Q4 2025 Penske Automotive Group Inc Earnings Call

Speaker #2: Good afternoon and welcome to the Penske Automotive Group 4th Quarter 2025 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately one hour after completion, through February 18, 2026, on the company's website under the Investors tab at www.penskeautomotive.com.

Operator: Good afternoon and welcome to the Penske Automotive Group's Fourth Quarter 2025 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately 1 hour after the completion through 18 February 2026, on the company's website under the investors tab at www.penskeautomotive.com. I will now introduce Anthony Pordon, the company's Executive Vice President of Investor Relations and Corporate Development. Please go ahead, sir.

Speaker #2: I will now introduce Anthony Pordon, the company's Executive Vice President of Investor Relations and Corporate Development. Please go ahead, sir.

Anthony Pordon: Thank you, Regina. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's Fourth Quarter 2025 financial results was issued this morning and is posted on our website along with a presentation designed to assist you in understanding the company's results. As always, I'm available by email or phone for any follow-up questions you may have.

Speaker #3: Thank you, Regina. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's 4th quarter 2025 financial results was issued this morning.

Speaker #3: And as posted on our website, along with the presentation designed to assist you in understanding the company's results. As always, I'm available by email or phone for any follow-up questions you may have.

Speaker #3: Joining me for today's call are Roger Penske, Chair and CEO; Shelley Hulgrave, EVP and Chief Financial Officer; Rich Shearing, North American Operations; Randall Seymore, International Operations; and Tony Paccione, Vice President and Corporate Controller.

Operator 2: Joining me for today's call are Roger Penske, Chairman and CEO; Shelley Hulgrave, EVP and Chief Financial Officer; Rich Shearing, North American Operations; Randall Seymore, International Operations; and Tony Facione, Vice President and Corporate Controller. During the fourth quarter, we acquired Penske Motor Group from a commonly controlled affiliate. As a result, the information contained in today's press release has been retrospectively recast to include the full quarterly and annual results of Penske Motor Group in both periods, which is required by GAAP under common control accounting. We have provided schedules in today's press release to help you better understand the impact of the recast. Additionally, we may include forward-looking statements on today's call about our earnings potential, outlook, and other future events, and we may also discuss certain non-GAAP financial measures such as EBITDA and adjusted EBITDA.

Anthony Pordon: Joining me for today's call are Roger Penske, Chairman and CEO; Shelley Hulgrave, EVP and Chief Financial Officer; Rich Shearing, North American Operations; Randall Seymore, International Operations; and Tony Facione, Vice President and Corporate Controller. During the fourth quarter, we acquired Penske Motor Group from a commonly controlled affiliate. As a result, the information contained in today's press release has been retrospectively recast to include the full quarterly and annual results of Penske Motor Group in both periods, which is required by GAAP under common control accounting. We have provided schedules in today's press release to help you better understand the impact of the recast. Additionally, we may include forward-looking statements on today's call about our earnings potential, outlook, and other future events, and we may also discuss certain non-GAAP financial measures such as EBITDA and adjusted EBITDA.

Speaker #3: During the 4th Quarter, we acquired PENSKE MOTOR GROUP from a commonly controlled affiliate. As a result, the information contained in today's press release has been retrospectively recast to include the full quarterly and annual results of PENSKE MOTOR GROUP in both periods.

Speaker #3: Which is required by GAAP under common control accounting. We have provided schedules in today's press release to help you better understand the impact of the recast.

Speaker #3: Additionally, we may include forward-looking statements on today's call about our earnings potential, outlook, and other future events, and we may also discuss certain items such as EBITDA and adjusted EBITDA.

Speaker #3: Our future results may vary from our expectations because of risks and uncertainties outlined in the press release today. We have also prominently presented and reconciled any non-GAAP measures to the most directly comparable GAAP measures in this morning's press release and investor presentation, both of which are available on our website.

Operator 2: Our future results may vary from our expectations because of risks and uncertainties outlined in the press release today. We have also prominently presented and reconciled any non-GAAP measures to the most directly comparable GAAP measures in this morning's press release and investor presentation, both of which are available on our website. Our future results may vary from our expectations because of risks and uncertainties outlined in the press release under forward-looking statements. I direct you to our SEC filings, including our Form 10-K and previously filed Form 10-Qs, for additional discussion and factors that could cause future results to differ materially from expectations. I will now turn the call over to Roger Penske. Thank you, Tony. Good afternoon, everyone, and thank you for joining us today. Today, I'd like to begin with thanking each of our team members for their hard work and commitment to exceeding expectations in 2025.

Anthony Pordon: Our future results may vary from our expectations because of risks and uncertainties outlined in the press release today. We have also prominently presented and reconciled any non-GAAP measures to the most directly comparable GAAP measures in this morning's press release and investor presentation, both of which are available on our website. Our future results may vary from our expectations because of risks and uncertainties outlined in the press release under forward-looking statements. I direct you to our SEC filings, including our Form 10-K and previously filed Form 10-Qs, for additional discussion and factors that could cause future results to differ materially from expectations. I will now turn the call over to Roger Penske.

Speaker #3: Our future results may vary from our expectations because of risks and uncertainties outlined in the press release under forward-looking statements. I direct you to our SEC filings, including our Form 10-K, and previously filed Form 10-Qs, for additional discussion and factors that could cause future results to differ materially from expectations.

Speaker #3: I will now turn the call over to Roger

Speaker #3: Penske. Thank you, Tony.

Roger Penske: Thank you, Tony. Good afternoon, everyone, and thank you for joining us today. Today, I'd like to begin with thanking each of our team members for their hard work and commitment to exceeding expectations in 2025.

Speaker #4: Good afternoon, everyone, and thank you for joining us today. Today, I'd like to begin by thanking each of our team members for their hard work and commitment to exceeding expectations in 2025.

Speaker #4: Despite several challenges, our business generated another year of strong profitability. I look forward to the future, and I'm even more optimistic about PAG. The recent strategic acquisitions of Toyota and Lexus dealerships, combined with our existing diversification, provide a solid foundation for future growth and improved profitability.

Operator 2: Despite several challenges, our business generated another year of strong profitability, and I look forward to the future, and I'm even more optimistic about PAG. The recent strategic acquisitions of Toyota and Lexus dealerships, combined with our existing diversification, provide a solid foundation for future growth and improved profitability. During 2025, PAG delivered 485,000 new and used vehicles and nearly 19,000 new and used commercial trucks. We generated $31 billion in revenue. We earned almost $1.3 billion in earnings before taxes and $935 million in net income and generated earnings per share of $14.13. We continue to grow in the US and Italy with the acquisition of two Toyota and two Lexus dealerships, and one Ferrari dealership. We followed that up with the announcement of the two Lexus dealerships we plan to acquire in Q1. These are located in Orlando, Florida.

Roger Penske: Despite several challenges, our business generated another year of strong profitability, and I look forward to the future, and I'm even more optimistic about PAG. The recent strategic acquisitions of Toyota and Lexus dealerships, combined with our existing diversification, provide a solid foundation for future growth and improved profitability. During 2025, PAG delivered 485,000 new and used vehicles and nearly 19,000 new and used commercial trucks. We generated $31 billion in revenue. We earned almost $1.3 billion in earnings before taxes and $935 million in net income and generated earnings per share of $14.13. We continue to grow in the US and Italy with the acquisition of two Toyota and two Lexus dealerships, and one Ferrari dealership. We followed that up with the announcement of the two Lexus dealerships we plan to acquire in Q1. These are located in Orlando, Florida.

Speaker #4: During 2025, PAG delivered 485,000 new and used vehicles, and nearly 19,000 new and used commercial trucks. We generated $31 billion in revenue. We earned almost $1.3 billion in earnings before taxes and $935 million in net income, and generated earnings per share of $14.13.

Speaker #4: We continue to grow in the US and Italy with the acquisition of two Toyota and two Lexus dealerships and one Ferrari dealership. We followed that up with the announcement of the two Lexus dealerships we plan to acquire in the first quarter.

Speaker #4: These are located in Orlando, Florida. In total, these acquisitions represent $2 billion in estimated annualized revenue. We also completed strategic divestitures representing approximately $700 million in revenue.

Operator 2: In total, these acquisitions represent $2 billion in estimated annualized revenue. We also completed strategic divestitures representing approximately $700 million in revenue. These divestitures generated $200 million in proceeds that were redeployed into higher-returning assets. We expect to generate another $140 million in proceeds from additional divestitures planned for 2026. In our press release this morning, we announced the 21st consecutive increase in our quarterly dividend. The increase was $0.02 per share to $1.40. Our dividend payout ratio increased to 37.4%, and the forward yield is 3.4%. We repurchased 1.2 million shares of stock representing 1.8% of our outstanding shares for $182 million. Let me now turn your attention to the fourth quarter. In the automotive, our business was impacted by weaker premium sales in both US and UK.

Roger Penske: In total, these acquisitions represent $2 billion in estimated annualized revenue. We also completed strategic divestitures representing approximately $700 million in revenue. These divestitures generated $200 million in proceeds that were redeployed into higher-returning assets. We expect to generate another $140 million in proceeds from additional divestitures planned for 2026. In our press release this morning, we announced the 21st consecutive increase in our quarterly dividend. The increase was $0.02 per share to $1.40. Our dividend payout ratio increased to 37.4%, and the forward yield is 3.4%. We repurchased 1.2 million shares of stock representing 1.8% of our outstanding shares for $182 million. Let me now turn your attention to the fourth quarter. In the automotive, our business was impacted by weaker premium sales in both US and UK.

Speaker #4: These divestitures generated $200 million in proceeds that were redeployed into higher-returning assets. We expect to generate additional proceeds from further divestitures planned for 2026.

Speaker #4: In our press release this morning, we announced the 21st consecutive increase in our quarterly dividend. The increase was $0.02 per share to $1.40. Our dividend payout ratio increased to 37.4%, and the forward yield is 3.4%.

Speaker #4: We repurchased 1.2 million shares of stock, representing 1.8% of our outstanding shares. To turn your attention to the fourth quarter, the automotive business was impacted by weaker premium sales in both the US and UK, by tariff and BEV-related pull forward, unusually high unit sales in the prior year related to stop sale, the Land Rover cyber incidents which resulted in 800 fewer units sold in Q4, and the macroeconomic conditions in the UK.

Operator 2: by tariff and BEV-related pull forward, unusually high unit sales in the prior related to stop sale, the Land Rover cyber incidents which resulted in 800 units of fewer sales in Q4, and the macroeconomic conditions in the UK. For example, our new sales of the German luxury brands were down 20% in the US and 22% in the UK, including the decline of over 2,800 units when compared, these are BEV units when compared to Q4 the prior year. As a result, automotive same-store units delivered declined 8% and used declined 4%. Gross profit per unit retailed in Q4 was $4,689, and it was up $47 per unit sequentially. Gross profit per used unit was $1,770, which was consistent with Q4 in the prior year and in line with seasonal expectations.

Roger Penske: by tariff and BEV-related pull forward, unusually high unit sales in the prior related to stop sale, the Land Rover cyber incidents which resulted in 800 units of fewer sales in Q4, and the macroeconomic conditions in the UK. For example, our new sales of the German luxury brands were down 20% in the US and 22% in the UK, including the decline of over 2,800 units when compared, these are BEV units when compared to Q4 the prior year. As a result, automotive same-store units delivered declined 8% and used declined 4%. Gross profit per unit retailed in Q4 was $4,689, and it was up $47 per unit sequentially. Gross profit per used unit was $1,770, which was consistent with Q4 in the prior year and in line with seasonal expectations.

Speaker #4: For example, our new sales of the German luxury brands were down 20% in the U.S. and 22% in the U.K., including the decline of over 2,800 units when compared.

Speaker #4: These are BEV units when compared to Q4 of the prior year. As a result, automotive same-store units delivered declined 8%, and used declined 4%.

Speaker #4: Gross profit per unit retailed in Q4 was $4,689, and it was up 47 dollars per unit sequentially. Gross profit per used unit was $1,770, which was consistent with Q4 in the prior year and in line with seasonal expectations.

Speaker #4: In the commercial truck segment, PTG outperformed the market; however, the continuing freight recession drove lower new and used unit sales and also impacted our equity income from PTS.

Operator 2: In the commercial truck segment, PTG outperformed the market; however, the continuing freight recession drove lower new and used unit sales and also impacted our equity income from PTS. In total, PAG Q4 revenue was $7.8 billion, down 4%. The decline in revenue is from the lower unit sales coupled with strategic divestitures in dealerships, which impacted the quarter revenue by $200 million. EBT was $256 million, net income $186 million, and earnings per share was $2.83. On an adjusted basis, EBT was $263 million, net income $192 million, and earnings per share was $2.91. We estimate fourth quarter EBT was impacted by $29 million or $0.32 a share. First item was the UK social programs with approximately $3 million. The cyber event with Jaguar Land Rover $8 million, continued freight weakness impacted by Premier Truck $11 and PTS by $5, and cost of strategic divestitures of approximately $2 million.

Roger Penske: In the commercial truck segment, PTG outperformed the market; however, the continuing freight recession drove lower new and used unit sales and also impacted our equity income from PTS. In total, PAG Q4 revenue was $7.8 billion, down 4%. The decline in revenue is from the lower unit sales coupled with strategic divestitures in dealerships, which impacted the quarter revenue by $200 million. EBT was $256 million, net income $186 million, and earnings per share was $2.83. On an adjusted basis, EBT was $263 million, net income $192 million, and earnings per share was $2.91. We estimate fourth quarter EBT was impacted by $29 million or $0.32 a share. First item was the UK social programs with approximately $3 million. The cyber event with Jaguar Land Rover $8 million, continued freight weakness impacted by Premier Truck $11 and PTS by $5, and cost of strategic divestitures of approximately $2 million.

Speaker #4: In total, PAG Q4 revenue was $7.8 billion, down 4%. The decline in revenue is from a lower unit sales coupled with strategic divestitures in dealerships, which impacted the quarter revenue by $200 million.

Speaker #4: EBT was $256 million, net income was $186 million, and earnings per share was $2.83. On an adjusted basis, EBT was $263 million, net income was $192 million, and earnings per share was $2.91.

