AutoNation, Inc.

morning my name is charlie and i will be your conference operator today at this time i would like to welcome everyone to the auto nation fourth quarter 2021 earnings conference call all lines have been placed on mute to prevent any background noise after the speaker's remarks there will be a question and answer session if you would like to ask a question during this time simply press star followed by one on your telephone keypad if you would like to withdraw your question please press star followed by two thank you I would now like to turn the call over to Rob Cotaro, Vice President of Investor Relations. You may begin your conference.

Thank you. Good morning and welcome to AutoNation's fourth quarter and full year 2021 conference call and webcast. Please ensure that your lines are muted until the operator announces your turn to ask a question. Leading our call today will be Mike Manley, our 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 FDC 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 Chief Executive Officer, Mike Manley.

Yeah, thank you, Rob. Well, good morning, everybody, and thank you for joining us. Obviously, the main focus for today's call is naturally the presentation of Automation's fourth quarter results, which we'll also touch on the full year as well, which Joe and I are going to discuss in detail. But as this is my first call, I was also trying to think about what may be helpful for me to touch on in addition to the financial results. And I thought that, firstly, I'm going to give a brief overview of some of the things that I've been doing over the last three months. And then I'm going to go through the highlights of the group's performance and hand over to Joe, who will give you more of the fine detail. After that, I'm going to touch on a number of the key topics that have gained attention over the last few weeks. And in closing, before our Q&A, I thought I might give a nod to the future, which will be just a summary of some of my preliminary observations. So as you can imagine, when you join a new organization, particularly one that has a broad national footprint of retail locations and over 20,000 people in the field, you spend quite a lot of time traveling around the country. And today, I had the opportunity to visit a number of our franchise dealerships, including our most recent acquisitions, many of our Automation USA stores, our auction sites, and a number of our collision centers from coast to coast. Now obviously, I knew from my previous life that Automation was the largest automotive retailer in the United States. and that it also began to build additional brands, businesses, and capabilities at scale. But I have to genuinely say that reading about it on paper actually doesn't do it justice to what has been built and the talent that the organization possesses that I could actually see, feel, and get a sense of by actually visiting the locations. I think when you get the opportunity to travel to our dealerships and businesses, you really start to recognize the incredible assets that the group has been able to build, acquire, and develop. When I think about the 330 franchises in our dealerships, not only do the brands we represent account for 99% of all new vehicles sold in the US, but we're also fortunate to have a superbly balanced portfolio of the best automotive brands in the world, and they are located in some of the most exciting franchise territories. In addition to visiting our retail businesses, I've also met with a number of our OEM partners, and I have to say, unfortunately, I haven't been able to get around all of them, so for me, this is a big clear to do and finish list, and I'm looking forward to meeting with our partners that I haven't met yet. But I have to say, the ones that I have now been incredibly encouraged by our conversations, we've had what I would consider very frank exchanges of views, and very importantly, I've been able to see the brand and the product plans for the future, and for me, just makes representing fantastic brands even more exciting when you understand what's actually coming through the pipeline. Now, obviously, our franchise dealerships are an important core part of our group, and our scale gives us significant opportunities. What is also clear is that we're also developing businesses and platforms that will significantly expand our reach, and I think give us the opportunity to take advantages of things as they unveil in the future. As you know, we're building a strong focus used car brand with Automation USA, and as Joe will tell you in a minute, all of the stores we have, including those added in 2021, are up and running. They're profitable out of our expectations and adding happy customers to our growing family on a daily basis. And finally, and I think this is really important, the one thing you really do get a true feel of once you're on the inside on a day-to-day basis is the quality and the passion of the alternation team. It doesn't matter where I've been, either in our dealerships, our collision centers, in our corporate office, I think there's really a clear will to win and a customer and community-focused culture. So on this point, as a reality check, I do have to say I've never heard an incoming CEO say anything bad about the team he or she walked into. Certainly not, at least on the first phone call. And you no doubt probably expected me to compliment our people. But my comment actually goes well beyond gratitude. Because you can imagine our strong performance, how pleased I am with the team's delivery of a seventh consecutive record quarter. And I think we have to remember this is still delivered during very unusual times with significant disruption from lack of supply, winter COVID spikes and competition everywhere. And my comments actually go beyond that. They're made as much for the performance the team delivered as they are for the less visible selfless work they do in our communities in the fight against cancer. AutoNation's Drive Pink campaign was a true revelation to me. Not in the sense that an organisation was involved in social and community projects or charity works, Because actually, I think that's what organizations are supposed to do. But I was amazed to see just how many of our associates get involved on their own time to support Drive Pink and Drive Out Cancer. To date, the people of Alter Nation have raised over $30 million, which has been plowed into research, treatment, and care. Now, that is a team that I can tell you I'm already very proud of. Okay, so it just gives you a brief flavor of my first three months, and now I'm going to turn to our results. So you've seen from the numbers, We delivered another outstanding quarter and a very strong year. And today, as I already mentioned, we report our seventh consecutive record quarterly results with adjusted EPS of $5.76, which is an increase of $137, and revenue increasing by 797 million or 14% compared to the prior year. Now, this was driven by robust growth in used vehicle sales, consumer finance services, and after sales. Total units of the quarter declined by 1%, and that was driven by new vehicle sales down 20%, which was largely offset by an increase in 21% of used vehicle volume compared to the prior year. And with strong consumer demand, we continued to focus on our self-sourcing capabilities for used vehicles, which further strengthened both our franchise dealerships and our Alternation USA businesses. When I look at that, nearly 90% of all pre-owned vehicles vehicles retailed in the quarter were self-sourced via our acquisition strategy, which obviously includes all of the trade-ins. But now, increasingly, we buy your car program, which purchases directly from customers. And as a result, used vehicle revenue increased 55% for the quarter. Now, as I previously mentioned, AutoNation USA is a successful part of our plan. And in November, we opened AutoNation USA Avondale in Phoenix. and recently entered the new market with our 10th automation store, USA Store in Charlotte. Now, each new store opened in 2021 has exceeded expectations, as I said, profitable in the first full month of operation, and we remain on target to open 12 additional new stores over the next 12 months. I think our focus on margin expense control significantly contributed to our performance with strong new used financing insurance margin per unit, perhaps significantly year over year and in the quarter, and continues to our improvement in our after-sales business, which delivered an 11% increase in gross profit. I know it's been discussed before, but the ongoing expense control, something which, frankly, I consider structural in the business now, helped contribute to an overall increase in total store profits by over 150%. Now, with that, I'm going to hand you over to Joe, who's going to take you through the detail of the financials.