing off of that.
Speaker 4: used truck prices there are also at all time levels. So you could maybe see some backing off of that but as long as there's no
But as long as Theres no no volume or any supply, we're going to see higher mark. So overall and then we have acquisitions in that space, which obviously, we continue to do in our diversified portfolio.
Speaker 4: no volume or any supply, we're going to see higher marks. So overall, and then we have acquisitions in that space, which obviously we continue to do in our diversified portfolio.
Speaker 7: And I'm sorry, on the light vehicle side, Roger, I mean, there's a lot of push that the grosses are way too high. And when volume comes back, they'll go back down. But I mean, it seems like it's kind of a seesaw. I mean, you're going to get the benefit of volume as the grosses are coming under pressure. The usage you said will grow and parts service will continue to grow. How do you think about sort of the formula around this idea that you may be over earning in the new vehicle business or new vehicle dealerships in total, or are there lots of offsets?
And I'm sorry on the light vehicle side, Roger I mean, you know theres a lot of push that you know the grosses are way too high and.
And when volume comes back we'll go back down, but I mean, it seems like it's kind of a seats army.
The benefit of volume is the grocers are coming under under pressure in the used you've said, we'll grow in parts and service will continue to grow. So how do you think about sort of the formula around this idea that you may be over earning in the new vehicle business one vehicle dealerships.
Audio lots of offsets.
Speaker 4: Okay, you're talking about the new vehicle retail car business, not the truck business, correct?
Talking about the new vehicle retail car business not the truck business correct.
Speaker 4: Well, I was asking about that as well. Yeah, I'm sorry. I ask a lot of questions. Sorry. Sure, no problem. Is you think about availability of new units. You know we had 18,000 units.
Well I was asking about that as well, yes, I'm sorry.
A lot of questions Roger sorry, yeah.
As you think about.
Availability of new units.
We had 18000 units.
Speaker 4: at the end of last year at this time and we have 2000 and that's down 500 so I would say that's going to continue to put pressure
At the end of last year at this time, and we have 2000 and Thats down 500, So I would say that's going to continue to put pressure.
Speaker 4: you know, on margins to keep them up because we're selling in the pipeline and we have, when you're selling in the pipeline coming in, vehicles coming in, you're going to have ability to get more content on those vehicles and probably make a higher margin with a customer. You know, the question is, is use...
On margins that keep them up because we are selling in the pipeline and we have when you are selling in the pipeline coming in vehicles coming in youre going to have ability to get more content on those vehicles would probably make a higher margin with a customer.
<unk> is used is used trucks are used cars, because we just don't won't see the supply of them at this particular through the normal channels and we've really shifted from auctions now to buying cars from consumers, but parts and service will continue to grow but I don't see anything in the light vehicle market now other than that.
Speaker 4: trucks or used cars because we just don't won't see the supply of them at this particular through the normal channels and we've really shifted from auctions now to buying cars from consumers but parts and service will continue to grow but I don't see anything in the light vehicle market now other than the supply chain.
Supply chain.
Speaker 4: that's going to change the structure and where we're going from the standpoint today because we have plenty of demand. As I said earlier, in the UK alone, we're up 25% when we look at March, which will be a registration month, which is key. I think the bigger issue that we have to execute across all of our businesses is
To change the change.
Change the structure and where we're going from a standpoint today, because we have plenty of demand as I said earlier in the UK alone were up 25%. When we look at March which will be a registration month, which is key I think.
The bigger issue.
We have to execute across all of our businesses is our people and I've heard people talk about everything but the human capital I think for the people on the line would understand it we're just having a tough time at this particular time to maintain the number of key people that we need to carry on the bill.
Speaker 4: And I've heard people talk about everything but human capital.
Speaker 4: I think for the people on the line would understand that we're just having a tough time at this particular time to maintain the number of key people that we need to carry on the business in a professional way. We've accelerated our training.
In a professional way, we've we've accelerated our training.
Speaker 4: We've certainly accelerated our acquiring of new candidates. But again, people have learned to live differently. And in the type of businesses we're in, it's going to be something that's going to challenge us. And I think it's going to challenge the OEMs also.
