Penske Automotive Group Inc (PAG) 2021 Q4 法說會逐字稿

Good afternoon, and welcome to the Penske Automotive Group Fourth Quarter and Full Year 2021 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately 1 hour after completion through February 16, 2022, 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. Sir, please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's record fourth quarter and record full year 2021 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 am available by e-mail or phone for any follow-up questions you may have.

Joining me for today's call are Roger Penske, our Chair and CEO; Shelley Hulgrave, Chief Financial Officer; and Tony Facione, Vice President and Corporate Controller.

Our discussion today may include forward-looking statements about our operations, earnings potential, outlook, future events, growth plans, liquidity and assessment of business conditions. We may also discuss certain non-GAAP financial measures, such as adjusted income from continuing operations, adjusted earnings per share from continuing operations and earnings before interest, taxes, depreciation and amortization or EBITDA and adjusted EBITDA.

We have prominently presented the comparable GAAP measures and have reconciled the non-GAAP measures in this morning's press release and investor presentation, which are available on our website to the most directly comparable GAAP measures. Our actual results may vary materially because of risks and uncertainties outlined in today's press release, which may cause the actual results to differ materially from expectations. I direct you to our SEC filings, including our Form 10-K, for additional discussion and factors that could cause results to differ materially.

I will now turn the call over to Roger Penske.

Thank you, Tony. Good afternoon, everyone, and thank you for joining us today. I'm pleased to report all-time record fourth quarter results as our diversified business and strong execution produced record revenue, earnings before taxes, net income and earnings per share for a revenue increase of 8% to $6.3 billion.

Earnings before taxes increased 60% to $420 million. And our income from continuing operations increased 55% to $312 million. Earnings per share increased 59% to $3.97. Excluding the Q4 charges of $10.1 million reconciled in our press release and earnings presentation, adjusted earnings before taxes increased 64% to $431 million.

Our adjusted income from continuing operations increased 60% to $320.5 million. And adjusted earnings per share increased 65% to $4.10. Our Q4 performance was driven by strong retail automotive and commercial truck vehicle margins, a 26% increase of same-store gross profit and strong performance from Penske Transportation Solutions, which increased 62%.

Looking at our retail automotive operations on a same-store basis, Q4 '21 versus Q4 '20. Unit sales continue to be impacted by supply shortages and declined 9.5%, including a 19% on new and 1% on used. Revenue increased 4%, gross profit increased 26%, including a 320 basis point increase in gross margin. Unit gross profit increased 48% to $6,550 from $4,420.

Looking at CarShop, we added 6 CarShop locations during 2021, including 3 in the fourth quarter, and we now operate 23 locations. During the fourth quarter, CarShop unit sales increased 24% to almost 15,000 units. Revenue improved 61% to approximately $400 million, and same-store unit sales increased 7% and same-store revenue increased 38%. Our gross profit per unit at CarShop retail increased 14% to $2,655. Our current annualized run rate is approximately 65,000 to 75,000 units and revenue of $1.6 billion, EBT of $35 million to $40 million.

Let me now turn to the retail commercial truck dealership business. During 2021, we added 7 new dealerships and 5 parts and service locations through acquisition, adding $650 million in annualized revenue. We now operate 37 commercial truck locations in the U.S. and in Canada.

And during the fourth quarter, revenue increased approximately 19%. Same-store was flat. Gross profit increased 51%, including a 35% increase in Service and Parts. Same-store gross profit increased 29%. Service and Parts represented 59% of our total gross profit and covered 121% of our fixed costs in the fourth quarter.

Earnings before taxes increased 69% to $45 million and represented 11% of PAG's total revenue and EBT. For the full year, our commercial truck business generated $160 million in EBT, a 6.4% return on sales. Approximately 75% to 80% of unit sales are Class 8 commercial trucks. And that market really remains very strong.

Class 8 retail sales increased 16% to 270,000 units and the backlog increased 46% to 261,000 at the end of the year. Freight rates ended up last year at record levels and ship charges are creating pent-up demand in the market. Based on current industry forecast, Class 8 retail sales are expected to increase over the next 2 years, certainly, will provide tailwinds to our commercial truck and truck leasing businesses.

