AN

Sonic Automotive, Inc. SAH reported second-quarter 2026 adjusted earnings of $1.82 per share. Earnings declined 17% year over year but beat the Zacks Consensus Estimate of $1.75 by 4%. Revenues rose 8% to $3.93 billion and topped the consensus mark of $3.78 billion by 4%. The quarter benefited from higher retail new and used vehicle volumes and growth across EchoPark and Powersports segments. At the consolidated level, gross profit rose 2% to $616.2 million. Adjusted SG&A expenses increased 6% to $443.4 million. Adjusted SG&A, as a percentage of gross profit, was 72.0% compared with 69.2% a year earlier. Adjusted net income fell 23% to $58.3 million. Sonic Automotive, Inc. price-consensus-eps-surprise-chart | Sonic Automotive, Inc. Quote Franchised Dealerships segment revenues increased 6% year over year to $3.28 billion. New-vehicle revenues rose 5% to $1.76 billion, while used-vehicle revenues increased 9% to $814.3 million. Parts, service and collision repair revenues advanced 6% to $515.5 million, while finance, insurance and other revenues increased 2% to $147.9 million. Retail new-vehicle unit volume rose 1%, and used-vehicle volume advanced 6%. Profit per vehicle remained under pressure. Reported retail new-vehicle gross profit per unit fell 11% to $3,024, while used-vehicle gross profit per unit declined 12% to $1,399. Segment income was $70.7 million, down 23% from the year-ago period. Management cited difficult comparisons tied to pre-tariff consumer demand pull-forward in the second quarter of 2025. EchoPark revenues increased 15% to $582.9 million, while gross profit rose 4% to a second-quarter record $64.3 million. Retail used-vehicle sales volume increased 17% as Sonic carried more affordable inventory and expanded its non-auction sourcing mix. Wholesale vehicle volumes increased 12%. That volume growth came with lower per-unit economics. Total used-vehicle and F&I gross profit per unit fell 12% to $3,292. Segment income dropped 38% to $7.2 million, while adjusted EBITDA declined 15% to $13.9 million. Powersports revenues surged 53% to a second-quarter record $73.5 million. Gross profit increased 58% to $19.7 million. New retail unit volume rose 27% to 1,775 units, while used retail volume jumped 61% to 1,317 units. Finance and insurance revenues climbed 75% to $3.5 million, with F&I gross profit per unit up 27% to $1,125. Segment income improved to $2.3 million from breakeven, and adjusted EBITDA increased 145% to $4.9 million. The five Harley-Davidson dealerships acquired in April are expected to add about $100 million in annualized revenue. Sonic ended the quarter with about $294 million of cash and floor plan deposits and roughly $676 million of total available liquidity. The board approved a quarterly dividend of 41 cents per share, to be paid out on Oct. 15, 2026, to stockholders of record as of Sept. 15. Management raised full-year new-vehicle gross profit per unit guidance to $2,850-$3,000 from $2,700-$3,000. EchoPark is still expected to deliver 12%-15% retail used-unit growth, total gross profit per unit of $3,100-$3,300 and adjusted EBITDA of $35-$40 million. Sonic also expects $8-$12 million of incremental EchoPark brand marketing expense in the fourth quarter and plans to open an Orlando location during the quarter. Sonic currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Penske Automotive Group, Inc. PAG reported second-quarter 2026 adjusted earnings of $3.62 per share, beating the Zacks Consensus Estimate of $3.38 by 7.1%. Adjusted earnings declined 4.2% from the comparable $3.78 per share a year ago. Penske’s revenues rose 6% year over year to $8.51 billion and topped the Zacks Consensus Estimate of $7.93 billion by 7.4%. For the first six months of 2026, cash flow from operations totaled $418 million and capital expenditures were $134.9 million. As of June 30, Penske’s liquidity was about $1.4 billion, including $69.5 million in cash. Lithia Motors LAD posted second-quarter 2026 adjusted earnings of $10.03 per share, which increased 9% from $9.20 a year ago. The bottom line beat the Zacks Consensus Estimate of $8.67 by 15.7%. Quarterly revenues increased 2.2% year over year to $9.79 billion and topped the consensus estimate of $9.64 billion by 1.6%. As of June 30, 2026, Lithia had cash, restricted cash and cash equivalents of $363.9 million, up from $341.8 million as of Dec. 31, 2025.During the quarter, Lithia repurchased roughly 854,000 shares at a weighted average price of $284, representing $242 million of share repurchases. AutoNation, Inc. AN reported second-quarter 2026 adjusted earnings of $5.56 per share, up 1.8% from $5.46 a year ago. Earnings beat the Zacks Consensus Estimate of $5.43 by 2.4%. Revenues of $6.93 billion declined 0.6% year over year and missed the consensus estimate of $6.97 billion by 0.6%. Parts and service revenues increased 3.4% year over year to $1.26 billion. Gross profit rose 1.4% to a record $607.1 million, making After-Sales the largest contributor to AutoNation's gross profit. As of June 30, 2026, AutoNation had cash and cash equivalents of $53.3 million. Non-vehicle debt was $4.43 billion. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Sonic Automotive, Inc. (SAH) : Free Stock Analysis Report Penske Automotive Group, Inc. (PAG) : Free Stock Analysis Report AutoNation, Inc. (AN) : Free Stock Analysis Report Lithia Motors, Inc. (LAD) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Penske Automotive Group, Inc. PAG reported second-quarter 2026 adjusted earnings of $3.62 per share, beating the Zacks Consensus Estimate of $3.38 by 7.1%. Adjusted earnings declined 4.2% from the comparable $3.78 per share a year ago. Revenues rose 6% year over year to $8.51 billion and topped the Zacks Consensus Estimate of $7.93 billion by 7.4%. Retail automotive same-store new and used units increased 5%, while same-store service and parts gross margin improved 80 basis points to 59.5%. Penske currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Penske Automotive Group, Inc. price-consensus-eps-surprise-chart | Penske Automotive Group, Inc. Quote Retail automotive revenues increased 6% year over year to $7.3 billion. New vehicle revenues rose 5.9% to $3.38 billion, used vehicle revenues advanced 9.4% to $2.47 billion and finance and insurance revenues increased 1.3% to $211 million. Service and parts revenues rose 1.6% to $867.1 million, while fleet and wholesale revenues declined 0.8% to $375.6 million. Same-store revenues grew 5.7% to $7.12 billion. Retail automotive gross profit slipped 0.7% to $1.16 billion, with gross margin contracting to 15.8% from 16.9%. New vehicle gross profit per retail unit fell 10.4% to $4,782, while used vehicle gross profit per unit declined 8.8% to $2,095. Service and parts gross profit increased 3.1% to $517 million. Retail commercial truck revenues declined 1.7% year over year to $927.8 million. Total new and used truck units retailed increased 1.7% to 5,431, as a 64.8% jump in used units offset a 7.8% decline in new units. Retail commercial truck gross profit slipped 0.6% to $142.8 million, while gross margin improved 20 basis points to 15.4%. Class 8 market orders increased 170% in the second quarter. Premier Truck Group's backlog was about 10,400 units, with the majority expected to convert into retail sales in the second half of 2026. Used truck demand also strengthened as freight conditions improved. Commercial Vehicle Distribution and Other revenues jumped 41.1% year over year to $283.9 million. Gross profit rose 30.5% to $57.7 million, although gross margin declined to 20.3% from 22%. Australia's off-highway business was a key contributor, with revenues increasing 63% in the quarter. The company secured more than $300 million of orders during the period, bringing its 2026 secured order book to nearly $660 million, supported by energy solutions, mining and defense demand. Penske Transportation Solutions contributed $57.4 million in earnings to PAG, up 7% year over year. The improvement reflected growth in full-service leasing, better fleet utilization, lower operating expenses and lower interest costs. PTS managed more than 379,200 trucks, tractors and trailers. Continued weakness in the rental market and a lower gain on used-truck sales partly offset the benefits from improved freight conditions and fleet-rightsizing actions. Consolidated gross profit edged up 0.4% to $1.36 billion, but gross margin narrowed to 15.9% from 16.8%. Selling, general and administrative expenses increased 3.2% to $974 million, and operating income declined 7.6% to $337.6 million. Operating margin fell to 4% from 4.5%. Adjusted EBITDA was $401.8 million, up 0.3%, while other interest expense rose 53.2% to $33.1 million, reflecting higher borrowing costs associated with