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Penske Automotive Group (NYSE:PAG)
Q2 2018 Earnings Conference Call
Jul. 26, 2018 2:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen. Welcome to the Penske Automotive Group second-quarter 2018 earnings call conference call. Today's call is being recorded and will be available for replay approximately one hour after completion through August 2, 2018 on the company's website under the Investor Relations 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.

Anthony Pordon -- Executive Vice President, Investor Relations & Corporate Development

Thank you, Laurie. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's second-quarter 2018 financial results was issued this morning and is posted on our website, along with the presentation designed to assist you in understanding our performance and company strategy.As always, I am available by email or phone for any follow-up questions you may have. Joining me for today's call are Roger Penske, our chairman; J.D. Carlson, chief financial officer; and Shelley Hulgrave, the corporate controller.

On this call, we will be discussing certain non-GAAP financial measures such as earnings before interest, taxes, depreciation and amortization or EBITDA and have reconciled the non-GAAP measures in this morning's press release and investor presentation, which is available on our website, to the most directly comparable GAAP measures. Also, we may make forward-looking statements about our operations, our earnings potential and outlook on the call today. Our actual results may vary because of risk 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

Roger Penske -- Chairman and Chief Executive Officer

Thank you, Tony, and good afternoon, everyone. Thank you for joining us. I'm pleased to report record results for the second quarter and the first half of 2018 for PAG. In the second quarter, total revenues increased 10.3% to a record $5.9 billion.

Earnings before taxes increased 12.3% to $176 million. Income from continuing operations increased 27% to $134.6 million and related earnings per share increased 28.5% to $1.58.EBITDA increased 11.6% to $230 million. And as a result of the tax reform act in 2017, our effective tax rate was 23.3% compared to 32% in 2017. Our record results were driven by outstanding performance across each area of our business, demonstrating the strength of our diversified transportation services model.

I'm particularly pleased with the performance of our 14 stand-alone used vehicle supercenter operations, our 21 location -- North American retail commercial truck business locations and our investment in Penske Truck Leasing.Looking at our retail automotive business for the second quarter, total retail units increased 3.1%, including 1.6% on a same-store basis. Total retail revenue increased 9.1% or 8.8% on a same-store basis. On a same-store basis, gross profit per unit retail increased as follows, new vehicle, plus $32 per unit to $3,127, used vehicles were up $151 per unit to $1,574 and finance and insurance was up $90 per unit at $1,247. Our supply of new vehicles was 72 days at the end of June compared to 70 days at the same time last year.

Our supply of used vehicles is 45 days at the end of June compared to 44 days at the same time last year. Just to note, we have 930 vehicles representing $37 million on stop sale. Service and parts revenue increased 6% on a same-store basis, including customer pay, it was up 8.9%. Our warranty was flat and body shop and PDI was up 1.6%.

Given that our business is global, I thought it might be helpful on this call to provide a midyear update on the U.K. and discuss the strategic advantages realized from that business. My comments will be on a six-month year-to-date basis ending June 30, 2018, unless otherwise noted. U.K.

represents approximately 37% of consolidated revenue and 32% of gross profit. Service and parts generate a substantial portion of the gross equaling 32% of the overall gross margin and margin is 62%. According to Automotive Management 100, PAG is the largest car retailer in the U.K. today.

Our U.K. business has the leading market position in Northern Ireland, which includes sole representation for Audi, Mercedes-Benz and Porsche in that market. We're also the No.1 or 2 partner for all the brands that we represent in the U.K.  We recently have built a significant foundation as one of the leading stand-alone used vehicle operators in the market as well. PAG's U.K.

franchise dealership brand mix is over 90% premium/luxury and includes a market-leading position in the super luxury sports car market. These brands are core to the U.K. strategy and typically provide a higher return on sales. In fact, premium/luxury brands continue to take market share and represent 31.4% of the overall U.K.

market. We believe the premium brand mix provides an opportunity to generate higher and more stable growth per unit retail. Despite concerns over Brexit, the U.K. economy has remained quite resilient too, with strong employment and wage growth, inflation remains low and GDP continues to grow.

