Penske Automotive Group Q1 2025 Earnings Report

Penske Automotive Group EPS Results

• Actual EPS: $3.39
• Consensus EPS: $3.27
• Beat/Miss: Beat by +$0.12
• One Year Ago EPS: $3.21

Penske Automotive Group Revenue Results

• Actual Revenue: $7.60 billion
• Expected Revenue: $7.68 billion
• Beat/Miss: Missed by -$77.03 million
• YoY Revenue Growth: +2.10%

Penske Automotive Group Announcement Details

• Quarter: Q1 2025
• Date: 4/30/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, April 30, 2025
• Conference Call Time: 2:00PM ET

Penske Automotive Group (NYSE:PAG), a diversified transportation services company, operates automotive and commercial truck dealerships worldwide. The company operates through four segments: Retail Automotive, Retail Commercial Truck, Other, and Non-Automotive Investments. It operates dealerships under franchise agreements with various automotive manufacturers and distributors. The company is also involved in the sale of new and used motor vehicles, maintenance and repair services, sale and placement of third-party finance and insurance products, third-party extended service and maintenance contracts, replacement and aftermarket automotive products, collision repair services, and wholesale of parts. In addition, it operates a heavy and medium duty truck dealership, which offers Freightliner and Western Star branded trucks, as well as offers a range of used trucks. Further, it imports and distributes Western Star heavy-duty trucks, MAN heavy and medium duty trucks and buses, and Dennis Eagle refuse collection vehicles with associated parts. Additionally, the company distributes diesel and gas engines, and power systems. Penske Automotive Group, Inc. was incorporated in 1990 and is headquartered in Bloomfield Hills, Michigan.

Penske Automotive Group Q1 2025 Earnings Call Transcript

Key Takeaways

• Penske Automotive delivered a record Q1 2025 revenue of $7.6 billion (+2%), with same-store retail automotive revenue up 2% and service & parts revenue up 4%, driving a 3–6% increase in related gross profit and adjusted EPS of $3.39 (+6%).
• The company’s diversified model generated 59% of revenue in North America and 40% internationally, with 36% of earnings from non-automotive operations and only 26% of 2024 gross profit tied to new vehicle sales.
• Service & parts remained a growth engine, with 6% same-store revenue growth, 8% gross profit growth, a 60 bp margin expansion to 58.6%, and improved fixed-absorption rates (87.1% in US auto and 117.5% in North American trucks).
• Disciplined cost control drove a 70 bp year-over-year improvement in adjusted SG&A as a percentage of gross profit and a 30 bp sequential improvement, while headcount stayed ~10% below pre-COVID levels.
• Strong cash generation underpinned capital returns and liquidity, with Q1 operating cash flow of $283 million, free cash flow of $206 million, $40 million in share repurchases, a 1.2x non-vehicle leverage ratio, and $2.1 billion of available liquidity.

Presentation

[Operator]

Good afternoon. Welcome to the Penske Automotive Group First Quarter twenty twenty five Earnings Conference Call. Today's call is being recorded and will be available for replay approximately one hour after completion through 05/07/2025, on the company's website under the Investors tab at www.penskeautomotive.com. I will now introduce Tony Porton, the company's Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead.

[Tony Pordon, Executive Vice President Investor Relations and Corporate Business Development at Penske Automotive Group]

Thank you, Julianne. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's first quarter twenty twenty five financial results was issued this morning and is posted on our website along with a presentation designed to assist you in understanding the company results. As always, I'm available by email or phone for any follow-up questions you may have. Joining me for today's call are Roger Penske, Chair and CEO Shelly Hulgrave, EVP and Chief Financial Officer Rich Sheering, North American Operations Randall Seymour, International Operations and Tony Piccione, Vice President and Corporate Controller.

[Tony Pordon, Executive Vice President Investor Relations and Corporate Business Development at Penske Automotive Group]

Our discussion today may include forward looking statements about our operations, earnings potential, outlook, acquisitions, future events, growth plans, liquidity and assessment of business conditions. We may also discuss certain non GAAP financial measures as defined under SEC rules such as adjusted net earnings before taxes, adjusted net income, adjusted earnings per share, adjusted selling, general and administrative expenses, earnings before interest, taxes, depreciation and amortization or EBITDA and adjusted EBITDA and our leverage ratio. We've prominently presented the comparable GAAP measures and have reconciled the non GAAP measures to their most directly comparable GAAP measures in this morning's press release and investor presentation, both of which available on our website. Our future results may vary from our expectations because of risks and uncertainties outlined in today's press release under forward looking statements. I direct you to our SEC filings, including our Form 10 ks and previously filed Form 10 Qs for additional discussion of factors that could cause future results to differ materially from expectations.

[Tony Pordon, Executive Vice President Investor Relations and Corporate Business Development at Penske Automotive Group]

I will now turn the call over to Roger.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Thank you, Tony. Good afternoon, everyone, and thank you for joining us today. I'm pleased with the results of our first quarter. Our diversified international transportation service business generated record first quarter revenue, the seventh consecutive quarter of stable gross margin and a 70 basis point improvement of adjusted selling, general and administrative expenses as a percentage of gross profit when compared to the first quarter of last year. During the quarter, revenue increased 2% to a record of 7,600,000,000.0 Same store retail automotive revenue also increased 2%, while related gross profit was up 3%.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Same store retail automotive service and parts revenue increased 4%, while related gross profit was up 6%. Service and parts gross margin increased 60 basis points to 58.6%. Our business generated three thirty seven million dollars in earnings before taxes, $244,000,000 in net income and earnings per share of $3.66 each which increased by 14%. On an adjusted basis, earnings before taxes increased 5% to $310,000,000 and net income increased 5% to $226,000,000 and our earnings per share increased 6% to $3.39 As we look at the automotive and commercial truck markets, the current environment remains very fluid. We believe the administration is encouraging companies and individual countries to come to the table to discuss their plans.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