Let me now turn to Penske Transportation Solutions. As you know, we own 28.9% of PTS and provides us with equity income, cash distribution and cash tax savings, Since making our first investment, PTS has generated over $1.1 billion in equity earnings, paid nearly $600 million in dividend distributions and generated nearly $800 million in cash tax savings. Currently, PTS is operating a fleet of 360,000 vehicles.

In 2021, a stronger economy, industry capacity constraints, improving rental demand and a move by fleets to more leasing drove our record profitability. This drove record revenue and profitability of $11.2 billion and $1.3 billion, respectively.

In Q4, PTS generated $3 billion in revenue and $316 million in profit. As a result, our equity earnings increased 62% to $91 million. Our leasing business was up 4.9%. Our commercial rental business was up at 48.6%. And key to our profitability was utilization, it was over 85%. Our consumer rental was up 29% and our logistics increased 30%.

Let me now turn over the call to Shelley Hulgrave, our Chief Financial Officer.

Thank you, Roger. Good afternoon, everyone. Our capital allocation strategy continues to lead our balance sheet in great faith. At December 31, we have $101 million in cash and over $1.1 billion in liquidity.

In 2021, we generated $1.3 billion in cash flow from operations. We invested that cash flow as follows: we spent $249 million in capital expenditures, including $53 million to acquire land for future expansion. Our acquisitions were $456 million, and we spent $294 million on share repurchases and paid $142 million in dividends, returning $436 million to our shareholders.

For the period of January 1 through February 8, we repurchased 0.4 million shares for an aggregate amount of $36 million. Our existing repurchase authorization has $194 million remaining.

When looking at our future capital allocation, we maintain a disciplined approach that focuses on opportunistic investments across our retail, automotive and commercial truck businesses; capital expenditures to support growth, including our CarShop growth strategy; delivering a strong dividend to our shareholders, reducing debt and share repurchases. We have repaid approximately $900 million of long-term debt since the end of 2019.

In addition, we have either repaid or refinanced our senior subordinated debt to lower rates while lengthening the firms to take advantage of current market conditions, which has contributed to a $42 million reduction in other interest expense in 2021. These initiatives lowered our debt to total capitalization to 26% compared to 34% at December 31, 2020, and 46% at the end of 2019.

At the end of December, our long-term debt was $1.47 billion, which consists of $1 billion of subordinated notes, $350 million in mortgages and $100 million in other items. Our leverage ratio sits at 0.8x compared to 2.9x at the end of 2019.

At the end of December 2021, total inventory was $3.1 billion, down $300 million from December of 2020. Retail automotive inventory was $2.4 billion, which is down $533 million from December of last year. We have a 17-day supply of new vehicles. Our days supply of premium is 19 and volume foreign is 7.

We continue to sell into our future pipeline. We expect the current supply challenges, coupled with strong demand, to keep our new vehicle supply at low but manageable levels, at least through the first half of 2022. Used vehicle inventory is in good shape, with 60 days supply.

At this time, I will turn the call back over to Roger.

Thank you, Shelley. Moving on to our digital initiatives. We continue to grow, expand and enhance our digital footprint. As part of our omnichannel customer experience, we focused on increasing engagement with our customer base and service through online service appointments, online payment and the use of videos. Online payments have increased 76% since the fourth quarter of '19. Our online BDC appointments increased 49% to 475,000 when compared to the fourth quarter of 2019.

We also strive to be a leader in online reputation, including online customer reviews and star ratings on Google. 94% of our Google reviews were positive. In addition to these items, we generate clicks by providing flexible buying options that allow customers to proceed at their own pace when buying their next vehicle.

In 2021, we retailed 10,500 units or 4% of our U.S. unit sales via the Preferred Purchase tool and 14% of our customers used the tool to initiate their buying journey. We also sold 3,000 vehicles using our Buy Online tool in the U.K. during the quarter.

We're also piloting many BMW, Nissan, Lincoln and Porsche retailing tools at this time, and we expect to launch a pilot with Toyota and Lexus with their programs in Q2. We feel aligning with our OEM partners allows us to provide a consistent look and feel, participate in joint marketing efforts and benefit from the future development of these integrations.