Showcasing the strength of our business on a local currency, same-store revenue increased 3.1% so far this year despite a 6.3% year-over-year decline in the U.K. new vehicle market registrations. One additional point, our U.K. business continue to evolve.

At the midpoint of 2014, our used-to-new ratio was 0.93:1. At the midpoint of 2018, our used-to-new ratio was 1.76:1. The U.K. business has a great platform, I would say, unrivaled by anyone else in the U.K.

to continue to grow its used vehicle presence particularly through the stand-alone supercenter formats. Used cars are not subject to OEM pressures and perform well in economic downturns as many consumers turn from new to used. The stand-alone supercenters in the U.K., I expect, will retail over 55,000 units in 2018. This business is a hybrid of the traditional-type dealership with a robust e-commerce platform, where the customers may reserve a vehicle online through a transparent, no-haggle, fixed-price offering, receive a guaranteed trade valuation, apply for finance and arrange for pickup or home delivery, all online, which is a key differentiator in U.K.

today as compared to most U.K. car retailers. In fact, in 18 short months, PAG has become the third largest used stand-alone dealership group in the U.K. With strong new vehicle franchise dealerships and a growing stand-alone used business, we believe PAG's U.K. auto retail business is unique, making it less vulnerable to perceive new vehicle market pressures.

The U.K. has delivered record revenue and EBT results for the first half of 2018 and has been recognized by both major U.K. automotive magazines as the dealer group of the year. The strength of our U.K.

operations and the record results are driven by seasoned and well-respected management team. The team has driven revenues from $900 million in 2002 to approximately $8 billion on an annualized basis in 2018 and all of this growth has been funded by internal debt and cash flow. I'd really like to congratulate the entire U.K. team for their efforts.Let's move on to our stand-alone used vehicle supercenter business.

We operate 14 locations, five in the U.S. and nine in the U.K. Both of these operations use one price and no-haggle approach. In 2018, we expect to retail nearly 70,000 vehicles through these supercenters and generate approximately $1.2 billion in revenue. In the second quarter, the stand-alone used dealerships retailed almost 19,000 units and generated $346 million in revenue and had a return on sales of 4.3%.

The average transaction price is approximately $15,000 and the variable gross profit was $2,266. That was up $33 sequentially. Our variable gross margin was 13.8%. We expect to grow the stand-alone business through a combination of e-commerce initiatives and new market introduction.Let me now turn to our retail commercial truck dealership business.

This market continues to experience strong market conditions, including improved freight metrics and truck utilization rates. Build rates remain strong and industry backlog is increasing. 2018 ACT data forecast North American Class 8 retail sales at 315,000, which should represent a 25% year-over-year increase. Additionally, North American Class 6 and 7 midrange retail sales are forecasted to grow approximately 3% to over 150,000.

For the quarter, our retail commercial truck group, Premier, increased its unit sales 60.6% to 2,504 units and generated $339 million of revenue and had a return on sales of 4.7%. Same-store retail revenue increased 45%. Service and parts represented 69% of the total gross profit and covered 124% of our fixed cost and over 100% of total operating. Gross margin on new and used and service all increased during the quarter.

We believe these strong market conditions will continue to help drive our business with improved sales and growing profitability.Let me now turn to our investment in Penske Truck Leasing. Our ownership is 28.9% and PTL provides us with equity earnings and annual cash distribution and tax benefits generally associated with accelerated depreciation. We made our initial investment in PTL in 2008, which is approximately $200 million. Our total cash investment in PTL today is $957 million, approximately $700 million was invested in '16 and '17.

We received over $579 million in cash benefits and another $379 million in equity income. Penske Truck Leasing operates across three main segments, full-service lease, which is 50%; logistics, 27%; and our rental products represent 27%. Our full-service lease and logistics typically have three to five-year firm contracts with economic escalators providing long-term stability. For the three months ended June 30, PTL generated $1.7 billion in operating revenue and income of $121 million and a return on sales of 7.1%.

