Penske Automotive Reports All-Time Record Quarterly Results

BLOOMFIELD HILLS, Mich., Oct. 27, 2021 /PRNewswire/ -- Penske Automotive Group, Inc. (NYSE:PAG), a diversified international transportation services company and one of the world's premier automotive and commercial truck retailers, today announced record third quarter and nine months 2021 results, including the best quarterly results in company history. For the three months ended September 30, 2021, the company reported a 43.9% increase in income from continuing operations attributable to common shareholders to $354.8 million and a 45.3% increase in related earnings per share to $4.46. This compares to income from continuing operations attributable to common shareholders of $246.5 million, or $3.07 per share, in the prior year. Foreign exchange positively impacted earnings per share by $0.06.

Third Quarter 2021 Operational Highlights versus Third Quarter 2020

• Total Revenue - increased 8.8% to $6.5 billion from $6.0 billion
• Gross Margin – increased 190 basis points to 17.9%
• Selling, General & Administrative Expenses as a Percentage of Gross Profit - improved by 230 basis points
• Income From Continuing Operations Before Taxes – increased 52.8% to $476 million
• Retail Automotive Same-Store Revenue - increased 6.6%
• New Vehicle -3.1%; Used Vehicle +16.3%; Finance & Insurance +15.3%; Service & Parts +6.7%
• Retail Automotive Same-Store Gross Profit - increased 18.4%
• Retail Automotive Variable Gross Profit Per Unit - increased 38.8% to $5,747
• Retail Commercial Truck Dealership Earnings Before Taxes – increased 106.4%
• Penske Transportation Solutions Equity Earnings – increased 83.4%

Commenting on the company's results, Chair and CEO Roger Penske said, "Our business produced an all-time record third quarter driven by strength across all areas of our business, including continued strong vehicle margins, improving service and parts operations, a growing Class 8 commercial truck market, record performance at Penske Transportation Solutions, and continuing cost controls, which contributed to a 230 basis point improvement in selling, general, and administrative expenses as a percentage of gross profit. During the quarter, we reduced long-term non-vehicle debt by $245.4 million to $1.4 billion, improved our leverage ratio to 0.9 to 1 on a trailing twelve-month basis, and reduced debt to total capitalization to 27%. Since the end of 2019, we have reduced non-vehicle long-term debt by more than $900 million." Penske continued, "Despite the ongoing supply-chain challenges which continue to impact the availability of new vehicles in both the automotive and commercial truck markets, our performance in the quarter demonstrates the strength of the automotive and commercial truck retail models and the benefits from our diversification."

For the nine months ended September 30, 2021, the company reported a 155.3% increase in income from continuing operations attributable to common shareholders to $876.1 million and a 155.5% increase in related earnings per share to $10.91. This compares to income from continuing operations attributable to common shareholders of $343.1 million, or $4.27 per share, in the prior year. For the nine months ended September 30, 2021, income from continuing operations and related earnings per share include charges of $21.4 million, consisting of $12.6 million of debt redemption costs ($0.16 per share) and $8.8 million of charges relating to the increase in U.K. corporate taxes in 2023 ($0.11 per share). Excluding these items, adjusted income from continuing operations increased 172.8% to $897.5 million, and related earnings per share increased 172.7% to $11.18. Foreign exchange positively impacted earnings per share by $0.23. Total revenue increased 31.6% to $19.3 billion from $14.6 billion in the same period last year.

Retail Automotive Dealerships

For the three months ended September 30, 2021, total retail automotive revenue increased 7.2% to $5.6 billion, or 6.6% on a same-store basis, including 13.8% for CarShop. Total retail automotive gross profit increased 19.0% to $1.0 billion, including 18.4% on a same-store basis. Gross margin increased 170 basis points to 17.9% as variable gross profit per unit retailed increased 39%, or $1,607, to $5,747. We are currently in the process of constructing three new franchise dealership points which are expected to open in 2022.

CarShop Used Vehicle SuperCenters

We operated twenty CarShop used vehicle locations as of September 30, 2021. In October 2021, we opened two additional CarShop locations bringing our total number of locations to twenty-two. We expect to open one additional location before the end of the year. We are targeting 150,000 in unit sales and $100 million of earnings before taxes for CarShop by the end of 2023. For the three months ended September 30, 2021, retail unit sales increased by 0.4% to 18,451 while revenue increased by 24.3% to $438.1 million. For the nine months ended September 30, 2021, retail unit sales increased by 17.7% to 48,588 while revenue increased by 37.7% to $1,088.9 million.

Retail Commercial Truck Dealerships

For the three months ended September 30, 2021, earnings before taxes increased 106.4% to $48.3 million compared to $23.4 million in the same period last year, return on sales was 6.7%, and fixed cost absorption was 129.9%. The increase in earnings before taxes was principally driven by a 57.7% increase in gross profit, including a 39.9% increase in same-store gross profit. For the nine months ended September 30, 2021, earnings before taxes increased 123.4% to $115.5 million compared to $51.7 million in the same period last year and return on sales was 6.5%.

Penske Transportation Solutions Investment

Penske Transportation Solutions ("PTS") is a leading provider of full-service truck leasing, truck rental, contract maintenance, and logistics services. Penske Automotive Group has a 28.9% ownership interest in PTS and accounts for its ownership interest using the equity method of accounting. For the three and nine months ended September 30, 2021, the company recorded $118.3 million and $274.5 million in earnings compared to $64.5 million and $108.0 million for the same period last year, representing increases of 83.4% and 154.2%, respectively. The increase was principally driven by a strong North American Class 8 truck market and increased demand for the company's full-service leasing, rental, and logistics services, coupled with improved efficiency and a reduction in operating expenses which drove a 14% return on sales for PTS during the third quarter 2021.

