AutoNation, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the AutoNation third quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 in your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to turn the call over to Rob Quartar, VP of Investor Relations. Please go ahead.

Thank you. Good morning and welcome to AutoNation's third quarter 2020 conference call and webcast. Leading 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 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 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.

Thank you. Thank you. Good morning, everyone. Thank you for joining us today. WaterNation's third quarter results were the best ever in the company's history. We reported an all-time record quarter adjusted EPS for continuing operations of $2.38, an increase of 102% compared to last year. In the third quarter, we saw solid demand and a strong pricing environment due to low interest rates and increased interest in vehicle ownership from consumers. With the higher demand and tight inventory, We adjusted pricing, and we're able to improve our margins. New vehicle inventory remains tight, and we expect it will remain tight into 21. For the quarter, same-store total variables gross profit per vehicle retail increased $966, or 28%, compared to the prior year. Same-store new vehicle gross profit per vehicle retail increased $914, or 56%, And same-store used vehicle gross profit per vehicle retail increased $602, or 43%, compared to prior year. With our continued focus on our We Will Buy Your Car initiative, we're more than double the number of vehicles we sourced compared to last quarter. Approximately 75% of the pre-owned units retailed are acquired from customers. For the third quarter, we acquired over 12,000 units with We'll Buy Your Car, and we're currently sourcing over 4,000 units a month to both supplement our inventory as well as reduce our average used vehicle acquisition costs. During the third quarter, we continued to leverage our digital capabilities to drive cost reductions and increase efficiency for the business's long-term success. These efforts, combined with our strong gross profit growth, grow significant SG&A leverage in the quarter. Adjusted SG&A as a percentage gross profit was 64.4% in the third quarter of 2020, representing a 800 basis point improvement compared to the third quarter of 2019. We are committed to operating below 68% SG&A as a percentage gross profit on a long-term basis. Our AutoNation USA stores delivered another profitable quarter. The continued growth and strong execution at these stores solidify our decision to move forward with the AutoNation USA expansion announced in the second quarter. We plan to build over 100 AutoNation USA pre-owned stores with over 50 completed by the end of 2025. Our plan includes five new AutoNation USA stores to be opened by the end of 21. The AutoNation USA expansion will include extending AutoNation's coast-to-coast footprint into new markets, with our first new stores to open in Austin and San Antonio in 21. These stores will continue to leverage the AutoNation brand and its proven processes for competitive advantage. With this expansion, we have set the long-term goal of selling over 1 million combined new and used retail units per year, Additional information regarding our AutoNation USA stories mansion can be found in the third quarter 2020 earnings presentation on our investor relations website. I will now turn the call over to Joe, our chief financial officer.