Accordingly, we recognized $35 million in equity earnings during the second quarter of 2018.Turning to our Australian commercial vehicle business. We operate a commercial truck distribution and power system business in Australia, New Zealand and other parts of the Pacific. During the second quarter, these businesses generated $139 million in revenue, $39 million in gross profit and had a return on sales of over 6%. We continue to experience improved conditions across the Australian and New Zealand markets, which is contributing to overall improved performance.

Our power systems product sales continue to be strong, especially in the industrial, power generation, defense and marine markets. Recently, we have won bids in the defense sector, which will provide strong sales and profits. In future periods, these contracts are expected to provide reoccurring life cycle service and parts opportunities. Additionally, we've combined the power systems and commercial vehicle businesses where possible in order to realize economies of scale and improve customer service.

Looking at our balance sheet. At the end of June, we had $45.8 million of cash. Our same-store inventory was $3.3 billion, up $145 million, $59 million in new and $86 million in used. Floor plan debt was $3.6 billion, and non-vehicle debt was $2.15 billion.

At the end of June of 2018, we have approximately $600 million in retail vehicle equity on our balance sheet, 34% of our floor plan and non-vehicle debt is at fixed rates, while 66% is at variable. Good news here, the debt to total capitalization ratio was 46% and our leverage was 2.7 times compared to 2.9 times at the end of 2017.Looking at some of the highlights of our capital allocation during the first half. We continue to increase our cash dividend, returning $59 million to our shareholders. We repurchased 1.2 million shares for $56 million.

We generated approximately $59 million in cash from the sale of several non-core dealerships. We invested $119 million in capital expenditures, including $14 million in land acquisitions for future development. At the end of June, we had $700 million of liquidity, providing plenty of dry powder to continue growing and expanding our business. Additionally, with the tax law change at the end of the year, we have the ability to repatriate $1 billion in cash from our international operations on a tax-free basis.

Long-term non-vehicle debt in the U.K. was only $100 million on June 30. In closing, our record results for the second quarter and first half of 2018 demonstrate the strength, the resilience and the opportunity provided by PAG's diversified transportation-service models. In the second quarter, our model generated a 10% increase in revenue, a 12% increase in earnings before taxes, a 27% increase from income from continuing operations and a 28% increase in earnings per share. Most recently, the dividend we paid to shareholders was for the 29th consecutive quarter.

With a continuing strong U.S. automotive market, the strength of our premium/luxury automotive brand mix, the continued strength of the Class 8 heavy-duty truck market in North America, a growing stand-alone used vehicle operation and the benefits we continue to receive from Penske Truck Leasing investment, we remain confident and I remain optimistic about the future of our business. Thanks for joining us on the call. Let's open it up to the operator for questions.

Questions and Answers:

Operator

[Operator instructions] Our first question from James Albertine with Consumer Edge Research. Please go ahead, sir.

James Albertine -- ConsumerEdge Research

Great. Thank you and good afternoon, Roger and Tony and team.

Roger Penske -- Chairman and Chief Executive Officer

Hi, Jamie.

James Albertine -- ConsumerEdge Research

So I wanted to ask quickly just sort of a housekeeping item. There's a pre-announcement, as you know, from one of your competitors calling out Honda and BMW. Just wanted to get your take on what you've been seeing in those two brands, particularly BMW in your portfolio. And then, secondly, I wanted to ask more of a strategic question related to your stand-alone new stores and the early days kind of progress you're seeing on the parts and service contribution and maybe the opportunity that you see for parts and service and stand-alone used over time.

Thanks.

Roger Penske -- Chairman and Chief Executive Officer

All right. Good. Let me just -- I'll take the last question first. Basically, today, we're only getting about 1% of our revenue from the stand-alone parts and service, generating about 15% of the growth.