Best To Work For

We are pleased to announce that thirty-five of our U.S.-based dealerships have been named to the Automotive News List of Top 100 Dealerships to Work For, the most of any dealership group. Audi Turnersville was once again ranked No. 1; the Company has six dealerships in the top ten and fifteen of the top 25 on the annual list. In addition, seven dealerships were ranked in the Top 10 nationally, including the top three places, for their efforts to promote Diversity, Equity & Inclusion.

Corporate Development and Liquidity

Through the nine months ended September 30, 2021, we acquired annualized revenue of approximately $600 million. Subsequent to September 30, 2021, we acquired the remaining 51% of our Japan-based joint venture of premium/luxury automotive brands which is expected to add $250 million in annualized revenue. We have an additional $300 million in annualized revenue under contract and subject to due diligence at the present time.

As of September 30, 2021, the company had available liquidity under its various credit agreements of approximately $1.1 billion, plus $119 million in cash.

Dividend and Share Repurchases

On October 20, 2021, we announced an increase in the quarterly dividend to $0.46 per share payable on December 1, 2021, to shareholders of record as of November 10, 2021.

During the nine months ended September 30, 2021, we repurchased 2,524,938 shares of our outstanding common stock for $219.8 million, or an average of $87.05 per share, including 2.0 million shares during the third quarter. At the end of the third quarter, we had $71.3 million available under our Board approved share repurchase authority.

Conference Call

Penske Automotive Group will host a conference call discussing financial results relating to the third quarter of 2021 on Wednesday, October 27, 2021, at 2:00 p.m.Eastern Daylight Time. To listen to the conference call, participants must dial (866) 996-5381 [International, please dial (602) 585-9891] using access code 4572964. The call will also be simultaneously broadcast over the Internet through the Investors section of the Penske Automotive Group website. Additionally, an investor presentation relating to the third quarter 2021 financial results has been posted to the company's website. To access the presentation or to listen to the company's webcast, please refer to www.penskeautomotive.com.

About Penske Automotive

Penske Automotive Group, Inc., (NYSE:PAG) headquartered in Bloomfield Hills, Michigan, is a diversified international transportation services company and one of the world's premier automotive and commercial truck retailers. PAG operates dealerships principally in the United States, the United Kingdom, Canada, Germany, Italy, and Japan and is one of the largest retailers of commercial trucks in North America for Freightliner. PAG also distributes and retails commercial vehicles, diesel and gas engines, power systems, and related parts and services principally in Australia and New Zealand. Additionally, PAG owns 28.9% of Penske Transportation Solutions, a business that manages a fleet of over 350,000 vehicles providing innovative transportation, supply chain, and technology solutions to North American fleets. PAG is a member of the Fortune 500, Russell 1000, and Russell 3000 indexes and is ranked among the World's Most Admired Companies by Fortune Magazine. For additional information, visit the company's website at www.penskeautomotive.com.

Non-GAAP Financial Measures

This release contains certain non-GAAP financial measures as defined under SEC rules, such as adjusted income from continuing operations, adjusted earnings per share, earnings before interest, taxes, depreciation, and amortization ("EBITDA"), and adjusted earnings before interest, taxes, depreciation, and amortization. The company has reconciled these measures to the most directly comparable GAAP measures in the release. The company believes that these widely accepted measures of operating profitability improve the transparency of the company's disclosures and provide a meaningful presentation of the company's results from its core business operations excluding the impact of items not related to the company's ongoing core business operations and improve the period-to-period comparability of the company's results from its core business operations. These non-GAAP financial measures are not substitutes for GAAP financial results and should only be considered in conjunction with the company's financial information that is presented in accordance with GAAP.

Caution Concerning Forward Looking Statements

Statements in this press release may involve forward-looking statements, including forward-looking statements regarding Penske Automotive Group, Inc.'s financial performance, growth plans, and completion of the acquisitions. Actual results may vary materially because of risks and uncertainties that are difficult to predict. These risks and uncertainties include, among others, the satisfaction of customary closing conditions, the duration, severity, and resolution of the COVID-19 pandemic, government mandated restrictions on our business in light of COVID-19 or otherwise, economic conditions generally, conditions in the credit markets, changes in interest rates and foreign currency exchange rates, changes in tariff rates, new rules in place after the recent Brexit accord between the European Union and the U.K. could slow parts originating in the U.K. or Europe for distribution to our dealerships, adverse conditions affecting a particular manufacturer, including the adverse impact to the vehicle and parts supply chain due to limited vehicle availability due to the COVID-19 pandemic, the shortage of automotive semiconductor chips or other components, natural disasters, recall or other disruptions that interrupt the supply of vehicles or parts to us, changes in consumer credit availability, the outcome of legal and administrative matters, and other factors over which management has limited control. These forward-looking statements should be evaluated together with additional information about Penske Automotive Group's business, markets, conditions, and other uncertainties, which could affect Penske Automotive Group's future performance. These risks and uncertainties are addressed in Penske Automotive Group's Form 10-K for the year ended December 31, 2020, and its other filings with the Securities and Exchange Commission ("SEC"). This press release speaks only as of its date, and Penske Automotive Group disclaims any duty to update the information herein.

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