PENSKE AUTOMOTIVE GROUP, INC.

Penske Automotive Group, Inc. is a diversified international transportation services company and one of the world's premier automotive and commercial truck retailers, operating dealerships in the United States, the United Kingdom, Canada, Germany, Italy, Japan, and Australia, and is one of the largest retailers of commercial trucks in North America for Freightliner. The company also distributes and retails commercial vehicles, diesel and gas engines, power systems, and related parts and services principally in Australia and New Zealand. Additionally, Penske Automotive owns a 28.9% ¹ ownership interest in Penske Transportation Solutions, a business that manages one of the largest, most comprehensive and modern trucking fleets in North America with over 396,600 ² trucks, tractors, and trailers under lease, rental, and/or maintenance contracts. The U.S. franchised automotive dealer industry is a market of approximately $1.3 trillion ³, and the industry remains highly fragmented with approximately 90% ⁴ of the U.S. industry's market share remaining in the hands of smaller regional and independent dealers. In 2025, U.S. industry new light vehicle sales increased 2.2% ⁵, to 16.3 million ⁶ units, while North American sales of Class 6-8 medium- and heavy-duty trucks decreased 15.5% ⁷ from the prior year to 399,796 ⁸ units. The company's business benefits from a diversified revenue and gross profit mix across multiple geographies and business lines, which management believes helps mitigate the cyclicality that has historically impacted some elements of the automotive sector.

Penske Automotive Group is one of the largest global automotive retailers as measured by the $27.5 billion ⁹ in total retail automotive dealership revenue generated in 2025. The company offers over 40 ¹⁰ vehicle brands, with 71% ¹¹ of its retail automotive franchised dealership revenue generated from premium brands such as Audi, BMW, Land Rover, Lexus, Mercedes-Benz, and Porsche, and 23% ¹² of revenue generated from volume non-U.S. brands such as Toyota and Honda. In 2025, revenue generated at the company's BMW/MINI, Audi/Volkswagen/Porsche/Bentley, Toyota/Lexus, and Mercedes-Benz/Sprinter/smart dealerships represented 25% ¹³, 22% ¹⁴, 18% ¹⁵, and 8% ¹⁶, respectively, or 73% ¹⁷ in aggregate, of total automotive dealership revenues. The retail commercial truck operations rely principally on Freightliner and Western Star trucks, both Daimler brands, which represented approximately 41.0% ¹⁸ of the Class 8 heavy-duty truck market during 2025. Primary competitors named in the filing include other franchised dealers, automotive manufacturers that sell directly to consumers, independent used vehicle dealerships, and online retailers such as Carvana. The company's stated competitive advantages include its premium facilities, superior customer service, management experience, sales expertise, reputation, and the location of its dealerships, as well as its ability to absorb multi-unit trade-ins associated with fleet sales and effectively disperse used commercial vehicles for resale throughout its dealership network.

The company generates revenue through multiple streams: new and used vehicle sales, finance and insurance commissions, service and parts operations, and fleet and wholesale activities. Revenue is recognized upon satisfaction of performance obligations under contracts with customers, with vehicle sales recorded at a point in time when vehicles are delivered, service and parts revenue recognized over time as work is completed, and finance and insurance commissions recorded at a point in time when the customer enters into the contract. Some dealerships in the U.K. and Europe operate under an agency model where the company receives a fee for facilitating the sale by the manufacturer of a new vehicle but does not hold the vehicle in inventory, and only the fee, not the price of the vehicle, is reported as new revenue with no corresponding cost of sale. The company's primary customer segments include retail consumers, fleet customers, and leasing companies. The company also holds a 28.9% ¹⁹ ownership interest in Penske Truck Leasing Co., L.P., accounted for under the equity method, with equity earnings recorded under "Equity in earnings of affiliates."