So when you compare that to the traditional auto business on our company overall, we're at 10% of revenue and about 44% of gross profit. So obviously, there's a real upside there. And I think the focus today, both domestic and international, is to be sure, as we build new stores and we focus on just the arrangement or engineering of the facility, that we focus on a place for the customers who bring their vehicles back, because, basically, these are used cars. They don't have warranty on them other than what we might sell at the time of the sale.

So it can be easy customer for us to capture, to ring back. So I think the strategy, obviously, is to do that. They have done a better job in the U.S. on that, quite honestly.

And I think the way the stores are configured in the U.K, we need some reengineering, but there's no question that we will make that change and we'll get some benefits. So we're going to advertise service more than we have in the past and I'm sure look at maybe even some service contracts that we'd execute in the individual stores specifically. So that's, I think, the strategic forward look on our parts and service in the supercenters. Let me move on to BMW, your first question, Jamie.

In the second quarter, our new business with BMW in the U.S. was flat. Our used business was up 10%. And again, when you think about BMW, half of our business is in the U.K.

and half of it -- or international and half of it is in the U.S. When you look at margin, our margin on new was down 5%. But that's probably in the range of somewhere $200 to $300, if you look at it specifically. On the other hand, our used business margin was up 4%.

And when you think that the used business was up 10% in the quarter, giving us a total of 6.5%, our business was pretty good. And when you think about the new -- the used-to-new ratio at BMW, we're at 1.65:1. And I think when you look at this, as we pull out, we have over 2,000 loaner cars at BMW and we're turning those cars 4,000 to 5,000 to 6,000. And as they come out, they've got depreciation of approximately 1.8% to 2% per month.

There might be some money that we get from the manufacturer, but this provides us with a young used car and allows us to sell this without any reconditioning to speak of or any certified cost. And this has become a very good product for us, and that's driven this 1.65:1 used to new. And I think that, from our perspective, overall, our used car business -- or excuse me, our BMW business was good in the second quarter. In fact, in the U.K, on up -- on a year-to-date basis, the profits were up 38%.

So BMW is really strong for us. And I could go into the other brands also. If you look at Mercedes, you look at Lexus and you look at Audi, all of these are obviously on the premium side. We're up about 10% when you look at the overall used car business just in those brands.

And again, we're 1:1 at least on the used to new. From a Honda perspective, in the quarter, our business was flat. We're down about 0.5% year to date. Used was down 2%.

And again, overall, that would give us pretty much a flat Q2. On the margin side, I will say that we've had a significant impact of probably about 9% on used -- excuse me, on new, and used was up about 0.25%. So I think, part of this has been, on the new side, we're pushing for sales, because there really hasn't been a lot of support on the new Accord, and the overall incentives for it have been really very moderate when you think about other manufacturers. So there's also been some deterioration in parts and service growth due to the fact that the airbag and some of those warranty areas are now past us.

So again, we've got increased floor plan cost also, so that's kind of the story on Honda.

James Albertine -- ConsumerEdge Research

Well, thank you. Thank you both again and best of luck in the third quarter.

Roger Penske -- Chairman and Chief Executive Officer

Thanks, Jamie.

Operator

And we have a question from John Murphy with Bank of America Merrill Lynch. Please go ahead.

Roger Penske -- Chairman and Chief Executive Officer

Hey, John.

John Murphy -- Bank of America Merrill Lynch -- Analyst

Hey, Roger. Hey, Tony. Just looking at this. I think, that a lot of us are coming to terms with the idea that the diversification in the used dealers, the truck business, power and then PTL is really, really working.

I'm just curious. As you look at that, I mean, it seems like there's a good level of diversification and maybe some counter cyclicality there. But as you look at these businesses, how much opportunity do you think there is for growth even if we went into a macro slowdown? Really meaning, is there just a lot more opportunity for you to buy or greenfield facilities on the used vehicle side or on the truck dealerships side to offset and just any kind of macro pressure and really just grow in those businesses significantly?