We remain in close contact with our OEM partners. Many OEMs have announced their intent to hold current prices while tariff negotiations continue and we believe most brands are evaluating their individual geographic footprint including production capacity, model mix, suppliers, vehicle content, among others. As we look to the future, the diversification of PAG will be a key differentiator. The diversification provided by a premium brand mix, our President and International Automotive markets, our retail commercial truck dealerships and our investment in Penske Transportation Solutions, coupled with our highly variable cost structure provide us with opportunities to flex our businesses to meet the changing landscape. Approximately 59% of our revenue is generated in North America, 30 1 Percent in The UK and 9% in other international markets.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Our profitability is also diversified with 64% of our earnings in 2024 coming from our automotive retail operations and 36% from our non automotive operations as we generate that profitability across multiple sources such as new, used, service and parts and finance and insurance. In fact, only 26% of our total gross profit in 2024 was generated from new vehicle sales. So now let's turn our attention to a few additional details of the first quarter results. During the first quarter, we delivered 120,000 new and used automotive units and over 4,700 commercial trucks. New automotive units delivered increased 68% on a same store basis.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Used automotive units declined 1611% on a same store basis. The decline is associated with the realignment of our UK used only dealerships to sit and select, which took place in the last half of twenty twenty four, we sold or closed four locations, realigned the cost base, changed the focus to retailing fewer units at higher margin. Excluding the performance of Sytner Select in both periods, used unit delivered only decreased 1% in total on a same store basis. Average new transaction price increased 4% to $59,202 while average used vehicle transaction price increased 12% to $37,624 New and used vehicle gross profit per unit retail remained strong. New vehicle gross was $5,059 down over $87 when compared to the fourth quarter of last year.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Used vehicle gross increased $352 per unit when compared to the fourth quarter of twenty twenty four, largely due to our efforts with Sytner Select and the overall improvement in used vehicle inventory management. Variable vehicle profit, which includes new used and F and I was $5,281 per unit, representing a $38 unit decline when compared to the fourth quarter of last year. In the quarter, service and parts revenue increased 6% to $789,000,000 including a 4% on a same store basis with customer pay up 1% and warranty up 17%. Warranty continues to be driven by recall activity across several brands. Fixed absorption in The U.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

S. Automotive business increased three ten basis points to 87.1%. It was 117.5% for our North American retail commercial truck business. As we look to continue growing this important part of our business, we've increased our technician headcount by 5% since March of twenty twenty four, and the effective labor rate increased 5% in The US and 6% in The UK. Lastly, I remain pleased with our efforts to control costs.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

On an adjusted basis, our SG and A to gross profit declined by 70 basis points to 70 when compared to the first quarter last year and declined by 30 basis points sequentially when compared to the fourth quarter of twenty twenty four. Now let me turn the call over to Rich Schering to discuss our North American operations.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

Thank you, Roger,

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

and good afternoon, everyone. In our retail U. S. Retail automotive operations, we experienced a rise in traffic, especially near the March. For the quarter, U.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

S. New units increased 8%, while used units increased 2%. During the quarter, 29% of the new units sold in The U. S. Were at MSRP.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

Leasing in The U. S. Increased to 33% on new vehicles retailed, up from 32% in Q1 last year, and leasing on our premium brands is in the mid-forty percent range compared to the mid-fifty percent in 2019 prior to COVID. We sold 2,800 new BEV vehicles in The U. S.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

During the quarter, representing approximately 8.5% of new vehicle sales. Our U. S. Days supply for BEV is vastly improved at fifty six days compared to seventy six days at the December and eighty seven days in March. Although we have done a great job working with our OEM partners to manage that inventory to be more closely aligned with consumer demand, the majority of BEV units still require significant discounting.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

The average discount on BEV from MSRP was over $7,400 during Q1 compared to $6,300 Q1 last year. In our automotive business, service and parts same store revenue increased 6% during Q1 and same store gross profit increased 8%. Turning to our retail commercial truck business, we operate 45 locations and remain one of the largest commercial truck retailers for Diamond Trucks North America. The retail truck business is one of the core pillars of our diversified model and represents 11% of revenue and gross profit. We believe Class eight commercial truck demand will continue to be driven primarily by replacement purchases in 2025 rather than fleet growth.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

Premier trucks sold 4,714 units in Q1, which was up 4% when compared to Q1 last year and new units increased 7%, but declined 2% on a same store basis. This compares favorably to the 12% decline in the North American Class eight market in Q1 as the strength of our customer mix and the strength of the Freightliner West and Star brands outperformed. As of the March, the current industry backlog was 132,000 units or approximately six months of sales, down from 163,000 units in March. Used units declined 7%, including 9% on a same store basis. However, used gross profit more than doubled to 7,541 from 3,187.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

Revenue was $824,000,000 and EBT was $45,000,000 for the quarter for a return on sales of 5.5%. Same store SG and A to gross profit was 63.1% and fixed absorption was 117.5%. Looking to the future, Freightliner is committed to a minimal price increase related to tariffs. Initially, a tariff surcharge of $3,000 on Heaven Duty and $1,500 on Medium Duty trucks will be applied. Any customer who places an order prior to the May for production by the October will see a not to exceed maximum tariff of $3,500 Tariffs on future orders beyond this point are not known at this time.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

Further, the potential truck pre buy for 2027 emission changes will be dependent on the outcome of the current EPA review of the waivers granted to certain states. Turning to Penske Transportation Solutions. During Q1, revenue was flat at $2,700,000,000 Full service revenue and contract business increased 5%, logistics revenue decreased one percent and rental revenue declined 10% as the freight recession continues to impact the number of units on rent and our overall rental utilization. During the quarter, PTS sold over 11,000 units and ended the quarter with 428,000 units down from 435,000 at the December. PTS earnings were up $3,000,000 when compared to the first quarter last year and our share was $33,200,000 up 2% from $32,500,000 in the first quarter last year.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

I would now like to turn the call over to Randall Seymour to discuss our international operations.

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

Thank you, Rich. Good afternoon, everyone. As a reminder, we operate retail automotive dealerships in The UK, Germany, Italy, Japan and Australia and a commercial vehicle and power systems business in Australia and New Zealand. Our international operations represents approximately 40% of PAG's revenue. Looking at The U.

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

K. Retail automotive market, new vehicle market registrations increased 6% compared to Q1 last year. We outperformed the market as same store new units delivered in Q1 increased by 9%. New vehicle gross per unit remained resilient, declining only $138 per unit on a sequential basis when compared to the fourth quarter last year. Same store used units declined 22% as a result of the transition of the U.

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

K. CarShop to Sytner Select and the closure and sale of four locations. Excluding Sytner Select, same store used unit sales in The UK would have only decreased by 2%. However, used vehicle same store gross increased by $589 per unit when compared to the fourth quarter of twenty twenty four as a result of improved vehicle inventory management. Service and parts same store revenue increased 2% and gross profit increased by 3%.