Before closing, I'd like to highlight our record performance for the recently completed year in 2021. We retailed 460,000 new and used units while increasing our new to used -- our used-to-new ratio to 1.35:1. We completed acquisitions representing $1.3 billion in expected annual revenue, and we increased our revenue by 25% to $25.6 billion, including a 23% increase on a same-store basis, more than doubled earnings before taxes to an all-time record of $1.6 billion.

We increased income from continuing operations by 119% to $1.2 billion, reduced selling and G&A expenses as a percent of gross profit by 760 basis points. And we generated strong cash flow from operations of $1.3 billion and reduced long-term debt by $216 million. We returned $436 million to shareholders through dividend and stock repurchases.

Also, 35 Penske U.S. dealerships were named by Automotive News to be the best 100 dealerships to work for, including 6 of the top 10 dealerships, 12 of the top 25 and Audi of Turnersville was ranked #1 in the country. Penske had more dealerships on this list than any other automotive retailer. We issued our inaugural ESG report demonstrating our efforts towards sustainability.

In closing, we had a terrific year. I'd like to thank our team for their outstanding contribution and our success in 2021. As we look forward to the future, I remain confident about the opportunities I see across our diversified enterprise, driven by our strong balance sheet, diligent capital allocation, our priorities and our human capital.

I want to thank you all for joining the call today, and I'll turn it now back over to the operator. Thank you.

(Operator Instructions) Our first question will come from Rick Nelson with Stephens.

So the balance sheet is in great shape. I'm curious how we should think about capital allocation. You've done a combination of acquisitions, buybacks, debt paydown. How should we think about that as we push forward into 2022?

Rick, let me have Shelley answer that. Okay, Shelley, go ahead.

Sure, Rick. So when we look at our capital allocation, we spent approximately 50% this year on growth, either between CapEx and/or acquisitions. We spent another 15% reducing our debt. We've talked many times about how we are a disciplined buyer, and we're waiting for the right opportunities.

So what we said there, we repaid $216 million of our debt and then returned about 35% of that cash flow to our shareholders through dividends and share repurchases, as we mentioned. So our approach remains disciplined. We wait for the right opportunities. And we had a lot of them this year, and we've got more in the pipeline coming up for next year.

And also, I -- let me just add. I think we're going to continue to focus on our diversification, obviously, through our acquisitions, whether it be retail auto, or be Australia, PTS, PTG. And certainly, as Shelley said, our top priority is shareholder return.

Great. So you're coming off record 2020, a new record in 2021. Curious how you see the drivers for growth in 2022? And can you, in fact, grow on top of 2021?

Well, I think when you think about growth, let's just talk about the new and used car side. I think supply is going to generate the amount of growth we can get from new and used car volume. I think the -- because of the short supply, when you look at our business today, Rick, go back a year ago, we had 18,000 new cars in stock a year ago today. And today, we have 2,000.

And I think that, that just shows you the pivot that's taken place as far as supply, and we don't know when that's really going to slow us down. I think right now, we're delivering everything that's on the truck, but we're even down 500 units from December 31 at the end of the year.

As we see growth, we think we'll have acquisitions somewhere around 5% of our 2021 total revenue of $26 billion. So that would equate to about $1.3 billion. And we're hoping that our same-store growth will be somewhat between 4% and 5%. That's what it was in the fourth quarter.

I think overall, right now, we're seeing the tightest market on new. And what's happened when you think about the last 2 years from a SAAR perspective, we've had about 4 million units come out of the marketplace, which probably would generate another 50%, maybe more of Used Vehicles.

So we've had to pivot to buy cars from customers and the drive-thrus, call customers, buy cars on the curb. And I think that's going to be something we're going to have to continue to do, but I'm not sure how deep that well is. I think parts and service are going to continue to grow because there's more miles driven. And I think that's -- I think that will be key.

One thing that is good news is we're seeing a spring back in the U.K. Because remember, they were shut down between January 1 and the middle of April last year. So we're going to see some benefit out of that when we look at it. So I think the order book, when we look at it for March, which is the registration month, is up about 25% from last year. So that should give some -- it's a good runway here in Q1.

Your next question will come from John Murphy with Bank of America.

Just a similar question that Rick kind of posed you. I mean, we get this often from folks that you may be over-earning in the light vehicle business, the commercial dealership business and in PTS. I'm just curious if you can give us your view on that?