Speaker #4: We estimate 4th quarter EBT was impacted by $29 million, or $0.32 a share. The first item was the UK social programs, with approximately $3 million.

Speaker #4: The cyber event with Jag Land Rover 8 million, continued freight weakness impacted by premier truck 11 and PTS by 5, and cost of strategic divestitures of approximately 2 million.

Speaker #4: Additionally, when you compare Q4 of the prior year, a higher tax rate reduced net income by approximately 8 million or 12 cents per share.

Operator 2: Additionally, when you compare Q4 of the prior year, a higher tax rate reduced net income by approximately $8 million or $0.12 per share. This time, I'd like to turn it over to Rich Shearing to discuss our North American operations. Rich? Thank you, Roger, and good afternoon, everyone. In U.S. retail automotive, same-store new and used unit sales decreased 4%, with new decreasing 6% and used decreasing 1%. In Q4, new unit sales of our German luxury brands declined 20% and were impacted by pull forward activity from tariffs and the expiration of BEV credit. Also, Land Rover new unit sales decreased 37% as production was halted for six weeks, limiting our available inventory for sale. BEV sales declined 63% or 1,700 units in Q4 2024 versus Q4 2024. During the quarter, 25% of new units sold were at MSRP compared to 29% in the same quarter last year.

Roger Penske: Additionally, when you compare Q4 of the prior year, a higher tax rate reduced net income by approximately $8 million or $0.12 per share. This time, I'd like to turn it over to Rich Shearing to discuss our North American operations. Rich?

Speaker #4: This time, I'd like to turn it over to Rich Shearing to discuss our North American operations.

Speaker #4: Rich? Thank you, Roger, and good

Rich Shearing: Thank you, Roger, and good afternoon, everyone. In U.S. retail automotive, same-store new and used unit sales decreased 4%, with new decreasing 6% and used decreasing 1%. In Q4, new unit sales of our German luxury brands declined 20% and were impacted by pull forward activity from tariffs and the expiration of BEV credit. Also, Land Rover new unit sales decreased 37% as production was halted for six weeks, limiting our available inventory for sale. BEV sales declined 63% or 1,700 units in Q4 2024 versus Q4 2024. During the quarter, 25% of new units sold were at MSRP compared to 29% in the same quarter last year.

Speaker #5: Afternoon, everyone. In U.S. retail automotive, same-store new and used unit sales decreased 4%, with new decreasing 6% and used decreasing 1%. In Q4, new unit sales of our German luxury brands declined 20% and were impacted by pull-forward activity from tariffs and the expiration of the BEV credit.

Speaker #5: Also, Land Rover new unit sales decreased 37% as production was halted for six weeks, limiting our available inventory for sale. BEV sales declined 63%, or 1,700 units, in Q4 2024 versus Q4 2023.

Speaker #5: During the quarter, 25% of new units sold were at MSRP compared to 29% in the same quarter last year. Used vehicle sales continue to be constrained by fewer lease returns and affordability.

Operator 2: Used vehicle sales continue to be constrained by fewer lease returns and affordability. Lease returns bottomed in 2025 and are expected to begin improving in 2026. Our US same-store service and parts revenue increased 6% and related gross profit increased 5.5%. Customer pay gross was up 7% and warranty was up 9%. On average, in the US, we estimate each of our automotive technicians generate approximately $30,000 of gross profit per month. Our automotive technician count is up 2% when compared to the end of December last year. Our automotive service and parts revenue and gross profit is at a record level, and we continue to focus on driving higher utilization in our bays. Turning to Premier Truck Group, during Q4, Premier Truck outperformed the industry retail sales of new trucks, which decreased 14% compared to an industry decline of 28% for Class 8 sales.

Rich Shearing: Used vehicle sales continue to be constrained by fewer lease returns and affordability. Lease returns bottomed in 2025 and are expected to begin improving in 2026. Our US same-store service and parts revenue increased 6% and related gross profit increased 5.5%. Customer pay gross was up 7% and warranty was up 9%. On average, in the US, we estimate each of our automotive technicians generate approximately $30,000 of gross profit per month. Our automotive technician count is up 2% when compared to the end of December last year. Our automotive service and parts revenue and gross profit is at a record level, and we continue to focus on driving higher utilization in our bays. Turning to Premier Truck Group, during Q4, Premier Truck outperformed the industry retail sales of new trucks, which decreased 14% compared to an industry decline of 28% for Class 8 sales.

Speaker #5: Lease returns bottomed in 2025 and are expected to begin improving in 2026. Our U.S. same-store service and parts revenue increased 6%, and related gross profit increased 5.5%.

Speaker #5: Customer pay gross was up 7%, and warranty was up 9%. On average, in the U.S., we estimate each of our automotive technicians generate approximately $30,000 of gross profit per month.

Speaker #5: Our automotive technician count is up 2% compared to the end of December last year. Our automotive service and parts revenue and gross profit are at record levels, and we continue to focus on driving higher utilization in our bays.

Speaker #5: Turning to Premier Truck Group, during Q4, Premier Truck outperformed the industry retail sales of new trucks, which decreased 14%, compared to an industry decline of 28% for Class 8 sales.

Speaker #5: We retailed 3,789 new and used trucks, generating $725 million in revenue and $121 million in gross profit. Tariffs pulled some orders previously scheduled for delivery in Q4 up to earlier in the year, while other customers remained on the sidelines due to Section 232 tariffs and the resolution of the EPA 2027 emissions rules.

Operator 2: We retailed 3,789 new and used trucks, generated $725 million in revenue and $121 million in gross profit. Tariffs pulled some orders previously scheduled for delivery in Q4 up to earlier in the year, while other customers remained on the sidelines due to Section 232 Tariffs and the resolution of the EPA 2027 emissions rules. Service and parts revenue declined 1% and represented 74% of the total gross profit during Q4. EBT declined $11 million from $45 million to $34 million when compared to Q4 last year as the prolonged recessionary freight environment impacted Class 8 orders, new and used unit sales, and fixed operations activity. Turning to Penske Transportation Solutions, the freight environment also impacts the full-service lease, rental, and logistics operations of PTS. During Q4, operating revenue declined 5% to $2.6 billion. Rental revenue declined 17%, and logistics revenue declined 3%.

Rich Shearing: We retailed 3,789 new and used trucks, generated $725 million in revenue and $121 million in gross profit. Tariffs pulled some orders previously scheduled for delivery in Q4 up to earlier in the year, while other customers remained on the sidelines due to Section 232 Tariffs and the resolution of the EPA 2027 emissions rules. Service and parts revenue declined 1% and represented 74% of the total gross profit during Q4. EBT declined $11 million from $45 million to $34 million when compared to Q4 last year as the prolonged recessionary freight environment impacted Class 8 orders, new and used unit sales, and fixed operations activity. Turning to Penske Transportation Solutions, the freight environment also impacts the full-service lease, rental, and logistics operations of PTS. During Q4, operating revenue declined 5% to $2.6 billion. Rental revenue declined 17%, and logistics revenue declined 3%.

Speaker #5: Service and parts revenue declined 1% and represented 74% of the total gross profit during Q4. EBT declined $11 million, from $45 million to $34 million, when compared to Q4 last year, as the prolonged recessionary freight environment impacted Class 8 orders, new and used unit sales, and fixed operations activity.

Speaker #5: Turning to Penske Transportation Solutions, the freight environment also impacts the full-service lease, rental, and logistics operations of PTS. During Q4, operating revenue declined 5% to $2.6 billion.

Speaker #5: Rental revenue declined 17%, and logistics revenue declined 3%. Throughout this past year, PTS has reduced its fleet size and rental, leading to reduced operating costs for maintenance while also reducing depreciation and interest expense.

Operator 2: Throughout this past year, PTS has reduced its fleet size in rental, leading to reduced operating costs for maintenance while also reducing depreciation and interest expense. PTS sold 9,750 units in Q4 and 41,500 units for the full year of 2025, ending the quarter with a fleet size of just under 397,000 units, down from 435,000 units at the end of December 2024. The weak freight market continues to impact gain on sale. Overall, the gain on sale declined by $18 million in Q4 and $87 million for 12 months of 2025. Despite market headwinds, equity earnings from PTS were down less than 10% to $48 million. The PTS team continues to focus on cost reductions, including right-sizing of the fleet and operating cost reductions. The actions will see future benefits when the freight environment recovers.

Rich Shearing: Throughout this past year, PTS has reduced its fleet size in rental, leading to reduced operating costs for maintenance while also reducing depreciation and interest expense. PTS sold 9,750 units in Q4 and 41,500 units for the full year of 2025, ending the quarter with a fleet size of just under 397,000 units, down from 435,000 units at the end of December 2024. The weak freight market continues to impact gain on sale. Overall, the gain on sale declined by $18 million in Q4 and $87 million for 12 months of 2025. Despite market headwinds, equity earnings from PTS were down less than 10% to $48 million. The PTS team continues to focus on cost reductions, including right-sizing of the fleet and operating cost reductions. The actions will see future benefits when the freight environment recovers.

Speaker #5: PTS sold 9,750 units in Q4, and 41,500 units for the full year of 2025, ending the quarter with a fleet size of just under 397,000 units.

Speaker #5: Down from 435,000 units at the end of December 2024. The weak freight market continues to impact gain on sale. Overall, the gain on sale declined by $18 million in Q4 and $87 million for the 12 months of 2025.

Speaker #5: Despite market headwinds, equity earnings from PTS were down less than 10% to $48 million. The PTS team continues to focus on cost reductions, including right-sizing of the fleet and operating cost reductions.

Speaker #5: The actions will see future benefits when the freight environment recovers. In fact, in January, PTS experienced a net increase in full-service lease fleet tractor rental utilization of 82%, and improved operating profit and rental versus the prior year as a result of these actions.

Operator 2: In fact, in January, PTS experienced a net increase in full-service lease fleet, tractor rental utilization of 82%, and improved operating profit in rental versus the prior year as a result of these actions. I would now like to turn the call over to Randall Seymore to discuss our international operations. Thanks, Rich, and good afternoon, everyone. During Q4, our international revenue was $2.8 billion, down 2%. The UK remains challenging as inflation, higher taxes, consumer affordability, and the government push towards electrification impacts the overall market. We are encouraged to see the Bank of England cut interest rates to their lowest level since early 2023, with additional cuts predicted in 2026. We have taken steps to realign our UK operations with current market conditions.

Rich Shearing: In fact, in January, PTS experienced a net increase in full-service lease fleet, tractor rental utilization of 82%, and improved operating profit in rental versus the prior year as a result of these actions. I would now like to turn the call over to Randall Seymore to discuss our international operations.

Speaker #5: I would now like to turn the call over to Randall Seymore to discuss our international.

Randall Seymore: Thanks, Rich, and good afternoon, everyone. During Q4, our international revenue was $2.8 billion, down 2%. The UK remains challenging as inflation, higher taxes, consumer affordability, and the government push towards electrification impacts the overall market. We are encouraged to see the Bank of England cut interest rates to their lowest level since early 2023, with additional cuts predicted in 2026. We have taken steps to realign our UK operations with current market conditions.

Speaker #6: good afternoon, everyone.

Speaker #6: During Q4, our international revenue was $2.8 billion, down 2%. The UK remains challenging as inflation, higher taxes, consumer affordability, and the government push towards electrification impacts the overall market. Thanks, Rich, and operations.

Speaker #6: We are encouraged to see the Bank of England cut interest rates to their lowest level since early 2023, with additional cuts predicted in 2026.

Speaker #6: We have taken steps to realign our UK operations with current market conditions. These steps include reducing the footprint of our Sitner Select locations, closing unprofitable franchise dealerships, and reducing our headcount in the past year by 1,000 people.

Operator 2: These steps include reducing the footprint of our Sytner Select locations, closing unprofitable franchise dealerships, and reducing our headcount in the past year by 1,000 people. At the beginning of January, we also changed our management approach from a brand-driven to a market-driven offense. We believe this strengthens our management team and enhances our focus on a market-by-market basis across the UK. This approach is similar to the structure that we have in the US. During Q4, same-store new units delivered were impacted by weaker national sales of the German luxury brands, which declined by 20%. However, our new car gross improved by $34 per unit. Same-store used units decreased by 10% as lower new car volume impacted vehicle availability, combined with lower unit sales at the Sytner Select locations.

Randall Seymore: These steps include reducing the footprint of our Sytner Select locations, closing unprofitable franchise dealerships, and reducing our headcount in the past year by 1,000 people. At the beginning of January, we also changed our management approach from a brand-driven to a market-driven offense. We believe this strengthens our management team and enhances our focus on a market-by-market basis across the UK. This approach is similar to the structure that we have in the US. During Q4, same-store new units delivered were impacted by weaker national sales of the German luxury brands, which declined by 20%. However, our new car gross improved by $34 per unit. Same-store used units decreased by 10% as lower new car volume impacted vehicle availability, combined with lower unit sales at the Sytner Select locations.

Speaker #6: At the beginning of January, we also changed our management approach from a brand-driven to a market-driven offense. We believe this strengthens our management team and enhances our focus on a market-by-market basis across the UK.

Speaker #6: This approach is similar to the structure that we have in the U.S. During Q4, same-store new units delivered were impacted by weaker national sales of the German luxury brands, which declined by 20%.

Speaker #6: However, our new car gross improved by $34 per unit. Same-store used units decreased by 10% as lower new car volume impacted vehicle availability, combined with lower unit sales at the Sitner Select locations.

Speaker #6: The Sytner Select locations retailed 1,000 fewer cars due to a reduction in the number of dealerships and the macro environment in the UK. However, pleasingly, our used car gross increased by $150 per unit.

Operator 2: The Sytner Select locations retailed 1,000 fewer cars from a reduction in the number of dealerships, and the macro environment in the UK. However, pleasingly, our used car gross increased by $150 per unit. Service and parts same-store revenue increased 2% as our strategies to increase customer pay resulted in a 9% increase, which was offset with the 18% decrease in warranty. We see an encouraging environment across our Germany and Italy businesses, leading to an improvement in those markets of profitability during our Q4. Turning to Australia, we had a very strong fourth quarter. EBT nearly doubled when compared to the same period in the previous year. In automotive, we have spent the last 12 months implementing the One Ecosystem strategy for our three Porsche stores in the Melbourne market.