acquisitions. For the first six months of 2026, cash flow from operations totaled $418 million and capital expenditures were $134.9 million. As of June 30, liquidity was about $1.4 billion, including $69.5 million in cash. PAG repurchased 265,104 shares for $42.5 million in the first half, leaving $221.2 million available under its repurchase authorization. The board also raised the quarterly dividend 1.4% to $1.44 per share, marking the company's 23rd consecutive quarterly increase. Sonic Automotive, Inc. SAH reported second-quarter 2026 adjusted earnings of $1.82 per share, which fell 17% year over year but beat the Zacks Consensus Estimate of $1.75 by 4%. Revenues rose 8% to $3.93 billion and topped the consensus mark of $3.78 billion by 4%. Sonic ended the quarter with about $294 million of cash and floor plan deposits and roughly $676 million of total available liquidity. The company raised full-year new-vehicle gross profit per unit guidance to $2,850-$3,000 from $2,700-$3,000. Sonic’s EchoPark unit is still expected to deliver 12%-15% retail used-unit growth this year. Lithia Motors LAD posted second-quarter 2026 adjusted earnings of $10.03 per share, which increased 9% from $9.20 a year ago. The bottom line beat the Zacks Consensus Estimate of $8.67 by 15.7%. Quarterly revenues increased 2.2% year over year to $9.79 billion and topped the consensus estimate of $9.64 billion by 1.6%. As of June 30, 2026, Lithia had cash, restricted cash and cash equivalents of $363.9 million, up from $341.8 million as of Dec. 31, 2025.During the quarter, Lithia repurchased roughly 854,000 shares at a weighted average price of $284, representing $242 million of share repurchases. AutoNation, Inc. AN reported second-quarter 2026 adjusted earnings of $5.56 per share, up 1.8% from $5.46 a year ago. Earnings beat the Zacks Consensus Estimate of $5.43 by 2.4%. Revenues of $6.93 billion declined 0.6% year over year and missed the consensus estimate of $6.97 billion by 0.6%. Parts and service revenues increased 3.4% year over year to $1.26 billion. Gross profit rose 1.4% to a record $607.1 million, making After-Sales the largest contributor to AutoNation's gross profit. As of June 30, 2026, AutoNation had cash and cash equivalents of $53.3 million. Non-vehicle debt was $4.43 billion. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Penske Automotive Group, Inc. (PAG) : Free Stock Analysis Report AutoNation, Inc. (AN) : Free Stock Analysis Report Sonic Automotive, Inc. (SAH) : Free Stock Analysis Report Lithia Motors, Inc. (LAD) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

AutoNation, Inc. AN reported second-quarter 2026 adjusted earnings of $5.56 per share, up 1.8% from $5.46 a year ago. Earnings beat the Zacks Consensus Estimate of $5.43 by 2.4%. Results benefited from record After-Sales gross profit and stronger Customer Financial Services profitability. Revenues of $6.93 billion declined 0.6% year over year and missed the consensus estimate of $6.97 billion by 0.6%. AutoNation, Inc. price-consensus-eps-surprise-chart | AutoNation, Inc. Quote Parts and service revenues increased 3.4% year over year to $1.26 billion. Gross profit rose 1.4% to a record $607.1 million, making After-Sales the largest contributor to AutoNation's gross profit. Customer-pay revenues increased 7% year over year, while wholesale parts revenues advanced 16%. Customer-pay repair orders rose 5% and warranty repair orders increased 8%. Parts and service gross margin declined to 48.1% from 49%, mainly reflecting a higher mix of lower-margin wholesale parts. Customer Financial Services gross profit totaled $357.6 million, down 2.7% from $367.7 million a year earlier as lower retail vehicle volumes offset stronger per-unit profitability. CFS gross profit per vehicle retailed climbed 3.2% to $2,799 from $2,712. The improvement came despite an approximately 2% drag from higher AutoNation Finance originations. AutoNation Finance, meanwhile, generated income of $10.7 million, up from $2 million a year ago. The portfolio reached $2.67 billion, increasing about 52% from $1.76 billion, while quarterly originations totaled $485 million. AN Finance accounted for 11% of total vehicle sales and 18% of financed vehicle sales, highlighting the growing contribution of the captive finance platform. New vehicle revenues declined 3.1% to $3.29 billion as retail unit sales fell 4% to 63,240. New vehicle gross profit per unit dropped 14.5% to $2,381, reflecting higher vehicle costs. Much of the volume decline was due to weaker battery-electric vehicle sales and difficult comparisons against tariff-related demand pull-forward in 2025. Used vehicle revenues increased 1.3% to $2.01 billion despite a 7.5% decline in retail unit sales to 64,521. Retail used vehicle revenue per unit increased 8.4% to $28,674, while gross profit per unit slipped 2.5% to $1,582. Total gross profit fell 3.5% year over year to $1.23 billion, with gross margin narrowing to 17.8% from 18.3%. Adjusted operating income declined 7% to $343.1 million from $369.3 million. Adjusted SG&A expenses represented 68.2% of gross profit, improving sequentially from 69.8% in the first quarter but remaining above 66.2% a year ago. Management expects the ratio to reach its 66%-67% target range on a run-rate basis by year-end. Adjusted free cash flow totaled $439.2 million in the first half of 2026, representing 125% of adjusted net income. AutoNation spent $316.5 million on acquisitions and $126 million on capital expenditures during the period. The company also repurchased 2.3 million shares for $457 million in the first half.  As of June 30, 2026, cash and cash equivalents were $53.3 million. Non-vehicle debt was $4.43 billion. AutoNation had about $1 billion of liquidity, including $0.9 billion available under its revolving credit facility, net of commercial paper borrowings. Management expects after-sales customer-pay gross profit to maintain mid-single-digit growth, supported by customer retention and technician capacity. With stable vehicle unit profitability, continued CFS and After-Sales growth, AutoNation Finance expansion and a lower share count, management expects adjusted earnings per share to grow year over year in the second half of 2026. AN stock currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Penske Automotive Group, Inc. PAG reported second-quarter 2026 adjusted earnings of $3.62 per share, beating the Zacks Consensus Estimate of $3.38 by 7.1%. Adjusted earnings declined 4.2% from the comparable $3.78 per share a year ago. Penske’s revenues rose 6% year over year to $8.51 billion and topped the Zacks Consensus Estimate of $7.93 billion by 7.4%. For the first six months of 2026, cash flow from operations totaled $418 million and capital expenditures were $134.9 million. As of June 30, Penske’s liquidity was about $1.4 billion, including $69.5 million in cash. Sonic Automotive, Inc. SAH reported second-quarter 2026 adjusted earnings of $1.82 per share, down 17% year over year. Earnings beat the Zacks Consensus Estimate of $1.75 by 4%. Revenues rose 8% to $3.93 billion and topped the consensus mark of $3.78 billion by 4%. Sonic ended the quarter with about $294 million of cash and floor plan deposits and roughly $676 million of total available liquidity. The company raised full-year new-vehicle gross profit per unit guidance to $2,850-$3,000 from $2,700-$3,000. Sonic’s EchoPark unit is still expected to deliver 12%-15% retail used-unit growth this year. Lithia Motors LAD posted second-quarter 2026 adjusted earnings of $10.03 per share, which increased 9% from $9.20 a year ago. The bottom line beat the Zacks Consensus Estimate of $8.67 by 15.7%. Quarterly revenues increased 2.2% year over year to $9.79 billion and topped the consensus estimate of $9.64 billion by 1.6%. As of June 30, 2026, Lithia had cash, restricted cash and cash equivalents of $363.9 million, up from $341.8 million as of Dec. 31, 2025. During the quarter, Lithia repurchased roughly 854,000 shares at a weighted average price of $284, representing $242 million of share repurchases. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AutoNation, Inc. (AN) : Free Stock Analysis Report Penske Automotive Group, Inc. (PAG) : Free Stock Analysis Report Sonic Automotive, Inc. (SAH) : Free Stock Analysis Report Lithia Motors, Inc. (LAD) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Image source: The Motley Fool. Friday, July 31, 2026 at 10:00 a.m. ET VP of Investor Relations - Derek Fiebig Chief Executive Officer - Michael Manley Chief Financial Officer - Thomas Szlosek Operator: Hello, everyone. Thank you for joining us, and welcome to AutoNation Inc.'s Second Quarter 2026 Earnings Call. I will now hand the conference over to Derek Fiebig, VP of Investor Relations. Derek, please go ahead. Derek Fiebig: Thanks, Kenneth, and good morning, everyone. Welcome to AutoNation's Second Quarter 2026 Conference Call. Leading our call today will be Mike Manley, our Chief Executive Officer; and Tom Szlosek, 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 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 the 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 investor.autonation.com. With that, I'll turn the call over to Mike. Michael Manley: Yes. Thank you, Derek, and good morning, everybody. Thank you for joining us today. So as usual, we're going to provide a detailed discussion of our second quarter results, after which we'll take your calls on Q&A. Now once we finish the Q&A session, I'm going to share with you some thoughts on our performance over time and our expectations going forward. So please don't disconnect after the Q&A. Now Slide 3 is a quick summary of our main messages. We think the industry and consumers are in good shape. The June SAAR is the highest June in 4 years. Consumer sentiment is improving every month. Our banking partners are reporting a 20% increase in applications and originations, and their delinquencies continue to improve. After sales was once again solid, in our workshops internal pay was moderately down, broadly in line with our unit volumes. However, customer pay, which for us is a more relevant indication of after sales performance in our market was up, delivering -- I think that was a coffee you got me. In our workshops, internal pay was moderately down, but broadly in line with our unit volume. However, customer pay, which for us is a more relevant indication of after sales performance in our market was up delivering a gross profit that increased by 7% in total and 4% on a same-store basis. Now our strategy to grow and develop our parts wholesale is also gaining traction and starting to pay off. Our wholesale businesses saw revenues increase by 16% during the quarter. Now moving to vehicle sales, you will see that unit profitability in both new and used has remained within a tight band over the last 4 quarters, and our customer financial services team, once again, had an industry-leading quarter. Now we're looking forward to the second half when the volume comparison headwinds from 2025 relating to tariff and EV credits lapse. As always, SG&A management is front and center, and you will see meaningful progress in Q2 and a path to our 66% to 67% expectation range by year-end. AutoNation Finance continues its growth, generating $11 million profit for the quarter. Free cash flow, frankly, has been excellent. We're up 11% year-to-date and continue to deploy our cash in a consistent shareholder-focused way investing $317 million on attractive M&A and $457 million on share repurchases. Now with that opening, let me get into the details by business. Moving to Slide 4. For the quarter, we reported adjusted EPS of $5.56, and which was up from $5.46 a year ago, marking our sixth consecutive quarter of year-over-year growth. Results were again led by aftersales, which drives half of our profits and delivered record gross profit of $607 million, increasing both sequentially from the first quarter and year-over-year from a very tough comparison. This revenue and income stream is durable, has a recurring nature and is high margin. It's also an important driver of customer engagement and retention. Our repair order volume was strong and customer pay fueled our revenue growth increasing 7% from a year ago. And as I previously mentioned, we had 16% growth in wholesale parts. Overall, aftersales performance reflects disciplined execution as we continue to grow this portion of the business while offsetting lower internal reconditioning activity tied to our used vehicle stocking mix and volume. In Customer Financial Services, the team delivered strong second quarter results with CFS per vehicle profitability of $2,800. This represents a 3% increase from a year ago, even after accounting for increased loan originations from AN Finance, which, as we've discussed before, bring a headwind to CFS profit in the quarter but a significantly improved profit per unit over the term of the loan to AN Finance. And Tom, I know you'll give everyone on the call more details on that of course. Our CFS team continues to run a value-driven customer-focused process that provides our customers with critical products and services. Now once again, customers purchased on average 2 products per vehicle with extended service contracts, again, leading the mix clearly supporting future aftersales revenue and customer retention. Finance penetration also continues to grow from a year ago with roughly 3/4 of units sold with a finance contract. And we continue to see sequential stability in our profit per unit for both new and used vehicles. New vehicle per unit profitability of nearly $2,400 represents the fourth consecutive quarter of stability. As expected, new unit sales were lower versus a year ago, which benefited from tariff-related pull-forward activity and higher BEV sales. BEV sales were down by more than 30% year-over-year. Importantly, our market share remained relatively consistent with the first quarter in the markets we serve. In used vehicle sales, we continue to see strength in unit sales for vehicles priced about $40,000. Our volume was slightly impacted by lower mix of vehicles priced below $20,000 than we would like, and we continue to work to improve our accessibility to vehicles priced in this range. Used vehicle profitability remained stable at approximately $1,600 per unit. Total gross margin was just under 18% of revenue for the quarter, which represents consistent top-tier performance for the sector. Now turning to Slide 5. Adjusted free cash flow continues to stand out, including more than $180 million generated in the quarter and $439 million for the first half of the year. The year-to-date conversion rate was 125%. We continue to deploy capital in a disciplined manner. During the first half, we reinvested $443 million in the business through CapEx and acquisitions, and we returned $457 million to shareholders through share repurchases. The acquisitions we made were Toyota of Newnan, Georgia, in the Atlanta area and 3 premium luxury stores in the San Francisco Bay area. These will add additional scale to markets where we already have meaningful presence. These acquisitions bring approximately $600 million in annual revenue and around 9,700 in new and used unit sales. AutoNation Finance continued to scale with the portfolio growing to $2.67 billion from $1.76 billion a year ago. Funding also continued to improve, with debt funded status increasing to 91% from 83% a year ago. Overall, it was a solid quarter. And as I mentioned, it was the consecutive quarter where we have delivered year-over-year increases in adjusted EPS. Now with that introduction, I'm going to turn you over to Tom for a closer look at the quarter's financial results. Thomas Szlosek: Thanks, Mike. Turning to Slide 6, I'll walk through our quarterly P&L. Total revenue was $6.93 billion, essentially in line with the $6.97 billion in the second quarter last year as after sales growth helped offset tariff and BEV related headwinds. Revenue was also up 6% sequentially from $6.55 billion in the second quarter. Gross profit was $1.23 billion compared with $1.28 billion a year ago and $1.21 billion in the first quarter, representing 17.8% of revenue and continued top-tier performance. Adjusted SG&A expense was 68.2% of gross profit compared with 66.2% a year ago and 69.8% in the first quarter, reflecting a 160 basis point sequential improvement. We expect SG&A as a percentage of profit -- of gross profit to reach our 66% to 67% target range on a run rate basis by the end of the year. AutoNation Finance continued to scale with profitability increasing to $11 million in the quarter compared with $9 million in the first quarter and $2 million a year ago. Adjusted operating income was $343 million compared with $369 million in the prior year quarter and $312 million in the first quarter, delivering a consistent operating margin of approximately 5%. Weighted average shares outstanding of 33.8 million were down 4.5 million shares or approximately 12% year-over-year, reflecting our share repurchase activity. Diluted EPS was $5.56 per share compared with $5.46 in the prior year quarter and $4.69 in the first quarter. The year-over-year adjusted EPS growth reflects our continued operating execution and disciplined capital allocation. Moving to Slide 7. After sales remains our largest gross profit contributor and delivered record gross profit in the quarter. After sales revenue increased to $1.26 billion from $1.22 billion a year ago, reflecting continued