I mean, I certainly don't think you are. I think there's opportunity to grow business structure over time. But maybe not thinking about just 2022 outlook, just the puts and takes in gross, particularly around new in the new vehicle business. What's going on the commercial and the PTS side? I mean, how do you think about where -- how do you answer that question? Are you over-earning at the moment? Or is there the potential to structurally grow over time? .

Well, I think one of the things that we have in PTS, that's the truck rental, leasing and logistics business, is we have a backlog of vehicles around order of over 54,000. Now all of those aren't for new customers, but a lot of them are. And I think we're short of rental vehicles when you run at 87%, 85% to 87% utilization. So that's certainly going to drive more business.

And we're seeing more mileage driven on our PTS lease and rental units, which, obviously, is a variable revenue piece for us, which will also drive profitability. The only thing that I see that might impair maybe some of the bottom line might be is used truck sales. We just don't have the volume of trucks that we're going to sell off until we get this backlog of New Vehicles come in.

And we were up $100 million during 2021, and we expect that to come back during 2022 based on just availability of trucks. The market is still very hot on these types of vehicles, especially the vehicles that we put into the market is used. So we see our rental leasing business continuing to grow. There's no question that our commercial rental is really off the charts when you look at it, it was up 49%.

And I think the CPI adjustments that we make on all of our leasing businesses and logistics -- as you know, we have economic escalators on an annual basis, and I think that will be key. And I think, on the other hand, when you think about Premier Truck, that's our Freightliner business. John, you asked about that also. They're sold out for 2022.

And with the acquisitions that we've made and the growth that we've made during the year, that's going to drive considerable revenue for us in 2022. And when you look at ACT, which represents the marketplace for the heavy trucking business, they say that, really, we don't see any lift from the standpoint of some lifting off the gas and less business during '22 and '23.

So we see that business strong. Used truck prices there are also at all-time levels. So you could maybe see some backing off of that. But as long as there's no volume or any supply, we're going to see higher marks. So overall, now we have acquisitions in that space, which, obviously, we continue to do in our diversified portfolio.

And I'm sorry, on light vehicle side, Roger, I mean, there's a lot of push that grosses are way too high. And when volume comes back, they'll go back down. But I mean, it seems like it's kind of a seesaw. I mean, it might benefit the volume when the grosses are coming under pressure.

The used, as you said, will grow and parts service will continue to grow. So how do you think about sort of the formula around this idea that you may be over-earning in the new vehicle business or your retail dealerships in total? Or are there lots of offsets?

So you're talking about the new vehicle retail car business, not the truck business, correct?

Well, I was asking about that -- on that as well. Yes, I'm sorry. I asked a lot of questions on that, Roger, sorry.

Yes. Sure, no problem. As you think about availability of new units, we had 18,000 units at the end of last year at this time, and we have 2,000, and that's down 500. So I would say that's going to continue to put pressure on margins to keep them up because we're selling in the pipeline.

And we have -- when you're selling in the pipeline coming in -- vehicles coming in, you're going to have ability to get more content on those vehicles and probably make a higher margin with the customer. The question is, is used trucks or used cars because we just don't -- won't see the supply of them at this particular -- through the normal channels.

And we've really shifted from auctions now to buying cars from consumers, but parts and service will continue to grow. But I don't see anything in the light vehicle market now other than the supply chain that's going to change the structure and where we're going from the standpoint to date because we have plenty of demand. As I said earlier, in the U.K. alone, we're up 25% when we look at March, which will be a registration month, which is key.

I think the bigger issue that we have to execute across all of our businesses is our people. And I've heard people talk about everything but human capital. I think for the people on the line would understand that we're just having a tough time at this particular time to maintain the number of key people that we need to carry on the business in a professional way.

We've accelerated our training. We've certainly accelerated our acquiring of new candidates. But again, people have learned to live differently. And then the type of businesses we're in, it's going to be something that's going to challenge us. And I think it's going to challenge the OEMs also because you hear many of these -- don't have a number of people in the day to build the trucks or cars that they need.

So I think that's going to be something that's going to be more apparent. The good news is what we've been able to do is rightsize our business. Since COVID started, we're down about 9% on a same-store basis. So that maybe is too much color, but that's -- I wanted to be sure I got that in.