Randall Seymore: The Sytner Select locations retailed 1,000 fewer cars from a reduction in the number of dealerships, and the macro environment in the UK. However, pleasingly, our used car gross increased by $150 per unit. Service and parts same-store revenue increased 2% as our strategies to increase customer pay resulted in a 9% increase, which was offset with the 18% decrease in warranty. We see an encouraging environment across our Germany and Italy businesses, leading to an improvement in those markets of profitability during our Q4. Turning to Australia, we had a very strong fourth quarter. EBT nearly doubled when compared to the same period in the previous year. In automotive, we have spent the last 12 months implementing the One Ecosystem strategy for our three Porsche stores in the Melbourne market.

Speaker #6: Service and parts same-store revenue increased 2%, as our strategies to increase customer pay resulted in a 9% increase, which was offset by the 18% decrease in warranty.

Speaker #6: We see an encouraging environment across our Germany and Italy businesses, leading to an improvement in those markets of profitability during our Q4. Turning to Australia, we had a very strong fourth quarter.

Speaker #6: EBT nearly doubled when compared to the same period in the previous year. In automotive, we have spent the last 12 months implementing the One Ecosystem strategy for our three Porsche stores in the Melbourne market.

Speaker #6: Through this process, we have improved the customer experience, increased the performance of our used vehicles, and grown our service and parts business while increasing profitability.

Operator 2: Through this process, we have improved the customer experience, increased the performance of our used vehicles, and grown our service and parts business while increasing profitability. On the Australian commercial vehicle and power system business, we are diversified with revenue and gross profit split of approximately two-thirds off-highway and one-third on-highway. In particular, we see strength in the off-highway market segments of energy solutions, mining, and defense. We completed projects worth nearly $700 million in revenue last year and already have $500 million in secured orders so far for 2026. In energy solutions, this growing segment provides power solutions for data centers to support the growth of artificial intelligence, and these data centers require robust infrastructure with reliable power at the core of its operations. The engines and support we provide will be critical as this segment evolves.

Randall Seymore: Through this process, we have improved the customer experience, increased the performance of our used vehicles, and grown our service and parts business while increasing profitability. On the Australian commercial vehicle and power system business, we are diversified with revenue and gross profit split of approximately two-thirds off-highway and one-third on-highway. In particular, we see strength in the off-highway market segments of energy solutions, mining, and defense. We completed projects worth nearly $700 million in revenue last year and already have $500 million in secured orders so far for 2026. In energy solutions, this growing segment provides power solutions for data centers to support the growth of artificial intelligence, and these data centers require robust infrastructure with reliable power at the core of its operations. The engines and support we provide will be critical as this segment evolves.

Speaker #6: On the Australian commercial vehicle and power system business, we are diversified, with revenue and gross profit split of approximately two-thirds off-highway and one-third on-highway.

Speaker #6: In particular, we see strength in the off-highway market segments of energy solutions, mining, and defense. We completed projects worth nearly $700 million in revenue last year, and already have $500 million in secured orders so far for 2026.

Speaker #6: In energy solutions, this growing segment provides power solutions for data centers to support the growth of artificial intelligence, and these data centers require robust infrastructure with reliable power at the core of its operations.

Speaker #6: The engines and support we provide will be critical as this segment evolves. We see the potential for our energy solutions business to generate at least $1 billion in revenue by 2030.

Operator 2: We see the potential for our energy solutions business to generate at least $1 billion in revenue by 2030. I would now like to turn the call over to Shelley Hulgrave to review our cash flow, balance sheet, and capital allocation. Thank you, Randall. Good afternoon, everyone. We remain committed to our diversification strategy, a strong balance sheet, and a flexible and disciplined approach to capital allocation while implementing efficiencies to lower costs. During 2025, total SG&A expenses grew by 2.1% and were in line with inflation. SG&A, as a percentage of gross profit for the 12 months ended 31 December 2025, was 72.1%. Excluding certain one-time items in 2025, adjusted SG&A to gross was 71.5% and is in line with our previous guidance.

Randall Seymore: We see the potential for our energy solutions business to generate at least $1 billion in revenue by 2030. I would now like to turn the call over to Shelley Hulgrave to review our cash flow, balance sheet, and capital allocation.

Speaker #6: I would now like to turn the call over to Shelly Hulgrave to review our cash flow, balance sheet, and capital

Shelley Hulgrave: Thank you, Randall. Good afternoon, everyone. We remain committed to our diversification strategy, a strong balance sheet, and a flexible and disciplined approach to capital allocation while implementing efficiencies to lower costs. During 2025, total SG&A expenses grew by 2.1% and were in line with inflation. SG&A, as a percentage of gross profit for the 12 months ended 31 December 2025, was 72.1%. Excluding certain one-time items in 2025, adjusted SG&A to gross was 71.5% and is in line with our previous guidance.

Speaker #6: allocation. Thank you,

Speaker #1: Randall: Good afternoon, everyone. We remain committed to our diversification strategy, a strong balance sheet, and a flexible and disciplined approach to capital allocation, while implementing efficiencies through 2025 to lower total costs.

Speaker #1: During the period, SG&A expenses grew by 2.1% and were in line with inflation. SG&A as a percentage of gross profit for the 12 months ended December 31, 2025, was 72.1%.

Speaker #1: Excluding certain one-time items in 2025, adjusted SG&A to gross was 71.5% and is in line with our previous guidance. As Roger mentioned earlier, Q4 SG&A to gross was impacted by lower new and used units previously discussed, lower business volume at Premier Truck Group, and higher social program costs in the UK.

Operator 2: As Roger mentioned earlier, Q4 SG&A to gross was impacted by lower new and used units previously discussed, lower business volume at Premier Truck Group, and higher social program costs in the UK. For the 12 months ended 31 December 2025, we generated $1 billion in cash flow from operations and EBITDA of $1.5 billion. Our free cash flow, which is cash flow from operations after deducting capital expenditures, was $651 million. We used our cash flow and strong balance sheet to allocate capital as follows. We repaid $550 million of senior subordinated notes at their scheduled maturity. We invested $325 million in capital expenditures. We completed acquisitions representing $1.6 billion in estimated annualized revenue, which included Longo Toyota, the number-one Toyota, and Longo Lexus, the number-four Lexus dealerships in the US.

Shelley Hulgrave: As Roger mentioned earlier, Q4 SG&A to gross was impacted by lower new and used units previously discussed, lower business volume at Premier Truck Group, and higher social program costs in the UK. For the 12 months ended 31 December 2025, we generated $1 billion in cash flow from operations and EBITDA of $1.5 billion. Our free cash flow, which is cash flow from operations after deducting capital expenditures, was $651 million. We used our cash flow and strong balance sheet to allocate capital as follows. We repaid $550 million of senior subordinated notes at their scheduled maturity. We invested $325 million in capital expenditures. We completed acquisitions representing $1.6 billion in estimated annualized revenue, which included Longo Toyota, the number-one Toyota, and Longo Lexus, the number-four Lexus dealerships in the US.

Speaker #1: For the 12 months ended December 31, 2025, we generated $1 billion in cash flow from operations and EBITDA of $1.5 billion. Our free cash flow, which is cash flow from operations after deducting capital expenditures, was $651 million.

Speaker #1: We used our cash flow and strong balance sheet to allocate capital as follows: we repaid $550 million of senior subordinated notes at their scheduled maturity.

Speaker #1: We invested $325 million in capital expenditures. We completed acquisitions representing $1.6 billion in estimated annualized revenue, which included Longo Toyota, the number one Toyota, and Longo Lexus, the number four Lexus dealership in the US.

Speaker #1: At the same time, we generated cash proceeds of $200 million by divesting non-strategic dealerships representing $700 million in revenue and $4.5 million in EBT.

Operator 2: At the same time, we generated cash proceeds of $200 million by divesting of non-strategic dealerships representing $700 million in revenue and $4.5 million in EBT. Through 31 December, we paid $344 million in dividends. Today, we announced an increase in our dividend to $1.40 per share, representing the 21st consecutive quarterly increase. On a forward basis, our current dividend yield is approximately 3.4%, with a payout ratio of 37.4% over the last 12 months. During 2025, we repurchased 1.2 million shares of common stock, or approximately 1.8% of outstanding shares, for $182 million. As of 31 December 2025, $247.5 million remained available for repurchases under our securities repurchase program. Over the last four-plus years, we have returned approximately $2.5 billion to shareholders through dividends and share repurchases.

Shelley Hulgrave: At the same time, we generated cash proceeds of $200 million by divesting of non-strategic dealerships representing $700 million in revenue and $4.5 million in EBT. Through 31 December, we paid $344 million in dividends. Today, we announced an increase in our dividend to $1.40 per share, representing the 21st consecutive quarterly increase. On a forward basis, our current dividend yield is approximately 3.4%, with a payout ratio of 37.4% over the last 12 months. During 2025, we repurchased 1.2 million shares of common stock, or approximately 1.8% of outstanding shares, for $182 million. As of 31 December 2025, $247.5 million remained available for repurchases under our securities repurchase program. Over the last four-plus years, we have returned approximately $2.5 billion to shareholders through dividends and share repurchases.

Speaker #1: Through December 31, we paid $344 million in dividends. Today, we announced an increase in our dividend to $1.40 per share, representing the 21st consecutive quarterly increase.

Speaker #1: On a forward basis, our current dividend yield is approximately 3.4%, with a payout ratio of 37.4% over the last 12 months. During 2025, we repurchased 1.2 million shares of Common Stock, or approximately 1.8% of outstanding shares, for $182 million.

Speaker #1: As of December 31, 2025, $247.5 million remained available for repurchases under our securities repurchase program. Over the last four-plus years, we have returned approximately $2.5 billion to shareholders through dividends and share repurchases.

Speaker #1: At the end of December, our non-vehicle long-term debt was $2.17 billion, which is only up $314 million since the end of December 2024. Floor plan is $4.1 billion.

Operator 2: At the end of December, our non-vehicle long-term debt was $2.17 billion, which is only up $314 million since the end of December 2024. Floor plan is $4.1 billion. While we continue to evaluate the impact of the One Big Beautiful Bill on our financial statements, we do expect to recognize positive cash flow impacts related to our 28.9% ownership in the PTS partnership. We estimate the bonus depreciation feature will provide an estimated $120 to $150 million of additional cash flow each year. For the year, total interest expense declined $18.8 million, or 7%, due to our cash management and lower interest rates. We estimate a 25 basis point change in interest rates would impact interest expense by approximately $12 million. Total inventory was $4.8 billion, up $104 million from December 2024.

Shelley Hulgrave: At the end of December, our non-vehicle long-term debt was $2.17 billion, which is only up $314 million since the end of December 2024. Floor plan is $4.1 billion. While we continue to evaluate the impact of the One Big Beautiful Bill on our financial statements, we do expect to recognize positive cash flow impacts related to our 28.9% ownership in the PTS partnership. We estimate the bonus depreciation feature will provide an estimated $120 to $150 million of additional cash flow each year. For the year, total interest expense declined $18.8 million, or 7%, due to our cash management and lower interest rates. We estimate a 25 basis point change in interest rates would impact interest expense by approximately $12 million. Total inventory was $4.8 billion, up $104 million from December 2024.

Speaker #1: While we continue to evaluate the impact of the One Big Beautiful bill on our financial statements, we do expect to recognize positive cash flow impacts related to our 28.9% ownership in the PTS partnership.

Speaker #1: We estimate the bonus depreciation feature will provide an estimated $120 to $150 million of additional cash flow each year. For the year, total interest expense declined $18.8 million, or 7%, due to our cash management and lower interest rates.

Speaker #1: We estimate a 25 basis point change in interest rates would impact interest expense by approximately $12 million. Total inventory was $4.8 billion, up $104 million from December 2024.

Speaker #1: At December 31, new vehicle inventory is at a 49-day supply, including 52 days for premium and 34 days for volume foreign. Used vehicle inventory is also at a 49-day supply, with the U.S. at 34 days and the U.K. at 66 days.

Operator 2: At 31 December, new vehicle inventory is at a 49-day supply, including 52 days for premium and 34 days for volume foreign. Used vehicle inventory is also at a 49-day supply, with the U.S. at 34 days and the U.K. at 66 days. At the end of December, we had $65 million of cash and liquidity of $1.6 billion. At this time, I will turn the call back to Roger for some final remarks. Thank you, Shelley. As I look towards 2026 and beyond, I'm quite optimistic. We anticipate the long-awaited recovery in the commercial truck market, and we expect a stronger macroenvironment in the U.S. The Big Beautiful Bill, tax refunds, lower interest rates, and GDP growth will have a positive impact on all of our operations. One thing we can't control is the weather. A few weeks ago, our businesses in the southern, Midwest, and northeast U.S.

Shelley Hulgrave: At 31 December, new vehicle inventory is at a 49-day supply, including 52 days for premium and 34 days for volume foreign. Used vehicle inventory is also at a 49-day supply, with the U.S. at 34 days and the U.K. at 66 days. At the end of December, we had $65 million of cash and liquidity of $1.6 billion. At this time, I will turn the call back to Roger for some final remarks.

Speaker #1: At the end of December, we had $65 million of cash and liquidity of $1.6 billion. At this time, I will turn the call back to Roger for

Speaker #1: some final remarks. Thank you,

Roger Penske: Thank you, Shelley. As I look towards 2026 and beyond, I'm quite optimistic. We anticipate the long-awaited recovery in the commercial truck market, and we expect a stronger macroenvironment in the U.S. The Big Beautiful Bill, tax refunds, lower interest rates, and GDP growth will have a positive impact on all of our operations. One thing we can't control is the weather. A few weeks ago, our businesses in the southern, Midwest, and northeast U.S.

Speaker #2: Shelly, as I look towards 2026 and beyond, I'm quite optimistic. We anticipate the long-awaited recovery in the commercial truck market, and we expect a stronger macro environment in the U.S.

