AutoNation, Inc. Q1 FY2026 earnings call

• AutoNation delivered fifth consecutive quarter of year-over-year growth in adjusted earnings per share. • Adjusted EPS was $4.69, up from a year ago. • Generated $256 million of adjusted free cash flow. • After sales had mid-single digit growth despite adverse weather. • Customer financial services had strong per unit profit growth. • AutoNation Finance performed well with increasing portfolio and improved funding profile. • Deployed approximately $350 million of capital including $300 million in share repurchases. • Balance sheet remains strong with leverage ratio within targeted range.

After sales: Gross profit was $593 million, a first quarter record. Same store gross profit increased 3% and total store gross profit increased 5%. Internal pay declined by 6%, customer pay grew at 8%, warranty-related gross profit grew at 7%. Customer financial services: Per unit profit up 6% from a year ago, offsetting year-over-year decline in unit volumes. AutoNation Finance: Generated $9 million of profit in the quarter, portfolio ended at $2.45 billion, up about $1 billion year over year, originations were 17% of all deals financed in the first quarter. New vehicle: Unit sales down in line with industry, BEV unit sales declined more than 50% year over year, premium luxury unit sales decreased 16% from a year ago, new vehicle unit profitability increased sequentially by 5%. Used vehicles: Achieved highest used to new ratio in two years, used retail unit sales had mixed shifts, average selling prices increased 5%, used vehicle unit profitability increased by more than $150 sequentially.

• Expect SG&A to moderate as a percentage of gross profit in subsequent quarters but remain above targeted range due to continued investment. • Anticipate improvements in used business over the course of the year as lease returns increase and execution continues to improve. • New vehicle sales continue to track in line with broader retail market and unit profitability shows signs of stabilization. • Focus on driving free cash flow to improve maximum capital deployment capacity.

• Industry challenges such as year-over-year comps being challenging. • Unfavorable self-insurance experience including damage related to weather events. • Impact of geopolitical and economic uncertainties on affordability and consumer confidence which may affect demand. • Uncertainty regarding the return on strategic investments in brand building and technology.

Q: Removed previous 2026 outlook slide, reason and guardrails around new and used vehicle GPU trajectory.

A: Industry had affordability headwinds from inflation, fuel prices, etc. After-sales is anti-cyclical. Margin compression could stimulate volume.

Q: Shift towards more profitable parts of business, view on trend.

A: It's a concerted effort. Industry became more efficient, inventory discipline contributes to stabilization of variable grosses.

Q: Used vehicle comps, GPUs, ability to drive improvement.

A: Focus on sourcing vehicles, reducing inefficiencies to maintain margin even if ATPs mitigate.

Q: Impact of war on consumer confidence and demand trend.

A: Affordability affected, middle cohort's disposable income impact on industry, deferred purchases feed into after sales.

Q: Used car business strategy, sourcing.

A: Focus on trade-ins, We Buy Your Car activities, reposition brand, dip into auction market, balanced portfolio of vehicles.

Q: ANF annualizing, steady state and future penetration.

A: Originations increasing, penetration can continue to improve, targeting 20% penetration.

Q: Impact of weather on quarter, SG&A spending levels.

A: Weather impact on self-insured claims was about $5 million. Focus on SG&A productivity through AI and digital applications, expecting SG&A to moderate.