The Retail Automotive segment generated $27.5 billion ²⁰ in total revenue in 2025, comprised of $12,855.4 million ²¹ from new vehicles, $8,941.1 million ²² from used vehicles, $816.5 million ²³ from finance and insurance, net, $3,377.9 million ²⁴ from service and parts, and $1,483.7 million ²⁵ from fleet and wholesale. As of December 31, 2025, the company operated 365 ²⁶ retail automotive franchised dealerships, of which 148 ²⁷ are located in the U.S. and 217 ²⁸ are located outside of the U.S., principally in the U.K., and also operated 15 ²⁹ used vehicle dealerships. The company retailed and wholesaled, including agency units, more than 583,000 ³⁰ vehicles in 2025. Service and parts sales generated the largest part of retail automotive gross profit, with a 58.4% ³¹ gross margin in 2025. The retail automotive dealerships achieved a 75.7% ³² fixed absorption ratio for 2025. The Retail Commercial Truck segment generated $3.4 billion ³³ in total revenue in 2025, comprised of $2,252.5 million ³⁴ from new trucks, $228.7 million ³⁵ from used trucks, $15.1 million ³⁶ from finance and insurance, net, $892.4 million ³⁷ from service and parts, and $22.6 million ³⁸ from other. As of December 31, 2025, Premier Truck Group operated 45 ³⁹ locations across 10 ⁴⁰ U.S. states and the Canadian provinces of Ontario and Manitoba, and retailed and wholesaled 19,239 ⁴¹ new and used trucks in 2025. PTG achieved a 131.3% ⁴² fixed absorption ratio for 2025. The Commercial Vehicle Distribution and Other segment generated $922.6 million ⁴³ in total revenue in 2025, with $192.3 million ⁴⁴ in gross profit. Penske Australia is the exclusive importer and distributor of Western Star heavy-duty trucks, MAN heavy- and medium-duty trucks and buses, and Dennis Eagle refuse collection vehicles across Australia, New Zealand, and portions of the Pacific, and also distributes diesel and gas engines and power systems. The Non-Automotive Investments segment consists primarily of the company's 28.9% ⁴⁵ equity method investment in Penske Transportation Solutions, which recorded $192.8 million ⁴⁶ in equity earnings in 2025.

The company's business is diversified geographically, with 61% ⁴⁷ of total retail automotive dealership revenues in 2025 generated in the U.S. and Puerto Rico and 39% ⁴⁸ generated outside of the U.S. The company's consolidated revenue by country as a percentage of total revenue is: United States 62% ⁴⁹, United Kingdom 26% ⁵⁰, Germany/Italy 6% ⁵¹, Japan 1% ⁵², Canada 1% ⁵³, and Australia/New Zealand 4% ⁵⁴. The company's consolidated gross profit by country as a percentage of total gross profit is: United States 63% ⁵⁵, United Kingdom 24% ⁵⁶, Germany/Italy 5% ⁵⁷, Japan 1% ⁵⁸, Canada 2% ⁵⁹, and Australia/New Zealand 5% ⁶⁰. The company's automotive dealership revenue mix consists of 71% ⁶¹ related to premium brands, 23% ⁶² related to volume non-U.S. brands, 3% ⁶³ related to brands of U.S. based manufacturers, and 3% ⁶⁴ related to used vehicle dealerships.

During 2025, in the U.S. the company sold four retail automotive franchises, closed one retail automotive franchise, and opened one retail automotive franchise. On November 19, 2025, the company acquired Penske Motor Group, LLC, representing two Lexus brand locations and one Toyota brand location in California and one Toyota brand location in Texas, including Longo Toyota, the largest Toyota brand dealership in the U.S., accounted for as a transaction between entities under common control. In the U.K., the company sold one used vehicle dealership and opened eight retail automotive franchises at existing Sytner Select locations, representing the Geely and Chery brands, and opened two Skoda points at existing VW brand dealerships. The company also acquired a Ferrari brand dealership in Modena, Italy, and opened a BYD franchise in Germany. During 2025, in aggregate, the company acquired or opened dealerships representing approximately $1.6 billion ⁶⁵ in expected annualized revenue, of which $1.5 billion ⁶⁶ is related to the acquisition of PMG, and disposed of dealerships representing approximately $408.5 million ⁶⁷ of expected annualized revenue. In February 2026, the company acquired Lexus of Orlando and Lexus of Winter Park, both located in the Orlando metropolitan area of Central Florida. The company repaid in full at scheduled maturity its $550 million ⁶⁸ of 3.50% senior subordinated notes due September 1, 2025. During 2025, the company repurchased 1.0 million ⁶⁹ shares of common stock under its securities repurchase program for $159.1 million ⁷⁰, and paid $343.8 million ⁷¹ of cash dividends to stockholders. The company also received $98.7 million ⁷² of pro rata cash distributions from its PTS investment during 2025.

In fiscal year 2025, the company generated total revenues of $31.8 billion ⁷³, compared to $31.8648 billion ⁷⁴ in fiscal 2024 and $30.9165 billion ⁷⁵ in fiscal 2023. Gross profit was $5.2170 billion ⁷⁶ in 2025, compared to $5.2171 billion ⁷⁷ in 2024 and $5.1474 billion ⁷⁸ in 2023. Net income attributable to Penske Automotive Group common stockholders was $935.4 million ⁷⁹ in 2025, compared to $968.9 million ⁸⁰ in 2024 and $1.1088 billion ⁸¹ in 2023. Diluted earnings per share was $14.13 ⁸² in 2025, compared to $14.49 ⁸³ in 2024 and $16.31 ⁸⁴ in 2023. Operating income was $1.2807 billion ⁸⁵ in 2025, compared to $1.3701 billion ⁸⁶ in 2024 and $1.4093 billion ⁸⁷ in 2023. Net cash provided by operating activities was $975.1 million ⁸⁸ in 2025, compared to $1.2306 billion ⁸⁹ in 2024 and $1.1452 billion ⁹⁰ in 2023. The company's results for 2025 include a gain of $52.3 million ⁹¹ from the sale of a retail automotive franchise in the U.S., resulting in an after-tax gain of $38.9 million ⁹², or $0.58 ⁹³ per share, partially offset by impairments and other charges of $32.5 million ⁹⁴, resulting in an after-tax expense of $26.3 million ⁹⁵, or $0.39 ⁹⁶ per share, for a net after-tax gain of $12.6 million ⁹⁷, or $0.19 ⁹⁸ per share.