Roger Penske -- Chairman and Chief Executive Officer

Well, obviously, when you look at the heavy truck businesses, it has been cyclical. There's no question that, today, we're getting some benefit of ELD, which is electronic logging device, by a guy driving a heavy-duty tractor that can't run two logbooks. So that's put pressure on availability of trucks, probably 40,000 to 50,000 short. So that's made a big difference.

But I see, overall, that this business, there's -- we have a major competitor with Ryder there that does a good job. On the other hand, I see -- if there are people who want to get out the business, because there's a cyclical drop, meaning other dealers, we are definitely on a prowl to add more to our portfolio. And I think that from a Freightliner perspective, where we have an agreement to handle only exclusively Freightliner, that they want to see us consolidate anyhow. So there's support from the OEM, and I see that business being able to grow.

You think about -- we bought businesses in West Texas. We bought businesses in the East, in Tennessee and we've also bought businesses already in Toronto -- in the Toronto market area. And those are still in infancy from the standpoint of growth, so I see that business continuing to grow from the standpoint of heavy truck. When you look at Penske Truck Leasing specifically, we were at 270,000 trucks last year.

We're at 287,000 if I review this past week. So we see that continuing to grow both on the logistics and also on the full-service contract maintenance and rental side. So to me, there's more people wanting to come out of ownership and let us handle the leasing of their vehicles, because of complexity, also the cost of the trucks have gone up significantly and it impairs their balance sheet. So overall, I see that.

And with the team, we have 800 -- almost 850 locations around the country from a full-service capability, and we're in a very good position to grow that business. And I think the team we have is well-seasoned and there's no question, we're a leader from a standpoint -- at this point, when you look at revenues and bottom lines through the first six months.

John Murphy -- Bank of America Merrill Lynch -- Analyst

And the used vehicle business as well, I mean, when you think about that, I mean, typically that's a real growth engine. Do you need to make incremental acquisitions of points that exist already, to use a new vehicle term? Or can you greenfield facilities now that you have the D&A both in the U.S. and Europe? I mean, is there anything you need to get, from a strategic or operating standpoint, that you need to enhance? Or is it really just going out there and opening lots?

Roger Penske -- Chairman and Chief Executive Officer

Well, I think it will be kind of a hybrid, particularly here in the U.S. where we bought a facility today that we're in the process of reengineering. We'll open that up probably in the next six or seven months. It's right in a good sweet spot in our market.

We've also bought land in two different areas that we expect to grow in. So they'll be some of both. In the U.K., we've made three purchases, OK, one in Bristol, one in Stoke. And we've also bought a big DHL warehouse, where we can move into that almost immediately when they would move on, and that would be, probably, sometime early in 2019.

So I guess, it's somewhat of a hybrid. We expect to grow this business. On top of that, I think, it's important that, at the end of the day, that we will continue to streamline our e-commerce, online business, because with the capability we have, with the consumer and the touch points that we could maybe place into the market, it would be key to have an online business, where we have a hybrid, which might be facilities with vehicles and then we would have the online capability, where they never came to a location, would be delivered to home or to a particular delivery spot. So I think, we've got a wide road there as we grow this.

We're going to grow it slowly, but, I think, with people that have experience. And then the technology continues to give us better availability, better analytics for us to know what kind of cars we want to buy, what color, what model in particular markets. And I think that's one of the things that we've developed in our businesses, both U.S. and U.K., that give us probably a competitive advantage.

It's one thing to say you've got a lot of cars on your lot, but do you have the right ones? And remember that most of these cars that we're selling have to be acquired through auctions, through personal purchases or other ways that we might -- many of the OEMs now obviously have vehicles coming off their financial services businesses from leasing, so we have a real opportunity to pick those up. So I see the flow of vehicles to us much stronger over the next three to five years, because off lease and then our ability, through our analytics, that we'll be able to pick the right vehicles. But when you think about that business, overall, our variable compensation is probably 60% of what it is in a normal dealership. So if you're talking about 29% to 30%, we're probably into the 17% to 18%, which is key and you think about no CI and a lot of things that we have to do, lots of white space, no franchise loss.

