AutoNation, Inc.

Welcome to the AutoNation Second Quarter 2020 Earnings Conference Call and Audio Webcast. First to speak will be Rob Cortaro, Vice President of Investor Relations. Please go ahead, sir.

Good morning, and welcome to AutoNation's Second Quarter 2020 Conference Call and Webcast. Meeting our call today will be Mike Jackson, our Chairman and Chief Executive Officer, and Joe Lauer, our Chief Financial Officer. Following their remarks, we will open up the call for questions. I will be available by phone following the call to address any additional questions that you may have. Before we begin, let me read our brief statement regarding forward-looking comments. Certain statements and information on this call, including any statements regarding our anticipated financial results and objectives, constitute forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks. including economic conditions and changes in applicable regulations that may cause our actual results or performance to differ materially from such forward-looking statements. Additional discussions of factors that could cause our actual results to differ materially are contained in our press release issued earlier today and in our SEC filings, including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. And now I'll turn the call over to AutoNation's Chairman and Chief Executive Officer, Mike Jackson.

Good morning. Thank you for joining us. AutoNation delivered remarkable results for the second quarter compared to the prior year. Today we reported an all-time record best-ever quarter adjusted EPS from continuing operations of $1.41, an increase of 18% compared to last year. No question the second quarter is certainly one for the history books. In early April, same-store retail unit sales dropped 50% compared to the prior year when the entire country shut down due to the COVID-19 pandemic. For the month of June, thanks to the monumental effort of our associates, we recovered to achieve unit volume in line with last year. In April, same-store new vehicle unit sales were down approximately 50%, and for the month of June, only down 13% compared to last year. Inventory shortages from the manufacturer's plant closures led to strong new vehicle gross profit per vehicle retailed. At the end of the quarter, new vehicle inventory was down 26,000 units, or 41% compared to last year. We expect new vehicle margins to normalize as new vehicle inventories recover. At the beginning of April, same-store used vehicle retail unit volume was down approximately 60%, and for the month of June, increased 14% compared to last year. However, inventory levels are tight. Demand is currently outpacing supply. We continue to focus on We'll Buy Your Car initiative, where we sourced over 6,000 units directly from consumers in the quarter. For July, we will source 3,500 units to help build our inventory. Customer care is also seeing improvement. In April, our average same-store customer care gross profit per service day was down approximately 40%, and for the month of June, it was down roughly 10% compared to last year. The pandemic has accelerated a shift in consumer behavior towards digital engagement. Our AutoNation Express online selling tools enable customers to buy and sell vehicles online, and our store-to-door delivery option allows customers to completely take delivery at home. We're also investing in data and analytics. We have built a proprietary equity mining tool, which leverages millions of sales and service transactions into a central system. The tool automatically appraises the customer's current vehicle and identifies a newer replacement vehicle for a similar or lower payment. It shows household vehicle service history, propensity to purchase, and customer financial service product history. The equity mining tool is linked to our recently launched Customers 360, which has over 8 million active customer sales and service records. Customer 360 allows our associates to see the lifetime value and transaction history of our customers. We will continue to invest in digital capabilities that enable us to provide a truly comprehensive and personal experience for our customers. Over the last two years, AutoNation has taken an aggressive approach to streamline the business. The company's continued investment in digital created greater efficiencies, which made possible position eliminations, and reduction in advertising costs. Additionally, in 2018, Water Nation implemented a restructuring plan that reduced costs annually, consolidated its regional structure from three to two. This year, we made further reductions to headcount, advertising, and discretionary spending. These efforts allowed us to deliver adjusted SG&A as a percent of gross profit of 68.2% in the second quarter of 2020, which represents a 520-point basis point improvement compared to the second quarter of 2018. We intend to operate below 69% SG&A as a percentage of gross profit on a long-term basis. Today, we announced plans to build at least 20 additional AutoNation USA stores over the next three years. We'll provide details of the rollout schedule next quarter. We see an opportunity to take a larger share of the used vehicle market which is substantially larger than the new vehicle market and benefit from the increased interest in vehicle ownership from consumers. AutoNation's strong brand, first-class digital capabilities, our one-price strategy combined with lower acquisition costs, stable used vehicle retail pricing make AutoNation USA stores an attractive investment opportunity. I'd now like to turn it over to Joe. Please, Joe.