Speaker #2: The Big Beautiful bill, tax refunds, lower interest rates, and GDP growth will have a positive impact on all of our operations. One thing we can't control is the weather.

Speaker #2: A few weeks ago, our businesses in the Southern, Midwest, and Northeast US were impacted by snow and ice storms, which lasted several days. Over half our locations felt some level of impact.

Operator 2: were impacted by snow and ice storms, which lasted several days. Over half our locations felt some level of impact. I'd like to thank all of our team members for their efforts in recovery, taking care of this storm, which we had not expected. I want to thank all of you for joining us today, and we'll open it up for questions. Thank you. We will now begin the question-and-answer session. To ask a question, press star, then the number one on your telephone keypad. Our first question will come from the line of Michael Ward with Citigroup. Please go ahead. Thanks. Good afternoon, everybody. Hey, Mike. I don't know if I'm looking at this the right way, but I tried to check back a couple of years ago and look where your brand mix has trended, and it seems like it's Toyota, Lexus, BMW, Porsche have been the growers.

Roger Penske: were impacted by snow and ice storms, which lasted several days. Over half our locations felt some level of impact. I'd like to thank all of our team members for their efforts in recovery, taking care of this storm, which we had not expected. I want to thank all of you for joining us today, and we'll open it up for questions. Thank you.

Speaker #2: I'd like to thank all of our team members for their efforts in recovery taking care of this storm, which we had not expected. I want to thank all of you for joining us today, and we'll open it up for questions.

Speaker #2: Thank

Speaker #2: Thank you. We will now

Operator: We will now begin the question-and-answer session. To ask a question, press star, then the number one on your telephone keypad. Our first question will come from the line of Michael Ward with Citigroup. Please go ahead.

Speaker #3: We will now begin the question-and-answer session. To ask a question, press star, then the number 1 on your telephone keypad. Our first question will come from the line of Michael Ward with Citigroup.

Speaker #3: Please go ahead.

Michael Ward: Thanks. Good afternoon, everybody. Hey, Mike. I don't know if I'm looking at this the right way, but I tried to check back a couple of years ago and look where your brand mix has trended, and it seems like it's Toyota, Lexus, BMW, Porsche have been the growers.

Speaker #4: Thanks. Good afternoon, everybody.

Speaker #4: Thanks. Good afternoon, everybody.

Speaker #2: Hey, Mike. Hi, Mike.

Speaker #4: Yeah, I don't know if I'm looking at this the right way, but I tried to check back a couple of years ago and look where your brand mix has trended, and it seems like it's Toyota, Lexus, BMW, Porsche that have been the growers.

Speaker #4: And is that in the U.S. and the U.K.? Is it mostly in the U.S., that growth? Is that strategic? And then it also looks like you're getting focused on—if you look regionally—you have Northeast, Florida, California, Texas.

Operator 2: Is that in the US and the UK? Is it mostly in the US that growth? Is that strategic? And then it also looks like you're getting focused on, if you look regionally, you have Northeast Florida, California, Texas. Am I looking at that the right way? Is that a strategic direction for Penske? Well, first, let me say strategically. Obviously, when you think about Florida, you think about Texas and California where we have a big footprint. These would be, obviously, typically where we'd like to have add-on brands. And there's no question when you think about Toyota, Lexus, Porsche, and certainly BMW, we've grown with these brands over the last four or five years significantly, not just in the US, but I would say internationally. We look at these brands as premium luxury.

Michael Ward: Is that in the US and the UK? Is it mostly in the US that growth? Is that strategic? And then it also looks like you're getting focused on, if you look regionally, you have Northeast Florida, California, Texas. Am I looking at that the right way? Is that a strategic direction for Penske?

Speaker #4: Am I looking at that the right way? Is that a strategic direction for Penske?

Roger Penske: Well, first, let me say strategically. Obviously, when you think about Florida, you think about Texas and California where we have a big footprint. These would be, obviously, typically where we'd like to have add-on brands. And there's no question when you think about Toyota, Lexus, Porsche, and certainly BMW, we've grown with these brands over the last four or five years significantly, not just in the US, but I would say internationally. We look at these brands as premium luxury.

Speaker #2: Strategically, obviously, when you think—well, first, let me say, about Florida, you think about Texas and California, where we have a big footprint. These would be, obviously, typically where we'd like to have add-on brands.

Speaker #2: And there's no question, when you think about Toyota, Lexus, Porsche, and certainly BMW, we've grown with these brands over the last four or five years significantly—not just in the U.S., but I would say internationally.

Speaker #2: We look at these brands as premium luxury. Obviously, the volume foreign, which would be the Toyota business, has been very strong across the country with everyone that handles that particular brand.

Operator 2: Obviously, the volume foreign, which would be the Toyota business, has been very strong across the country with everyone that handles that particular brand. As I look at the future and you take your BMW business, you take our Toyota, Lexus business, including Orlando, and add Porsche to it, it's probably over 50% of our business from a sales volume. So to me, we know how strong those brands are. And one of the things that drives us here is the captive finance companies: Toyota Financial, Lexus Financial, Porsche, and also BMW. These are the strongest players that we have within the market. And I think at the end of the day, we continue to keep our mix primarily I think it's 71%, if I'm correct, Tony, 71% premium luxury, which will go up when we look at adding the two Lexus stores.

Roger Penske: Obviously, the volume foreign, which would be the Toyota business, has been very strong across the country with everyone that handles that particular brand. As I look at the future and you take your BMW business, you take our Toyota, Lexus business, including Orlando, and add Porsche to it, it's probably over 50% of our business from a sales volume. So to me, we know how strong those brands are. And one of the things that drives us here is the captive finance companies: Toyota Financial, Lexus Financial, Porsche, and also BMW. These are the strongest players that we have within the market. And I think at the end of the day, we continue to keep our mix primarily I think it's 71%, if I'm correct, Tony, 71% premium luxury, which will go up when we look at adding the two Lexus stores.

Speaker #2: As I look at the future, and you take your BMW business, you take our Toyota, Lexus business—including our Orlando—and add Porsche to it, it's probably over 50% of our business from a sales volume.

Speaker #2: So, to me, we know how strong those brands are. And one of the things that drives us here is the captive finance companies. Toyota Financial, Lexus Financial, Porsche, and also BMW—these are the strongest players that we have within the market.

Speaker #2: And I think, at the end of the day, we continue to keep our mix primarily—I think it's 71%, if I'm correct, Tony—71% premium luxury, which will go up when we look at adding the two Lexus stores.

Speaker #2: So I would say California, Texas, and Florida—strong markets, brands right where we want to be. And then we've divested, Mike, which we've talked about before, stores where we weren't getting the returns that we needed.

Operator 2: So I would say California, Texas, and Florida, strong markets, brands right where we want to be. And then we've divested, Mike, which we've talked about before, stores where we weren't getting the returns that we needed. The markets were not the ones that had the growth, and we had certain CI requirements. So again, adding those markets with Arizona where we have, I think, Shelley, what, almost $2 billion worth of business in Arizona, it puts us really in the sweet spot. The second thing, could you talk a little bit about the cadence of earnings in 2026? Because Q1 is a tough comp, and now you have the weather sitting on top of it. Can you talk about the cadence, how we should look at it going through the year? Yeah, Mike. This is Tony. Thanks for that question.

Roger Penske: So I would say California, Texas, and Florida, strong markets, brands right where we want to be. And then we've divested, Mike, which we've talked about before, stores where we weren't getting the returns that we needed. The markets were not the ones that had the growth, and we had certain CI requirements. So again, adding those markets with Arizona where we have, I think, Shelley, what, almost $2 billion worth of business in Arizona, it puts us really in the sweet spot.

Speaker #2: The markets were not the ones that had the growth, and we had certain CI requirements. So again, adding those markets where there are zones where we have, I think, Shelly, what, almost $2 billion worth of business in Arizona, it puts us really in the sweet spot.

Speaker #4: The second thing, could you talk a little bit about the cadence of earnings in 2026? Because Q1 is a tough comp, and now you have the weather sitting on top of it.

Michael Ward: The second thing, could you talk a little bit about the cadence of earnings in 2026? Because Q1 is a tough comp, and now you have the weather sitting on top of it. Can you talk about the cadence, how we should look at it going through the year?

Speaker #4: Can you talk about the cadence, how we should look at it going through the

Speaker #4: year? Yeah, Mike.

Anthony Pordon: Yeah, Mike. This is Tony. Thanks for that question.

Speaker #2: This is Tony. Thanks for that question. So, Q1 will be impacted by the tariff-related effect that we saw—the pull-forward into March of last year.

Operator 2: So Q1 will be impacted by the tariff-related effect that we saw, the pull forward into March of last year. So with that, we expect some headwinds there. On top of that, we saw a SAR of $17.8 million in that month, I believe, and it carried forward into April. And then in the UK last year, in the month of March and into April, they had a new tax that came on in April last year, which actually caused some pull forward of demand into the first quarter. So our earnings are always judged and predicated upon how the registration periods for the UK do in Q1 and Q3. And then typically, Q2 is a really, really strong period for the US marketplace.

Anthony Pordon: So Q1 will be impacted by the tariff-related effect that we saw, the pull forward into March of last year. So with that, we expect some headwinds there. On top of that, we saw a SAR of $17.8 million in that month, I believe, and it carried forward into April. And then in the UK last year, in the month of March and into April, they had a new tax that came on in April last year, which actually caused some pull forward of demand into the first quarter. So our earnings are always judged and predicated upon how the registration periods for the UK do in Q1 and Q3. And then typically, Q2 is a really, really strong period for the US marketplace.

Speaker #2: So, with that, we expect some headwinds there. On top of that, we saw a SAR of 17.8 million in that month, I believe, and it carried forward into April.

Speaker #2: And then in the UK last year, in the month of March and into April, they had a new tax that came on in April last year, which actually caused some pull-forward of demand into the first quarter.

Speaker #2: So our earnings are always judged and predicated upon how the registration periods for the UK do in Q1 and Q3. And then, typically, Q2 is a really, really strong period for the US marketplace.

Speaker #2: If you go back and look at our historical trends, as you know, the summer selling season kicks off, you've got all the tax refunds that have come in through everything.

Operator 2: If you go back and look at our historical trends, as you know, the summer selling season kicks off, you've got all the tax refunds that have come in and through everything. So I think you'll have those types of challenges in front of us in Q1 with those year-over-year comparisons. I think in Q2, Tony, in Q2 we'll have it's great for our one-way business. We see a spike in Q2 with people coming out of school and going out for the summer. It's a big thing. And of Q2 beginning, usually throughout Q3. Yeah. All right. So you have soft Q1, big Q2, and then you go from there, it sounds like. Right. I never want to use the word soft. That's your word. Yeah. Go ahead. Well, thank you very much. All right. Thanks, Mike.

Anthony Pordon: If you go back and look at our historical trends, as you know, the summer selling season kicks off, you've got all the tax refunds that have come in and through everything. So I think you'll have those types of challenges in front of us in Q1 with those year-over-year comparisons.

Speaker #2: So, I think you'll have those types of challenges in front of us in the first.

Speaker #2: quarter with those year-over-year comparisons. I

Speaker #4: Think in Q2, Tony. In Q2, we'll have great numbers for our one-way business. We see a spike in Q2 with people coming out of school and going out for...

Roger Penske: I think in Q2, Tony, in Q2 we'll have it's great for our one-way business. We see a spike in Q2 with people coming out of school and going out for the summer. It's a big thing.

Speaker #4: the summers. And

Anthony Pordon: And of Q2 beginning, usually throughout Q3.

Speaker #5: of Q2 beginning, usually throughout Q3.

Speaker #2: Yeah.

Roger Penske: Yeah.

Anthony Pordon: All right. So you have soft Q1, big Q2, and then you go from there, it sounds like.

Speaker #4: All

Speaker #4: Right. So you have soft Q1, big Q2, and then you go from there. That's what it sounds like.

Speaker #2: Right. I never want to use the word 'soft.' That's your—

Roger Penske: Right. I never want to use the word soft. That's your word. Yeah. Go ahead.

Speaker #2: word. Go ahead. Yeah.

Speaker #4: Well, thank you very much.

Michael Ward: Well, thank you very much.

Anthony Pordon: All right. Thanks, Mike.

Speaker #2: All right.

Speaker #2: Thanks, Mike.

Speaker #5: Thanks, Mike. Our next

Operator 2: Our next question will come from the line of Alex Perry with Bank of America. Please go ahead. Alex, hi. Hello. Hi. Thanks for taking my question here. I guess first, I just wanted to talk through your outlook on the parts and service business as we move through the year here. Obviously, it's sort of been a big outperformer. Should we continue to expect really strong growth on a same-store basis? And maybe just walk us through what key company initiatives are driving strong growth for you guys. Thanks. Yeah. Hey, Alex. Rich here. So I can speak to the US and kick it over to Randall for the international. But I think, obviously, as you pointed out, continues to be the bedrock and foundation of the profitability of the business.

Operator: Our next question will come from the line of Alex Perry with Bank of America. Please go ahead.

Speaker #3: The next question will come from the line of Alex Perry with Bank of America. Please go ahead.

Speaker #3: ahead. Alex,

Roger Penske: Alex, hi.

Alexander Perry: Hello. Hi. Thanks for taking my question here. I guess first, I just wanted to talk through your outlook on the parts and service business as we move through the year here. Obviously, it's sort of been a big outperformer. Should we continue to expect really strong growth on a same-store basis? And maybe just walk us through what key company initiatives are driving strong growth for you guys. Thanks. Yeah.

Speaker #6: Hello. Hi. Hi. Thanks for taking my question here. I guess first, I just wanted to talk through your outlook on the parts and service business as we move through the year here.

Speaker #6: Obviously, it's sort of been a big outperformer. Should we continue to expect really strong growth on a same-store basis? And maybe just walk us through what key company initiatives are driving strong growth for you guys?

Speaker #6: Thanks.

Speaker #5: Yeah. Hey, Alex. Rich here. So I can speak to the U.S. and kick it over to Randall for the international. As you pointed out, it continues to be the bedrock and foundation of the profitability of the business.