Management discusses expectations for 2026 in qualitative terms, noting that for the first half of 2026, vehicle sales in the retail commercial truck segment are expected to continue to be challenging in light of freight market uncertainty, which is expected to be partially offset by increased demand for service and parts operations driven by increasing vehicle fleet age. For the retail automotive segment in 2026, the company expects continued lower EV sales in the U.S. due to the elimination of EV tax credits and lower availability of certain products from select manufacturers, coupled with strong demand for service and parts operations driven by increased vehicle sales in recent years, increased average age of vehicles, recall campaigns, increased miles driven, and vehicle complexity. In the U.K., the company expects a continued challenging macroeconomic environment, including as a result of elimination of premium vehicles from certain government incentive programs and lower availability of certain products from select manufacturers, partially offset by efforts to implement cost savings strategies.

The company identifies several growth vectors. In the commercial vehicle distribution and other operations, Penske Australia had significant orders for defense and energy systems products in 2025, and management expects demand for these products to remain strong, in particular in providing standby power energy solutions for data systems customers. The company has experienced growth in its power system operations, in particular in providing standby power energy solutions for data systems customers. In the retail automotive segment, the company opened eight retail automotive franchises at existing Sytner Select locations in the U.K. representing the Geely and Chery brands, opened a BYD franchise in Germany, and acquired a Ferrari brand dealership in Modena, Italy, indicating expansion into new brand representations and geographic markets. The company also acquired Lexus of Orlando and Lexus of Winter Park in February 2026, expanding its presence in the Orlando metropolitan area of Central Florida.

The company identifies the continued recessionary freight environment as a significant headwind. PTG and PTS are currently experiencing weak market conditions in light of the continued recessionary freight environment, with PTG experiencing lower vehicle sales and PTS experiencing weak market conditions for used vehicle sales and commercial rental demand. The company expects the recessionary freight environment to continue to impact PTS' operating results. PTS has decreased, and expects to continue to decrease, the size of its consumer and commercial rental fleets throughout 2026 in connection with lower demand. In the U.K., the company expects a continued challenging macroeconomic environment, including as a result of elimination of premium vehicles from certain government incentive programs and lower availability of certain products from select manufacturers. Affordability remains a consideration for consumers, given higher average vehicle prices and the resulting impact on monthly payments.

The company discusses margin and cost dynamics. Selling, general, and administrative expenses as a percentage of gross profit were 72.1% ⁹⁹ in 2025, compared to 70.6% ¹⁰⁰ in 2024 and 69.0% ¹⁰¹ in 2023. The increase in SG&A expenses as a percentage of gross profit in 2025 was attributed to increases in personnel expenses, impairments and other charges, other general overhead expenses, as well as the prolonged recessionary freight rate environment on PTG's earnings. The company believes its expenses can be adjusted over time to reflect economic trends, as the majority of selling expenses are variable and a significant portion of general and administrative expenses are subject to management's control.

The company discusses its operational outlook. As of December 31, 2025, the new vehicle days' supply was 49 ¹⁰², compared to 49 ¹⁰³ as of December 31, 2024, and the used vehicle days' supply was 49 ¹⁰⁴, compared to 47 ¹⁰⁵ as of December 31, 2024. As of December 31, 2025, the Class 6-8 medium- and heavy-duty truck backlog was 170,568 ¹⁰⁶ units according to data published by ACT Research, compared to 213,366 ¹⁰⁷ as of December 31, 2024. The company employs over 27,700 ¹⁰⁸ people worldwide, and believes its employee turnover of approximately 20% ¹⁰⁹ is below the industry averages for its businesses. The company has implemented AI-driven technologies at its dealerships, including a voice assistant to answer and appoint inbound service calls and an engagement system to address customer lead inquiries and schedule sales and service appointments.