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

Turning to Australia. As you may recall, last year, we acquired three Porsche dealerships in Melbourne. During the first quarter, these dealerships retailed $5.40 new and used units and generated $60,000,000 in revenue. We remain very pleased with our progress in the commercial vehicle and power system business in Australia as well. Service and parts represented approximately 61% of our total gross profit, so our focus on increasing units and operation is a key driver of the business.

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

In the on highway market, during the first quarter, we gained 150 basis points of market share. In the off highway sector, revenue and margin were driven by strong energy solutions demand. We have a $300,000,000 backlog for 2025 delivery and an order bank of over $600,000,000 predominantly related to growth in the large data center and battery energy storage solution businesses. We continue to maintain market leadership in the high horsepower power generation segment with over 55% share. I would now like to turn the call over to Shelly Holgrave to review our cash flow, balance sheet and capital allocation.

[Shelley Hulgrave, Executive Vice President & CFO at Penske Automotive Group]

Thank you, Randall. Good afternoon, everyone. Our balance sheet remains in great shape and our continued strong cash flow provides us with opportunities to maximize capital allocation. As you know, we follow an opportunistic approach, providing us with the ability to grow our business through acquisitions and return capital to shareholders through dividends and securities repurchases. We strongly believe that the strength of our balance sheet, strong cash flow, disciplined approach to capital allocation and our diversification will will provide benefits as we work with our customers and partners in an uncertain environment.

[Shelley Hulgrave, Executive Vice President & CFO at Penske Automotive Group]

During q one, we generated $283,000,000 in cash flow from operations, and our EBITDA was 400,000,000 or $372,000,000 on an adjusted basis. On a trailing twelve month basis, EBITDA was over $1,500,000,000 Our free cash flow, which is cash flow from operations after deducting capital expenditures, was $2.00 $6,000,000 During Q1, we paid $82,000,000 in dividends and invested $77,000,000 in capital expenditures to improve or expand our facilities. When compared to Q1 last year, capital expenditures were down $26,000,000 During the quarter, we repurchased 255,000 shares of stock for $40,000,000 and year to date through April 25, have repurchased 750,000 shares for $111,000,000 We expect to continue repurchasing shares on an opportunistic basis. As of April 25, we have $46,000,000 remaining under the existing securities repurchase authorization. Our dividend is $1.22 per share.

[Shelley Hulgrave, Executive Vice President & CFO at Penske Automotive Group]

Since the end of twenty twenty three, we have increased the dividend by 54%. Using yesterday's closing price, our current yield is approximately 3.1% with a payout ratio of 36%. Additionally, as we focus on strategic capital allocation, we divested one retail automotive location in Q1, which represented approximately $200,000,000 in estimated annualized revenue. Our strong cash flow has allowed PAG to keep its non vehicle debt and leverage low. At the March, our non vehicle long term debt was $1,770,000,000 down $80,000,000 from the December year.

[Shelley Hulgrave, Executive Vice President & CFO at Penske Automotive Group]

78% of the non vehicle long term debt is at fixed rate. Debt to total capitalization was 24.7% and leverage is 1.2 times. When including floor plans, we have $4,400,000,000 of variable debt. 55% of our variable rate debt is in The US. We estimate a 25 basis point interest rate would impact interest expense by approximately $11,000,000 At the March, we had $118,000,000 of cash, and the liquidity available to us was $2,100,000,000 Upon the maturity of our $550,000,000 3 point 5 percent senior subordinated notes due in September, we currently expect to either repay those notes from cash flow from operations or borrowings under our U.

[Shelley Hulgrave, Executive Vice President & CFO at Penske Automotive Group]

S. Credit agreement or refinance those notes in whole or in part with similar notes depending on the prevailing interest rate. Total inventory was $4,500,000,000 down $140,000,000 from the December 2024. Floor plan debt was $4,000,000,000 New and used inventory remains in good shape. New vehicle inventory is at a thirty nine day supply, including thirty eight days for premium and twenty nine days for volume foreign.

[Shelley Hulgrave, Executive Vice President & CFO at Penske Automotive Group]

Used vehicle inventory is at a thirty six day supply. At this time, I will turn the call back to Roger for some final remarks.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Thank you. PAG's Q1 performance was certainly strong. I remain particularly pleased with the continued resilience of gross profit per vehicle retail, performance

[Roger Penske, Chairman & CEO at Penske Automotive Group]

of

[Roger Penske, Chairman & CEO at Penske Automotive Group]

our automotive service and parts operations and the success we continue to demonstrate with our SG and A leverage and our focus on cost controls, remain confident in our diversified model and its ability to flex with market conditions and remain very pleased with the performance of our business in the first quarter. Operator, at this time, you can open up the call for questions.

[Operator]

Thank you. Our first question comes from John Murphy from Bank of America. Please go ahead. Your line is open.

[John Murphy, Managing Director at Bank of America Merrill Lynch]

Hey, John. Hey, Roger. Hey, everybody. Just a first question on The UK. I mean, SITNER Select sounds like it's chugging along and you're making great progress there.

[John Murphy, Managing Director at Bank of America Merrill Lynch]

We got another two quarters before that anniversaries itself. But it sounds like there's some other really good work going on in The UK to make the business much more efficient and profitable over time. I wonder if you could just maybe comment and highlight some of the things that are going on there.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Let me let Randall give you an update on that. Go ahead.

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

Hey, John.

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

How are doing?

[John Murphy, Managing Director at Bank of America Merrill Lynch]

Good. How are you?

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

Yeah. Good. Thank you. Look at the Q1, the U. K.

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

Total market was up 6% and at Sytner, we were up 9%, so outperformed. So that was certainly pleasing. But as you mentioned, you know, the gross profit on used cars overall was up $589. We had a record fixed month, in our, after sales gross profit as well. And back to both new car and used car, I'd really the kingpin there is inventory management.

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

We the aging is at a at a the best it's been in quite some time. We're really focusing on our new car day supply by model. So what that's doing is it's translating in lower inventory, more efficient inventory, a better turn on the inventory and better gross profit. So I really hats off to the team there. And then on the expense control as well, we're really looking at all of our demos where our headcount, we've had natural attrition where we've had headcount reduction there with some savings.

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

Back to fixed gross profit, our gross profit per technician was up 7%. So I think there's a lot of levers there we're pulling that is equated to the good result in Q1. And I think the best news is it's all sustainable as we move through the rest of the year.

[John Murphy, Managing Director at Bank of America Merrill Lynch]

That's very helpful. And then just a second question on parts and service. Results there are good, particularly on the margin side. But it sounds like warranty really dominated. I think, Roger, you mentioned up 17%.