So to me, both in the U.K., internationally and here, we've got real opportunities. And we can move this model, obviously, into Italy and maybe into Germany at a later date. So upside, I think, is very positive.

John Murphy -- Bank of America Merrill Lynch -- Analyst

And that kind of just leads to just my last quick question. I mean, SG&A to gross was actually pretty good in the quarter as you got some good leverage year over year. As you're growing the business particularly, as you just mentioned on the used, I mean, is there more opportunity to drive this down? Any thoughts sort of on targets or progress you want to make in working down SG&A to gross?

Roger Penske -- Chairman and Chief Executive Officer

Well, look, we need -- we obviously need to gain SG&A-gross traction, there's no question. One of the things that probably impacted us another 30 basis points during the first six months would be, as you know, under the new tax law, we decided to increase our 401(k) contribution by 67%, going from 1.5% to 2.5%. But ironically, the key part that is that when the enrollment went from 65% to almost 95%, so that had about 35 basis points impact. But I would have to say, hopefully, every quarter, we can, so we made certainly some progress.

But are we going to make 100 basis points? I don't know that. I think, we've got to look at that with the size business we have if we continue to invest in many of these initiatives.

John Murphy -- Bank of America Merrill Lynch -- Analyst

Great. Thank you very much.

Roger Penske -- Chairman and Chief Executive Officer

Alright. Thanks.

Operator

And we have a question from Rick Nelson with Stephens Inc. Please go ahead.

Rick Nelson -- Stephens Inc. -- Analyst

Thanks. Good afternoon, guys.

Roger Penske -- Chairman and Chief Executive Officer

Hey, Rick.

Anthony Pordon -- Executive Vice President, Investor Relations & Corporate Development

Hi, Rick.

Rick Nelson -- Stephens Inc. -- Analyst

I wanted to follow up on that online home delivery potential that you're working on, what sort of timeline you have in mind. And is this focused on freestanding used car stores or the franchise dealerships? And how big could this potentially be?

Roger Penske -- Chairman and Chief Executive Officer

Well, I think, we have to look at -- and we talked about a hybrid. It's ironic. I had our guys look at what are we really doing here in the U.S. today? And I would say, from a CarSense perspective, the actual home delivery is probably 1% or 2%.

So with -- the option is always there. So at this point, we don't see that as something that is going to drive that business down, because we don't do more of it. I think, it's communication, it's options for the customer. In the U.K., I think, the home delivery is a little bit further up the line from a percentage.

I can't give it to you exactly. But I think, in all cases -- all of our sites are mobile enabled. In fact, half of our traffic comes from smartphones, and I think less than 10% of our leads come from third-party providers. So looking at a completely online model, I think that we have people out there that are generating real market value from that.

I think, it's something we're all looking at. But at the end of the day, we've got to have a model that we bank money on, that we could give money back to our shareholders. And on top of that, I think, if you look at our overall Penske footprint that we have in the U.S., with a number of locations, we could really have the opportunity to have delivery points for customers that wanted to buy online and maybe never go to the specific dealership. Certainly, through our Preferred Purchase, we have the ability today to do everything online.

And I think, overall, there's no question that we're implementing more Preferred Purchase across our network and we're upgrading that. So we have -- everything is transparent. We'll be able to bring the payment calculation. Everything will be down to the penny as we go forward, so full product integration with pricing capability.

So at the end of the day, I think that there's a wide option -- many options for us, believe me, a multitiered approach. So I think, you stay tuned on that. I don't want to give anybody something that we're doing that we're really not. I just think we're looking at this as we go forward.

And remember that from an overall standpoint, today, a big portion of our service scheduling is really online. If you took our BDCs on top of that, it's 70%. So people are using the Internet now to connect with us in the service. We do probably 20,000 per week online, so a good opportunity.

And I think your point on where do we go with this is going to be interesting as we go into new markets.