Rich Shearing: Hey, Alex. Rich here. So I can speak to the US and kick it over to Randall for the international. But I think, obviously, as you pointed out, continues to be the bedrock and foundation of the profitability of the business.

Speaker #5: And I think whether it was truck or automotive dealerships, we continue to grow our effective labor rate. Up 5% on the auto side, up 2% on the truck side.

Operator 2: I think whether it was truck or automotive dealerships, we continue to grow our effective labor rate up 5% on the auto side, up 2% on the truck side. And we saw our fixed absorption rate go up by 200 basis points as well in the US automotive business to 89.6%. And so as we look to this year, certainly we would target to kind of have that same mid-single-digit growth in our fixed operations business. We've got to always take a look at the balance of what is customer pay versus warranty. And we've been very fortunate the last couple of years on the warranty side that the OEMs have had a lot of recalls. That is never guaranteed from one year to the next. So we need to continue to work on our customer pay opportunities.

Rich Shearing: I think whether it was truck or automotive dealerships, we continue to grow our effective labor rate up 5% on the auto side, up 2% on the truck side. And we saw our fixed absorption rate go up by 200 basis points as well in the US automotive business to 89.6%. And so as we look to this year, certainly we would target to kind of have that same mid-single-digit growth in our fixed operations business. We've got to always take a look at the balance of what is customer pay versus warranty. And we've been very fortunate the last couple of years on the warranty side that the OEMs have had a lot of recalls. That is never guaranteed from one year to the next. So we need to continue to work on our customer pay opportunities.

Speaker #5: And we saw our fixed absorption rate go up by 200 basis points as well in the U.S. automotive business to 89.6%. And so as we look to this year, certainly we would target to kind of have that same mid-single-digit growth in our fixed operations business.

Speaker #5: We've got to always take a look at the balance of what is customer pay versus warranty. And we've been very fortunate the last couple of years on the warranty side that the OEMs have had a lot of recalls. That is never guaranteed from one year to the next.

Speaker #5: So, we need to continue to work on our customer pay opportunities. And we've talked in the past about what we're doing with artificial intelligence, tech videos, and then really targeting segment two and segment three customers, right?

Operator 2: And we've talked in the past about what we're doing with artificial intelligence, tech videos, and then really targeting segment two and three customers, right? Because if you look at the age of the car park, we've talked about this before. It's at an all-time high. Average mileage for cars in the car park is at almost 70,000 miles. We need to make sure those customers that are operating those older vehicles and maybe aren't in the market right now to buy a new car are coming back into our dealerships. We haven't cracked that code yet. It's something we're still working on. But those are some of the opportunities. And then I think you look at where we're investing. I think everybody thought maybe that the radar and ADAS systems were going to eliminate collision. And that's just not the case.

Rich Shearing: And we've talked in the past about what we're doing with artificial intelligence, tech videos, and then really targeting segment two and three customers, right? Because if you look at the age of the car park, we've talked about this before. It's at an all-time high. Average mileage for cars in the car park is at almost 70,000 miles. We need to make sure those customers that are operating those older vehicles and maybe aren't in the market right now to buy a new car are coming back into our dealerships. We haven't cracked that code yet. It's something we're still working on. But those are some of the opportunities. And then I think you look at where we're investing. I think everybody thought maybe that the radar and ADAS systems were going to eliminate collision. And that's just not the case.

Speaker #5: Because if you look at the age of the car park, we've talked about this before. It's at an all-time high. Average mileage for cars in the car park is at almost 70,000 miles.

Speaker #5: We need to make sure those customers that are operating those older vehicles, and maybe aren't in the market right now to buy a new car, are coming back into our dealerships.

Speaker #5: We haven't cracked that code yet. It's something we're still working on. But those are some of the opportunities. And then I think you look at where we're investing.

Speaker #5: I think everybody thought maybe that the radar and ADAS systems were going to eliminate collisions. And that's just not the case. In fact, we're seeing when the repairs need to be made on these vehicles, the severity of those repairs is higher from a labor dollar standpoint.

Operator 2: In fact, we're seeing when the repairs need to be made on these vehicles, the severity of those repairs is higher from a labor dollar standpoint. Because of the cost of that technology, depending on the damage, a propensity maybe for those cars to get written off by the insurance companies. But it's an area we're investing in. We just opened an 85,000sq ft facility on the truck side in our Dallas market as well. So I think those are going to be the areas that we continue to focus on. I think also when you look at, Alex, the acquisition of Longo, Rich talked about our expansion to try to have the opportunity to grow in the car side and the truck side. Longo Toyota's body shop generates $1 million worth of gross profit just in the body shop. So they per month.

Rich Shearing: In fact, we're seeing when the repairs need to be made on these vehicles, the severity of those repairs is higher from a labor dollar standpoint. Because of the cost of that technology, depending on the damage, a propensity maybe for those cars to get written off by the insurance companies. But it's an area we're investing in. We just opened an 85,000sq ft facility on the truck side in our Dallas market as well. So I think those are going to be the areas that we continue to focus on.

Speaker #5: There is, because of the cost of that technology—depending on the damage—a propensity, maybe, for those cars to get written off by the insurance companies.

Speaker #5: But it's an area we're investing in, and we just opened an 85,000-square-foot facility on the truck side in our Dallas market as well.

Speaker #5: So, I think those are going to be the areas that we continue to focus on.

Speaker #5: on. I think

Roger Penske: I think also when you look at, Alex, the acquisition of Longo, Rich talked about our expansion to try to have the opportunity to grow in the car side and the truck side. Longo Toyota's body shop generates $1 million worth of gross profit just in the body shop. So they per month.

Speaker #2: Also, when you look at it, Alex, the acquisition of Longo—Rich talked about our expansion to try to have the opportunity to grow in the car side and the truck side.

Speaker #2: Longo Toyota's body shop generates 1 million dollars' worth of gross profit just in the body shop. So they per month. And they have a tremendous opportunity for us to learn how they do that across the country.

Operator 2: They have a tremendous opportunity for us to learn how they do that across the country. And also, internally, will continue to be a key asset of ours coming in the revenue for used cars and also the PDI on new cars and also adding accessories. We have two businesses out in Oklahoma where we provide OLI accessories for both Ford and GM products, which are not put on the cars on the assembly line. So that business continues to grow for us also with a great return. That's incredibly helpful. And then I wanted to ask my second question on what is your outlook on the freight market for the year? Are you seeing some relief in terms of the supply side overcapacity headwinds that had been facing the industry, or are you a little more optimistic on the freight side? Thanks. Yeah. Thanks, Alex.

Roger Penske: They have a tremendous opportunity for us to learn how they do that across the country. And also, internally, will continue to be a key asset of ours coming in the revenue for used cars and also the PDI on new cars and also adding accessories. We have two businesses out in Oklahoma where we provide OLI accessories for both Ford and GM products, which are not put on the cars on the assembly line. So that business continues to grow for us also with a great return.

Speaker #2: And also, internal will continue to be a key asset of ours coming into revenue for used cars and also the PDI on new cars.

Speaker #2: And also adding accessories. We have two businesses out in Oklahoma where we provide all the accessories for both Ford and GM products, which are not put on the cars on the assembly line.

Speaker #2: So that business continues to grow for us also, with a great return.

Alexander Perry: That's incredibly helpful. And then I wanted to ask my second question on what is your outlook on the freight market for the year? Are you seeing some relief in terms of the supply side overcapacity headwinds that had been facing the industry, or are you a little more optimistic on the freight side? Thanks.

Speaker #6: That's incredibly helpful. And then I wanted to ask my second question: What is your outlook on the freight market for the year? Are you seeing some relief in terms of the supply side, overcapacity headwinds that had been facing the industry, or are you a little more optimistic on the freight side?

Speaker #6: Thanks.

Rich Shearing: Yeah. Thanks, Alex.

Speaker #5: Yeah, thanks, Alex. I'd say yes, generally a little bit more optimistic. There have been some green shoots as of late—some things that I think are driving that.

Operator 2: I'd say yes, generally a little bit more optimistic. There has been some green shoots as of late. Some things that I think are driving that. We've talked in the past about the administration's efforts to crack down on non-domiciled CDL and illegal CDL holders. We are seeing that have an effect. And when we talk to some of our shippers, they say that there is a capacity tightening in certain areas of the country. They mentioned specifically Chicago, Northeast, parts of Texas, and some parts of California as well. And for the first time in years, they've been able to turn down loads that maybe are less desirable from an economic standpoint. So I think that's a positive. Of course, I think Q3, Q4 last year, you had uncertainty around tariffs. You had uncertainty around what the EPA 2027 regulations were going to look like.

Rich Shearing: I'd say yes, generally a little bit more optimistic. There has been some green shoots as of late. Some things that I think are driving that. We've talked in the past about the administration's efforts to crack down on non-domiciled CDL and illegal CDL holders. We are seeing that have an effect. And when we talk to some of our shippers, they say that there is a capacity tightening in certain areas of the country. They mentioned specifically Chicago, Northeast, parts of Texas, and some parts of California as well. And for the first time in years, they've been able to turn down loads that maybe are less desirable from an economic standpoint. So I think that's a positive. Of course, I think Q3, Q4 last year, you had uncertainty around tariffs. You had uncertainty around what the EPA 2027 regulations were going to look like.

Speaker #5: We've talked in the past about the administration's efforts to crack down on non-domiciled CDL and illegal CDL holders. We are seeing that have an effect.

Speaker #5: And when we talk to some of our shippers, they say that there is a capacity tightening in certain areas of the country. They mentioned specifically Chicago, the Northeast, parts of Texas, and some parts of California as well.

Speaker #5: And for the first time in years, they've been able to turn down loads that maybe are less desirable from an economic standpoint. So I think that's a positive.

Speaker #5: Of course, I think Q3, Q4 last year, you had uncertainty around tariffs. You had uncertainty around what the EPA '27 regulations were going to look like.

Speaker #5: I think this caused a number of carriers to just sit on their hands with respect to order placement. I think as those things get more clarity, we'll see people that are kind of on the sidelines right now get in the market.

Operator 2: I think this caused a number of carriers to just sit on their hands with respect to order placement. I think as those things get more clarity, we'll see people that are kind of on the sidelines right now get in the market. And we saw, I think some of that in January where industry orders were up 20%. So I think we'll continue to see the tightening. I think interest rates will help. And then obviously, the investment the administration's been talking about with respect to onshoring of manufacturing, that's a big driver of freight as well. And I think when those dollars start to get deployed and the construction begins relative to those investments, it's really going to be beneficial for the trucking market. You have smaller fleet carriers exit the market too, right, which helps overall. Yeah. Yeah. That's all incredibly helpful. Best of luck going forward.

Rich Shearing: I think this caused a number of carriers to just sit on their hands with respect to order placement. I think as those things get more clarity, we'll see people that are kind of on the sidelines right now get in the market. And we saw, I think some of that in January where industry orders were up 20%. So I think we'll continue to see the tightening. I think interest rates will help. And then obviously, the investment the administration's been talking about with respect to onshoring of manufacturing, that's a big driver of freight as well. And I think when those dollars start to get deployed and the construction begins relative to those investments, it's really going to be beneficial for the trucking market. You have smaller fleet carriers exit the market too, right, which helps overall. Yeah. Yeah.

Speaker #5: And we saw, I think, some of that in January, where industry orders were up 20%. So I think we'll continue to see the tightening.

Speaker #5: I think interest rates will help, and then, obviously, the investment the administration's been talking about with respect to onshoring of manufacturing—that's a big driver of freight as well.

Speaker #5: And I think when those dollars start to get deployed and the construction begins, relative to those investments, it's really going to be beneficial for the trucking.

Speaker #5: market. You had smaller fleet carriers, like I said, the

Speaker #2: market too, right, which helps

Speaker #2: overall. Yeah.

Speaker #5: Yeah.

Alexander Perry: That's all incredibly helpful. Best of luck going forward.

Speaker #6: That's all incredibly helpful. Best of luck going forward.

Operator 2: Thank you, Adam. Thanks. Appreciate it. Our next question will come from the line of John Babcock with Barclays. Please go ahead. Hey, good afternoon. Just one quick question just while we're on the trucking side of things on PTS. I was wondering if you could talk about what sort of utilization rate it's going to take to see earnings start to meaningfully inflect there, and then have a follow-on. Well, look, I don't think so much. You look at utilization as one because we're balancing our fleet. The big impact, when you think about it, the total of loss on gain on sale versus 2024 was $87 million. And you get that back to where it normalized. But when you're defleeting in a soft market, obviously, the opportunity to take that profitability we normally had went away. And then what we've had to do, we've had an interest down.

Rich Shearing: Thank you, Adam. Thanks.

Speaker #5: Thanks.

Speaker #2: Appreciate Thank you, Adam.

Roger Penske: Appreciate it.

Speaker #2: it. Our next

Operator: Our next question will come from the line of John Babcock with Barclays. Please go ahead.

Speaker #7: The question will come from the line of John Babcock with Barclays. Please go ahead.

Speaker #7: ahead. Hey, good

[Analyst]: Hey, good afternoon. Just one quick question just while we're on the trucking side of things on PTS. I was wondering if you could talk about what sort of utilization rate it's going to take to see earnings start to meaningfully inflect there, and then have a follow-on.

Speaker #8: Afternoon. Just one quick question, just while we're on the trucking side of things on PTS. I was wondering if you could talk about what sort of utilization rate it's going to take to see earnings start to meaningfully inflect there, and then have a follow-on.

Roger Penske: Well, look, I don't think so much. You look at utilization as one because we're balancing our fleet. The big impact, when you think about it, the total of loss on gain on sale versus 2024 was $87 million. And you get that back to where it normalized. But when you're defleeting in a soft market, obviously, the opportunity to take that profitability we normally had went away. And then what we've had to do, we've had an interest down.

Speaker #5: Well, look, I don't think so much it's—you look at utilization as one, because we're balancing our fleet. The big impact, when you think about it, the total loss on gain on sale versus 2024 was $87 million.

Speaker #5: And you get that back to where it normalized. But when you're defleeting in a soft market, obviously, the opportunity to take that profitability we normally had went away.

