AutoNation, Inc.

Welcome to the Alternation First Quarter 2024 conference call. My name is Carla, and I will be coordinating your call today. During the presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I will now hand you over to your host, Terry Fiebig, Vice President of Investor Relations. You may now begin.

Thank you, Carla, and good morning, everyone. I'd like to welcome you to the first quarter 2024 conference call for AutoNation. 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 to 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 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 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 located at investors.autonation.com. With that, I'll turn the call over to Mike. Thank you, Derek, and good morning, everybody, and thank you for joining us today.

I'm going to start on slide three and, as usual, provide some opening remarks before Tom takes you through our first quarter results in greater detail. Consumer demand for vehicles in the first quarter was robust, and, in fact, this is the first time we have had a quarterly increase in both new and used vehicle sales since the second quarter of 2021. Now, specific to new vehicles, you might recall that new unit sales were up 8% in the fourth quarter, and now we're up 7% in the first quarter. Now, as you know, new vehicles start the flywheel of various revenue streams, so these continued strong trends are certainly encouraging, I think, for our future. Now, as expected, the average selling price for new vehicles decreased 5%, resulting in a new vehicle revenue increase of 2% per quarter. New vehicle margins were down $325 on a sequential basis, modestly better than the rate of decline we experienced in the fourth quarter and the rate I previously signaled for the first quarter. New vehicle supply chain is in the final stages of recovery, and our inventory is also nearing normalized levels. There does continue to be a wide range of inventory by model, make, and segments, with some approaching historic levels. New vehicle inventory in terms of dollars increased approximately 5% since the beginning of the quarter, compared to a rate of sequential increase approaching 25% for the past eight quarters. And you may see that as a signal of a declining rate of increase of new vehicle inventory on the ground. For used vehicles, same-store units decreased 2% from the same quarter a year ago, while total units were up 2%, reflecting the growth of ANUSA stores in the year. Sequentially, used vehicle units were up 6%. Now, in the fourth quarter earnings release, we discussed the market factors impacting our used vehicle business, including type availability, a return to historical depreciation patterns, and lower demand in higher-priced vehicles. We also discussed our planned action to align inventory levels and return rate with the market and shared our view that used vehicle PVRs would improve late in the first quarter. While the same market factors prevail, I'm pleased to note that the team has completed the inventory alignment actions, and we have experienced improvement in unit profitability in each month of the first quarter as we had expected. The first quarter PVR of $1,473 was better than the fourth quarter, and we are encouraged with the March PVR exit rate. Customer financial services was again a strong point in the quarter. Our product attachment rates were solid, and our team continued to effectively navigate a challenging interest rate environment. After sales, delivered another outstanding quarter, and congrats to the team. Well done. Total store revenue was up 8%, but evenly, well, not evenly, really, but across all product categories. And gross profit, as you can see, was up 9%. Now, I think the greater complexity of vehicles is leading to higher values per repair order, and this, coupled with increased number of repair orders from a year ago, resulted in an excellent total performance. The strength of our balance sheet and cash generation continue to give us optionality on capital deployment. CapEx was stable for the quarter. We ended up passing on a number of M&A opportunities that did not meet our return requirements. But make no mistake, our appetite and capacity for acquisitions in our core space is strong. Also, we continue to balance share repurchase opportunities with targeted leverage levels. And as of yesterday, we have repurchased $250 million of automation shares in 2024. reducing share count by another 4% since the beginning of the year. Our board of directors has also approved an additional $1 billion under our share repurchase program. 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 developing our offerings that enable us to realize a greater share of our customers' transportation space. AutoNation Finance originated over $160 million of loans during the quarter, And the portfolio balance now exceeds $560 million. We also continued with the rollout of our ANUSA footprint with four SOAR openings during the quarter. Three were in Florida and one in Nevada, adding density to these markets and bringing our store count to 23. Our business model is clearly resilient, working well, and we continue to deliver strong financial performance. And this performance is, of course, made possible by our 24,000 plus dedicated automation associates who take care of our customers every day. With that time, I'm going to pass the call over to you.