AutoNation, Inc. Q3 FY2025 earnings call

Market Conditions

• New and used vehicle markets are reasonable, with industry inventory below pre-pandemic levels. Tariffs are impacting OEM profitability, leading to decontenting, reduced trim levels, and moderation in incentives.

Q3 Results

• Delivered 25% adjusted EPS growth, strong cash flow, and deployed capital for share repurchases and acquisitions. Same-store new vehicle sales up 4.5%, domestic segment up 11%. Hybrid sales up 25%, BEV up 40%. Used vehicle acquired ~90% via trade-ins/We'll Buy Your Car. After-Sales gross profit up 7%, margin up 100 basis points.

AN Finance

• Originations nearly doubled, portfolio >$2B, performance in line with expectations, with delinquency rates expected to normalize.

New Vehicle

• Unit volumes increased 5% total store and 4% on a same-store basis. Domestic vehicles grew ~12% in the quarter, import up 4%, Premium Luxury flat. Hybrid New Vehicle unit sales were up nearly 25% from the prior year, BEV up more than 40%. Inventory was 47 days of supply, down from last year.

Used Vehicle

• Retail sales improved 4% on a total store basis with average retail prices up 4%. Gross profit increased 3%, same-store up 2%. Acquired approximately 90% of vehicles through trade-ins and the We'll Buy Your Car effort.

Customer Financial Services

• Gross profit was the highest ever, up 12% from a year ago. More than 2 products were attached per vehicle, with finance penetration higher.

After-Sales

• Record revenue and gross profit. Same-store revenue increased 6%, gross profit up 7%. Technician headcount increased 4% on a same-store basis from a year ago.

Q4 Expectations

• New vehicle mix to improve with less BEV and more Premium Luxury. Used vehicle inventory held at higher levels to support growth. AN Finance performance expected to continue.

Risks

• Tariff impacts on OEMs and dealers, potential decontenting and reduced incentives. Competition in used vehicle sourcing causing upward pressure on wholesale prices. Delinquency rates in AN Finance portfolio, though expected to normalize as the portfolio matures.

Q: Quantify variable gross per unit decline, A: Impact from BEV mix and domestic combustion sales compression, expected to improve in Q4.

Q: Auto credit trends, A: Portfolio performance in line with expectations, no acceleration in delinquencies.

Q: Used car growth and profitability, A: Higher inventory levels held, progress above industry, margin pressure but stable.