Well, that's incredibly helpful. And then just lastly, on inventory. I mean, if we step beyond the short-term inventory crunch, whether the chips or whatever else is inducing this, and get back to a time when the automakers have the ability to produce as they would like, how do you think they're going to run?

I mean, obviously, you'd like a bit of inventory, rebuilds but maybe not back to the heavy levels of pre-COVID. But I'm just curious how you -- what's your sense of what they're going to do when things are normal, and they can act as they wish?

Well, number one, I think we've got to look at capacity. What's the current capacity to build the hot trucks and things they need. So they're going to have to have supply and demand. But another phenomenon will take place is when you look at the floor plan support, you look at the customer support and you look at the incentives that are being paid over the traditional years where we had normal business, the OEMs are digging deep in their pocket.

Now they've seen a real benefit by backing that off. In fact, I think that's helping them look rationally down the road that will help them fund the R&D that's going to be necessary when we look at electrification. So hopefully, they'll get a taste of that and that will be a slow return, and they'll keep the days' supply in the 30 to 45 days. And we won't obviously be where we are today in single digits, but I think we can manage that carefully brand by brand.

Operator, are you there?

They're not able to hear me.

Can you hear us, operator?

Hello, can you hear me?

Yes, we can.

All right. Your next question is from Michael Ward from Benchmark.

So Roger, if you look back over the last 20 years or so, the dealer model has continued to kind of evolve. As you look out over the next 10 years, what do you think are some of the bigger opportunities that Penske has as it evolves even further? Is it consolidation in the auto retail or the retail truck? Is there another leg to the stool? What do you think about as you look out 5 to 10 years?

Are you asking me this question because I'm the oldest guy on the phone here, I wonder?

It's because you're the most admired.

Talking about a 30-year swag. So I think the -- from a PAG perspective, when you go back to really 1999, 2000, we were 100% retail automotive and only a domestic U.S. company. I think that we're going to continue to grow internationally, taking our expertise around the globe. And that could even, from the standpoint of looking to grow our special used car shop type business, I think the truck rent and leasing continues to grow. We opened up in Australia.

And obviously, as we look at Continental Europe, the opportunity to buy stores there will continue to be attractive to us. So we have opportunities to add, I think, a finance company at some point, maybe. I think we got more used opportunities as we look forward. But I think overall, we'll continue to invest, as Shelley has said, for growth, and that's 50% of our cash flow.

So I see the same trajectory. I don't see us jumping into many things that will be way off our landscape. The truck leasing and logistics business, we're 360,000 trucks today. I think if I look 20 years from now, I hope they have 700,000. But we're growing now at 20,000 to 30,000 a year, and we expect to be close to 400,000 at the end of 20 -- of '22. And certainly, at the end of '25, we'd like to be at 500,000. So this just shows you, with our own footprint that we have today in the business that we have, there's a big extension of opportunity, of revenue and profit.

Makes sense. It sounds like a lot more growth out in front of you. Shelley, on Page 34, it shows your cash flow from operations in the last 2 years. It's been like $1.2 billion, $1.3 billion each year. And it looks like 2022 and '23 could be similar type levels. You kind of outlined the allocation. Your balance sheet is in such a good shape. And just tying it to what Roger was just talking about. Do you or would you have an appetite for one of these $1 billion-plus type acquisitions if the right one came along?

Yes. When we talked about capital allocation, we talked about paying down our debt. That's to put us in the best position possible when an opportunistic investment comes around. And yes, as long as the price is in line with what we're willing to pay and it fits with our strategy, we certainly have the dry powder to do it.

Your next question will come from Stephanie Moore with Truist.

I wanted to touch a little bit maybe as a follow-up to the last question. And if you wanted to, Roger, maybe provide some insight on what you're seeing with the introduction of EV, the threat of the direct-to-consumer model and kind of how you see that panning out over the course of the next couple of years? Again, I think your insight would be very helpful.

Well, when we look at electric vehicles, yes, there's no question that, more and more, we're reading about them. There's more activity at the OEMs. I think the infrastructure is still a key problem. How much is going to be subsidized by the government from the standpoint of the U.S. market? I'm not going to talk about Europe and rest of world.

But to me, I think as we look at 300 million units in the car park today, and we've sold about 85 million units over the last 3 years, I think average 98% of those have been [ICE]. So the [bad part] is less than 2%.