We've certainly accelerated our acquiring of new candidates, but again people have learned to live differently and then the type of businesses. We're in it's going to be something thats going to challenge us and I think it's going to challenge the Oems also.
Speaker 4: Because you hear many of these don't have a number of people in the day to build the trucks or cars that they need. So I think that's going to be something that's going to be more apparent. The good news is what we've been able to do is right size our business.
As you hear many of these don't have a number of people in the day to build the trucks or cars that they need so I think thats going to be something that's going to be more apparent. The good news is what we've been able to do is rightsize our business since Covid started and were down about 9% on a same store basis. So that maybe is too much color, but I.
Speaker 4: Since COVID started, we're down about 9% on the same store basis. So that may be too much color, but I wanted to be sure I got that in.
I wanted to be sure I got that in.
Speaker 7: Well, that's incredibly helpful. And just lastly, on inventory, I mean, if we step beyond
That's incredibly helpful and just lastly on inventory I mean, if we step beyond the short term.
Speaker 7: short-term, you know, inventory crunch, whether it be chips or whatever else is inducing this, and get back to a time when the automakers have the ability to produce as they would like. How do you think they're going to run? I mean, obviously, you'd like a bit of inventory rebuilt, but maybe not back to the heady levels of pre-COVID. I'm just curious how you, you know, what's your sense of what they're going to do when things are normal and they can act as they wish?
Inventory crunch, whether it be chips or whatever else is inducing this and get back to a time when the automakers have the ability to produce as they would like.
How do you think theyre going to run I mean, obviously, you would like a bit of inventory rebuilds, but maybe not back to the heady levels of three co but I'm just curious how you how you what's your sense of what Theyre going to do when things are normal and they can act as as they wish.
Speaker 4: Well, number one, I think we got to look at capacity. What's the current capacity to build, you know, the hot trucks and things they need. So they're going to have to, you know, they're going to have to match the supply and demand. But, you know, another phenomenon that will take place is when you look at the
Number one I think we got to look at capacity, what's the current capacity to build the HUD trucks and things they need so theyre going to have this.
You have to match the supply and demand, but another phenomenon will take place is when you look at the.
Speaker 4: floor plan support, you look at the customer support, and you look at the incentives that are being paid.
Floor plan support you look at the customer support and you look at the incentives that are being paid.
Speaker 4: over the traditional years where we had normal business, the OEMs were digging deep in their pocket. They have seen a real benefit by backing that off. In fact, I think that is helping them look rationally down the road that will help them fund the R&D that is going to be necessary when we look at electrification. So hopefully...
Over the traditional years, where we had normal business, the Oems or dig a deepen their pocket now they've seen a real benefit by backing that off in fact, I think that's helping them look rationally down the road it'll help them fund the R&D, that's going to be necessary. When we look at electrification. So hopefully they got.
Speaker 4: they got a taste of that and that will be a slow return and they'll keep the day's supply you know in the 30 to 45 days and we won't obviously be where we are today in single digits but I think we can manage that carefully brand by brand.
A taste of that and that will be a slow return and they'll keep the days supply and a 30% to 45 days and we won't obviously be where we are today in single digits, but I think we can manage that carefully brand by brand.
Got you alright, Thank you very much I appreciate it thanks, Sean.
Okay.
Operator, you there.
Able to hear me.
Speaker 1: Can you hear us, operator? Hello, can you hear me? Yes, we can. All right, your next question is from Michael Ward from Benchmark, please proceed. Thanks very much.
Can you hear us operator.
Hello can you hear me, yes, we can alright. Your next question is from Michael Ward from Benchmark. Please proceed.
Thanks, very much good afternoon, everyone.
Speaker 8: So Roger, if you look back over the last 20 years or so, the dealer model has continued to kind of evolve. As you look out over the next 10 years, what do you think are some of the bigger opportunities that Penske has as it evolves even further? Is it consolidation in the auto retail or in the retail truck? Is there another leg to this tool? What do you think about as you look out five to 10 years?
So Roger if you look back over the last 20 years or so the dealer model has continued to kind of evolve.