growth in a durable recurring and high-margin part of the business. Gross margin was 48.1% compared with 49% in the prior quarter with the decline primarily related to the higher mix of wholesale parts, which, as Mike indicated, were up 16% in the quarter. Margin was stable sequentially versus the first quarter. Revenue growth reflected continued strength in customer pay, which increased 7% year-over-year. And as I said, wholesale parts increased 16%, driven by recent commercial wins. Repair order growth was strong in the key customer-facing categories with customer pay repair orders up 5% and warranty up 8%. This more than offsets cyclically lower internal repair orders. Total after-sales gross profit increased $9 million from the second quarter of 2025, including the benefit of acquisitions. This was led by customer pay, which increased 7% year-over-year and wholesale parts, which increased 9%. Warranty increased slightly and internal gross profit was down, reflecting cyclical softness. We remain focused on deploying technology to drive additional volume and productivity and on hiring, developing and retaining technicians. These efforts increase same-store franchise technician head count by more than 2% year-over-year, reflecting improved retention. Growing our technician workforce is key to consistently delivering mid-single-digit growth in after sales gross profit. I'm now on Slide 8, Customer Financial Services. The momentum in CFS continued with Q2 per unit profitability of $2,799, up approximately 3% from $2,712 a year ago, while absorbing an approximately 2% drag from increased AutoNation finance loan originations. Total CFS gross profit was $358 million compared with $368 million in the prior year quarter with lower retail unit volume more than offsetting the stronger per unit profitability I mentioned. Results were supported by continued robust product and finance penetration along with improved service contract and commission profitability. This performance reflects continued execution by the team and the strength of our value-driven customer focused process. Slide 9 provides an update on AutoNation Finance, our captive finance company and its continued solid performance. AutoNation Finance delivered another record quarter, generating $11 million of profit in the second quarter and $20 million for the first half of 2026 compared with $2 million in 2025 as we continue to profitably scale this business. Total interest margin increased $11 million or 35% year-over-year driven primarily by continued portfolio growth. Delinquencies and reserve rates remain stable, reflecting disciplined underwriting and continued portfolio performance. Originations were $485 million for the quarter and AutoNation finance penetration was 11% of our total vehicle sales and 18% of our vehicle sales financed during the quarter. The AutoNation finance portfolio grew to $2.67 billion, up from $1.76 billion a year ago, an increase of approximately 52%. We also closed our third ABS transaction in June 2026 for approximately $550 million, increasing the portfolio to 91% debt funded compared with 83% in the second quarter of 2025. To close on AutoNation Finance, our compelling offerings are driving healthy customer takeup, and we continue to expect attractive returns on equity as profitability grows and equity investment requirements moderate. Slide 10 provides some color on new vehicle performance. New vehicle unit sales were 63,240 units, down 4% from a year ago, principally driven by a decline in sales of battery electric vehicles. As Mike mentioned, our market share performance remained consistent with the first quarter in the markets we serve. By segment, import unit sales increased 1%, partially offset by declines of 12% in domestic and 4% in premium luxury. And premium luxury was down 1%, excluding the battery electric vehicle impact. New vehicle gross profit per unit was $2,381, compared with $2,785 in the prior year quarter. reflecting higher vehicle costs. Importantly, new unit profitability has been relatively stable sequentially over the last 4 quarters. Inventory day supply is healthy with domestic at 73 days and luxury at 66 days while import remained at 34 days. Turning to Slide 11. As Mike mentioned, used vehicle supply remains tight for lower-priced units, and the team executed well, balancing sourcing, unit volumes and overall profitability, used retail unit sales were lower year-over-year, but mix remained favorable with units priced above $40,000, up 10%, driving an 8% increase in revenue per unit, the unit profitability in this category is more than double that for the rest of our used business. Used vehicle gross profit was $1,582 and in the second quarter compared with $1,622 in the prior year with unit profitability remaining stable over the last year. Our vehicle supply remains healthy with approximately 90% of used vehicles internally sourced. And we expect the off-lease supply to accelerate meaningfully in the second half. Turning to Slide 12 on free cash flow. Adjusted free cash flow was $439 million for the first half of 2026 and compared with $394 million a year ago, so an 11% increase. Conversion improved to 125% from 100%, reflecting our focus on working capital and cycle times to support robust free cash flow generation. For the full year, we remain on track for approximately $325 million of CapEx. Slide 13. Our consistent cash conversion gives us flexibility to invest in growth and drive shareholder value. Through June 2026, we deployed $900 million of capital compared with $478 million a year ago, including $457 million of share repurchases, $317 million for M&A and $126 million of capital expenditures. The store in -- the Toyota store in Georgia and 3 premium luxury stores we acquired in the San Francisco Bay Area represent attractive brands have $600 million of combined annual revenue and add to our scale and density in these markets. Adjusted cash from operations was $565 million through June 2026 compared with $548 million in the prior year period, and total capital deployed represented 159% of adjusted cash from operations compared with 87% a year ago, reflecting significant reinvestment in the business and continued returns to shareholders. Our capital allocation approach remains the same. Fund CapEx, which is mostly compulsory maintenance-related spend, pursue selected M&A opportunities that add scale and density, return residual cash flow to investors and maintain our investment-grade rating. Our balance sheet remains strong. covenant leverage remains comfortably within our targeted 2x to 3x EBITDA range. The strength of our balance sheet and robust cash flow generation give us significant flexibility to continue deploying capital, driving shareholder returns and growing earnings per share. At this point, we'll open the lines for your questions. Derek Fiebig: Kenneth, if you could please remind the participants how to get in queue for the question-and-answer period. . Operator: [Operator Instructions] Your first question today comes from the line of Rajat Gupta from JPMorgan. Michael Manley: Operator, can you check his lines open, please? Rajat Gupta: Sorry, can you hear me now? Michael Manley: Yes, we can hear you. Rajat Gupta: Sorry about that. I just wanted to start with parts and services. 3% revenue growth, but flat to close profit growth. It looks like there was a margin mix impact. It sounds like from your remarks that the consumer is fine in general. But curious like what's driving the overall gross profit like deceleration? And is this just a temporary phenomena based on some tough comps? When can we expect growth there to recover back to like the mid-single-digit cadence over the next few quarters? And I have a quick followup. Michael Manley: Yes, Rajat, this is Mike. As I said, the I am very, very pleased with the way the after sales team continue to grow customer pay businesses regardless of whether the comps are tough or not comes, I actually look at the penetration in the marketplace and how we're retaining our customers. So within the overall number, obviously, you're picking up a mix issue on internal pay as our mix shifted more towards $20,000, $40,000 cars and less towards under $20,000 cars, which obviously has a different mix of preparation and reconditioning and we saw shifts in warranty mix. We moved much more towards higher volume, lower content per RO in warranty. I think all of those things are just point in time, very temporary. And I look at the underlying performance in what really matters to me which is the penetration in the park and customer pay. And notwithstanding the fact that if you look at the addressable market in the aftersales park, is still working through the COVID hole in the 3- to 10-year