Capital allocation details are provided. Capital expenditures were $324.6 million ¹¹⁰ in 2025, $377.8 million ¹¹¹ in 2024, and $386.0 million ¹¹² in 2023, relating primarily to improvements to existing dealership facilities, construction of new facilities, acquisition of property or buildings associated with existing leased facilities, and acquisition of land for future development. As of December 31, 2025, $247.5 million ¹¹³ remained outstanding and available for repurchases under the securities repurchase program, which has no expiration. The company paid cash dividends of $5.18 ¹¹⁴ per share in 2025, $4.09 ¹¹⁵ per share in 2024, and $2.78 ¹¹⁶ per share in 2023, and announced a cash dividend of $1.40 ¹¹⁷ per share payable on March 5, 2026. The company currently expects to continue to pay comparable dividends in the future.

The company identifies several structural headwinds and execution risks. Tariffs enacted during 2025 on automobiles, automobile parts, medium- and heavy-duty trucks and truck parts have impacted each of the company's automotive and commercial vehicle suppliers, as well as its and PTS' operations, and the policies and announcements regarding tariffs remain fluid. The U.K. government requires in 2026 that 33% ¹¹⁸ of new cars sold shall be electric vehicles, with manufacturers paying significant penalties if such amount is not achieved, and continues to propose a ban on the sale of internal combustion engines in new cars and new vans beginning in 2030. These U.K. regulations increase through 2035 and continue to affect the profitability and mix of vehicles sold by the company's U.K. dealerships. In the U.S., the elimination of the $7,500 ¹¹⁹ per new vehicle EV tax incentive on September 30, 2025 negatively impacted sales of EVs in the fourth quarter of 2025. The company also faces risks from increasing market share of Chinese manufacturers, which totaled 9.7% ¹²⁰ of U.K. new vehicle registrations in 2025 as compared to 4.8% ¹²¹ in 2024.

The company identifies geographic, regulatory, and macro factors as constraints. The company has significant operations outside of the U.S. that expose it to changes in foreign currency exchange rates and to the impact of economic and political conditions in the markets where it operates. A ten percent change in average exchange rates versus the U.S. Dollar would have resulted in an approximate $1.22 billion ¹²² change to revenues for the year ended December 31, 2025. The company's commercial vehicle distribution and other operations in Australia and New Zealand may be impacted by local and regional economic conditions and in particular, the price of commodities such as copper and iron ore. The company is subject to a wide range of environmental laws and regulations, and the U.K. Financial Conduct Authority has proposed a redress scheme requiring lenders to compensate customers whose financing arrangements are deemed unfair, which could subject the company to significant administrative obligations.

The company faces material risks from the prolonged recessionary freight environment, which has negatively impacted PTG's vehicle sales and PTS' used vehicle sales and commercial rental demand, and a further prolonged downturn will continue to impact operating results. Tariffs enacted during 2025 on automobiles, automobile parts, and trucks have impacted acquisition costs and consumer demand, and the fluid nature of tariff policy creates ongoing uncertainty. The company is subject to significant concentration risk, as revenue generated at BMW/MINI, Audi/Volkswagen/Porsche/Bentley, Toyota/Lexus, and Mercedes-Benz/Sprinter/smart dealerships represented 73% ¹²³ of total automotive dealership revenues in 2025, and adverse events affecting any of these manufacturers could materially impact the company. The U.K. government's requirement that 33% ¹²⁴ of new cars sold in 2026 be electric vehicles, with penalties for non-compliance, and the proposed ban on internal combustion engine sales beginning in 2030, continue to affect the profitability and mix of vehicles sold by the company's U.K. dealerships. The company has $4.1 billion ¹²⁵ of floor plan notes payable and $2.2 billion ¹²⁶ of non-vehicle long-term debt, and a 100-basis-point change in interest rates would result in an approximate $39.7 million ¹²⁷ change to annual floor plan interest expense and an approximate $6.3 million ¹²⁸ change to annual other interest expense, exposing the company to significant interest rate risk.

Management's message to shareholders emphasizes the company's position as a diversified international transportation services company and one of the world's premier automotive and commercial truck retailers. The strategic priorities emphasized for the period ahead include navigating the impact of tariffs and trade policy, managing through the prolonged recessionary freight environment affecting PTG and PTS, and continuing to execute on growth through acquisitions and organic expansion. Management highlights the acquisition of Penske Motor Group, LLC on November 19, 2025, representing approximately $1.5 billion ¹²⁹ in expected annualized revenue, and the February 2026 acquisition of Lexus of Orlando and Lexus of Winter Park. Management also emphasizes the company's focus on higher-margin service and parts operations, which generated the largest part of retail automotive gross profit, and the diversification benefits from the 28.9% ¹³⁰ ownership interest in PTS. The forward-looking statements include expectations that the recessionary freight environment will continue to impact PTS' operating results, that vehicle sales in the first half of 2026 will continue to be challenging for the retail commercial truck segment, and that the company expects continued lower EV sales in the U.S. due to the elimination of EV tax credits.