Speaker #5: And then what we've had to do, we've had an interest on we've seen some interest costs come down because our total fleet's down. When you defleet, you generate capital.

Operator 2: We've seen some interest costs come down because our total fleet's down. When you defleet, you generate capital. We're down about $1.4 billion in total debt in the leasing company. That's going to be a benefit. I think what will take place is that the customer, when you look at our business, the two components which are key are obviously full-service leasing. We provide the truck, the licensing, the maintenance, etc. But then also, we provide extra vehicles when there are spikes in their business. I would say that for the last two years, the rental revenue we get from our existing lease customers has been off. I don't want to say it's a guess, but I think it's off 50%.

Roger Penske: We've seen some interest costs come down because our total fleet's down. When you defleet, you generate capital. We're down about $1.4 billion in total debt in the leasing company. That's going to be a benefit. I think what will take place is that the customer, when you look at our business, the two components which are key are obviously full-service leasing. We provide the truck, the licensing, the maintenance, etc. But then also, we provide extra vehicles when there are spikes in their business. I would say that for the last two years, the rental revenue we get from our existing lease customers has been off. I don't want to say it's a guess, but I think it's off 50%.

Speaker #5: And we're down about $1.4 billion in total debt in the leasing company, so that's going to be a benefit. I think what will take place is that the customer, when you look at our business, the two components which are key are, obviously, full-service leasing.

Speaker #5: And we provide the truck, the licensing, the maintenance, etc. But then also, we provide extra vehicles when there are spikes in their business. And I would say that for the last two years, the rental revenue we get from our existing lease customers has been off—I'm going to, maybe this is not a— I don’t want to say it’s a guess, but I think it’s off 50%.

Speaker #5: And on top of that, the mileage that's being driven by our lease customers because you have a fixed rate per week, and then you have a mileage rate.

Operator 2: And on top of that, the mileage is being driven by our lease customers because you have a fixed rate per week, and then you have a mileage rate. And without miles, we don't get the revenue. I see that coming back, which will be very positive for us as this market, as Rich talked about, starts to expand and accelerate. So if we get the gain on sale to level off, think about it. Operationally, we were off about $16 or 17 million total last year EBT, and we had $87 million less in gain on sale. So from an operating standpoint, the guys knocked the ball out of the court. But it's a good core business. No one has a fleet like we have. And on the other hand, our logistics business there continues to grow with key customers.

Roger Penske: And on top of that, the mileage is being driven by our lease customers because you have a fixed rate per week, and then you have a mileage rate. And without miles, we don't get the revenue. I see that coming back, which will be very positive for us as this market, as Rich talked about, starts to expand and accelerate. So if we get the gain on sale to level off, think about it. Operationally, we were off about $16 or 17 million total last year EBT, and we had $87 million less in gain on sale. So from an operating standpoint, the guys knocked the ball out of the court. But it's a good core business. No one has a fleet like we have. And on the other hand, our logistics business there continues to grow with key customers.

Speaker #5: And without miles, we don't get the revenue. I see that coming back, which will be very positive for us as this market, as Rich talked about, starts to expand and accelerate.

Speaker #5: So if we get the gain on sale to level off—think about it, operationally, we were off about $16 or $17 million total last year EBT.

Speaker #5: And we had $87 million less in gain on sale. So from an operating standpoint, the guys knocked the ball out of the court. But it’s a good core business.

Speaker #5: No one has a fleet like we have. And on the other hand, our logistics business there continues to grow with key customers. And we're being very selective.

Operator 2: And we're being very selective, just not trying to grow logistics. We want ones where we can provide not just warehousing, but try to provide warehousing and dedicated carriers, etc. So I think there's lots of areas that will give us some real opportunity. And again, there, we've reduced the number of people also, obviously, in our rental area because of the slowdown in rental. But when you think about 40,000 units coming out of the fleet, the amount of depreciation, interest, and maintenance that comes out with that is massive. And that's helped us a lot. All right. Thanks. That's very helpful. And then just my last question or really follow-on here, I guess. On the M&A market, how does that feel right now? And also, what are your goals on the M&A front 2026?

Roger Penske: And we're being very selective, just not trying to grow logistics. We want ones where we can provide not just warehousing, but try to provide warehousing and dedicated carriers, etc. So I think there's lots of areas that will give us some real opportunity. And again, there, we've reduced the number of people also, obviously, in our rental area because of the slowdown in rental. But when you think about 40,000 units coming out of the fleet, the amount of depreciation, interest, and maintenance that comes out with that is massive. And that's helped us a lot.

Speaker #5: We're not just trying to grow logistics. We want ones where we can provide not just warehousing, but try to provide warehousing and dedicated carriage, etc.

Speaker #5: So, I think there's lots of areas there that will give us some real opportunity. And again, there, we've reduced the number of people also. Obviously, in our rental area, because of the slowdown in rental.

Speaker #5: But when you think about 40,000 units coming out of the fleet, the amount of depreciation, interest, and maintenance that comes out with that is massive.

Speaker #5: And that's helped us a lot.

[Analyst]: All right. Thanks. That's very helpful. And then just my last question or really follow-on here, I guess. On the M&A market, how does that feel right now? And also, what are your goals on the M&A front 2026?

Speaker #8: All right, thanks. That's very helpful. And then, just my last question—or really a follow-on here, I guess—on the M&A market: How does that feel right now?

Speaker #8: And also, what are your goals on the M&A front in '26? So, for example, are there certain geographies or brands that you're looking to fill out?

Operator 2: So for example, are there certain geographies or brands that you're looking to fill up? Well, I would say that with the acquisition that we made with Penske Motor Group and also what we have in the bucket here for Orlando, the two Lexus stores, will give us about $2 billion. I think we've talked about it over the years, about a 5% increase through acquisitions and 5% organically. So I think that we're hitting one of those right in the target. We will continue to look for strategic areas in markets where we have scale. I don't see any markets that we're going to break into today unless we buy another big group. I think from a ratio, from the standpoint of our leverage, we want to keep it well under 2. With that, we're going to be very selective as we go forward.

[Analyst]: So for example, are there certain geographies or brands that you're looking to fill up?

Roger Penske: Well, I would say that with the acquisition that we made with Penske Motor Group and also what we have in the bucket here for Orlando, the two Lexus stores, will give us about $2 billion. I think we've talked about it over the years, about a 5% increase through acquisitions and 5% organically. So I think that we're hitting one of those right in the target. We will continue to look for strategic areas in markets where we have scale. I don't see any markets that we're going to break into today unless we buy another big group. I think from a ratio, from the standpoint of our leverage, we want to keep it well under 2. With that, we're going to be very selective as we go forward.

Speaker #5: Well, I would say that with the acquisition that we made with Penske Motor Group, and also what we have in the bucket here for Orlando—the two Lexus stores—that will give us about $2 billion.

Speaker #5: And I think we've talked about it over the years, about a 5% increase through acquisitions and 5% organically. So I think that we're hitting one of those right in the target.

Speaker #5: And we will continue to look for strategic areas in markets where we have scale. I don't see any markets that we're going to break into today unless we buy another big group.

Speaker #5: And I think from a ratio, from the standpoint of our leverage, we want to keep it well under 2. And with that, so we're going to be very selective as we go forward.

Speaker #5: And obviously, capital allocation, Shelley could talk about, will be looking at share buyback and certainly the CapEx requirements we—

Operator 2: Obviously, capital allocation, as Shelley could talk about, we'll be looking at share buyback and certainly the CapEx requirements we have. All right. Thanks, Ken. Thanks, John. Our next question comes from the line of Rajat Gupta with JPMorgan. Please go ahead. Hey, thanks for taking the question. I just wanted to double-click a little bit on used car GPUs. Typically, I mean, Q4 is always down slightly versus Q3. But this is the largest decline we've seen sequentially. I understand year-over-year was up slightly, but the prior quarters year-over-year was up a lot because of the Sytner consolidation. So I'm just curious if you could comment or unpack the Q4 dynamics a bit. We've seen some of this weakness across your peers as well.

Roger Penske: Obviously, capital allocation, as Shelley could talk about, we'll be looking at share buyback and certainly the CapEx requirements we have. All right. Thanks, again. Thanks, John.

Speaker #5: have. All right.

Speaker #8: Thanks, Ken.

Speaker #7: Our next Thanks, John. question comes from the line of Rajat Gupta with JPMorgan. Please go ahead.

Operator: Our next question comes from the line of Rajat Gupta with JPMorgan. Please go ahead.

Rajat Gupta: Hey, thanks for taking the question. I just wanted to double-click a little bit on used car GPUs. Typically, I mean, Q4 is always down slightly versus Q3. But this is the largest decline we've seen sequentially. I understand year-over-year was up slightly, but the prior quarters year-over-year was up a lot because of the Sytner consolidation. So I'm just curious if you could comment or unpack the Q4 dynamics a bit. We've seen some of this weakness across your peers as well.

Speaker #9: Hey, thanks for taking the question. I just wanted to double-click a little bit on used car GPUs. Typically, I mean, fourth quarter is always down slightly versus the third quarter.

Speaker #9: But this is the largest decline we’ve seen sequentially. I understand year over year was up slightly, but the prior quarters, year over year, were up a lot.

Speaker #9: Because of the Sitner consolidation, I'm just curious if you could comment on or unpack the fourth quarter dynamics a bit. We've seen some of this weakness across your peers as well.

Speaker #9: So, I'm wondering if there's anything that's changed in the market landscape recently? Anything to do with NYX? Is there anything you would call out to help us understand that better, and how we should think about 2026?

Operator 2: So I'm wondering if there's anything changed in the market landscape recently, anything to do with mix, anything you would call out to help us understand that better and how we should think about 2026. And have a quick follow-up. Thanks. So Rajat, this is Tony. Thanks for the question. So basically, when you take a look at our overall gross per unit in Q4, it was $1,770. That compares to $1,773 in Q4 last year. So it was flat. Average selling price stayed relatively flat. But one of the things we did see is that there was a mix shift between our business in the international markets, principally the UK, fewer units in that market where we saw a larger decline in same-store unit sales.

Rajat Gupta: So I'm wondering if there's anything changed in the market landscape recently, anything to do with mix, anything you would call out to help us understand that better and how we should think about 2026. And have a quick follow-up. Thanks.

Speaker #9: And have a quick follow-up.

Speaker #9: Thanks. So Rajat, this is Tony.

Anthony Pordon: So Rajat, this is Tony. Thanks for the question. So basically, when you take a look at our overall gross per unit in Q4, it was $1,770. That compares to $1,773 in Q4 last year. So it was flat. Average selling price stayed relatively flat. But one of the things we did see is that there was a mix shift between our business in the international markets, principally the UK, fewer units in that market where we saw a larger decline in same-store unit sales.

Speaker #5: Thanks for that. Thanks for the question. So, basically, when you take a look at our overall gross per unit in Q4, it was $1,770.

Speaker #5: That compares to $1,773 in Q4 last year, so it was flat. Average selling price stayed relatively flat. But one of the things we did see is that there was a mix shift between our business in the international markets—principally the UK—with fewer units in that market, where we saw a larger decline in same-store unit sales, and we saw better results in the US on the used unit side of things.

Operator 2: We saw better results in the US on a used unit side of things, but we make less in the US on the overall gross on a used vehicle. So the combination of those two things really caused the biggest decline that you saw in that gross between Q3 and Q4. On top of that, you have seasonality that comes into play in the fourth quarter where there's defleeting that's taking place. So as you saw what happened in Q4 of 2024, same phenomena happens in Q4 of each year. We would expect then some improvement as we move sequentially into Q1, Q2 of this year in the gross per unit. One thing, Tony, just to mention is we were and I'll use the word struggling to try to get the right focus on Sytner Select.

Anthony Pordon: We saw better results in the US on a used unit side of things, but we make less in the US on the overall gross on a used vehicle. So the combination of those two things really caused the biggest decline that you saw in that gross between Q3 and Q4. On top of that, you have seasonality that comes into play in the fourth quarter where there's defleeting that's taking place. So as you saw what happened in Q4 of 2024, same phenomena happens in Q4 of each year. We would expect then some improvement as we move sequentially into Q1, Q2 of this year in the gross per unit.

Speaker #5: But we make less in the US on the overall gross on a used vehicle. So the combination of those two things really caused the biggest decline that you've saw in that gross between Q3 and Q4.

Speaker #5: On top of that, you have seasonality that comes into play in the fourth quarter, where there's defleeting that's taking place. So, as you saw what happened in Q4 of 2024, the same phenomena happens in Q4 of each year.

Speaker #5: And we would expect, then, some improvement as we move sequentially into Q1 and Q2 of this year in the gross per unit. One thing Tony just mentioned is, we were—and I'll use the word—struggling to try to get the right focus on Sytner Select. The big issue there in that business was to get enough used cars every month to sell five or six thousand.

Roger Penske: One thing, Tony, just to mention is we were and I'll use the word struggling to try to get the right focus on Sytner Select.

Operator 2: The big issue there in that business was to get enough used cars every month to sell 5,000 or 6,000. We were never able to get that kind of number and have any profitability when we bought cars at the auctions, etc. So we shifted down a gear. We decided we would go out and try to buy big blocks of cars, which we hadn't done before. Well, I think we bought, don't hold me to this, between 1,000 and 1,500 cars. And we're paying for some of those in gross, so we're not getting the profitability we expected. I think the good news now is that 46% or 47% of the cars that we generated for used cars was actually from internal or from trades. And that's gone up to over 60% now.

Roger Penske: The big issue there in that business was to get enough used cars every month to sell 5,000 or 6,000. We were never able to get that kind of number and have any profitability when we bought cars at the auctions, etc. So we shifted down a gear. We decided we would go out and try to buy big blocks of cars, which we hadn't done before. Well, I think we bought, don't hold me to this, between 1,000 and 1,500 cars. And we're paying for some of those in gross, so we're not getting the profitability we expected. I think the good news now is that 46% or 47% of the cars that we generated for used cars was actually from internal or from trades. And that's gone up to over 60% now.

