AutoNation, Inc.

Good morning. My name is Brica and I will be your conference operator for today. At this time, I would like to welcome everyone to the AutoNation first quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. And 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 the number one on your telephone keypad. If you would like to withdraw your question, please press star then two. Thank you. I would now like to turn the call over to Derek Fiebig, Vice President of Investor Relations. So, Derek, you may begin your conference.

Thanks, Farika, and good morning, everyone. Welcome to AutoNation's first quarter 2023 conference call. Leader of our call today will be Mike Manley, our Chief Executive Officer, and Joe Lauer, our CFO. Following their remarks, we'll open up the call for questions. Before beginning, I'd like to remind you that 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 Security Litigations 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 today and in our filings with SEC. Certain non-GAAP financial measures, as defined under SEC rules, will be discussed on this call. Reconciliations are provided in our materials and our website located at investor.autonation.com.

With that, I'll turn the call over to Mike. Yeah, thanks, Eric. and good morning everybody and thank you for joining us today we reported first quarter ETS of six dollars and seven cents and that really is a result of our resilience of our business in this environment but coupled with discipline capital allocation and as a result of those two things that six dollars and seven cents was a record result for us now Joe will take you through the numbers in detail but before that I wanted to discuss how we've been successfully navigating in the current environment and and where we'd be taking the business in the future. Obviously, there's a lot of mixed economic signals in the market and within auto retail, which do warrant, I think, a more cautionary approach than the past few years, although I think it's also evident that the current economic environment is having an impact. Some of the concerns of late last year have not yet manifested themselves to the extent some thought they would. And the consumer, in our opinion, is in no way tapped out, and the industry is benefiting from lower unit sales over the past few years, and an aging vehicle park, which has historically supported demand within the industry. Now, for new vehicles, industry inventory remains well below historical levels. And we have seen some recovery, but there is a wide variation amongst brands and models. First quarter new sales increased from a year ago, driven by a large increase in fleet vehicles, with retail units up slightly. Even with the recent increase in sales, the industry still remains at or near recessionary levels. Alternations unit mix for the quarter were in line with industry after counting for our brand mix. So if you look at our portfolio and the way the industry shaped out, our new vehicle sales were, as I just said, in line with the industry for that period. Our new vehicle profitability was solid, as you've seen. PVRs continued to moderate, as expected. as the inventory increased, yet remain very robust at more than $5,200. Moving to used vehicles, as we discussed on our last call, availability of used vehicle inventory will be a key thing this year. And the lower new unit sales over the past years have led to scarcity of supply of late model new vehicles. As of the end of last year, the population of vehicles five years and less of age was down about 10% from 2019. And vehicles three years and less were down more than 15% from 2019. In addition, the turnover of younger used vehicles, which are more of our sweet spot, has also declined as consumers are holding onto their vehicles for longer. But I do have to say that none of this was unexpected. Now, to help offset the resulting reduction in used volumes, we focused on enhancing economics through effective self-sourcing, reconditioning, speed to market, and of course, pricing. Our focus was squarely on internal sourcing, which is a strength of ours, asset turnover, and avoiding purchasing vehicles at auction, which either requires substantial reconditioning to get them up to the alternation standard, or come at a premium price, which would have significantly impacted our margin. Used equal gross profit was a first quarter record, and up both year over year and on a sequential basis from the fourth quarter. Last year in the first quarter, we made the tactical decision to realign, reposition, and reduce our used car inventory. I think that proved to be a prudent move as the year went on. It did, however, set us up for a tough bump for unit volume in Q1. We will remain nimble in our approach to used vehicles, and the expansion of our Alternation USA footprint remains a core tenet of our expansion and densification efforts. Turning to CFS, we continue to lead the industry in customer financial services. to increase focus on product penetration. We have structurally changed our CFS PVR, and we continue to average two products per vehicle. Product attachment for new vehicles has remained steady. Well, not surprisingly, there has been some reduction in product attachment for used vehicles. On the finance side, which represents about 30% of our total CFS business, penetration is lower than a year ago, but increased marginally from late last year. After sales, we've been consistently growing in the time margin business. Gross profit was a record $511 million, up 11% from the first quarter last year. This was fueled by customer pay warranty and collision, as we've been able to overcome the decrease in late model vehicle park, and we remain focused on expanding our technician workforce and serving more customers. And finally, for cash flow and capital allocation, for the quarter, we generated significant cash flow, with cash from operations of more than $500 million. This strong cash flow generation combined with the strength of our balance sheet allow us to continue to invest to change our business for the long term, make investments in our core operations and return capital to shareholders through share repurchase. During the first quarter, we invested more than $300 million to repurchase a total of 2.4 million shares. I think when you look at the shape and the performance of our business in this quarter, And in fact, recent prior periods, it's increasingly evident that the structural changes that we have made to automation during a time when the supply and demand economics have been a tailwind for our operation will have a lasting and meaningful impact on a go-forward basis on how to drive shareholder value and returns regardless of what cyclicality we may face. And just before turning the call over to Joe, I would like to provide some color on where automation is heading in our channels for growth. I think we've been intentional looking at areas we can expand and grow to meet the transportation need of our 11 million customers and their households as we seek a deeper, more frequent relationship for a longer period of time, which builds on AlterNation's very strong core business, utilizing our brand and our significant footprint. In many ways, this represents a change of mindset within the company. The approach is centered on the broadening of our customers and the nearly 10 million households we serve, During the first quarter, we brought on nearly 100,000 new households, and we're focused on enhancing our relationships with active customers and reactivating collapsed customers. We've taken a number of actions to extend the value creation of our core business by increasing the depth and breadth of our product and service offerings while providing a convenient, trusted, and transparent customer experience. These include our digital efforts and the investment in Trucar. the acquisition of CIG and creation of AM Finance, and the acquisition of RepairSmith, which extends the reach and brand of our after-sales business. As we've said, these acquisitions will not have a material impact on our near-term results, but have put in place critical pieces for our future. We're pleased with the effectiveness of AM Finance and its ability to compete with other financial institutions in meeting our customer needs. We have great relationships with existing lenders and will continue to work with them. As we've said, it will be a slow expansion for AM Finance as it earns its business with its customers. For RepairSmith, we're in the very early days, having acquired them earlier in the first quarter. It will take time for the business to obtain meaningful scale and scope, but we expect it will thrive in the automation ecosystem. Both of these acquired businesses are additive and are not substitutional for our business. and we will take a measured approach as we work for sustainable, profitable growth. The expansion of offerings builds on some of the step changes we have made to the business, which include our continued expansion into used vehicles through ANUSA, which is now at 15 stores, our continued growth in after sales, and our continued growth and focus in CFS to industry-leading PVRs. Over time, we expect our actions will garner a larger share of wallet from consumers, thereby reducing our relative exposure to the more cyclical parts of the business, namely new water sales. Now, I'll turn the call over to Joe, who's going to take you through the financials in greater detail.