AutoNation, Inc.

Hello everyone and thank you for joining the AutoNation Incorporated Q2 earnings call. My name is Harry and I'll be your operator today. All lines are currently in listen-only mode and there will be an opportunity for Q&A after management's prepared remarks. To enter the queue for questions, please dial star followed by one on your telephone keypad. I will now hand the call over to Derek Fiebig, VP of Investor Relations. Please go ahead.

Thank you, Harry, and good morning, everyone, and welcome to AutoNation's second quarter 2025 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 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 meeting 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. Hey, thanks, Eric, and good morning, everyone.

Thank you for joining us today. I'm going to start on slide three. Obviously, we're very pleased to report an outstanding second quarter. We delivered material improvements compared to the second quarter last year, and the numbers were strong even after removing the year-over-year impact from last year's CDK outage. Our sales of new vehicles increased 8%, and we gained share in the markets we serve and grew sales by more than 5% on a sequential basis. This performance was led by our domestic segment, which increased 19% from a year ago and 14% from the first quarter on a same-store basis. We also increased new unit profitability on a sequential basis across all segments. As was the case with the industry, our unit sales growth was strongest at the start of the quarter and moderated in May and June, And clearly, there was a pull ahead of sales in late March and April in reaction to the tariff announcement, and it stands to reason that some portion of that demand was pulled ahead from the latter part of the second quarter. Used vehicle gross profit increased 13% year over year, as we benefited from stronger unit sales, stable unit profitability, and improved performance in wholesale. Our unit sales increased 6% from a year ago with stronger performances for the over $40,000 and under $20,000 price points. The team continued to do a great job acquiring vehicles through trade-ins and directly from the consumer through our We Buy Your Car efforts. These channels accounted for over 90% of the vehicles acquired in the quarter. We ended June with over 28,000 used vehicles in inventory, which I believe positions us well for the second half of 2025. Customer financial services gross profit also increased 13%, increasing on a per unit basis sequentially and year over year. We continue to attach more than two products per vehicle, with extended service contracts continuing to be the top offering. Our finance penetration is stable, with around three quarters of units being sold with financing. The momentum in after sales continued. We delivered record revenue and grew our gross profit by more than 12%. with gross profit margins expanding by 100 basis points to record levels. And Tom will take you through the details, but the results were strong on both the sequential and the year-over-year basis. The sequential increase reflects one additional service day, as well as improvements for our internal reconditioning, customer pay, and warranty was about flat. And we continue to focus on our technician workforce by recruiting, retaining, and, of course, developing our technicians, and I do think the efforts are paying off. Our turnover has decreased, and technician headcount increased by about 3% from a year ago on a same-store basis. The strong momentum at AM Finance continued. Originations doubled from a year prior, and as the portfolio has grown, the team is delivering on leveraging its fixed cost base, enabled continued growth in profitability. During the quarter, we completed our inaugural AM Finance asset-backed securitization, and the transaction was very well received. We expect to regularly access this market as the portfolio grows. Our Q2 performance, combined with our share repurchases, helped us to grow our adjusted EPS by 37% from a year ago. This was the second consecutive year-over-year increase in adjusted EPS. Excluding the estimated impact from the CDK outage, adjusted EPS was still up mid-teens from 2024. All in all, a great result and great performance by the alternation team. Now, I know tariffs continue to be top of mind. And apart from the volume shifting I mentioned earlier, we saw limited additional impact in our Q2 results from tariffs. MSRP and invoice prices have been stable. and the June CPI report showed continued modest month-over-month declines in new and used vehicle pricing. We do expect the ongoing dialogue between our OEM partners and the U.S. administration to result in clarification and, of course, finalization of the auto tariff structures in the coming periods. This process also includes our OEM partners' full evaluation of supply chain footprints and planning to optimize tariff efficiency and to establish their forward pricing structures. We believe the objective of maintaining market share, particularly in critical segments, will work equally with the desire to offset any new tariffs. And as I said previously, we expect that alternation to some extent will be cushioned from any new tariffs by a cross-shopping effect, whereby demand for non-impacted or lesser-impacted brands and models will potentially supplant those for more effective counterparts. Naturally, in this situation, We hold both sides of the trade with a broad portfolio of brands and models, which I think gives us a distinct advantage. Now, to close, we're encouraged by some of the provisions contained in the recently enacted U.S. federal statute, which includes interest rate deductibility in auto loans and bonus depreciation for commercial enterprise. Although we're not forecasting a bonanza of new demand, but as you'll appreciate, every incremental action to encourage vehicle purchases is very welcomed by me and the team. Now I'll turn the call over to Tom to take you through our results.