AutoNation, Inc.

The AutoNation Incorporation Fourth Quarter 2023 Earnings Conference Call will begin shortly. We're currently waiting for more participants to join in. Please stand by. Hello, everyone, and welcome to the AutoNation Incorporation fourth quarter 2023 earnings conference call. My name is Bruno. I'll be operating your call today. During this presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. I'll now hand over to your host, Derek Fiebig, Vice President of Investor Relations. Please go ahead.

Thank you, Bruno, and good morning, everyone. Welcome to AutoNation's fourth quarter 2023 conference call. Leading our call today will be Mike Manley, our chief executive officer, and Tom Slozek, our chief financial officer. Following their remarks, we'll open up the call for questions. Before we begin, 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 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 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 on our website at investors.autonation.com. With that, I'll turn the call over to Mike.

Yeah, thanks, Eric, and good morning, everybody. Thank you for joining us today. I'm on slide three, and I'm going to provide some opening remarks before I hand over to Tom, who's going to take you through our fourth quarter results in greater detail. Now, as we know, there continue to be mixed economic signals in the economy and concerns over affordability. But from our perspective, consumer demand for new vehicles remains robust. Now, during the quarter, our total new vehicle revenue increased 7%, and unit sales increased 8%. And this reflected strong import growth, as well as the seasonal uplift in premium luxury sales. New vehicle margins continue to decline, but the rate of moderation in the fourth quarter, which was approximately $120 per month was more modest than earlier quarters. Total new vehicle inventory levels of 36 days increased from 19 last year and 31 in the third quarter. We have 66 days of domestic brands, 29 days of luxury, and 24 days of import brands. Inventory levels are expected to continue to grow in 2024, and as such, we expect to see a continued moderation of new vehicle margin. which we anticipate will be roughly the same pace as we experienced in Q4. Turning to used vehicles, same store units decreased 8% a year ago, while total units were down 4%, which reflects the growth of ANUSA stores in the year. The more recent sequential comparisons have us slightly better than the market. Now, we're managing several critical variables in the used market at the moment. Firstly, we continue to see tight availability. And this has been with us throughout 2023 and will no doubt continue into 2024. And notwithstanding the inventory availability, we're seeing used vehicle depreciation, which is broadly back to normal and historical levels. Mix between price bands is also normalizing. And as a result, we've seen lower demand in higher price used vehicles, partly because of affordability and partly because new vehicles are becoming more available with lower net transaction price. which is often accompanied by subsidized lending rates, which makes new products more compelling for a number of our customers. Tom's going to give you some of the specifics on unit sales by pricing band. Our inventory terms on used vehicles declined modestly during the quarter. The mixed change I just noted, combined with slower terms, moderated our used PVR, and we expect these market conditions to continue into 2024. And as a result, we expect our Q1 2024 use margins to be in the same range as our Q4 results. Now, we maintained our industry-leading performance in customer financial services in the quarter, as the team continued to do an outstanding job to overcome a higher interest rate environment by maintaining solid growth in product sales per unit sold compared to a year ago. This performance, combined with a 2% increase in total retail units sold, resulted in higher CFS gross profit. After sales delivered a record fourth quarter for revenue and margin. Total store revenue was up 11%, and our gross profit was up 13%. Growth came from all major categories. The greater complexity of vehicles is leading to higher values per repair order, and this coupled with increased numbers of repair orders from a year ago resulted in what I think is an excellent performance. The strength of our balance sheet and cash generation, which Tom will discuss, allowed us to deploy an additional $150 million towards share repurchases during the quarter, repurchasing more than 1.1 million shares. Now, aside from the solid quarter, from a financial perspective, there are a few other highlights I'd like to touch on. We continue to focus on our customers and are working to garner a greater share of customers' wallets. As such, during the quarter, we continued integrating automation finance across our portfolio, including the launch into nearly all of our franchise stores. We also continue with the rollout of our AMUSA stores, opening locations in Plano, Texas, and Fort Myers, Florida, during the quarter. And we opened additional stores in Florida early this year with Wesley Chapel, Sandford, and Jacksonville, adding to density in these markets. I think our business model is resilient, working well, and we continue to deliver a strong financial performance. Now, this performance is, of course, made possible by our 24,000-plus alternation associates who take care of our customers every day, And I think the team efforts continue to be recognized by outside parties because of this. And this year, Alternation once again made Fortune's most admired list, jumping four spots to number three in the Specialty Retailer section. Congratulations to everybody. Thank you for the things that you do for us. And with that, Tom, I'm going to hand over to you.