Penske Automotive (PAG) - 2024 Q1 - Quarterly Results

Q1 2024 Financial Performance Overview Key Financial Highlights Penske Automotive Group's Q1 2024 revenue increased by 1.5% to $7.4 billion, while net income and EPS significantly declined due to higher interest costs and lower equity earnings from PTS Q1 2024 Key Financial Metrics | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $7.4 Billion | $7.3 Billion | +1.5% | | Net Income Attributable to Common Stockholders | $215.2 Million | $298.3 Million | -27.9% | | Earnings Per Share (EPS) | $3.21 | $4.31 | -25.5% | - Profitability was negatively impacted by a $17.4 million increase in interest costs and lower equity earnings from the company's investment in Penske Transportation Solutions (PTS)[3] - Foreign currency exchange had a positive impact, increasing revenue by $98.1 million and EPS by $0.02[1] Operational Highlights and Management Commentary Q1 2024 saw a 4% increase in total retail automotive units delivered, record service and parts revenue, and improved SG&A as a percentage of gross profit, despite declines in same-store revenues Q1 2024 Same-Store Performance vs. Q1 2023 | Segment | Revenue Change | Gross Profit Change | | :--- | :--- | :--- | | Retail Automotive | -1% | -4% | | Retail Commercial Truck | -15% | -6% | - Total new and used retail automotive units delivered increased by 4% year-over-year[3] - CEO Roger Penske noted record retail automotive service and parts revenue, which grew 9% to $746 million, and a sequential improvement in SG&A as a percentage of gross profit by 30 basis points to 70.7%[4] Business Segment Performance Retail Automotive Dealerships The retail automotive segment experienced a 3% revenue increase and 4% rise in unit deliveries, but same-store performance declined, with service and parts revenue being a key growth area Q1 2024 Retail Automotive Performance | Metric | Value | YoY Change | | :--- | :--- | :--- | | Total Revenue | $6.5 Billion | +3% | | Total Units Delivered | 126,864 | +4% | | Total Gross Profit | $1.1 Billion | -1% | | Same-Store Revenue | N/A | -1% | | Same-Store Gross Profit | N/A | -4% | | Same-Store Service & Parts Revenue | N/A | +5% | Retail Commercial Truck Dealerships This segment faced a 12% decline in retail unit sales due to inventory issues, leading to lower revenue and earnings before taxes, despite an improved gross margin from a stronger sales mix - Retail unit sales declined 12% due to lack of inventory availability compared to the prior year[6] Q1 2024 Retail Commercial Truck Performance (in Millions) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | $791.8 | $895.6 | | Earnings Before Taxes | $50.5 | $57.1 | | Gross Margin | Increased 190 bps | N/A | Penske Transportation Solutions (PTS) Investment Earnings from the 28.9% stake in PTS significantly decreased to $32.5 million in Q1 2024, primarily due to lower rental utilization, higher interest rates, and reduced gains on vehicle sales Earnings from PTS Investment (in Millions) | Period | Earnings | | :--- | :--- | | Q1 2024 | $32.5 | | Q1 2023 | $80.8 | - Penske Automotive Group holds a 28.9% ownership interest in PTS, which operates a managed fleet of over 442,000 vehicles[7] Corporate Development and Financial Position Capital Allocation and Liquidity In Q1 2024, the company repurchased 0.2 million shares for $32.9 million, maintaining a strong financial position with $1.7 billion in liquidity and a 1.1x leverage ratio - Repurchased 0.2 million shares of common stock for approximately $32.9 million in Q1 2024[8] Financial Position as of March 31, 2024 (in Millions) | Metric | Value | | :--- | :--- | | Total Liquidity | $1,700 | | Cash | $117 | | Leverage Ratio | 1.1x | | Remaining Repurchase Authority | $182.6 | Acquisitions and Expansion The company expanded through the acquisition of Rybrook Group in the UK, two U.S. dealerships, and an agreement for two Porsche dealerships in Australia, adding significant annualized revenue - Completed the acquisition of Rybrook Group Limited in the UK, which includes 16 retail automotive franchises and is expected to generate approximately $1 billion in annualized revenue[9] - Acquired one Ford and one Chrysler/Dodge/Jeep/Ram dealership in the U.S.[9] - Signed an agreement to acquire two Porsche dealerships and one Ducati motorcycle dealership in Melbourne, Australia, with estimated annualized revenues of $140 million, expected to close in Q2 2024[9] Consolidated Financial Statements Consolidated Condensed Statements of Income Q1 2024 income statement shows a 1.5% revenue increase to $7.45 billion, but operating income and net income declined significantly due to higher floor plan interest and reduced equity earnings Q1 2024 Income Statement Highlights (in Millions) | Line Item | Q1 2024 | Q1 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $7,447.8 | $7,339.0 | +1.5% | | Gross Profit | $1,245.2 | $1,252.3 | -0.6% | | Operating Income | $327.6 | $373.5 | -12.3% | | Floor Plan Interest Expense | $(44.8) | $(27.9) | +60.6% | | Equity in