[John Murphy, Managing Director at Bank of America Merrill Lynch]

Customer pay was up only 1%. Is there a crowding out effect going on there where there's just so much warranty work, it's kind of tough to get to the customer pay and grow it? And if also you could just remind us what the tech growth there is and door rate increases are as well in the quarter?

[Roger Penske, Chairman & CEO at Penske Automotive Group]

I think I mentioned that our tech count is up by five The average technician is driving about 30,000 gross profit for for for the month. And I think when you look at customer pay, it declined 3% in The US and certainly 17% from a from a PTS perspective. I think the the most important thing to think about from a standpoint, you know, when we look at parts and service is really the utilization of bays. And I think, Rich, you talked about it. We talked about earlier today.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

We're running about 80% utilization of the bays, which is is critical. We have a big focus on, apprentices coming in because we've gotta build these technicians, from from the bottom up, which I I think is key. From a warranty standpoint, yeah, we've got Tundra, we've got Mercedes, we've got BMW, all with big recalls, which is driving that mix where it is at 17% overall versus 1%. And I think in The UK, as Randall's mentioned, we certainly have, have grown the gross profit there under because of cost controls and better utilization. And I would say we've driven a lower turnover in our service writers because we're getting probably, you know, more share of wallet from the customer when they come in.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

And I think, that absolutely is helping us grow our fixed absorption 300 basis points here, and I'm not sure what it grew in The UK. Well, interestingly,

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

in The UK in q one, our customer pay was up 11%. So, you know, we're able to grow that business. And you're right. On the service adviser, we've done a lot of training on best advice with service drivers service adviser with customers coming through the lane. So, you know, good.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Our our our fixed absorption was, was up, just shy of 280 basis points. So, John, you know, better utilization, you know, more productivity from the technicians, certainly more share of wallet on the RO. So I think that that's interesting. One point I wanna make that maybe you won't ask, but as we keep monitoring, the BEV units, the battery electric vehicles, the average repair is running about $1,400, and the ICE vehicle at the same time, same brand is running about 700. So we still have a big opportunity.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

And I would say all of Bev's work is warranty. So that's also driving the mix.

[John Murphy, Managing Director at Bank of America Merrill Lynch]

Got to love those Bev UIOs, Roger. Maybe just one last one. Tariffs are kind of impossible to call exactly where they're going to land right now, but it sounds like costs are going to go up to automakers and pricing might go up to some extent. Roger, what's your sort of gut feel on the price elasticity of demand particularly for your imports and your high end product? I mean is there room to inch up pricing and the consumer might not push back too much?

[John Murphy, Managing Director at Bank of America Merrill Lynch]

Mean what's your general just really gut check on that? It's tough to call.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Well, I think you gotta go back and we gotta look at the price increases that have taken place since '19. I think, the average selling price is up 17,000 just to put that in perspective. But I really wanna focus on, on premium luxury because as we look back, we're at 55% leasing. We've gone now to 45% here in the last, say, two quarters. So I see the ability to lease these vehicles with higher, certainly, residual values that the the finance companies can put on these will mitigate some of the impact to the customer.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

I think that's gonna be critical. And having those leased cars come back will be important later on because we've had kind of a dip in that, from the COVID time when there was more cash buyers. But I think, it's gonna be, certainly, as I look at it, it's gonna be a fluid situation. I mean, things are expected to change. They did last night, obviously.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

When you put it in perspective, there's about 7,900,000 vehicles that are imported to The US each year. And ironically, Mexico and Canada, I think, represent 51% or about 4,000,000 units. So with certainly, The US, actually, Canada initiative, hopefully that'll drive that to be more fluid and cost will be more realistic based on that opportunity for the people involved. So overall, I think there will be some impact probably on the lower priced vehicle depending if they're coming in, from from outside The US at the moment. But the stacking of tariffs, I think, was taken off the table here last or yesterday when it was announced.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

So let me just say, think it's a fluid situation. You know, remember, when we look at our business, today and and look at the overall, you know, our total gross profit was 300,000,000, in the first quarter, and only 26% of that was new vehicle. And obviously, with that, will give us it's not the whole gross profit chain because of parts and service and and our diversification. So, you know, overall, we're gonna have to work brand by brand. And I think, Rich, you might wanna comment today from an automotive standpoint and truck standpoint.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

Yes. So John, Rich here. I think I'd start with the truck. I think we stay close to Daimler. And as you know, we support exclusively the Freightliner Western Star brand.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

And I would say they've taken a real leadership position in their communication and position in the marketplace and provided some clarity for how tariffs will impact our products there through the October of this year. So I think initially, they stated there will be a not to exceed amount of 3,500. That was refined to 3,000 on heavy duty, 1,500 on medium duty through July 4 production. They subsequently come out and said that for orders placed prior to May 31, they'd extend that pricing protection through October. So really the balance of this year from a production and subsequent delivery to us as a dealer standpoint with the caveat that those orders placed prior to May 31 are non cancelable.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

So we'll have a high assurance of those orders when they come in that customers are committed to taking those trucks. So I think it's good that those customers have that certainty looking out in the future as things are very volatile at the moment. On the automotive side, a little bit varied brand by brand relative to the communication. But I would say the majority of brands have committed for price production through May or June timeframe. You know, and and with the units we have on ground in inventory at the moment, new units around 16,000, we think that carries us through June from a retail sales standpoint.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

And as we've seen over the last thirty days with various different changes, it's not unrealistic to think we'd see further change before the June as well.

[John Murphy, Managing Director at Bank of America Merrill Lynch]

Thank you very much guys. I appreciate it.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

Thanks, John.

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

Thank you.

[Operator]

Our next question comes from Mike Ward from Citigroup. Please go ahead. Your line is open.

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

Hey, Mike. Thanks very much. Good afternoon, everyone. Good afternoon, everyone. Hi, Hi,

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

SG

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

and A costs as a percentage of gross have been pretty flat. They've taken out seven straight quarters. Is that sustainable? And what are some of the things you've done, or can it even go lower?

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Why don't I have Shelly answer that question for you, Mike?

[Shelley Hulgrave, Executive Vice President & CFO at Penske Automotive Group]

Hey, Mike. How are you?

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

Hey, Shelly.

[Shelley Hulgrave, Executive Vice President & CFO at Penske Automotive Group]

Hey. Yeah. We are really pleased with our performance and SG and A to growth. Steve mentioned relatively flat in the low seventies as we have kind of guided and and feel very comfortable with that continued guidance, you know, down 70 basis points on an adjusted basis year over year, down 30 sequentially. It's really all about our team's daily focus on what we can control.