As you look out over the next 10 years.
What do you think are some of the bigger opportunities at Penske has had involves even further.
Is it.
Holiday season in the auto retail or the retail truck.
Is there another leg to the stool, what do you think about as you look out five to 10 years.
Speaker 4: Are you asking me this question because I'm the oldest guy on the phone here, I wonder? It's because you're the most admired. Talking about a 30-year swing. Well, I think, well, from a PAG perspective, when you go back to really 1999, 2000, we were 100% retail automotive and only a domestic U.S. company.
Are you asking me this question because I'm the oldest guy on the phone here I wonder.
It does.
Since youre the most admired.
In about a 30 year swing.
Well from a pag perspective, where do you go back to really a 1999 2000, and we were 100% retail automotive and only.
A domestic U S company.
Speaker 4: I think that we're going to continue to grow internationally, taking our expertise around the globe, and that could even, from the standpoint of looking to grow our special use car shop type business, I think the truck rental leasing continues to grow. We opened up in Australia, and obviously, as we look at continental Europe , the opportunity of to buy stores at up to $ Relaxed TV for more onto the futurese wanna buy a amazon
Think that we're going to continue to grow internationally, taking our expertise around the globe and that could even from the standpoint of looking to grow our especially used car shop type business I think the truck credit and leasing continues to grow we opened up in Australia, and obviously as we look at Continental Europe . The opportunity do you have to buy.
Storage there.
Speaker 4: will continue to be attractive to us. So we have opportunities to add.
We'll continue to be attractive to us so we have opportunities to add debt.
Speaker 4: I think a finance company at some point maybe. I think we got more used opportunities. We look forward. And I think overall.
I think our.
It's company at some point, maybe I think we got more used opportunities, we look forward and I think overall well.
We'll continue to invest as Shelly said for growth in that 50% of our cash flow. So I see the same trajectory.
Speaker 4: for growth and that's 50% of our cash flow. So I see the same trajectory.
Speaker 4: I don't see us jumping into many things that would be way off our landscape, the truck leasing and logistics business. The 360,000 trucks today, I think if I look 20 years from now, I hope they have 700,000, but we're growing.
<unk> see us jumping into many things that would be way off or.
Our landscape.
The truck leasing and logistics business with 360000 trucks today I think.
If I look 20 years from now I hope that you have 700000, but we're growing.
Speaker 4: know it 20 to 30,000 a year and we expect to be close to 400,000 at the end of end of 2022. And certainly at the end of 25, we'd like to be at 500,000. So this just shows you with our own footprint that we have today in the business we have there's a big extension of opportunity of revenue and profit.
At 20% to 30000, a year and we expect to be close to 400000 at the end of end of 2022 and certainly at the end of 'twenty five we'd like to be at 500000. So this just shows you with our own footprint that we have today in the business. So we have a big extension of opportunity of revenue.
And profit.
Speaker 8: make sense. Sounds like a lot more growth out in front of you. Shelly on page 34 shows your cash flow from operations in the last two years. It's been like 1.2 1.3 billion each year and it looks like 2022 and 23 could be similar type of levels. You kind of outline the the allocation, your balance sheet in such good shape and just you're tying into what Roger was just talking about.
Makes sense and it sounds like a lot more growth out in front of you.
Chilean on page 34 chose your cash flow from operations in the last two years, it's been like one point to $1 3 billion.
Each year and it looks like 2022 and 'twenty three it could be similar type levels, you kind of outlined the allocation your balance sheets are in such good shape.
Just tying it to what Roger was just talking about.
Speaker 8: Do you or would you have an appetite for one of these billion dollar plus type acquisitions? If the right one came along.
Do you where would you have an appetite for one of these $1 billion plus type acquisitions.
If the right one came along.
Yeah.
Speaker 5: When we talked about capital allocation, we talked about paying down our debt. That's to put us in the best position possible when an opportunistic investment comes around. And yeah, as long as the price is in line with what we're willing to pay and it fits with our strategy, we certainly have the dry powder to do it. Yeah, no question.
When we talked about.
