Penske Automotive (PAG) - 2024 Q4 - Annual Report

Revenue and Sales Performance - In 2024, the company generated total revenue of $30.5 billion, with$ 26.2 billion from retail automotive dealerships, $3.5 billion from retail commercial truck dealerships, and$ 777.9 million from commercial vehicle distribution and other operations[13]. - The company retailed and wholesaled over 594,000 vehicles in 2024, with 72% of retail automotive franchised dealership revenue coming from premium brands[14]. - Retail commercial truck dealerships accounted for 11.6% of total revenues and 11.7% of total gross profit in 2024, with 20,947 new and used trucks sold[17]. - In 2024, the company retailed over 244,990 new vehicles, generating 46.1% of retail automotive dealership revenue and 27.0% of gross profit[32]. - The company retailed 246,608 used vehicles in 2024, contributing 33.5% of retail automotive dealership revenue and 10.7% of gross profit[34]. - Finance and insurance sales accounted for 3.1% of retail automotive dealership revenue and 19.1% of gross profit in 2024[35]. - Service and parts sales represented 11.7% of retail automotive dealership revenue and 41.7% of gross profit in 2024[38]. - Fleet and wholesale sales made up 5.6% of retail automotive dealership revenue and 1.5% of gross profit in 2024[40]. - The retail automotive dealership market in the U.S. was approximately $1.2 trillion, with 16.0 million new cars and light trucks sold in 2024, a 2.5% increase from 2023[60]. - Used vehicle sales in the U.S. reached approximately 36.8 million units in 2024, up from 35.9 million in the previous year[62]. Operational Insights - The company operates 353 retail automotive franchised dealerships, with 148 in the U.S. and 205 outside the U.S.[14]. - The company’s diversified revenue streams help mitigate the cyclicality historically found in the automotive sector[28]. - The company holds a 28.9% ownership interest in Penske Truck Leasing Co., L.P., which offers a broad range of logistics services[52]. - PTS manages a fleet of approximately 435,000 trucks, tractors, and trailers, with an average full-service leasing Class 8 tractor fleet age of about 3.4 years as of December 31, 2024[53]. - PTS operates approximately 930 locations to provide full-service truck leasing, truck rental, and contract maintenance services[55]. - The company has implemented AI-driven technologies at certain dealerships to enhance customer experience, including a voice assistant for service calls[69]. - The company focuses on a data-driven digital strategy to enhance customer engagement and streamline vehicle purchasing and service scheduling[68]. Financial Performance - Gross profit for 2024 was$ 5.0 billion, comprising $4.3 billion from retail automotive dealerships,$ 584.5 million from retail commercial truck dealerships, and $178.2 million from commercial vehicle distribution and other operations[208]. - The company expects to continue paying comparable cash dividends, having announced a cash dividend of$ 1.22 per share payable on March 6, 2025[195]. - As of December 31, 2024, the company had $156.8 million remaining for share repurchases under its securities repurchase program[198]. - The cumulative total return for Penske Automotive Group, Inc. was 335.24% from December 31, 2019, to December 31, 2024[204]. Market Trends and Competition - U.S. industry new light vehicle sales increased by 2.5% to 16.0 million units in 2024, with expectations for growth to 16.2 million units in 2025[22]. - North American sales of Class 6-8 medium- and heavy-duty trucks decreased by 3.0% to 473,159 units in 2024[25]. - The company faces competition in the used vehicle market, which sells approximately 36.8 million units annually in the U.S.[80]. - The company competes with a variety of financial institutions for vehicle financing, including banks and local credit unions[79]. - The company is subject to increased competition from online retailers and new entrants in the automotive market, which could adversely affect market share and profitability[140]. Regulatory and Compliance Risks - The company is subject to numerous environmental laws and regulations, which may require significant capital and operating expenditures for compliance[97]. - The company has a proactive strategy for environmental, health, and safety compliance, including regular inspections of facilities[100]. - The U.S. Environmental Protection Agency has set standards requiring vehicle manufacturers to achieve an industry-wide average target of 85 grams of carbon dioxide per mile for light-duty vehicles by model year 2032, a nearly 50% reduction from the 2026 standard[103]. - The European Parliament mandates a 55% reduction in emissions for new cars by 2030 and aims for zero carbon emissions by 2035, effectively banning new gasoline and diesel vehicles[105]. - The company is subject to operational risks from geopolitical conditions, which can affect vehicle supply chains and overall market performance[118]. - The status of emission regulations remains uncertain due to potential changes in federal policies, including the rescinding of California's zero-emission vehicle regulations[111]. - The company is subject to multiple sets of climate-related financial disclosure regulations, which may result in additional compliance costs and risks[168]. Cybersecurity and Information Systems - The company has implemented a comprehensive Information Security Program, including annual cybersecurity risk assessments and multi-layered preventive controls[182]. - The Board of Directors oversees cybersecurity threats as a critical component of overall risk management, with regular updates provided during meetings[186]. - The Chief Information Officer, with over 25 years of experience, is responsible for implementing and overseeing the Information Security Program[187]. - A cybersecurity incident involving CDK Global impacted the company's Premier Truck Group business, leading to a temporary disruption in operations[175]. - The company relies heavily on third-party vendors for its information systems, which are critical for operations, including customer relationship management and financial reporting[173]. Financial Obligations and Risks - The company has$ 4.0 billion in floor plan notes payable, $1.9 billion in non-vehicle long-term debt, and$ 5.3 billion in future lease commitments, indicating significant financial obligations[145]. - The company faces risks related to a concentrated customer base and the financial health of its customers, which could affect sales and profitability[130]. - The company retains substantial risk related to general liability, workers' compensation, and property insurance, potentially leading to significant claims and losses[113]. - The introduction of shares from Penske Corporation's pledged stock could materially adversely affect the company's stock price[172]. Employee and Workplace Insights - As of December 31, 2024, the company employed approximately 28,900 people, with about 683 covered by collective bargaining agreements[90]. - The company achieved a turnover rate of approximately 20%, which is below industry averages[92]. - In 2024, 79 of the company's dealerships were recognized in the "Automotive News Best Dealerships To Work For," including nine of the top ten spots nationally[89].