[Shelley Hulgrave, Executive Vice President & CFO at Penske Automotive Group]

And so as our team is, taking a look at headcount, we remain still down 10% from pre COVID levels, on a same store basis. We look at turnover, which is a a daily effort by our teams, and and we remain below NADA averages across the board. So really keeping our personnel costs low, looking at comp to growth metrics, and making sure that we don't leak growth. You know, we had an excellent result this quarter. In The US, comp to growth declined 30 basis points.

[Shelley Hulgrave, Executive Vice President & CFO at Penske Automotive Group]

In The UK, they declined a 10 basis points. And when you factor in that more of their compensation is fixed, it's a tremendous result by our team. So they did a really great job containing those costs. And the other side of that equation, obviously, is growing growth. And and when you look at some of our our higher margin, growth line, you know, we've grown surface and parts 40% since the same q one of twenty nineteen.

[Shelley Hulgrave, Executive Vice President & CFO at Penske Automotive Group]

Randall and Rich both talked about fixed absorption on their business lines. And then some of the other items that we can control, advertising, for example, down $3,000,000 quarter over quarter, things like travel and entertainment down a million. All of those items really continue to add up, and, we're seeing the right result.

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

And so if if what I gathered from what Randall was saying, it sounds like The UK market has maybe bottomed and started to turn the other direction, gaining some momentum. And if a lot of those costs are fixed, then if if we start getting some momentum in The UK, we should see additional improvement. Am I hearing that right?

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

Yeah. Look, I would say as far as the macro market overall, you know, being up 6%, I don't expect it to to go up significantly. But I think just our leadership team over there is doing an amazing job, and we're pulling some levers like I talked earlier relative to inventory management. One thing I didn't mention was upside on F and I. We've introduced some more products.

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

And remember, March was a registration month too. September will be the next one. But I think our performance and as it pertains to managing the gross growth opportunity and our expenses is absolutely sustainable and super proud of what the team is doing.

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

I like to mention too on the sit and select what you're doing on inventory?

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

Yeah. So we typically hold about 2,000 units in inventory. And just to give you a note, as of today, we had 11 cars over ninety days. So we're really managing the age, but I think even more important than that is the sourcing and really trying to get more stickiness on on trades, whether it be on new car or used cars because our gross profit opportunity on trades is a lot better than, you know, raising your hand at the auction next to 50 other people. So the result of that was a record gross profit per unit at Select in March after escalating even from January, February being strong.

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

And the other point in that business, I mean, we're we're really focused on younger you used cars, meaning the zero to four, maybe five, six. But as soon as you start getting over that, we you know, that that space, you end up selling it and then you, you know, you invariably have problems, and you gotta take care of the customer. So your policy expense goes up or you're buying the car back. So we've just found it better to keep it clean with the, with the newer cars there on the on the select side.

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

And then, Shelley, is the share count currently or what we'll see on the 10 q, is it about 66,000,000?

[Shelley Hulgrave, Executive Vice President & CFO at Penske Automotive Group]

It's pretty consistent with prior year. As you know, when we make those buybacks, they that number is weighted, Mike. And we also had a a a share grant within the quarter. So you'll see a fairly consistent, you know, 66.7, in the quarter. However, you know, we'll continue to see that go down as as, repurchases are weighted differently throughout the year.

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

Yeah. For for two q or one q? Because you you bought back in April. Right?

[Shelley Hulgrave, Executive Vice President & CFO at Penske Automotive Group]

We bought back in March and in April. So, you'll see the full effect of the March, during q two and then a a weighted q two number, for, the April repurchases.

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

And and so the weighted two q number is gonna be sixty six seven or it's gonna be lower than that?

[Shelley Hulgrave, Executive Vice President & CFO at Penske Automotive Group]

Oh, I'm sorry. We, I thought you were talking about EPS for q one, but

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

it's you know, all

[Shelley Hulgrave, Executive Vice President & CFO at Penske Automotive Group]

that. Yeah.

[Shelley Hulgrave, Executive Vice President & CFO at Penske Automotive Group]

Yeah.

[Tony Pordon, Executive Vice President Investor Relations and Corporate Business Development at Penske Automotive Group]

So Mike this is Tony.

[Tony Pordon, Executive Vice President Investor Relations and Corporate Business Development at Penske Automotive Group]

So with the with the shares that we per repurchased in the month of April, the share count will be lower in the second quarter than what it was in the first quarter.

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

Correct. Right. Okay. Now, Shelly, when you're looking at repurchase, is it just the big sell off in April with the tariff talk opportunistic? And is that the way you're going to look at it?

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

I know you balance it out with acquisitions and other stuff. Is that side of the market dried up and you just find your stock cheap enough and that's why you picked up a little bit?

[Shelley Hulgrave, Executive Vice President & CFO at Penske Automotive Group]

I wouldn't say that it's dried up by any means, Mike. I would say the industry as a whole seems to be taking a pause as we await, you know, different outcomes of of the tariff discussion. We are certainly still interested from an acquisition standpoint. You know, we'll remain opportunistic. And so if if the market remains consistent or if, you know, we find ourselves with different options, we're gonna we're gonna weigh them as they come.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Yeah. Mike, we've operated. We really haven't changed any offense. We've been operating under a 10 b five, obviously, which goes out as of, I think, today, but that's been the driver specifically over the last quarter.

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

Okay. And and what what are your board meetings scheduled? Is there a specific date, like, Tuesdays of the month or anything like that?

[Tony Pordon, Executive Vice President Investor Relations and Corporate Business Development at Penske Automotive Group]

No. They they vary. We we our board meets five times a year, and the time varies based upon availability of the board.

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

Okay. Perfect. Thank you very much, everyone.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

All right.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

Thanks. Thank you.

[Operator]

Our next question comes from Daniela Hagian from Morgan Stanley. Please go ahead. Your line is open.

[Daniela Haigian, Vice President - Equity Research at Morgan Stanley]

Thank you. So within used, I know you mentioned in Q and

[Daniela Haigian, Vice President - Equity Research at Morgan Stanley]

A there's a focus on zero to four year old, maybe five to six year old vehicles. But with the younger used supply still tight and vehicle pricing only moving upwards from here, do you see greater opportunity in this mix shift towards this kind of middle aged cohort? And how does that impact your your GPUs?