Capital allocation, we talked about paying down our debt that's to put us in the best position possible in an opportunistic investment comes around.
And.
Yeah as long as the prices are in line with what we're willing to pay and and it fits with our strategy. We certainly have the dry powder to do it.
No question.
Thank you. Thank you both very much.
Good morning.
Speaker 1: Your next question will come from Stephanie Moore with Truist. Please proceed with your question.
Your next question will come from Stephanie more with <unk>. Please proceed with your question.
Speaker 5: Hi, good afternoon everybody. Hi, Steph. I wanted to touch a little bit, maybe as a follow up to the last question, and if you wanted to, Roger, maybe provide some insight on what you're seeing with the introduction of EVs, the threat of the direct to consumer model, and kind of how you see that panning out over the course of the next couple years. Again, I think your insight would be very helpful. Thank you.
Hi, Hey, good afternoon, everybody hi stuff.
I wanted to touch a little bit maybe as a follow up to the last question and if you wanted to you know Roger maybe you can provide some insight on what youre seeing with the introduction of easing the threat of the direct to consumer model and kind of how you see that panning out over the course of the next couple of years again.
That would be very helpful. Thank you.
Speaker 4: Well, when we look at electric vehicles, you know, there's no question that more and more we're reading about them. There's more activity at the OEMs. I think the infrastructure is still a key problem. How much is going to be subsidized by the government from the standpoint of the US market? I'm not going to talk about Europe and rest the world. But to me, I think as we look at 300 million units in the car park today, and we sold about 85 million units over the last
Well when we look at electric vehicles.
No question.
More and more we're reading about them there is more activity at the Oems I think the infrastructure is still a key problem how much is going to be subsidized by the government from the standpoint of the U S market and I'm not going to talk about Europe and rest of the world, but to me I think as we look at a 300 million units in the car Park today.
And we sold about 85 million units over the last steps.
Speaker 4: three years, I think average 98% of those have been ICE, so the Bev Park is less than 2%. So as we look at this...
Three years I think our average 98% of those had been ice's. So the Bev park is less than 2%. So as we look at this.
Speaker 4: I think each manufacturer has committed, at least verbally, that they will have a fully electric vehicle in most of their model lines. And I think that the key thing here is they're going to have to connect with the dealers in order to be sure they have an infrastructure that meets the customer requirements when he joins the dealer. However, when I look at this, I think it's going to take time because right now the cost is not being adjusted by any other supplier. So it really is, I think, broadening the354 dreaming of being a extracting Edition warrior in New York City, similar to the United States fitted-in business.
I think each manufacturer has committed at least verbally that they will have a fully.
Fully electric vehicle in most of their model lines and I think that the.
The key thing here is they're going to have to connect with the dealers in order to be sure. They have an infrastructure that meets the customer requirements. When he when he joins the dealer. However, when I look at this I think it's going to take time, because right now the cost.
Speaker 4: of an EV vehicle is considerably higher than an ICE. Now, if it's mandated in states and cities and what have you, I guess costs won't make a difference. But we think that it's gonna come. I think it's gonna take longer than people expect. And they're gonna have to get the pricing. I think today the range anxiety has pretty much been mitigated by some of the vehicles that have come to market. But I think when you look at Tesla and you look at Rivia and people like that that are going direct.
And easy vehicles is considered to be higher than in ICD now it's mandated in states and cities and what have you I guess costs won't make any won't make a difference, but we think that it's going to come I think it's going to take longer than people expect and theyre going to have to get the pricing I think the.
Today, the ranks arranging xiety has pretty much been mitigated by some of the vehicles come to market, but I think when you look at Tesla and you look at review on people like that that are going direct I think that's that's a particular couple of Oems, but when you look at the existing Oems and let's go back to a hummer.
Speaker 4: I think that's a particular couple of OEMs, but when you look at the existing OEMs, and let's go back to Hummer, GM just announced, they took orders into positive.
GM just announced they took orders and deposits, but those vehicles are all being delivered through the dealer network and when we were the distributor for smart a few years ago. Remember, we took 30000 deposits on reservations for smart, but again repurpose those once the cars were built to the dealer.
