AutoNation, Inc.

Hello and welcome to the AutoNation Incorporated first quarter 2026 earnings call. My name is Rob 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. 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, again, press star one. I will now hand the conference over to Derek Fiebig, VP of Investor Relations. Please go ahead.

Thanks, Rob, and good morning, everyone. Welcome to AutoNation's first quarter 2026 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 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 our website located at investors.autonation.com. With that, I'll turn the call over to Mike.

Thanks, Derek. Good morning, everyone. Thank you for joining us today. Now, as usual, we're going to provide a fulsome discussion of our results. And in our materials, I think you're going to notice some updates that we hope you will find useful. Obviously, we're very pleased to report that despite a challenging Q1 for the industry, particularly with year-over-year comps, AutoNation delivered its fifth consecutive quarter of year-over-year growth in adjusted earnings per share. This represents a solid first quarter for AutoNation. Now, we continue to deliver strong operating performance coupled with excellent consistent cash conversion which enables us to maintain our strategy of deploying capital in a disciplined way to deliver results to our shareholders on a consistent basis. For the quarter, we reported adjusted EPS of $4.69, up from a year ago, and as I mentioned, our fifth consecutive quarter of year-over-year adjusted EPS growth. Operating cash flow was also strong. We generated $256 million of adjusted free cash flow, which represents substantial cash flow conversion of adjusted earnings. Now starting on page three where we cover gross profit for each of our businesses. Results were led by after sales which once again delivered solid mid single digit growth despite some year over year impact from adverse weather. Same store gross profit increased 3% and total store gross profit increased 5% to $593 million which was a first quarter record for the company. The story underneath this solid total growth in growth gets even more interesting as you tease out the dynamics of the different sources of growth. Underneath that total growth of 5%, internal pay actually declined by 6%, somewhat expected, I think, due to lower industry volumes. This contraction in internal pay was more than offset from two important segments, customer pay, which grew at 8%, and warranty-related gross profit, which grew at 7%. Now, as always, there's still more for us to do in after sales, where we believe there is more growth to come, but clearly this revenue and net income stream is durable, has a recurring nature, and is high margin. It's also an important driver of customer engagement and retention. Now, moving on, I want to turn to customer financial services. The team delivered another outstanding quarter, posting a first quarter record per unit profit up 6% from a year ago. The team continues to run a value-driven, customer-focused process that provides our customers with valuable products and services. Customers purchased on average more than two products per vehicle, with extended service contracts again leading the mix, clearly supporting future after-sales revenue and customer retention. Finance penetration also continues to grow, with roughly three-quarters of units sold with a finance contract. Now this performance should be read with the added context of the growth in our own finance company originations, which as you know, deliver a superior return over time, but in the short term represent a headwind to the record per unit value we just delivered. And Tom, I know you're going to give everyone on the call more details of this dynamic. So let's look at new vehicle industry and our results. New vehicle unit sales were down in line with the market. As you'll remember, last year there was a significant acceleration in demand following tariff-related announcements, which clearly set up a very challenging year-over-year comp. As in the fourth quarter, following the elimination of the BEV incentives, BEV sales declined more than 50% year-over-year, and the largest reduction of that was in our premium luxury segments. Now, as a partial offset to industry volumes we just discussed, new vehicle unit profitability improved sequentially, up 5% from the fourth quarter, driven by higher per unit profit in both our import and premium luxury segments. Now, moving on to used vehicles, I feel we delivered a solid performance in the quarter. We actually achieved our highest used to new ratio in two years. Our margins were much more stable, delivering a per unit profitability sequentially higher. our wholesale performance was also strong. I would say that coming into the quarter we had a couple of challenges that were hangovers from 2025. Inventory levels that were lower than I would prefer and aging that was slightly elevated. I think the team has made good progress with these challenges and we now enter Q2 with improved inventory position at a younger average age. Now turning to slide four, I briefly touched on our customer financial services performance earlier But let's turn to our own finance company. AutoNation Finance performed well, generating $9 million of profit in the quarter, which, by the way, nearly equaled the entire profit for 2025. AM Finance generated over $20 million of cash for the quarter, and the portfolio continues to scale and ended the quarter at $2.4 billion, up $1 billion year over year. Our funding profile also improved following our second ABS transaction, which closed in January. The operating momentum of AutoNation Finance is obviously delivering attractive returns, and we are also benefiting from the ongoing customer engagement and valuable consumer insights that come from the business. And moving on to cash, adjusted free cash flow was strong again at $256 million. This reflects excellent cash conversion, which Tom will talk through in more detail. Now, during the quarter, we deployed approximately $350 million of capital, including $300 million in share repurchases. While we did not acquire any franchises in the first quarter, we do remain active in evaluating opportunities that can add scale and density in our existing markets. Our balance sheet remains strong. Our leverage ratio was in line with the first quarter of last year and remains comfortably within our targeted two to three times range as we maintain our our investment grade rating. The strength of our balance sheet and robust cash flow generation give us significant flexibility to deploy capital, drive shareholder returns, and grow earnings per share. Overall, it was a good quarter, strong results, and as I mentioned, the fifth consecutive quarter where we have delivered year-over-year increases in EPS. And now with that, Tom, I hand it over to you.