Speaker #5: We were never able to get that kind of number and have any of the auctions, etc., profitability when we bought cars. It shifted down a gear, and we decided we would go out and try to buy big blocks of cars, which we hadn't done before.

Speaker #5: Well, I think we bought—don't hold me to this—between 1,000 and 1,500 cars, and we're paying for some of those in gross, or we're not getting the profitability.

Speaker #5: We expected—I think the good news now is that 46 or 47% of the cars that we generated for used cars was actually from internal or from trades, and that’s gone up to over 60% now.

Speaker #5: So, I think we're going to see a better mix coming out of there, getting them from our existing stores. Plus, we'll see better margins.

Operator 2: So, I think we're going to see a better mix coming out of there, getting them from our existing stores. Plus, we'll see better margins. And I think we've got another quarter probably to work through this 1,500 car. It's not anything to worry about, but it just is another stumbling block that we hit because we continue to try to figure out what's the right solution because used car prices are up, hard to get them. We want to make a margin on them. We don't want to overrecondition when we do. It takes away from the one thing that's key, is really the amount of money that the finance company will allow to be financed. If you got a used car and you put too much reconditioning in it, it limits your profitability. So when you put all those together, I think that we're traveling.

Roger Penske: So, I think we're going to see a better mix coming out of there, getting them from our existing stores. Plus, we'll see better margins. And I think we've got another quarter probably to work through this 1,500 car. It's not anything to worry about, but it just is another stumbling block that we hit because we continue to try to figure out what's the right solution because used car prices are up, hard to get them. We want to make a margin on them. We don't want to overrecondition when we do. It takes away from the one thing that's key, is really the amount of money that the finance company will allow to be financed. If you got a used car and you put too much reconditioning in it, it limits your profitability. So when you put all those together, I think that we're traveling.

Speaker #5: And I think we've got another quarter, probably, to work through these 1,500 cars. It's not anything to worry about, but it just is another stumbling block that we hit because we continue to try to figure out what's the right solution, since used car prices are up.

Speaker #5: Hard to get them. We want to make a margin on them. We don't want to over-recondition when we do. It takes away from the one thing that's key, which is really the amount of money that the finance company will allow to be financed.

Speaker #5: If you've got a used car and you put too much reconditioning in it, it limits your profitability. So when you pull all those together, I think that we're traveling, Randall, you might want to make a comment on that as we go forward here in.

Operator 2: Randall, you might want to make a comment on that as we go forward here in 2026. Yeah. Look, we feel confident. If you look as we finish the month of December, compare to October and November and where we are in January, sequentially, the gross profit per unit continues to go up. And January over January was good as well. So you're right. It is the inventory, the health of the inventory, aging's in terrific shape. So look, it is hard to acquire cars. But in the same breath, as you said, Roger, the profile, 68% of the cars that we acquired are either from trade or buying off the street, which is up about 20 points versus what it was last year at the same time. And we're not in the old car business. I know some people feel that it's a great opportunity.

Roger Penske: Randall, you might want to make a comment on that as we go forward here in 2026.

Randall Seymore: Yeah. Look, we feel confident. If you look as we finish the month of December, compare to October and November and where we are in January, sequentially, the gross profit per unit continues to go up. And January over January was good as well. So you're right. It is the inventory, the health of the inventory, aging's in terrific shape. So look, it is hard to acquire cars. But in the same breath, as you said, Roger, the profile, 68% of the cars that we acquired are either from trade or buying off the street, which is up about 20 points versus what it was last year at the same time.

Speaker #10: Yeah, look, we feel confident if you look as we finish the month of December compared to October and November, and where we are in January, sequentially, the gross profit per unit continues to go up.

Speaker #10: And January over January was good as well. So you're right. It is the inventory, the health of the inventory, agings, and terrific shape. So look, it is hard to, in the same breath, as you said, Roger, the profile—68% of the cars that we acquired are either from trade or buying off the street.

Speaker #10: That's up about 20 points versus what it was last year at the same time.

Speaker #5: And we're not in the old car business. I know some people feel that it's a great opportunity. But I can tell you, when we were selling these older cars in the UK, the amount of cars that came back for policy or buyback, I just couldn't—we couldn't control it.

Roger Penske: And we're not in the old car business. I know some people feel that it's a great opportunity.

Operator 2: But I can tell you, when we were selling these older cars in the UK, the amount of cars that came back for policy or buyback, we couldn't control it. So that was another reason we decided to pull back and go down a gear because the older car gets, you can't do the full reconditioning. And remember, when you buy a car, you're expecting to be able to drive it, not have to take it back to the dealership three days later. So we're in this probably one- to five-year sweet spot when we look at our business on a going forward basis. Would that be what do you feel, Rich? Yeah. No, and I was going to add to a comment Rajat that Roger said earlier, right? We think we bottomed out last year on lease returns.

Roger Penske: But I can tell you, when we were selling these older cars in the UK, the amount of cars that came back for policy or buyback, we couldn't control it. So that was another reason we decided to pull back and go down a gear because the older car gets, you can't do the full reconditioning. And remember, when you buy a car, you're expecting to be able to drive it, not have to take it back to the dealership three days later. So we're in this probably one- to five-year sweet spot when we look at our business on a going forward basis. Would that be what do you feel, Rich?

Speaker #5: So that was another reason we decided to pull back and go down a gear, because the older the car gets, you can't do the full reconditioning.

Speaker #5: And remember, when you buy a car, you're expecting to be able to drive it, not have to take it back to the dealership three days later.

Speaker #5: So we're in this probably one- to five-year sweet spot when we look at our business on a going-forward basis. Would that be—what do you—

Speaker #5: So we're in this probably one- to five-year sweet spot when we look at our business on a going-forward basis. Would that be—what do you feel, Ray?

Speaker #4: Yeah, no. And I was going to add to the comment, Rajat, that Roger said earlier, right? We think we bottomed out last year on lease returns.

Rich Shearing: Yeah. No, and I was going to add to a comment Rajat that Roger said earlier, right? We think we bottomed out last year on lease returns.

Speaker #4: Lease returns were only 7% of our used car sales last year. That was down from 11% in '24. And so that gives us good cars that come back to our dealership that, generally, we're not competing against other dealers or other third parties to acquire.

Operator 2: Lease returns were only 7% of our used car sales last year. That was down from 11% in 2024. And so that gives us good cars that come back to our dealership that generally, we're not competing against other dealers or other third parties to acquire. Well, the other thing, we haven't been able to get the right cars because of some on the premium luxury side because of tariffs, etc. So we've been unable to turn our loaner cars. You take our BMW store, where we can turn loaner cars 303 times, that's 1,000 young used cars that we really haven't had to play with here over the last couple of years. So that's only going to help us going forward. Got it. Got it. That's all very helpful. I had a follow-up on PTL, just following up on Alex's question.

Rich Shearing: Lease returns were only 7% of our used car sales last year. That was down from 11% in 2024. And so that gives us good cars that come back to our dealership that generally, we're not competing against other dealers or other third parties to acquire.

Roger Penske: Well, the other thing, we haven't been able to get the right cars because of some on the premium luxury side because of tariffs, etc. So we've been unable to turn our loaner cars. You take our BMW store, where we can turn loaner cars 303 times, that's 1,000 young used cars that we really haven't had to play with here over the last couple of years. So that's only going to help us going forward.

Speaker #5: Well, the other thing—we haven't been able to get the right cars, on the premium luxury side, because of tariffs, etc.

Speaker #5: So, we've been unable to turn our loaner cars. You take our BMW store—we have a, where we can turn loaner cars 300, three times, that's 1,000 young used cars that we really haven't had to play with here over the last couple of years.

Speaker #5: So that's only going to help us going forward.

Speaker #5: forward. Got it.

Rajat Gupta: Got it. Got it. That's all very helpful. I had a follow-up on PTL, just following up on Alex's question.

Speaker #11: Got it. That's all very helpful. I had a follow-up on PTL. Just following up on Alex's question. Based on how January might have started and capacity coming out, in the past you've talked about maybe there's an opportunity on reducing the bad debt expenses as well.

Operator 2: Based on how January might have started and capacity coming out, in the past, you've talked about maybe there's an opportunity on reducing the bad debt expenses as well. Just keeping all those things in mind, would you expect PTL's income to grow in 2026? What's a good expectation for us to model for that segment? Thanks. Well, I think from an overall business, we will see an increase because our rental business is up. It'll probably be towards the second half because we've seen this good utilization here in January. Now, the weather is going to put a little dent in our fender here short term. But I see that up. There's no question that with the money that's going to be put into the economy by the government coming up, new tax rates, etc., I think you'll see the one-way business starting to accelerate.

Rajat Gupta: Based on how January might have started and capacity coming out, in the past, you've talked about maybe there's an opportunity on reducing the bad debt expenses as well. Just keeping all those things in mind, would you expect PTL's income to grow in 2026? What's a good expectation for us to model for that segment? Thanks.

Speaker #11: Just keeping all those things in mind, would you expect PTL income to grow in 2026? What's a good expectation for us to model for that segment?

Speaker #11: Thanks.

Speaker #5: Well, I think from an overall business perspective, we will see an increase because our rental business is up. It'll probably be towards the second half because we've seen this good utilization here in January.

Roger Penske: Well, I think from an overall business, we will see an increase because our rental business is up. It'll probably be towards the second half because we've seen this good utilization here in January. Now, the weather is going to put a little dent in our fender here short term. But I see that up. There's no question that with the money that's going to be put into the economy by the government coming up, new tax rates, etc., I think you'll see the one-way business starting to accelerate.

Speaker #5: Now, the weather is going to put a little dent in our fender here short-term. But I see that up. There's no question that with the money that's going to be put into the economy by the government—coming up, new tax rates, etc.—I think you'll see the one-way business starting to accelerate.

Speaker #5: It's been kind of on hold, due to the fact that people didn't have the money, obviously, to move out of their homes. So I see that as certainly a benefit.

Operator 2: It's been kind of on hold due to the fact people didn't have the money, obviously, to move out of their homes. So I see that as certainly a benefit. Logistics will continue to grow based on our acquisition of new business. But again, many of our logistics customers have been operating with slower revenue also from their customers. And we've seen that ourselves as we have some of the direct business with some of the OEM manufacturers who supply parts to the OEMs. But I see an increase in revenue. I think you talked about bad debts. We've faced, for the last couple of years in the rental side, people are maybe not aware of this, but we've faced a lot of fraud where people come in, make a reservation online with all the high-tech stuff we have. People come in with their credentials.

Roger Penske: It's been kind of on hold due to the fact people didn't have the money, obviously, to move out of their homes. So I see that as certainly a benefit. Logistics will continue to grow based on our acquisition of new business. But again, many of our logistics customers have been operating with slower revenue also from their customers. And we've seen that ourselves as we have some of the direct business with some of the OEM manufacturers who supply parts to the OEMs. But I see an increase in revenue. I think you talked about bad debts. We've faced, for the last couple of years in the rental side, people are maybe not aware of this, but we've faced a lot of fraud where people come in, make a reservation online with all the high-tech stuff we have. People come in with their credentials.

Speaker #5: Logistics will continue to grow based on our acquisition of new business. But again, many of our logistics customers have been operating with slower revenue, also from their customers.

Speaker #5: And we've seen that ourselves, as we have some of the direct business with some of the OEM manufacturers who supply parts to the OEMs.

Speaker #5: But I see an increase in revenue. I think you talked about bad debts. We've faced, for the last couple of years in the rental side, people are moving out—I'm aware of this.

Speaker #5: But we've faced a lot of fraud where people come in, make a reservation online with all the high-tech stuff we have. People come in with credentials.

Speaker #5: When we check them, they're fine. It turned around a week later—we can't get our truck back, or they never pay us. So we've gone to some very, very detailed techniques, not to be discussed here, in order to be able to take that down.

Operator 2: When we check them, they're fine. We turn around a week later, we can't get our truck back, or they never pay us. So we've gone to some very, very detailed techniques not to be discussed here in order to be able to take that down. We've seen that already, that offense at the end of Q4 and early this year already taking shape, which is another impact to bottom line because if we can reduce our bad debts by $10 or 15 million next year, it gives us some runway to exceed everyone's expectations. Understood. Great. Thanks for all the color and good luck. Thank you. Thanks, Rajat. Our next question comes from the line of Daniella Haggian with Morgan Stanley. Please go ahead. Thank you. So Roger, you've spoken about affordability pressures and going into 2026.

Roger Penske: When we check them, they're fine. We turn around a week later, we can't get our truck back, or they never pay us. So we've gone to some very, very detailed techniques not to be discussed here in order to be able to take that down. We've seen that already, that offense at the end of Q4 and early this year already taking shape, which is another impact to bottom line because if we can reduce our bad debts by $10 or 15 million next year, it gives us some runway to exceed everyone's expectations.

Speaker #5: And we've seen that already, that offense. And at the end of the fourth quarter, and early this year, it's already taking shape, which is another impact to the bottom line.

Speaker #5: Because if we can reduce our bad debts by $10 or $15 million next year, it gives us some runway to exceed everyone's expectations.

Rajat Gupta: Understood. Great. Thanks for all the color and good luck.

Speaker #11: Understood. Great. Thanks for all the color.

Speaker #11: and good luck. Thank you.

Roger Penske: Thank you.

Rich Shearing: Thanks, Rajat.

Operator: Our next question comes from the line of Daniella Haggian with Morgan Stanley. Please go ahead.

Speaker #1: Our next question comes from the lineup at Daniela Hagian with Morgan Stanley. Please go ahead.

Daniela Haigian: Thank you. So Roger, you've spoken about affordability pressures and going into 2026.

Speaker #12: Thank you. So, Roger, you've spoken about going into affordability pressures in 2026. Have you seen any change in consumer behavior, either in the finance business or in after-sales—maybe in terms of retention on those older models?

Operator 2: So how have you seen any change in consumer behavior, either in the finance business or in after-sales for maybe retention on those older model year vehicles? Well, let me let Rich talk about after-sales. Do you want to just where you think we are in after-sales? I can talk on the other. Yeah. So I think, Daniella, the affordability topic obviously gets mostly talked about from a new and used vehicle selling price perspective. But as we looked at our business towards the end of last year, because we meet with our team on a monthly basis to go over the operations, and it was conveyed to us during that time that the third-party financing for our after-sales repair orders is starting to climb. So obviously, repairs on cars are generally not anticipated unless it's a routine oil change.