Speaker 4: But those vehicles are all being delivered through the dealer network. And when we were the distributor for smart a few years ago, remember, we took 30,000 deposits on reservations for smart, but again, repurpose those once the cars were built to the dealer network. So I think this go direct thing probably has blown up a little bit higher than it will be because because of the
Network. So I think this go direct thing probably is blown up a little bit higher than it will be because because of the franchise network and that we have.
Speaker 4: franchise network that we have today and the way it's being managed through the laws of retailing and the automobile business. So again, I think right now the startups are really Ringside today!
Today in the way, it's being managed.
Through the the laws of of retailing in the automobile business. So again I think right now the startups are really overblown I think it's going to be part of our product line as I said earlier, we got the franchise laws. There is no question and at the end of the day I think it's going to be up to the customer do they want to pay more range anxiety is in good shape.
Speaker 4: I think it's gonna be part of a product line. As I said earlier, we got the franchise laws. There's no question.
Speaker 4: And at the end of the day, I think it's going to be up to the customer. Do they want to pay more range anxieties and good shapes? Some people are buying these from the standpoint of decarbonization, which obviously makes a difference. But...
Some people are buying these set from the standpoint of de Carbonization, which obviously makes a difference, but but overall I think it's going to be good at it.
Speaker 4: But overall, I think it's going to take time. And I think we'll see ICE engines here for quite a while. And I think hybrids are going to continue. As you see the numbers when you look at query v.
Take time, and I think we will see.
E engines here for quite a while and I think hybrids youre going to continue as you see the numbers. When you look at pure EV and you look at hybrid hybrid has been a big part of this and I think that will continue to play a role here for the next three to five years.
Speaker 4: And you look at hybrids, hybrid has been a big part of this and I think that will continue to play a role here for the next three to five years.
Yes.
Absolutely that's very helpful. And then switching gears to that the used side for the retail automotive business.
Speaker 5: Absolutely. That's really helpful. And then switching gears to the used side for the retail automotive business. It looks like inventory levels are definitely manageable. As you stood, you know, where we stand today, could you maybe talk about some of your sourcing capabilities and how that's changed over time and how you view your position both in the US and UK for this year with a used inventory? Well, when we look at our inventory between today, the end of the year and...
It looks like inventory levels are definitely manageable and as he said where.
Where we stand today could you maybe talk about some of your sourcing.
<unk> capabilities and how that's changed over time and how you view your position both in the U S and U K for this year with that used inventory well.
Well when we look at our inventory between today and the end of the year and.
Speaker 4: we sit here today, it's about flat. So we've been able to, and this is in the US only, I might say.
We sit here today, it's about flat so we've been able to and this is in the U S only I might say.
Speaker 4: been able to sustain that but what's really happened is we've seen quite a change you know our trades you know 52% of the use cars we get their vehicles Least returns are 14 and I think at the end of the day are
Able to sustain that but what's really happened is we've seen quite a change.
Trades.
52% of their used cars, we get their vehicles lease returns are 14, and I think at the end of the day our auction.
Speaker 4: numbers are down and from say roughly 25 percent down to below 20 percent. And I think overall, lease returns have been pretty much the same because they come back on a one-to-one basis. When you think about
Numbers are down and from say roughly 25% down to below 20% and I think overall our.
Lease returns have been pretty much the same because they come back on a one to one basis when you think about.
Speaker 4: the UK on the other hand, we see that opportunity the same way because they're sourcing. It really been when you looked at car shop specifically. I'm going to talk about car shop here. The old in 2020, we were about 54% from auction.
The U K on the other hand, we see that opportunity the same way because they're sourcing it really Ben.
When you looked at car shops specifics I'm going to talk about car shop here. The old in 2020, we were about 54% from auction today.
Speaker 4: you know, today when we looked at 2021, completing, we're a little bit, the mark is a little bit changed because of the first.
Today, when we looked at.
The 2021 complete and we're a little bit.
