AutoNation, Inc.

Good morning, my name is Alex and I'll be your conference operator today. At this time, I would like to welcome everyone to the AutoNation First Quarter 2022 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'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star too. Thank you. I would now like to turn the call over to Ankur Shah, Manager of Investor Relations. You may begin your conference.

Good morning and welcome to AutoNation's first quarter 2022 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 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 Chief Executive Officer Mike Manley.

Yeah, thanks, Ankur. Well, good morning, everybody, and thank you for joining us. Firstly, I am pleased to report that the momentum with which automation ended 2021 continued through to the first quarter of this year. From our view, consumer demand for personal vehicle ownership remains strong across both our new and our used channels, and our service and parts business is clearly showing the benefits of both increased miles traveled and our focus on increasing our penetration into the after-sales market. And really, as a result, today, AutoNation reports record first quarter performance with earnings per share of $5.78, which is an increase of 103%, and revenue of $6.8 billion, which increased $849 million, or 14% compared to prior year. Now, from a new sales perspective, our performance reflects the effect of continued tight supply basically with volumes down and new margins stable from the end of last year. At year-to-date, I can say compared to prior year, we've not seen any reduction in lead demand for new vehicles or really any perceivable segment shifting as a result of current economic conditions. Now, our used car performance reflected good volume growth on a same-store basis and the continued expansion of our Alternation USA business, and this helped maintain our revenue and total gross profit. Now, during the quarter, we sharpened our analytics capabilities, which are increasingly educating our buying, placement, and pricing decisions in the used market. And these disciplines are a work in progress, but I think you can clearly see they're going to have a beneficial impact on our business. For example, during the quarter, we recognized the need to rebalance some of our used vehicle inventory to help improve turn and margin. And as a result, in the quarter, we saw temporary reduction in used margin per unit sold. But because of these actions, as we enter the second quarter, margin return have already improved. As we all know, success in the used car market is basically dictated by your ability to manufacture great quality, well-priced, desirable used cars. And this clearly covers key elements of the business, including efficient and effective reconditioning, for example. But it all starts fundamentally with your ability to competitively acquire used inventory. And with strong consumer demand, We continue to focus on our self-sourcing capabilities for used vehicles, which I think further strengthens both our franchise dealerships but also our Alternation USA businesses. And as I've mentioned before, nearly all of our pre-owned vehicles retail to self-source, which includes our growing We Buy Your Car channel, which purchases directly from consumers. And when I look back at the first quarter, we self-sourced 94% of our pre-owned vehicles that we acquired. Now, as previously announced, the company entered two new markets this quarter with Alternation USA Charlotte in North Carolina and Alternation USA in Charleston in South Carolina. And our Alternation USA stores continue to exceed our expectations, and these two new stores were both profitable during their first four months of operation. And we remain on plan to open 12 additional stores over the year. And our target, as you know, is to have over 130 of these stores in operation from coast to coast by the end of 2026. These stores will continue to leverage the automation brand, the scale that we have, and our proven customer-centric processes to capture a larger share of the used vehicle market. Moving on to after sales, as I mentioned earlier, our team delivered what I consider to be a tremendous quarter with an increase in after sales gross profit of 19%. And I'm going to come back to this a little bit more in my closing comments. We continue to build our compelling customer value proposition through the combination of our digital tools and physical assets and going to leverage not just our existing business, but also Automation USA growth plan and our embedded structure improvements coupled with the rich data analytical capabilities that we continue to build, and this is going to help grow and strengthen our business and the Automation brand. But before I hand over to Joel, who's going to take you through our results in more detail, I'm going to briefly touch again on a topic that we did discuss last quarter when we reviewed our year-end results. During that time, I talked about a number of key profit drivers and disciplines that now are structurally embedded into the group, such as our used to new sales volume focus, our customer financial service performance, our after sales penetration and margin expense control. And I'm pleased to recognize that when I review the results for Q1, you can again see the benefits of this focus and discipline coming through strongly. Great performance from our sales and CFS teams, growing our used business and our per unit CFS performance. Our service and parts teams, led by our technicians, service lane advisors and and our past teams delivered strong performance improvement. And as you see, all of our associates, and frankly that's whether they work in our dealerships, collision centres, auction or support functions around the country, demonstrated the continued clear focus on margin but also expense control discipline. I think these things are important and I touch on them again because performance efficiency and effectiveness in these areas, my view, is sustainable and as such really do help decouple our company from the more circumstantial elements that could be viewed as transitional, such as supply and demand-driven constraints. Now, these embedded structural improvements in our performance should not be discounted because ultimately they do translate into long-term sustainable value, and they provide us with more control over where we're going and the opportunity to focus on expanding and developing our customer-centric personal transportation solutions while driving results for our manufacturer partners. So I just want to end this introduction by congratulating all of the people that work at AutoNation for the results they delivered in the quarter, thanking them for what they do. And with that, Joe, I'm going to hand over to you.