Earnings of Affiliates | $33.3 | $82.1 | -59.4% | | Net Income | $216.2 | $299.6 | -27.8% | | Diluted EPS | $3.21 | $4.31 | -25.5% | Consolidated Condensed Balance Sheets As of March 31, 2024, total assets increased to $16.15 billion, driven by inventories and intangible assets, with corresponding increases in total liabilities and total equity Balance Sheet Highlights (in Millions) | Account | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $5,810.6 | $5,679.7 | | Total Assets | $16,146.5 | $15,671.5 | | Total Current Liabilities | $5,910.1 | $5,657.9 | | Total Liabilities | $11,300.4 | $10,915.9 | | Total Equity | $4,846.1 | $4,755.6 | Detailed Operational and Segment Data Consolidated Operations Data North America's revenue contribution slightly decreased in Q1 2024, while the overall gross margin contracted by 40 basis points and SG&A as a percentage of gross profit increased to 70.7% Revenue by Segment (in Millions) | Segment | Q1 2024 Revenue | Q1 2023 Revenue | | :--- | :--- | :--- | | Retail Automotive | $6,478.0 | $6,299.8 | | Retail Commercial Truck | $791.8 | $895.6 | | Commercial Vehicle Distribution & Other | $178.0 | $143.6 | Key Operating Ratios | Ratio | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Gross Margin | 16.7% | 17.1% | | SG&A as % of Revenue | 11.8% | 11.5% | | SG&A as % of Gross Profit | 70.7% | 67.5% | Retail Automotive Operations (Total) Total retail automotive revenue grew by 2.8%, primarily from new vehicle sales and service/parts, though new vehicle gross profit declined, while used vehicle gross profit expanded Q1 2024 Retail Automotive Revenue & Gross Profit (in Millions) | Category | Revenue | Gross Profit | | :--- | :--- | :--- | | New Vehicles | $2,802.6 (+3.0%) | $272.4 (-13.2%) | | Used Vehicles | $2,336.2 (+1.7%) | $129.9 (+6.0%) | | Service and Parts | $746.1 (+9.2%) | $432.4 (+8.4%) | Q1 2024 Gross Profit Per Vehicle Retailed | Category | Gross Profit per Unit | YoY Change | | :--- | :--- | :--- | | New Vehicles | $5,229 | -17.2% | | Used Vehicles | $1,876 | +3.8% | Retail Automotive Operations (Same-Store) Same-store retail automotive revenue and gross profit declined, mainly due to new vehicle performance, but service and parts revenue and gross profit showed growth Q1 2024 Same-Store Revenue & Gross Profit (in Millions) | Category | Revenue | Gross Profit | | :--- | :--- | :--- | | New Vehicles | $2,688.7 (-1.1%) | $261.0 (-16.8%) | | Used Vehicles | $2,237.8 (-1.4%) | $122.3 (+0.2%) | | Service and Parts | $713.7 (+4.9%) | $417.5 (+5.1%) | - Same-store gross profit per new vehicle retailed saw a significant drop of 17.9% from $6,326 to $5,195[30] Retail Commercial Truck Operations (Total) The retail commercial truck segment's total revenue decreased by 11.6% to $791.8 million, yet gross margin expanded by 190 basis points, offsetting some profit decline - Total retail commercial truck units sold decreased by 12.2%, with new units down 22.7% while used units grew 60.2%[32] Q1 2024 Gross Profit Per Commercial Truck Retailed | Category | Gross Profit per Unit | YoY Change | | :--- | :--- | :--- | | New Vehicles | $9,909 | +37.8% | | Used Vehicles | $3,187 | -61.1% | Retail Commercial Truck Operations (Same-Store) Same-store commercial truck revenue sharply declined by 15.2%, with new vehicle revenue down 21.0%, despite a significant increase in gross profit per new vehicle retailed Q1 2024 Same-Store Commercial Truck Performance (in Millions) | Metric | Value | YoY Change | | :--- | :--- | :--- | | Total Revenue | $759.7 | -15.2% | | Total Gross Profit | $138.4 | -5.7% | | New Retail Units | 3,362 | -25.6% | | Used Retail Units | 1,024 | +56.3% | Supplemental Data and Non-GAAP Reconciliations Supplemental Data Premium brands constituted 72% of retail automotive revenue, with Q1 capital expenditures at $102.5 million and cash paid for acquisitions at $243.6 million, ending with 40 days' supply for new vehicles - The premium vehicle segment, including brands like BMW/MINI, Audi, and Mercedes-Benz, represented 72% of the retail automotive revenue mix, consistent with the prior year[36] Q1 2024 Capital Expenditures & Repurchases (in Millions) | Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Capital expenditures | $102.5 | $102.4 | | Cash paid for acquisitions | $243.6 | $0 | | Stock repurchases | $32.9 | $110.2 | Inventory Days' Supply | Vehicle Type | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | New vehicle | 40 days | 39 days | | Used vehicle | 36 days | 48 days | Non-GAAP Reconciliations Q1 2024 EBITDA decreased by 23.3% to $353.9 million, and the leverage ratio stood at 1.1x based on trailing twelve months adjusted EBITDA of $1.586 billion EBITDA Reconciliation (in Millions) | Period | Net Income | EBITDA | YoY Change (EBITDA) | | :--- | :--- | :--- | :--- | | Q1 2024 | $216.2 | $353.9 | -23.3% | | Q1 2023 | $299.6 | $461.6 | N/A | - The leverage ratio of 1.1x was calculated using total non-vehicle long-term debt of $1,677.2 million and trailing twelve months adjusted EBITDA of $1,586.1 million[39]