The market is little bit changed because of the first three and a half months. We were out we were at we were at 66%, but that has changed considerably now because they are sitting there auction is down and obviously were looking buying more cars at the curb and I think thats what were going to see as we go forward both in the U S and the UK, but it's got to be availability.
Speaker 4: three and a half months we were out. We were at 66%, but that has changed considerably now because our sitting or auction is down and obviously we're looking by more cars at the curb and I think that's what we're gonna see as we go forward both in the US and the UK. But it's gonna be availability and that's gonna put prices up. And remember, a lot of our vehicles, use vehicles, are financed or leased, primarily financed.
And that's going to put prices up and remember a lot of our vehicles used vehicles are financed or leased primarily finance and there is a cap on those flipped a finance company, we will be able to finance. So that's going to put ultimately a damper on these big margins that have been made.
Speaker 4: And there's a cap on those what the finance company will be able to finance. So that's going to put ultimately a damper on these big margins that have been made if the cost of sale is going up.
Ft cost of sale is going up.
Yeah.
Speaker 5: Absolutely. Well, that's it for me. Thanks so much. Thank you.
Absolutely well that's it for me. Thanks, so much thank you.
Speaker 1: Your next question will come from Rajat Gupa from JP Morgan. Please proceed.
Our next question will come from Rajat Gupta from Jpmorgan. Please proceed.
Speaker 9: Thanks for taking the questions. I had one question on FMI. Clearly at highly elevated levels today, 1,900.
Got it great. Okay. Thanks for taking the question.
I had one question.
Journey.
Highly elevated levels today 19 hungry.
Speaker 9: How should we think about a normalized level there? You know, one's prices move back to normal. Have there been any structural changes that will stick, maybe penetration, impact of rate that can offset the eventual declining prices? You're just curious.
How should we think about a normalized level.
Prices move back to normal.
Have there been any structural changes that will take you know maybe penetration.
In fact in freight that can offset the eventual decline in prices just curious what's like a normalized new normal level.
Speaker 9: or what's like a normalized new normal level there, you know, once your back to normal prices. I had to follow up. Yeah, let me say this. I think what's happened during this short...
Once once you're back to a more normal prices and I had a follow up.
Let me say this I think what's happened during the short supply of vehicles.
Speaker 4: the F&I process obviously our reserve is about 40%
The F&I process, obviously, our reserve is about 40%.
Speaker 4: of the total F&I income and product is 60%. So there's more product being sold add-ons to the vehicles today, maybe than there was in the past. So that's driving.
Of the total F&I income and product is 60%, so theres more product being sold add ons to the vehicles today, but maybe isn't there wasn't in the past. So that's driving more F&I. When you look at it and reserve. So to me that probably has some of the shift but we've done a big job in train.
Speaker 4: You know, more F and I when you look at it and reserve. So to me, that probably is some of the shift, but we've done a big job in training.
Speaker 4: I think that our markups are pretty much the same. The captives is about 75 basis points and our preferred lenders is close to 100.
I think that you know our markups are pretty much. The same the captives is about 75 basis points in our preferred lenders as close to a 100, then we receive flats on most of our leasing so our subprime business really is only 6%. So I think we're doing a better job we've always trailed.
Speaker 4: then we receive flats on most of our leasing. So our subprime business.
Speaker 4: really is only 6%. So I think we're doing a better job. We've always
Speaker 4: Trailed really some of our peers in that, but that's because we have such a big penetration of leasing, which I think makes a big difference. But overall, I just have to say we're selling more products and not just F&I income, but more products in the sale during this pandemic as people want to buy particular cars.
Some of our peers in that but that's because we have such a big penetration.
Leasing, which I think makes it makes a big difference but.
Overall, I would just have to say, we're selling more and more products.
And not just F&I income, but more products in the sale during this pandemic.
As people want to buy particular cars.
Got it got it that's helpful.
Speaker 9: Got it got it that that's helpful and then maybe on car shop, you know, given given the supply situation that has evolved over the last couple of years. You know, unlikely to use anytime soon. Given more of a historical reliance on auction versus, you know, trade ins, like you have with the franchise stores.
And then maybe on car shop.
Given given the supply situation that has evolved over the last couple of years.