park, which for us is obviously prime. So the market our after sales teams have made that up with improved penetration. And I think that's very positive, and that's going to continue. So I would view any temporary drop in terms of internal pay and warranty as a point in time, nothing structural in there, and you should look at the underlying performance with the penetration in the park. We did take time to call out our wholesale performance. Obviously, that's at a lower margin, and therefore, you're going to get an effect of that. But that's all incremental business for us. We're up very, very significantly, and that is share gain in that marketplace. And again, I think that is a result of the work that the team has done. So all in all, encouraged by the performance in aftersales and believe that we can continue that in customer pay, not just in the next half, but also continue it forward. Rajat Gupta: Got it. That's helpful color. And I just want to follow up also on the SG&A comments. If I heard correctly, I think you mentioned 66% to 67%, excluding the year. That's a pretty meaningful improvement versus the levels today. I know like you've talked about the investments you were making on customer experience. Is it just that some onetime expenses that are more weighted towards the first half and go away that's driving the improvement. Curious on the drivers there. Michael Manley: Yes. I think what you'll see is the drivers, Rajat, is improved gross profit, a number of productivity initiatives that we have, including those involving the application of we've got some programs around discipline around advertising that we've invested more heavily in, in the first half. I think that begins to moderate. You also saw that we took some portfolio actions, and that will also help the SG&A rate. So a number of orders in the water that are moving in the right direction. Operator: Your next question comes from the line of Mike Ward with Citigroup. Michael Ward: I wonder if you could talk a little bit about variable growth. It looks like it's stabilized in the $4,500 per unit range and it goes up and down whatever, $50 or $100 depending on the quarter and mix, et cetera, is that the new normal? And when I look at it, using new and used are down, but F&I is strong? And what could disrupt that trend? What are the things that are really driving that stability, as we look at it. Michael Manley: Yes. Thanks, Mike. Great question. And your question kind of reflects the focus that we have on total unit profitability. So you can pick at whatever you want on individual PVRs and so forth. But for us, it's a total economic equation, including the products and services that we offer from a CFS perspective, and we think our trajectory is very strong. In fact, the last 4 quarters, as we've mentioned, you can look at the new unit profitability, used unit profitability and see it's in a very narrow bandwidth, and we expect that to continue. And you couple that with gross growth in CFS, it was essentially 5% in unit profitability, you end up with a pretty attractive performance and expectation going forward. So we're looking at it comprehensively like you do. And think that's the way it should be done. Thomas Szlosek: Yes. Let me also add to that, Mike, if I can. And Tom, I think it was a great answer. But I talked in my opening comments about the importance of CFS to us and the fact that we are really attaching very valuable products for our customers as well as for us. And the main attach rate is in extended service contracts and warranties. And that's very important for us. So as we think about the overall economic balance that you mentioned, Mike and Tom reinforced. Within there, we know we're seeding future customers for our after sales and our service departments, and that's very, very important to us, and the team continues to perform incredibly well. And one thing that I don't think is discussed enough is that is a result, which I think is not just in credit industry leading, but it's also a result that reflects temporary headwinds from our AN Finance performance. Because as Tom has discussed on many occasions, as AN Finance scales, that profit from that business is released over time and not point in time. So notwithstanding the fact that it is a great result in the e itself, if you also add to the fact that AN Finance continues to grow and take that in context as well. Overall, I think it is a very, very strong performance. Michael Ward: Very helpful. Secondly, what percentage do CPO sales represent your used? And I think you mentioned that you're going to start to see lease returns pick up a little bit in late '26, '27. And I assume it seems to me that on the used vehicle side, there is more financing going on. Is that another potential boost for the CFS. Michael Manley: Well, yes. I mean our overall finance rate is something we track very, very carefully, and it's actually been very solid and stable. Our penetration, particularly on used vehicles, Mike, has continued to increase. And we see incremental opportunity there as we go forward with that finance penetration through AN Finance. But we have a process in place that really looks to work in partnership with other finance providers for that credit type that frankly is not in our target grouping that we're looking for. And that is holding up very well, and we think that there's incremental opportunity for us to drive that, not just in the second half, but all the way through 2027 as well. Tom, do you have the answer? Thomas Szlosek: Yes. I remember. So Mike, glad you asked that question. CPS or sorry, CPO continues to be moving in the right direction for us, we were roughly 15% last year in the first half. This year, we're closer to 20%. So we're happy with the progress that we're making there. And you had asked about lease returns as well. The progress on -- or sorry, the trends on lease returns will significantly increase in the second half from the first half, probably upwards of 30% to 40%. And now these are overall relative to the unit sales that we have for a month, it's not like 10% or -- 10% or anything like that. It's a fairly modest number. But the lease volumes definitely at least return volumes definitely are going to start to trend really strongly in the second half. Michael Manley: Yes. I mean you begin in just we've now passed through the trough of lease returns, we're beginning to see some recovery. It's not back to pre-COVID levels, but it is going to grow nicely in the second half, Tom, you're quite right. Operator: Your next question comes from the line of John Babcock with Barclays. John Babcock: I guess just quickly while we're on the off-fleet side of things. Any thoughts in terms of what percentage of off-lease vehicles are going to be kept by the grounding dealer this time around, just given everything that's going on with residual values and just broadly demand for off lease? Michael Manley: Yes. Well, it's certainly increasing, John, because as you know, when we were going through that period where not just supply was restricted. You also saw significant increase in residual values and a lot of equity in returning leases, which customers quite rightly took advantage of. That's obviously beginning to normalize as well. So the number of returns that come back to us that are either returned or bought out, which is our preference as we supply a new vehicle, has increased. It's still not back to the levels that it was before, but it's something that we have seen pretty steady progress on -- over the last few quarters. John Babcock: Okay. And also, you're not the only deal to report better GPUs on the used side of things. I'm just kind of curious, how sustainable do you think the increase in GPUs was this quarter, recognizing for you, it maybe was a little bit less than some of your peers. But Also, like how sustainable is this at this level? Do you think there are any market factors? Is there anything else that might lead to some pullback in the rest of the year? Michael Manley: Well, so frankly, GPU improvement comes from multiple places. It isn't just average transaction price. But there is a lot of opportunity for us to not just sustain what we're seeing, but also improve it. Clearly, mix is going to have an impact on that. But we're finding that our ability to drive our vehicles to market quicker -- to turn them quicker. And if you look at our relative turn rate compared to others in the marketplace, you'll see we see a very healthy turn rate, but it is also around the mix because as we're acquiring our vehicles through those channels that we have more control over, trade, for example, off lease that we've just talked about, it impacts our average purchase price of those vehicles. We turn them in