Rick Nelson -- Stephens Inc. -- Analyst

Thanks for that, Roger. Store growth for the freestanding used car stores, what are the current plans at the moment?

Roger Penske -- Chairman and Chief Executive Officer

What the existing growth or the...

Rick Nelson -- Stephens Inc. -- Analyst

CarSense, CarShop, Car People.

Roger Penske -- Chairman and Chief Executive Officer

Well, from an overall standpoint, I think, I mentioned earlier in one of the questions that I think we have, right now, anywhere from, I would say, six to seven locations that will activate here in the next 12 to 18 months. So there's no question that we have that capability.

Rick Nelson -- Stephens Inc. -- Analyst

Thanks a lot and good luck.

Roger Penske -- Chairman and Chief Executive Officer

Thanks, Rick.

Operator

And we have a question from Carl Dorf with Dorf Asset Management. Please go ahead.

Roger Penske -- Chairman and Chief Executive Officer

Carl, hi.

Carl Dorf -- Dorf Asset Management -- Analyst

Good morning, Roger, and nice quarter. Roger, what I'm interested in, in your thoughts on what this business will look like in two to three years, considering self-driving vehicles, electric vehicles. What do you think your model will look like? And what are your plans along this line?

Roger Penske -- Chairman and Chief Executive Officer

Well, if you're talking about autonomous vehicles, I don't think we're going to see that we'll be selling autonomous vehicles in the market over the next two to three years. I don't think that's a possibility. There might be areas that are ring-fenced that they'll be utilizing those. But to me, I don't think that we'll see that.

On the other hand, when you look at mobility, you really have, today, when I think about it, three types of mobility. You got ride hailing, which we all know about Uber and Lyft. We got the car sharing today, free floating. You got fixed point, peer-to-peer and vehicle subscriptions.

All of these areas are in test. None of them have proven, at least in things that I've looked at, that they're commercially viable from a profitability standpoint. One thing we know, if any of these things become something we should do, we have the footprint and we have the capital to mobilize pretty quickly. So I'm not going to be -- try to be the head guy in the race on this.

I think that, at the end of the day, we need to be agile, and we need to be flexible with our capital and also our people. So to me, we're going to be in the new and used car business. We'll be, obviously, growing our stand-alone superstores. We'll be continuing to look at profitability and stores that might need to be divested during the next two or three years based on the value from the many OEM or our own profitability.

And then, we're also going to obviously want to extend our truck business and our truck leasing business will continue to grow. So from a cash-flow perspective, I think, that we're really in very good shape when you look at different opportunities. And look at the commercial truck area, with the growth we have there with Freightliner, we have 41% of the marketplace. So trucks, leasing -- we didn't talk much about Australia, but when you think about our business out in Australia today, that business has grown nicely.

And we're in the position today to be a major provider in the defense area, so those give us long-term contracts, which are obviously very important for life-cycle cost for us and life-cycle opportunities. So I think we'll be a lot the same. We want to continue to grow. I think, the company, over the next couple of years, can grow the top line through acquisitions and same-store growth anywhere 4% to 8%.

So that's my goal.

Carl Dorf -- Dorf Asset Management -- Analyst

Thank you very much [Inaudible]

Roger Penske -- Chairman and Chief Executive Officer

Thanks, Carl.

Operator

And I'll turn it back to our speakers for closing remarks.

Roger Penske -- Chairman and Chief Executive Officer

At this time, I have nothing else to say. Thanks for joining the call, and we'll see you in Q3. Thank you.

Operator

[Operator sign-off]

Duration: 41 minutes

Call Participants:

Anthony Pordon -- Executive Vice President, Investor Relations & Corporate Development

Roger Penske -- Chairman and Chief Executive Officer

James Albertine -- ConsumerEdge Research

John Murphy -- Bank of America Merrill Lynch -- Analyst

Rick Nelson -- Stephens Inc. -- Analyst

Carl Dorf -- Dorf Asset Management -- Analyst

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10 stocks we like better than Penske Automotive Group
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