Unlikely to ease any time soon.
And given more of a historical reliance on auction versus no trading like you have with the franchise stores.
Speaker 9: Is there any change to the thinking around, you know, the faulty store network over the next couple years? Do you think that's still viable? You're just curious how you're thinking about that to You don't've made anything from that company.
And is there any change in the thinking around.
Well the 40 store network over the next couple of years.
Do you think that's still viable.
Curious, how you're thinking about that to give them given the supply dynamics.
Well, let me let me say this.
Speaker 4: Well, let me say this. I think there's no question that, you know, from a car shop situation in the UK.
I think Theres no question that.
From a from a from a car shop situation in the in the U K.
Speaker 4: you know, we've seen using the sitner auction, those vehicles have come down considerably here in the fourth quarter and where we are here in January because most of the dealerships are keeping the trades even if they're non-branded and selling those directly. So we're seeing some input there, but our off-street purchases, we look at car shop of gone from 6%.
We've seen a using the sitting or auction those vehicles have come down considerably here in the fourth quarter and where we are here in January because most of the dealerships are keeping the trades if even if they are non branded and selling those directly. So we're seeing some input there, but our off street purchases.
When you look at car shop have gone from 6% to 30%. So I think that shows you bodes well from where we are but that's a big change from what I can see from the standpoint of sourcing and we did use a lot of auctions in the U K, but again, we're going to purchasing I called out on the curve.
Speaker 4: to 30 percent. So I think that shows, bodes well from where we are, but that's the big change from what I can see from the standpoint of sourcing. And we did use a lot of auctions in the UK, but again, we're going to purchasing, I call it on the curb. And when you look at the corridor...
And when you look at the quarter, we did between 17 and 18000 units and our revenue was over $400 million and our earnings were approximately $9 million. So when you look at it I think it's balancing we're going to really need to rebalance during Q1 and Q2 because of the shutdown because of Covid.
Speaker 4: We did between 17,000 and 18,000 units, and our revenue was over $400 million.
Speaker 4: and our earnings were approximately 9 million. So when you look at it, I think it's balancing. We're gonna really need to rebalance during Q1 and Q2 because of the shutdown, because of COVID, you know, in the UK and also here in the US, which makes obviously, you know, made a difference. And again, we were really impacted from the standpoint of shutdown and car shop. No question for three and a half months last year in Q1, Q2.
In the U K and also here in the U S, which makes it obviously made a difference and again, we were really impacted from the standpoint of a shutdown and car shop no question for three and a half months last year and Q1 Q2.
Speaker 9: Got it. No, that's helpful. Great. Good luck in queue.
Got it.
Helpful, Great I'll get back in queue.
Hugh.
Speaker 1: Again, as a reminder, if you would like to ask a question that is star 1. your next question is from David with morning. Sorry please proceed with your question.
Again as a reminder, if you would like to ask a question that is star. One. Your next question is from David Whiston with Morningstar. Please proceed with your question.
Yeah.
Thanks, Good afternoon.
David.
Speaker 3: Roger, you mentioned a labor shortage earlier. Is that across the whole company or were you just referring to the Tikarshop or a particular geographic market?
Okay.
Roger you mentioned.
Labor shortage early or is that across the whole company or were you just referring to car shopper particular geographic market.
Speaker 4: I'm saying that this just generally today, you know, you have attrition in the retail auto business because a lot of the compensation is variable.
No I'm, saying that this just generally today you have attrition in the retail auto business because a lot of the compensation is variable and you know people have worked from home they've seen other ways that they can add.
Speaker 4: And people have worked from home. They've seen other ways that they can...
Speaker 4: you know, add to their income. So number one, we see that and then entry level technicians coming in people in the body shops, truck drivers, etc. All of these things are under pressure. And what we've had to do is really
Add to their income so number one we see that and then entry level technicians coming in people in the body shops.
Truck drivers et cetera, all of these things are under pressure and what we've had to do is really not upgrade but add additional recruiters across the whole country, whether it's in truck leasing rental our logistics, our overall business so I see that.