what we consider to be a reasonable pace thinking about our ability to replenish those vehicles. So we very much look at return on invested capital in used cars, which is why I think sometimes this maniacal focus purely on used volume actually misses the point. The point is how will we invest in that capital and what return are we getting? And we know that if we're able to replenish vehicles and turn for example, plus $40,000 used cars at a reasonable rate, the actual return on invested capital for that segment is better than sub-$20,000 cars. But often that gets missed in everybody's, as I said, maniacal focus on you use volumes of 2%. And I think people should focus on return on invested capital and cash flow is a better proxy. So it's coming from multiple areas. Faster to market, good control over reconditioning, reasonable turn rates, so depreciation is not impacting it, some mix. And therefore, I think as a result of that, it's sustainable you're going to get some cyclical times when it's up, somewhat is down, but the key drivers are under control and well managed. Operator: Your next question comes from the line of Bret Jordan with Jefferies. Bret Jordan: On the wholesale business, it obviously got some ink in the prepared remarks. How much of parts and service is wholesale. And I guess when you think about the margin of that mix, if we get a little bit more clarity on how big could it be? And where are you taking the share from? And as you think about 2 or 3 years out, is this going to be a material piece of the business. Michael Manley: Yes. Thanks, Bret. Great question. As you know, our franchise stores have exclusive distribution rights on wholesale for parts. And generally, in our business is, historically, we've been each store has been managing its own parts customer base, including the whole supply chain delivery for its single brand with this distributed approach, we were missing out on opportunities for growth and synergies, cost synergy opportunities. We're now orchestrating the business such that all products in all brands are managed through 1 supply chain. Our customers appreciate the simplicity of dealing with a single vendor. And for us, this is that resulted in some meaningful commercial wins, some large commercial wins that have contributed to the 16% growth we mentioned in the quarter as well as in the scaling of we're able to scale a relatively stable cost base and inventory base. So it should begin to help us improve margins as well. So we have a central acumen as well that helps us to manage our supplier incentive programs, doing that in one place with strong acumen will also help us to improve our yields there. So we're going to continue to invest in the business and invest in technology and drive further efficiencies here. Thomas Szlosek: Yes. I also going to talk about that because we talk -- we talk about the fact that we're very focused in terms of our M&A and that what we want to do is to build density in our clusters. This is a perfect example of why and I think the teams are now beginning to deploy this at scale. And if you look at our growth, and remember that this is business being sold into collision shops around a non-franchise, largely non-franchise aftermarket suppliers, which are operating in the same vehicle park as we are. We know -- you all know that collision volumes are down because of various factors. So the growth that we're seeing, you can clearly see the majority of that is coming from share gains. And I think that's really positive and healthy. And I think the approach to have a virtual parts warehouse and distributed system that Tom described very well, by the way, Tom -- is beginning to show the benefits, and I think there is more for us to go and get. Bret Jordan: Is this strictly OE parts as you sell into the aftermarket? I mean, 7 or 8 years ago, you were doing a private label import parts business as well. Are you selling the OE product or a mix of both? Michael Manley: The vast majority of our growth is OE, absolutely OE parts, yes. It's not after sales -- after sales parts and margins in that business compared to stocking costs are for us, not as attractive as leverage in the assets that we naturally have, which is all of the fantastic brands we represent. Operator: Your next question comes from the line of Jeff Lick with Stephens Inc. Jeffrey Lick: Mike, I was wondering if you could get your point of view on the new business from a couple of different angles. First, your same-store was down 4.7%. But when you look at that versus what you were up again seeing on a 2-year basis, it was up 2.7%, which is a better outcome than all of your peers, except for one, but actually a decent margin. First, just curious your thoughts on the new market as we go into the second half. And also I was wondering, somewhat look at your new GPU came in maybe a little bit more than others. But what you were talking about earlier in terms of maintaining a customer. When you look at your service and parts same-store sales, it's still pretty strong given what you're up against. Internally, do you guys think about that marginal transaction we don't want to lose because that's a customers. And so maybe you're willing to sacrifice a penny bit of GPU to gain new volume? Michael Manley: Jeff, I think your analysis is spot on. And I think it's, again, often getting lost in the headlines that we see, which I think when people sit down and actually look at the they're going to recognize that when you look at where AutoNation has come that the results are very, very credible in the marketplace. But let me specifically answer your questions, and I'm going to return to that at the end in terms of the how do we think about balance I hear a lot about affordability in the marketplace and how is it impacting things. I think, as Tom mentioned, SAAR actually is at a healthy place and consumers are incredibly resilient given everything that is going on. And from an affordability perspective, we saw in Q1 the best affordability levels that you have seen over the last few years. If you take any of the external metrics and look at the difference in average transaction price incentives, but also wage growth. You will see the best balance that has been there since pre-COVID times, which really indicates that affordability is not back to pre-COVID times, but it is significantly improved over the last 24 to 48 months. And that was largely stable Q1 to Q2. And I think it's going to be stable as we get into Q3 and Q4, which means from my point of view, the underlying SAAR, absent a shock that none of us can see, I think, is going to be in a good place as we get into the second half, and I think we're well positioned to do that. We -- our share performance Q2 to Q1 was in good shape. And I think that we're doing a number of things. That means we'll be able to not just maintain that, but we can also see opportunity for growth. It doesn't mean to say that the consumer isn't challenged. I think the consumer is challenged, but the results that we are seeing when you step back and look at all of the drivers in the industry, we had, as Tom said, very strong growing SAAR, I think that, that will continue and give us a tailwind as we get into the second half of the year. And I think we're positioned well as a result of that. And as I said, that's absent any shock. I just go back to your balance. This is something, I think, that we should talk about a lot more as we go forward. One of the things that we are very focused on is customer lifetime value. We look at customer lifetime value active customers and period of activity in the business, and that's something that we internally focus on we have a view that what we're trying to do with our businesses is acquire customers and then as they come into AutoNation world that we build that relationship and retain them. But we also grow -- we also grow the richness of that relationship for us and for our customers because we are able provide now a significant range of products and services with significantly good geography for our customers. And as we continue to add to those products and services, whether it is through our FinCo or, for example, our insurance pilots that we are running, we're able to grow that customer lifetime value. So the acquisition costs to put customers into that ecosystem is something that we want to balance very, very much. And you may see short-term pressure on margin, for example, because we want to and we recognize that through other areas and through other means, we can maintain a strong customer lifetime value even if the initial acquisition cost looks high, whether that's in marketing or whether that's in GPU that we retain. That is our entire approach. And it goes back to something