So as we look at this, I think each manufacturer has committed, at least, verbally, that they will have fully electric vehicle in most of their model lines. And I think that the key thing here is we're going to have to connect with the dealers in order to be sure they have an infrastructure that meets their customer requirements when he joins the dealer.

However, when I look at this, I think it's going to take time because right now, the cost of an EV vehicle is considerably higher than an ICE. Now if it's mandated in states and cities and what have you, I guess, cost won't make any -- won't make a difference. But we think that it's going to come. I think it's going to take longer than people expect, and they're going to have to get the pricing.

I think the -- that today, the range anxiety has pretty much been mitigated by some of the vehicles that have come to market. But I think when you look at Tesla and you look at Rivian, people like that, that are going direct, I think that's a particular couple of OEMs. But when you look at the existing OEMs, let's go back to Hummer, GM just announced they took orders and deposits, but those vehicles they are all being delivered through the dealer network.

And when we were the distributor for Smart a few years ago, remember, we took 30,000 deposits on reservations for Smart but again, repurposed those once the cars were built to the dealer network. So I think this go-direct thing probably has blown up a little bit higher than it will be because of the franchise network that we have today and the way it's being managed through the laws of retailing in the automobile business.

So again, I think right now, the start-ups are really overblown. I think it's going to be part of our product line, as I said earlier. We got the franchise laws. There's no question. And at the end of the day, I think it's going to be up to the customer. Do we want to pay more? Range anxiety is in good shape. Some people are buying these from the standpoint of decarbonization, which, obviously, makes a difference.

But overall, I think it's going to be -- going to take time, and I think we'll see ICE engines here for quite a while. And I think hybrids are going to continue. As you see the numbers, when you look at PURE EV and you look at hybrids, hybrid has been a big part of this. And I think that will continue to play a role here for the next 3 to 5 years.

Absolutely. That's really helpful. And then switching gears to the used side for the retail automotive business. It looks like inventory levels are definitely manageable, as you said, where we stand today. Can you maybe talk about some of your sourcing capabilities and how that's changed over time? And how you view your position both in the U.S. and U.K. for this year without used inventory?

Well, when we look at our inventory between today, the end of the year and as we sit here today, it's about flat. So we've been able to -- and this is in the U.S. zone, I might say. We've been able to sustain that.

But what's really happened is we've seen quite a change. Of our trades, 52% of the used cars we get or vehicles, lease returns are 14. And I think at the end of the day, our auction numbers are down, and from, say, roughly 25% down to below 20%. And I think, overall, lease returns have been pretty much the same because they come back on a one-to-one basis.

When you think about the U.K., on the other hand, we see that opportunity the same way because their sourcing had really been -- when you looked at CarShop, specifically, I'm going to talk about CarShop here. The old -- in 2020, we were about 54% from auction. Today, when we looked at 2021 complete, we're a little bit -- the market has a little bit changed because of the first 3.5 months, we were out. We were at 66%, but that has changed considerably now because our Sytner auction is down. And obviously, we're looking buying more cars at the curve, and I think that's what we're going to see as we go forward, both in the U.S. and the U.K.

But it's going to be availability, and that's going to put prices up. And remember, a lot of our vehicles, used vehicles are financed or leased, primarily financed. And there's a cap on those, what the finance company will be able to finance. So that's going to put, ultimately, a damper on these big margins that have been made if the cost of sale is going up.

Your next question will come from Rajat Gupta from JPMorgan.

I have one question on F&I. Clearly, at highly elevated levels today, around $1,900, how should we think about a normalized level there once prices move back to normal? Have there been any structural changes that will stake maybe penetration, impact of rates that, that can offset the eventual decline in prices? Just curious what's like a normalized new normal level there once you're back to the normal prices? And I have a follow-up.

Yes. Let me say this. I think what's happened during the short supply of vehicles, the F&I process, obviously, our reserve is about 40% of the total F&I income and product is 60%. So there's more product being sold add-ons to the vehicles today maybe than there was in the past. So that's driving more F&I, when you look at it on reserves.

So to me, that probably a sum of the shift. But we've done a big job in training. I think that our markups are pretty much the same. The captives is about 75 basis points, and our preferred lenders is close to 100. Then we received flats on most of our leasing. So our subprime business, really, is only 6%.