Speaker 4: not upgrade but add additional recruiters across the whole country, whether it's in truck leasing rental or logistics or overall business. So I see that.
Speaker 4: you know, is a big challenge for us. And we've added significant investment, not only in people, but in training in order to be able to keep people loyal to the company and also to attract them going forward.
It's a big challenge for Us and we've added significant investment not only in people, but in training in order to be able to keep people loyal to the company and also to attract them going forward.
Speaker 7: Okay, and on earlier on on on PTS, I think you were discussing that earlier, it sounds like you're pretty optimistic on continued robust equity earnings growth. But I mean, this quarter example is plus 62%. That are you kind of expect more like low double digit or we sold back in north of 20% 30% even next year for 22.
Okay and on earlier on Pts I think you were discussing that earlier it sounds like youre pretty optimistic on continued robust.
Equity earnings growth, but.
I mean this quarter for example was about 62%.
Or should it kind of makes it look more like low double digit or are we still talking north of 20%, 30% even next year for 'twenty two.
Speaker 4: I really can't really give you that number here just on the phone. I mean, obviously they're going to continue to grow. It obviously is the comparables, you know, that you're going to be looking at quarter to quarter. But on an overall basis, their growth has been outstanding. Their market shares, as I said, were up to 360,000 vehicles. And there is no slowdown in the commercial rental. And the consumer rental, we get a little bit of dip when some of these trucks come back from UPS and FedEx after Christmas, but it's ironic.
I really I can't really give you that number here just on the phone I mean, obviously, they're going to continue to grow it obviously as a comparable.
Youre going to be looking at quarter to quarter, but on overall basis. Their growth has been outstanding their market share as I said, we're up to 360000 vehicles and there is no slowdown in the commercial rental and the consumer rental we get a little bit of dip when some of these trucks come back from UBS and Fedex After Christmas but.
Ironic that we're seeing those going right back out and obviously some of those don't bring the margin that we had from a one way basis and I think the truck market is going to grow we've got a strong economy, you're only going to see lower gain on sale because we don't have enough units.
Speaker 4: that we're seeing those going right back out. And obviously, some of those don't bring the margin that we had from a one-way basis. And I think the truck market's going to grow.
Speaker 4: we got a strong economy only going to see lower gain on sale because we don't have enough units the profit per unit
<unk> per unit I don't think will deteriorate much at all it'll be just the number of units that we're going to be able to have available to retail our shell from Pts.
Speaker 4: I don't think will deteriorate much at all. It'll be just the number of units that we're going to be able to have available to retail or sell from PGS.
Speaker 10: Okay, and just one question on the balance sheet is probably for Shelley. The 2025, I think they have a change in their call for vision on September one. Do you have any interest in moving that maturity even to 2029 or even next decade?
Okay and just one question on the balance sheet is probably for Shelley.
The 2025 notes I think they have a change in a call provision on September one do you have any interest in moving that maturity, even 2029 or even next decade.
Speaker 5: No, not at this time. The premium and the low interest rate where we're at, we think we'll take advantage of that longer term for some time.
No not at this time of the premium and the low interest rate, where we're at we think well take advantage of that longer term for some time.
Okay alright. Thanks.
Speaker 1: At this time, there are no further questions in Q. I would now like to turn it back over to Roger Penske for any closing remarks.
At this time there are no further questions in queue I would now like to turn it back over to Roger Penske for any closing remarks.
Speaker 4: Thank you operator. Thanks everyone for joining us. We had a great year and
Thank you operator, thanks, everyone for joining us we had a great year in <unk>.
Speaker 4: 2021, the aspects that look out for 2022 look favorable. I think our brand mix are people, the diversification we have across all of our businesses is structured properly. And now we have to execute. So we'll see you after the first quarter. Thanks.
2021.
Aspect to look out for 2022 look favorable I think our brand mix or our people. The diversification we have across all of our businesses is structured properly and now we have to execute so we'll see you after the first quarter. Thanks.
Speaker 2: This concludes today's conference call. Thank you for participating. You may now disconnect.
This concludes today's conference call. Thank you for participating you may now disconnect.
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