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Danielle, let let me say this. You know, I've been in this business a long time, and we have tried every model, you know, car shop over here going down into the, you know, double digit, car, years from an old perspective. And in The UK, as we were trying to do 5,000 cars a month, you know, we were we were down deep into into double digit. And the outcome was brand damage because of so many cars that we had to deliver policy on or buy back. So we focused on the one to four.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

And because of our premium business from the standpoint of new cars on the lease returns that we get, we see a much better profitability. And we're running thousands of loaner cars, which we can turn into young used cars on a quarterly and annual basis, which makes a big difference. So I would say, at the moment, we're staying in the one to four, and you can see our margin. And, you know, typically, we don't get the F and I bang because we get flats in many of the leases that we do. So but it's a it's a three year, maybe max four year, and we get that have the opportunity to buy that vehicle back.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Obviously, everybody does, but we focus on that along with trades as our as our first offense as we as we look for for used cars.

[Tony Pordon, Executive Vice President Investor Relations and Corporate Business Development at Penske Automotive Group]

Daniel, the other thing to remember on used cars with our heavy leasing percentage, approximately 40% of our used vehicle sales in The U. S. Are certified pre owned.

[Tony Pordon, Executive Vice President Investor Relations and Corporate Business Development at Penske Automotive Group]

So that

[Tony Pordon, Executive Vice President Investor Relations and Corporate Business Development at Penske Automotive Group]

in that zero to four year, one to four year old time frame.

[Daniela Haigian, Vice President - Equity Research at Morgan Stanley]

That's helpful. Thank you. And then one more on parts and service. You know, you have relatively inelastic demand there. You mentioned 80% utilization.

[Daniela Haigian, Vice President - Equity Research at Morgan Stanley]

Is there demand to grow your current capacity? Or do you think you have the base and capacity currently to service incremental demand?

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

Certainly, Danielle, Rich here on The U. S. Side. We have capacity. I mean, we're as Roger said, we're about 80% utilization.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

So we probably have requisitions open right now for about 50 technicians. We grew our technician base in the first quarter by 94 technicians. And we would obviously look to continue to grow that technician base to leverage the utilization higher on our existing service facilities. And so I think we would do that certainly near term before we need to look at adding any brick and mortar that We added 100

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

bays in 2024. Yes, correct.

[Daniela Haigian, Vice President - Equity Research at Morgan Stanley]

Great. Thank you.

[Daniela Haigian, Vice President - Equity Research at Morgan Stanley]

Thank you.

[Operator]

Our next question comes from Ron Giacicco from Guggenheim. Please go ahead. Your line is open.

[Ron Jewsikow, Director at Guggenheim Securities, LLC]

Yes. Good afternoon, Roger and Ron. Hey, Thanks for taking my question. Maybe starting off with kind of the tariff impact on parts and service. Any sense for how much parts inflation could hit your parts and service segment?

[Ron Jewsikow, Director at Guggenheim Securities, LLC]

And it sounds like customer willingness to pay is quite strong, but just wanted to get your sense of how the customer will absorb those costs because I assume you're going to look to pass them through.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

I don't think we've calculated that now. When you think about today, typically, two thirds of the repair order is labor and one third of the repair order is parts. And when we think about a lot of parts that are being utilized for an older cars are really not genuine parts, and they're coming out of China. And if China has a higher, say, a 45% tariff, that's gonna drive their cost base up, and we'll get probably even with what we have here with the genuine parts. We might even see a benefit from that as we go forward, but that's speculation.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

You know, I can't say I see it today, but it'll certainly help us a lot in body shop parts where there is a lot of non genuine parts being used. So we'll see.

[Ron Jewsikow, Director at Guggenheim Securities, LLC]

No. That's helpful color on how you could become more competitive versus versus some of the independent shops.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

For sure.

[Ron Jewsikow, Director at Guggenheim Securities, LLC]

I think it's been a while since we've been into a call this long and haven't really touched on new GPU kind of outlook. But it seems like we got another data point this quarter that the trends are stabilizing at a much higher level. I guess specific to your portfolio of brands, should we expect a couple hundred dollars of new GPU moderation on a go forward basis? Or do you think we're closer to the bottom and maybe that second derivative of decline continues to improve?

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Well, when you look at new in Q1, we were down 3%. On new, usually, we're up 15%. This is on a total basis. And our F and I, say, was up four. So overall, variable was up six.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

And on a same store basis, we actually were up on new five, and usually, we're up 10. And I think that, you know, the last five quarters, we were at really $5,229 in first quarter of of twenty four, '5 thousand '3 hundred, '5 thousand '70 '2 in q three, and 5146. So we've been, I I guess, hovering around 5,000. And, a lot of that has to do, I think, our mix of of bev vehicles has gone down. If you look at it overall, replaced by ICE, and I think someone mentioned it earlier that our we're discounting bev vehicles probably about seven thousand under MSRP.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

That has some impact on it, and that mix is now down. I think we've got an inventory, Rich, of what? 16,000 new units. No, of Bev. Of Bev, sorry.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Yeah. We're with 10% of total and 1,700 units. Under 1,700 units at this point. So overall, I think that as I look into Q2, you'd have to think about with our businesses up 11% this month. And if you look at the quarter, you'd have to think there would be some momentum going to the end now before the current vehicle inventory we have is sold out because then you're going to be dealing with different cost pressures from the tariff.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

And Ron, to your point on our brand mix, I would only add that in the quarter, compared to our peer group, we had the lowest decline in new gross and we had the highest increase in used gross. So I think that supports the premium brand mix that we've got.

[Ron Jewsikow, Director at Guggenheim Securities, LLC]

Any sense for how that trended in Europe versus The U. S? Because typically, we would see, I think, luxury underperform going from 4Q to 1Q. So just trying to get a sense of unpacking that by region.

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

Yes. In The U. K, our new gross profit was down slightly. So it trended very similar to what it was in The U. S.

[Randall Seymore, Chief Operating Officer of International Operations at Penske Automotive Group]

On a new car side. And again, it's going to be predicated on mix.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Okay.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

In The US, Ron, we were down 70 6 a unit or 1%.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Okay. We had obviously, we had a registration month in March, so which drives some bonuses and other things at the end of the quarter, which could affect the upward gross profit.

[Ron Jewsikow, Director at Guggenheim Securities, LLC]

Okay. No. I I really appreciate the color. Thanks for taking my questions.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Great, Ron. Thank you.

[Operator]

Our next question comes from Jeff Licht from Stephens. Please go ahead. Your line is open.

[Jeff Lick, Managing Director & Equity Research - Consumer & Auto Ecosystem at Stephens Inc]

Hey, Jeff.