So I think we're doing a better job. We've always trailed really some our peers in that. And that's because we have such a big penetration of leasing, which, I think, makes a big difference. But overall, I just have to say we're selling more products and not just F&I income but more products in the sale during this pandemic as people want to buy particular cars.

Got it. Got it. That's helpful. And then maybe on CarShop, given the supply situation that has evolved over the last couple of years, unlikely to ease anytime soon. And given more of a historical reliance on auction versus trading, like you have with the franchise stores, is there any change to your thinking around the 40 store network over the next couple of years? Do you think that's still viable? I'm Just curious how you're thinking about that given the supply dynamics.

Well, let me say this. I think there's no question that, from a CarShop situation in the U.K., we've seen, using the Sytner auction, those vehicles have come down considerably here in the fourth quarter and where we are here in January because most of the dealerships are keeping the trades, even if they're nonbranded, and selling those directly. So we're seeing some input there.

But our off-street purchases, when you look at CarShop, have gone from 6% to 30%. So I think that shows you -- bodes well from where we are, but that's a big change from what I can see from the standpoint of sourcing. And we did use a lot of auctions in the U.K., but again, we're going to purchasing, I call it on the curve.

And when you look at the quarter, we did between 17,000 and 18,000 units, and our revenue was over $400 million and our earnings were approximately $9 million. So when you look at it, I think it's balancing. We're going to really need to rebalance during Q1 and Q2 because of the shutdown, because of COVID in the U.K. and also here in the U.S., which makes obviously made a difference. And again, we were really impacted from the standpoint of shutdown and CarShop, no question, for 3.5 months last year in Q1, Q2.

(Operator Instructions) Your next question is from David Whiston with Morningstar.

Roger, you mentioned the labor shortage earlier. Is that across the whole company? Or were you just referring to CarShop or a particular geographic market?

I'm saying that this -- just generally, today, you have attrition in the retail auto business because a lot of the compensation is variable. And people have worked from home. They've seen other ways that they can add to their income. So number one, we see that. And then entry-level technicians coming in, people in the body shops, truck drivers, et cetera, all of these things are under pressure.

And what we've had to do is really not upgrade, but add additional recruiters across the whole country, whether it's in truck leasing, rental or logistics or overall business. So I see that as a big challenge for us. And we've added significant investment, not only in people, but in training in order to be able to keep people loyal to the company and also to attract them going forward.

Okay. And on -- earlier on PTS, I think you were discussing that earlier. It sounds like you're pretty optimistic on continued robust equity earnings growth. But I mean, this quarter, for example, it was plus 62%. But I mean, aren't you kind of -- expect more like double digit? Or we saw back north of 20%, 30% even next year for '22?

I really -- I can't really give you that number here just on the phone. I mean, obviously, they're going to continue to grow. It obviously is the comparables that you're going to be looking at quarter-to-quarter. But on an overall basis, their growth has been outstanding. Their market share, as I said, we're up to 360,000 vehicles, and there is no slowdown in the commercial rental.

And the consumer rental, we get a little bit of dip when some of these trucks come back from UPS and FedEx after Christmas, but it's ironic that we're seeing those going right back out. And obviously, some of those don't bring the margin that we had from a one-way basis.

And I think the truck market is going to grow. We got a strong economy. You're only going to see lower gain on sale because we don't have enough units. The profit per unit I don't think will deteriorate much at all. It will be just the number of units that we're going to be able to have available to retail or sale from PTS.

Okay. And just one question on the balance sheet, it's probably for Shelley. The 2025 [demos], I think they have a change in their call provision in September 1. Do you have any interest in moving that maturity even to 2029 or even next decade?

No, not at this time. The premium and the low interest rate where we're at, we think we'll take advantage of that longer term for some time.

At this time, there are no further questions in queue. I would now like to turn it back over to Roger Penske for any closing remarks.

Thank you, operator. Thanks, everyone, for joining us. We had a great year in 2021. The aspects to look out for 2022 look favorable. I think our brand mix, our people, the diversification we have across all of our businesses is structured properly, and now we have to execute. So we'll see you after the first quarter. Thanks.

This concludes today's conference call. Thank you for participating. You may now disconnect.