that Tom alluded to. As I said, people are going to get well, don't you know your volume is this and your volume is that. But ultimately, it is how we are using the shareholder capital that they have given us, how we are thinking about the return on the capital that we have and how we give that back to our shareholders. And I'll talk at the end of this call, and I'll give you our scorecard and you make up your mind, but that's how we're focused on running the business. So lifetime value, absolutely. How much does it cost to acquire those customers compared to how we can through great products and services and execution, deliver value for them and value for us. So often missed, but that's the important thing. Operator: Your next question comes from the line of Rob Saltzman with UBS. Robert Saltzman: Just a quick question. Strong customer pay performance on the part side, plus 7% in the quarter. Can you just talk a little bit about your strategy of driving that segment within parts and how you compete with independent repair shops in customer pay, you may be offering lower prices? And how do you keep customers coming back to your shops just in that customer base segment? Michael Manley: Yes. I think that's a very, very relevant question because we know the overall aftersales park, the overall vehicles in operation are going to grow over the coming years, particularly if the [ SAAR ] hangs in where it is, which I expect it to be from a franchise dealer point of view, the addressable part for us or the historical addressable part for us will actually dip in the next 24 months -- 12 months to 24 months. So how you penetrate that park and how you add product and service to it is important, and that's what drives our team. So what we look at is how do we create the right balance to improve penetration and we've been able to do that, and that's why we can see customer pay grow we focus very, very much, obviously, on that initial impression in 0 to 3 years, is hugely important to us because it establishes the relationship through 10 and that's where we're seeing some improvement in our penetration despite the fact that the addressable park is dipping and will dip for a little bit of time. And then if we can unlock increasingly that year plus park. That's very important to us and where we compete with the non-franchise players. It's also, as you can imagine, on average, the bigger ticket price. So how we do that is to focus on how we package and bundle value and how we communicate it. All that business is conquest. It's all conquest because it's gone somewhere else by the time you get to 10 years if we haven't been able to retain it. So your growth in and the work you do in that area pays off over time. And Christian and the aftersales team are heavily focused on how we can communicate the value that we offer or we can package for value and make sure that we are a very, very credible alternative to the loads and non-franchise businesses that are out there. And I think they did a reasonable job in Q2, which drove our customer pay which I was pleased with, as I said, plus 4%. That's not just a one-off quarter thing. You look back over the quarters and how often they've done that. So their comps are not easy, plus 7% in total and the expectation of Christian and team, from themselves, not just from me, but from themselves as they can continue to do it. So very much focused on how we can package the services that we provide, demonstrate that it adds competitive value, particularly for those older vehicles. Not easy, but that's a big focus for the team. Robert Saltzman: And just one follow-up. So technician growth head count 2% in the quarter. Maybe you can just talk a little bit about how you continue to compete with other dealerships to recruit technicians when you think about that mid-single-digit park and service algorithm, how much of that is continuing to add technicians in that tight labor market? Michael Manley: Yes. I mean without great people, you can't continue to maintain what you've got, let alone grow it. And it is an incredibly competitive marketplace, as you know. So what we focus on is we focus on the proposition that AutoNation can offer to the people in our organization, which is total rewards. It isn't just around the level of pay that they can achieve. It is also how we think about other benefits that we provide to our technicians is how we recognize them. We've just come off of after sales, technician recognition month. where we spend a lot of time thanking our technicians and our parts team, by the way, including our service advisers for what they've done in the business. We try and find ways to recognize them because often, it is not top of mind, even though it is absolutely the generator of our consistent profitability. We do a lot of work making sure that we're competitive in the marketplace in terms of the total rewards that we provide for our team. And we also like to provide them a good career journey for those that maybe want to become master techs in the business, but they also want to become general managers and regional directors. And we try and find talent in all areas of the business. And when we find talent, we like to put it in -- we like to put that talent into situations that stretch them and grow them, and they can continue their career journey with us. So as always, not one single thing can help, but 2% growth in terms of our technicians is good. We need to continue that, and we obviously need to continue to retain them. Thomas Szlosek: I'd also add, Mike, the amount that we're investing in our physical layouts and properties. It will be -- grow to a meaningful portion of our CapEx spend, and that's improving tools, improving working conditions and so forth. And I think that's going to be contributor as well. Operator: Your next question comes from the line of John Saager with Evercore ISI. John Saager: I got cut off earlier, so I apologize if someone already asked this. But everyone all of the publicly traded dealers discuss and think a lot about being disciplined in our capital allocation, balancing acquisitions with buybacks. But it feels like people are using different valuation or strategic metrics within that same type of framework. So can you frame out your thinking around your approach. There are certainly some private dealerships that are operating at higher margins than your overall book but how willing are you to pay a premium for those assets relative to your own valuation? And then how do you think about balancing a desire for growth and the network benefits from that overall customer flywheel versus just buying back your own stock, especially when it's trading at these valuations. Thomas Szlosek: Yes. Thanks for the question, John. for us, I mean, it is important that you pay a competitive rate you compete for properties that are attractive to you. And for us, that means they're generally in brands that we're strong in and in locations and areas where we have density. We feel like we can create the most value with those types of conditions. But with that said, it's not just what you pay, but it's the returns. And we have very clear measures in terms of our expectations on ROIC, and that really dictates what we're going to compete for. And over time, perhaps our M&A spend has not been -- kept pace with our return to shareowners, but it really just is a reflection of where we think we can create value for the shareowners. And we'll end up passing on deals that we think we can't meet the mark on ROIC and return the residual cash to our shareholders is the way we think about it. Michael Manley: Yes, I'm going to add to that, Tom. I think I may have mentioned on a couple of times the sixth consecutive quarter of EPS growth. I don't think anybody else has done that. Earnings per share is important because shareholders are individuals. I know we think about them as one particular group, but they're individuals. So we think about the individual return that we can give our shareholders. And 6 consecutive quarters of EPS with our capital strategy, I think, speak very, very loudly. And therefore, we look at the biggest benefit we can give our shareholders for each dollar that we are going to invest. We are very clear on the maintenance CapEx that we have to invest because it maintains obviously, a cash stream for us. But everything else, we look at the best use of those dollars and how competitively we can invest it. As we have grown the synergistic benefits of coming into a group like AutoNation, it means that we can make acquisitions that in the past were marginal. They now actually yield a great result for us because we have proven that, for example, through the discussion we've had on wholesale, that is a synergistic play