[Jeff Lick, Managing Director & Equity Research - Consumer & Auto Ecosystem at Stephens Inc]

Hi, Roger. Good afternoon, everybody. Thanks for taking my question. Question for Rich. Rich, in The US, I know some of your brand partners, the luxury side, Mercedes, particularly BMW.

[Jeff Lick, Managing Director & Equity Research - Consumer & Auto Ecosystem at Stephens Inc]

Last year, we're a little more focused on bevs. And I think that had implication in terms of both how the sales play out in the GPU. And I wonder if you could maybe just unpack that and just share how that benefited Q1 or how that rolled through Q1 this year?

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

So if you look at BM I'm sorry, Mercedes, let's start there. If we go back about a year ago now, they were north of 40% of our total inventory was battery electric vehicle. And not only battery electric vehicle, but on the high end of the price point with the EQS and EQE. Probably mid year last year is when they realized they had to make adjustments to balance production with supply. And so they've made almost 180 degree turn as we sit here today.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

The Mercedes day supply is significantly reduced and under 5% of our total inventory at this point. And so we see a significant benefit in that to our West Coast dealerships and their profitability with the right mix and the right safe supply for the demand in the market. BMW has come off their peak as well, but they are still around that 25% to 30% as a percent of total from a bev mix, but they have probably the broadest product line of battery electric vehicles servicing the lower end of the market to the higher end of the market. And certainly, the i4 is a good seller there. If you look at days supply overall for battery electric, we peaked in June of last year at a ninety one day supply on new.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

And as we sit here today, we're at fifty six days at the end of the quarter. And I think in April here, we're at fifty one days. So it continues to trend in a more positive direction. And obviously, from a growth standpoint, we see that the gross profit on BEVs all in when you look at the front side money and F and I is generally 65% to 70% of what we would have on an ICE vehicle and heavily discounted, as Roger said, $7,400 now. So anything that balances that improves.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

The other thing BMW is doing in this month of May is pausing wholesale deliveries of bevs and supplementing with ICE vehicles, which I think is going to be very beneficial for our stores that are high on the BEV concentration at the moment. So that's another adjustment they're making to the market conditions.

[Jeff Lick, Managing Director & Equity Research - Consumer & Auto Ecosystem at Stephens Inc]

And then just a quick follow-up or a side question on commercial truck or retail truck. I'm just can you give any context to the delay in the 2027 emissions standards and just how big of a deal do you think that is? There was some thought that there'd be some pull forward of demand here over the next eighteen months. Just curious by way of magnitude, how much you think that's going to affect your business?

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

Well, I think any pull ahead in demand will be predicated on the outcome of the Congressional Review Act of the waivers that have been submitted by the or the legislation has been submitted by the House for potential rescindence of the Advance Clean Car, Advance Clean Truck, and the Omnibus rule. So those will be voted on, we think, by the May. And if those waivers do get rescinded, that not only impacts California but the other 13 states that opt into those regulations, Oregon being one of them that we operate in. And so that will have a positive impact, but it will obviously not spur any pre buy at that moment because there won't be the rush to purchase trucks that aren't going to be impacted by the increased cost of those vehicles, which our intelligence would say is north of $20,000 per vehicle for the technology has got to be added to meet these emissions requirements if they were to go into effect. I think the other important aspect of that legislation reform is one emission standard across The U.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

S. That creates a lot of complexity for the manufacturers today and for us as retailers to make sure that that truck is certified for the state it's going to operate in and it's being registered correctly. So I think if successful in those legislative reforms, it'll only be positive for the transportation on the commercial side.

[Jeff Lick, Managing Director & Equity Research - Consumer & Auto Ecosystem at Stephens Inc]

That's great. Thanks for that amount of detail. Well, best of luck in Q2. We look forward to talking to you soon.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

Thanks, Jeff. Thank you, Jeff.

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

Thank you.

[Operator]

Our next question comes from Rajat Gupta from JPMorgan. Please go ahead. Your line is open.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Hi, Rajat.

[Rajat Gupta, Executive Director, Autos at JP Morgan Chase & Co]

Great. Hey, Roger. Hey, everyone. Thanks for taking the question. Just one last question on just the used car.

[Rajat Gupta, Executive Director, Autos at JP Morgan Chase & Co]

I know you've got a lot of that given just pretty substantial improvements. The level of GPU that you had in the first quarter, you know, the 2,100 level, is that a new, like, base level we should be thinking about going forward? Do you feel comfortable sustaining those kind of growth? And I know it can be a little volatile here in February with the the prebuy and, like, just to pull forward a bit and just use car inflation. But 2,100, is that, like, a new normal for the business, you know, medium term?

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Well, I think it

[Roger Penske, Chairman & CEO at Penske Automotive Group]

can vary, but we're getting the benefit. So when you look at the total company, meaning international plus domestic, the impact of certainly sitting or select now highly profitable on the used is driving a significant amount. I think, Randy, you said you were up in UK on used grosses? Yeah, $5.80. 5 80, and we ended up being $3.57, I think, on a global basis.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

So to me, I think the one thing that could impact us some is that the vehicles during COVID, there there was not a lot of leasing. So some of the cars that we would get back, we're not getting. So they're building that pipeline back for us. But, I think the lack of new vehicles, when you think about it during COVID, drove the used vehicle business. So again, we're probably gonna see some upward pricing.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

And with that, we might see advance rates from the finance companies capped. So it reduced our ability to get higher gross margins. But I think we'll deal with that case by case as we go forward. But, you know, we're I'm comfortable that we've gotta lead the peer group on the used side because we're not into the ten and twenty year old cars. We're in vehicles that are one to four, which we can obviously and are certified, as Tony said, that it gives us the opportunity to get to get more margin.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

And 70% of our sales in the quarter were one to four years old. And I think that and five to eight was 20. So you see it's a very, very small part of that. And I think, you know, overall, the same thing in The UK, Sixty Five Percent, was, one before and about thirty percent five to eight, and that was probably skewed still, you know, by a sitter select.

[Rajat Gupta, Executive Director, Autos at JP Morgan Chase & Co]

Got it. Got it. That's helpful. And then just, you know, one question on PTL. Not a lot of discussion today.

[Rajat Gupta, Executive Director, Autos at JP Morgan Chase & Co]

Just curious, you know, any thoughts on the outlook here? You know, I know you've talked about, like, some choppiness choppiness in the freight market. Curious like how that impacts the PTL business. Should we expect the first quarter type of trend flat year over year growth type of trends continue for the remainder of the year? Or should we expect to be a little more volatile?