Daniela Haigian: So how have you seen any change in consumer behavior, either in the finance business or in after-sales for maybe retention on those older model year vehicles?

Speaker #12: year vehicles? Well, let me

Roger Penske: Well, let me let Rich talk about after-sales. Do you want to just where you think we are in after-sales? I can talk on the other.

Speaker #5: Let Rich talk about after-sales. Do you want to just say where you think we are in after-sales? I can—

Speaker #5: talk on the other. Yeah.

Rich Shearing: Yeah. So I think, Daniella, the affordability topic obviously gets mostly talked about from a new and used vehicle selling price perspective. But as we looked at our business towards the end of last year, because we meet with our team on a monthly basis to go over the operations, and it was conveyed to us during that time that the third-party financing for our after-sales repair orders is starting to climb. So obviously, repairs on cars are generally not anticipated unless it's a routine oil change.

Speaker #4: So I think, Daniela, the affordability topic obviously gets mostly talked about from a new and used vehicle selling price perspective. But as we looked at our business towards the end of last year—because we meet with our team on a monthly basis to go over the operations—it was conveyed to us during that time that the third-party financing for our after-sales repair orders is starting to climb.

Speaker #4: So obviously, repairs on cars are generally not anticipated unless it's a mechanical issue with your routine oil change. But if you have a car, the repairs can exceed $1,000.

Operator 2: But if you have a mechanical issue with your car, the repairs can exceed $1,000. As stretched as some people are today, it's just very difficult to afford that out of pocket with everything else costing more money. So we have seen an increase in the financing of some of our after-sales repair orders. We're focusing on level two and level three to try to keep this customer that's out of warranty also. Yeah. We're evaluating what we can do from a labor rate perspective, what we can do from a parts pricing perspective, whether it's offering an alternative part to make that repair so that the customer has a choice and can decide how they want to spend their money. Now, when you look at the business right now, affordability you've talked about. Everybody else has.

Rich Shearing: But if you have a mechanical issue with your car, the repairs can exceed $1,000. As stretched as some people are today, it's just very difficult to afford that out of pocket with everything else costing more money. So we have seen an increase in the financing of some of our after-sales repair orders. We're focusing on level two and level three to try to keep this customer that's out of warranty also. Yeah. We're evaluating what we can do from a labor rate perspective, what we can do from a parts pricing perspective, whether it's offering an alternative part to make that repair so that the customer has a choice and can decide how they want to spend their money.

Speaker #4: And as stretched as some people are today, it's just very difficult to afford that out of pocket, with everything else costing more money. So we have seen an increase in the financing of some of our after-sales repair orders.

Speaker #5: And we're focusing on level two and level three to try to keep this customer that's out of warranty also.

Speaker #4: Yeah, we're evaluating what we can do from a labor rate perspective, what we can do from a parts pricing perspective, whether it's offering an alternative part to make that repair, so that the customer has a choice.

Speaker #4: And can decide how they want to spend their money.

Roger Penske: Now, when you look at the business right now, affordability you've talked about. Everybody else has.

Speaker #5: Now, when you look at the business right now—affordability, you've talked about it, everybody else has—but we have this pressure of the really undecided Washington on where they're going with tariffs.

Operator 2: But we have this pressure of the really undecided Washington on where they're going with tariffs. And of course, that has a tremendous impact of 25% on the German OEMs. Today, the UK is 10% for the first 100,000 units. So that'd be pressure putting more cost on our trucks, more cost on our cars, and our light vehicles. I think that what's going to have to happen, we're going to have to start getting equipment or vehicles with less equipment because they load these things up in order to get margin. So there's going to have to be a definite look at, I'm not talking about strip versions, but I mean less equipment.

Roger Penske: But we have this pressure of the really undecided Washington on where they're going with tariffs. And of course, that has a tremendous impact of 25% on the German OEMs. Today, the UK is 10% for the first 100,000 units. So that'd be pressure putting more cost on our trucks, more cost on our cars, and our light vehicles. I think that what's going to have to happen, we're going to have to start getting equipment or vehicles with less equipment because they load these things up in order to get margin. So there's going to have to be a definite look at, I'm not talking about strip versions, but I mean less equipment.

Speaker #5: And of course, that has a tremendous impact—at 25%—on the German OEMs. Today, the UK is 10% for the first 100,000 units. So that'd be pressure, putting more cost on our trucks, more cost on our cars and our light vehicles.

Speaker #5: I think that what's going to have to happen is we're going to have to start getting equipment or vehicles with less equipment, because they load these things up in order to get margin.

Speaker #5: So there's going to have to be a definite look at—not talking about strip versions, but I mean less equipment. And then, when we look at BEV vehicles, because they do have some production and we're starting to see that inventory creep up—because they still want to utilize those lines—I think an ICE vehicle is going to have to be the same price as a BEV vehicle.

Operator 2: And then when we look at BEV vehicles, because they do have some production and we're starting to see that inventory creep up because they still want to utilize those lines, I think an ICE vehicle is going to have to be the same price as a BEV vehicle. They probably don't like me to say that, but I feel that they're going to have to get in that range in order to keep this market going the way they want to. But I don't see a lot of escalation except when they can say it's all tariff-driven. I don't know how you feel, Rich. Yeah. Daniella, I think the other thing is they're going to have to get back in the game from a leasing standpoint rather heavily because they can control the residual value and can drive what that payment needs to be.

Roger Penske: And then when we look at BEV vehicles, because they do have some production and we're starting to see that inventory creep up because they still want to utilize those lines, I think an ICE vehicle is going to have to be the same price as a BEV vehicle. They probably don't like me to say that, but I feel that they're going to have to get in that range in order to keep this market going the way they want to. But I don't see a lot of escalation except when they can say it's all tariff-driven. I don't know how you feel, Rich.

Speaker #5: They probably don't like me to say that, but I feel that they're going to have to get in that range in order to keep this market going the way they want to.

Speaker #5: escalation, except when they can say it's all—but I don't see a lot of

Speaker #5: tariff-driven. Yeah.

Speaker #5: I don't know how you feel, Rich. I

Rich Shearing: Yeah. Daniella, I think the other thing is they're going to have to get back in the game from a leasing standpoint rather heavily because they can control the residual value and can drive what that payment needs to be.

Speaker #4: I think, Daniela, the other thing is they're going to have to get back in the game from a leasing standpoint rather heavily, because they can control the residual value and can drive what that payment needs to be.

Speaker #4: And the U.S. market typically has been a leasing market. We were flat year over year at about 32% overall. But we still have upside in our premium luxury.

Operator 2: The US market typically has been a leasing market. We were flat year over year at about 32% overall. But we still have upside in our premium luxury. That historically has been between 50% and 55%. And we're still in the low to mid-40s from a leasing standpoint on the premium luxury at the moment. Thank you. And my follow-up is switching gears a little bit to Chinese OEMs in EU and rest of world markets. Has your strategy or how has your strategy evolved as it relates to the influx and changing market shares that you're seeing in these international markets? Randall, you want to take that question? Yeah. Sure. Hi, Daniella. So look, there's no doubt that in some of these foreign markets, particularly in Europe, the Chinese are gaining share. So particularly in the UK, they've doubled their share.

Rich Shearing: The US market typically has been a leasing market. We were flat year over year at about 32% overall. But we still have upside in our premium luxury. That historically has been between 50% and 55%. And we're still in the low to mid-40s from a leasing standpoint on the premium luxury at the moment.

Speaker #4: That historically has been between 50% and 55%. And we're still in the low to mid-40s from a leasing standpoint on the premium luxury at the—

Speaker #4: moment. Thank you.

Daniela Haigian: Thank you. And my follow-up is switching gears a little bit to Chinese OEMs in EU and rest of world markets. Has your strategy or how has your strategy evolved as it relates to the influx and changing market shares that you're seeing in these international markets?

Speaker #12: And my follow-up is switching gears a little bit to Chinese OEMs in EU and rest of world markets. Has your strategy, or how has your strategy evolved, as it relates to the influx and changing market shares that you're seeing in these international—

Speaker #12: markets? Brandon,

Roger Penske: Randall, you want to take that question?

Randall Seymore: Yeah. Sure. Hi, Daniella. So look, there's no doubt that in some of these foreign markets, particularly in Europe, the Chinese are gaining share. So particularly in the UK, they've doubled their share.

Speaker #13: Yeah, you want to take that question? Sure. Hi, Daniela. So look, there’s no doubt that in some of these foreign markets, particularly in Europe, the Chinese are gaining shares.

Speaker #13: So particularly in the UK, they've doubled their share. They have nearly 10% of the market now. And our strategy has been through siting or select stores.

Operator 2: They have nearly 10% of the market now. Our strategy has been through our Sytner Select store. So we've got our big-box pre-owned retail, these off-brand from our franchise. We've put Chinese brands, so Chery in 3 of the locations, Geely in 5 of them, and then we're opening 1 BYD store. So we're utilizing our existing assets. Of course, we need to spend some money on the corporate identity. But in Q4, we retailed 176 Chinese vehicles out of the Chery and Geely. We really, in earnest, were in business really starting the beginning of November. So Q1 will be the first full quarter. So look, it gives us an opportunity to understand the brand, understand the cars, gain relationships, and understand that with these OEMs as well. Great. Thank you. And our final question comes from the line of David Whiston with Morningstar. Please go ahead.

Randall Seymore: They have nearly 10% of the market now. Our strategy has been through our Sytner Select store. So we've got our big-box pre-owned retail, these off-brand from our franchise. We've put Chinese brands, so Chery in 3 of the locations, Geely in 5 of them, and then we're opening 1 BYD store. So we're utilizing our existing assets. Of course, we need to spend some money on the corporate identity. But in Q4, we retailed 176 Chinese vehicles out of the Chery and Geely. We really, in earnest, were in business really starting the beginning of November. So Q1 will be the first full quarter. So look, it gives us an opportunity to understand the brand, understand the cars, gain relationships, and understand that with these OEMs as well.

Speaker #13: So we've got our big box pre-owned retail, these off-brand from our franchise. We've put Chinese brands—so, Chery in three of the locations, Geely in five of them.

Speaker #13: And then we're opening one BYD store. So we're utilizing our existing assets. Of course, we need to spend some money on the corporate identity.

Speaker #13: But in Q4, we retailed 176 Chinese vehicles out of the Chery and Geely. We really, in earnest, were in business really starting the beginning of November.

Speaker #13: So Q1 will be the first full quarter. So, look, it gives us an opportunity to understand the brand, understand the cars, gain relationships, and understand that with these OEMs as well.

Daniela Haigian: Great. Thank you.

Speaker #12: Great. Thank

Speaker #12: you. And our final

Operator: And our final question comes from the line of David Whiston with Morningstar. Please go ahead.

Speaker #14: The question comes from the line of David Wiston with Morningstar. Please go ahead.

Speaker #5: Hey, David.

Operator 2: Hey, David. Hi, David. Hey, everyone. On the Orlando deal, once that closes, are you going to need to sell any Lexus stores to remain under the cap? Well, we will be once Joe's deal is completed; we'll be in compliance with the requirements from both Toyota and Lexus, including Penske Motor Group. Okay. And then on the credit line draws to partially fund these deals, do you prefer to let leverage inch up a little bit after the deals, or do you want to repay those credit line draws quickly? Well, let's take a look at it. Our leverage is 1.5. And I said we want to be well under 2.0. But the cash flow, if we have a similar year to what we had this year and our CapEx will probably come down $100 million, we'll have free cash flow after CapEx. We could have over $750 million.

Roger Penske: Hey, David.

Rich Shearing: Hi, David.

Rich Shearing: Hey, everyone. On the Orlando deal, once that closes, are you going to need to sell any Lexus stores to remain under the cap?

Speaker #15: Hey, hi, David. Everyone, on the Orlando deal—once that closes, are you going to need to sell any Lexus stores to remain under the...

Speaker #15: cap? Look, we will

Roger Penske: Well, we will be once Joe's deal is completed; we'll be in compliance with the requirements from both Toyota and Lexus, including Penske Motor Group.

Speaker #5: Once that deal is completed, we'll be in compliance with the requirements from both Toyota and Lexus, including Penske Motor Group.

Speaker #15: Okay. And then on the credit line draws to partially fund these deals, do you prefer to let leverage inch up a little bit after the deals, or do you want to repay those credit line draws quickly?

David Whiston: Okay. And then on the credit line draws to partially fund these deals, do you prefer to let leverage inch up a little bit after the deals, or do you want to repay those credit line draws quickly?

Roger Penske: Well, let's take a look at it. Our leverage is 1.5. And I said we want to be well under 2.0. But the cash flow, if we have a similar year to what we had this year and our CapEx will probably come down $100 million, we'll have free cash flow after CapEx. We could have over $750 million.

Speaker #5: Well, let's take a look at it. Our leverage is 1.5, and I said we want to be well under 2.0. But the cash flow, if we have a similar yearly result as we had this year, and our capex will probably come down $100 million, we'll have free cash flow after capex.

Speaker #5: We could have over $750 million. So we see this as a short-term flip in our leverage. But we don't see going into the market right now.

Operator 2: So we see this as a short-term flip in our leverage, but we don't see going into the market right now. Okay. That's all I have. Thank you. All right. Thanks, guys. Thanks, David. Thanks, everybody. We'll see you at the end of next quarter. This concludes today's call. Thank you all for joining. You may now disconnect.

Roger Penske: So we see this as a short-term flip in our leverage, but we don't see going into the market right now.

David Whiston: Okay. That's all I have. Thank you.

Speaker #15: Okay, that's all I had. Thank you.

Roger Penske: All right. Thanks, guys. Thanks, David. Thanks, everybody. We'll see you at the end of next quarter.

Speaker #5: Thanks, guys. Thanks, everybody. We'll see you at the end of next quarter.

Speaker #4: Thanks, David. All right.

Operator: This concludes today's call. Thank you all for joining. You may now disconnect.