[Rajat Gupta, Executive Director, Autos at JP Morgan Chase & Co]

Thanks.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Well, let's say the freight market. Let's just answer with that first freight market, obviously, has not been good for the last thirty six months when you think about it. And our rent our excuse me, the rental business is certainly seasonal. But with the freight market down, what we're seeing is that our customers who are leasing trucks on a three five year basis with CPIs, we see those customers not reaching out for extra vehicles, which is typically 50% of our rental revenue. So what we've had to do is reduce our fleet, which we've done from 88,000 down into the 70s, and that's driven lower maintenance, lower cost, lower depreciation.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

So we're trying to match it. But if we don't see an increase, certainly, because of the freight, I don't I think our rental business will continue to suffer. And again, that drives maybe a gain on sale of vehicles because when you're de fleeting, we can't get the margins you can if you're selling them one at a time. And we sold 4,000 vehicles last month. So it's a we're watching it.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

The good news is we outperformed the first quarter last year. Our income was about a million dollars more for our percentage that we own in the company. But, know, overall, our fleet is young. I think that we're well balanced on the on the headcount. We've taken out hundreds of people in the rental product line because of the the lower utilization and the lower demand.

[Rajat Gupta, Executive Director, Autos at JP Morgan Chase & Co]

Got it. Got it. That that's helpful. Just last one here. You know, you talked a little bit about, you know, some pull forward or maybe some pre buy here in the second quarter, you know, primarily for the premium luxury brand.

[Rajat Gupta, Executive Director, Autos at JP Morgan Chase & Co]

Did you expect the second half to, like, see some material deceleration here or, you know, irrespective of what happens with prices? Just curious if there's any way to size Well what degree of pull forward or pre buy you might be seeing in the business? Business?

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Let me say if we got any momentum, it's gotta be momentum on our existing inventory, isn't it? Correct. For us to be able to project what potential cost increase we have in the vehicle, we don't know that right now other than some of the things that were brought up last night in Trump's latest declaration as far as tariffs. So I would say the second half would be more cloudy for me from the standpoint of of where we're gonna be. We've got 16,000 vehicles that we can we can sell at current cost with no no increases due to tariffs.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

And, of course, we hope to go through those over the next sixty days. So again, we're gonna then have to look at what have we been able to be supplied at what price as we go forward. Rich, do you have any other comment?

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

No. I think you've you've covered it. I mean, to your to your point, Rajat, we saw a little bit of a tailwind at the March, and and certainly that carried into the April. But with each with each discussion around tariffs and then subsequently coming lower, it's difficult to predict what that demand looks like in the near term.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Yeah. One other thing that that I didn't mention when you talked about the freight market, you know, we're understanding that ports receiving container ships from China, looks like it's gotta be down 60% here over the next several weeks. So that'll certainly have some impact on the freight market.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

Yeah.

[Rajat Gupta, Executive Director, Autos at JP Morgan Chase & Co]

Understood. Thanks for all the color and good luck. Thanks.

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

Thank you.

[Operator]

Our last question comes from David Whiston from Morningstar. Please go ahead. Your line is open.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Hey, David. How are you?

[David Whiston, Equity Strategist - U.S. Autos at Morningstar]

Good, Roger. Hey, everyone. I actually just have one question. You mentioned that, early in the call, you said on a monthly basis, technicians contributing about $30,000 in gross profit per month. I was just curious roughly what was that number right before COVID?

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Well, I don't think anybody has that number. I'll get Tony to get that for you. But we've been growing that. We've been growing it for a couple of reasons because our effective labor rate has gone up. You follow me?

[Roger Penske, Chairman & CEO at Penske Automotive Group]

And we pay a percentage of that to the technician. Obviously, that's driven the opportunity plus our our ROs from the standpoint we've had more ROs, more service. So that's driving it. That's one of the reasons we want to continue to grow the mechanic base because we can drive more business, which I think is which is key which will drive gross margin and for the technician because it's the best job in the company because we provide the customer, provide the location, and we collect the money either from the factory or the or our customer. And I think that our turnover when you look at turnover in that in that sector, you know, I think we're running probably about 11 or 12 or 13%, which is is world class because it's so important to to get these highly skilled people to stay with you because of the complexity of the vehicles today.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

David, I would add to Roger's comments on the growth. So I would attribute some of it to our digital tools as well that we've deployed that enable us to load the shop more effectively. So we're getting better utilization out of the available hours that the technicians have through our artificial intelligence with service booking and reception. Tech video adoption is something that is still relatively new that we get better proficiency at across the businesses. Last August, we launched a communication tool for customers booking service appointments with us called Fastlane.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

That enables us to add previous recommended not done items that the customer declined at a previous event enables us to get that information in front of them. That generated additional $5,400,000 in revenue in the first quarter or on average about $7.00 $4 per appointment. So all those things collectively and then other things we're doing in the shop from an efficiency standpoint to keep the technicians in the bay where they're, you know, most productive and most happy are things we continue to look at as well as service adviser training. So it's it's not any one thing. It's a bunch of little things that are adding up year over year to make that improvement.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Yeah. I just checked and pre COVID, the average technician growth was about 26,500.

[David Whiston, Equity Strategist - U.S. Autos at Morningstar]

Okay. Great. Thanks, guys. That's all very helpful. That's all I had.

[Richard Shearing, Chief Operating Officer of North American Operations at Penske Automotive Group]

All right. Thank you, David.

[Roger Penske, Chairman & CEO at Penske Automotive Group]

Thank you, everyone, for joining us today.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Tony Pordon, Executive Vice President Investor Relations and Corporate Business Development
• Roger Penske, Chairman & CEO
• Richard Shearing, Chief Operating Officer of North American Operations
• Randall Seymore, Chief Operating Officer of International Operations
• Shelley Hulgrave, Executive Vice President & CFO

Analysts

• John Murphy, Managing Director at Bank of America Merrill Lynch
• Michael Ward, Vice President & Senior Analyst - US Insurance at Citi
• Daniela Haigian, Vice President - Equity Research at Morgan Stanley
• Ron Jewsikow, Director at Guggenheim Securities, LLC
• Jeff Lick, Managing Director & Equity Research - Consumer & Auto Ecosystem at Stephens Inc
• Rajat Gupta, Executive Director, Autos at JP Morgan Chase & Co
• David Whiston, Equity Strategist - U.S. Autos at Morningstar