that we're able to do through the density we've been able to develop in the marketplace. So you may see that some people get headline revenue growth, for example, and we may not grow our revenue in the same way, but 6 consecutive quarters of EPS growth for our shareholders, as I said, should speak loudly and we have shareholders that really push us on how we think about capital and how we deploy our capital. And I appreciate that from them. And we are very much thinking of it from their perspective. So yes, that means that sometimes our revenue may not grow as somebody who has been out and bought a load of other businesses and just bolted them in. That's inevitable, but we have optionality but it really is grounded in what's the best use of that dollar that we can deploy on behalf of our shareholders with their lens. John Saager: Very helpful, actually. And then just adding on to that, how do you think about sizing and leverage? And are there deals out there that are so large that you may decide to pursue them and pause share buybacks? Michael Manley: Yes. Yes. Thanks, John. Great question. Again, I would emphasize the return on equity, return on invested capital that is the basic focus of our M&A program. With that said, we're also managing our investment-grade rating, and we have a very healthy balance sheet, good relationship with the rating agencies. No doubt, if we did a larger acquisition, it would come with a lot more EBITDA and a lot more synergy opportunity. So it would depend on the return and it would depend on the upfront leverage as well as the ability to delever. And in general, with large acquisitions like that. Our expectation is that we could delever very, very quickly. And that's a conversation we're always willing to have. So size is important. You see a lot more flow in traffic on the small- and medium-sized deals. But yes, it's with our return focus with our shareholders, we're we have an open mind to considering all the opportunities that might be there. Thomas Szlosek: Yes, but it goes back to the same thing that we just discussed. We have a great balance sheet with phenomenal liquidity. If the investment gives the returns that we expect and is best use of our dollars we will find a way to be able to deal with very, very large scale acquisitions if it's the best use of our dollars. You've created with your team and the work that our people have done a great balance sheet, that gives us immense flexibility in the marketplace. And we will use exactly the same lens as we do across other investments that we make. Operator: The final question today comes from David Whiston with Morningstar. David Whiston: Sticking on capital allocation, buybacks were up 80% year-over-year in the first half. I'm just curious, can you comment directionally for the second half? Is it going to be around that range or a lot less? Or does that just all depend on the M&A environment? Michael Manley: Yes. Thanks. Good question, David. The -- ofcourse, our priorities are is what we've stated. I mean we'll continue to fund CapEx, and that's pretty much within a contained range, pretty confident in those numbers. We do consider an ongoing pipeline of M&A opportunities. As I said, we've been very thoughtful. As Mike points out. But our residual will continue to go to -- our residual cash flow will continue to go to share buyback. So is it going to be exactly what it was in the first half? I mean I don't really comment on that, but it is an important priority for us, and you can think of us as spending all of the free cash flow that we have. David Whiston: Okay. And on a different topic, just curious on the trend this year versus the past couple of years on new and used vehicle. AutoNation customers buying a vehicle online. Has that leveled off? Is it increasing or trended down a bit. Michael Manley: Well, like everybody else, we are continuing to see our customers in prepurchase and purchase, leveraging online resources increasingly, particularly as we get into as you will all know, the generational change of buyers from my generation, which is basically towards the end to a much younger generation that thinks about buying and buying habits in a very, very different way. Some of the things that we are investing in is to make sure that we can provide different options for our customers, depending upon their preference to do research, to purchase and to get fulfillment of their vehicles. That means that we have to constantly invest in some of those channels, digital channels to provide the functionality that they want. We continue to do that. And the trends we are seeing in terms of that preference for buying, I think, will continue. And because we're aware of that, we're obviously investing to make sure that we can provide those levels of access to the business that we have. Operator: There are no further questions at this time. I will now turn the call back to Mike Manley for closing remarks. Michael Manley: Yes Thank you, I thought -- great questions, and thank you for that. We appreciate you being on the call, and we appreciate your questions. But and I'm going to talk about some things that I'll actually speak to some of the answers that we've already given you. And I'm going to take a few minutes just to share some reflections on our sustained performance. And then as always, I do want to give you some of you on our forward expectations. So let's turn to Slide 16. Now this is about how AutoNation has set the pace in the auto retail world. I think we have an outstanding set of brand offerings. We're attractively positioned from a geographic perspective. We have scale and very, very importantly, and should never be missed, we have a team of associates who work in our playbook every day who are great who are committed and help drive our business forward. But if you have a look, these have enabled significantly strong overall financial results in the space. I emphasize overall because our focus is on operating profits and cash flows, not necessarily being #1 in each of the individual metrics referenced. We have a clear focus that Tom and I have talked about on many occasions. And you can see that come through in the results that I'm showing you here. Now approximately 80% of our profits come from CFS and after sales. Both a high-margin, highly recurring earnings streams and our growth and position in gross margins reflects this attractive business mix, I think. And further, we consistently deliver amongst the highest operating margins of the group, meaning that not only do we have strong positions in attractive segments, but we also have a strong track record of operating them effectively. Now our scale helps, of course, but it's really our strong measurement rigor. We bring operating standardization to our business, and we have excellent field leadership. And I know all of our field and our leadership teams are on this call, and I thank you for the things that you do, and I thank you for your focus on measurement and rigor. Because really that enables our results to stand out over the course of time. And I think that's important, and that's what our shareholders look for over the course of time. Now if you look at Page 17, it's clear from our ROIC that these operating results are being delivered in a capital-efficient manner. In 6 years, we've gone from approximately 9% return on invested capital to around 14%. And in this time frame, we've generated over $6.3 billion in free cash flow, and we've returned $6.5 billion to our shareholders in the form of share repurchases. We think this is a strong track record, and we think we're well positioned to continue it. But let me close on Slide 18. We talked about this we do have a diversified business model. We added AN Finance. And you can see from our results, not only is it scaling, but it is producing great returns on equity. And we're very pleased with the way the team are performing there which is important. But as I mentioned at the opening, consumer demand and industry sales do remain resilient and as such, we expect our unit sales to continue to track largely in line with the markets and brands we serve in both new and used vehicles. But as we talked about on the call, we really remain focused on trying to balance volume, margin, inventory and customer experience around that lens of customer lifetime value, what's our acquisition cost and then how can we provide value and services to our customers. So it is a blend. Sometimes you will see margins from a temporary lens move up. Sometimes you'll see them move down, but it really is with that more longer-term focus on what we're trying to do. And frankly, our aftersales business, which was a lot of topic of conversation today remains well positioned for continued mid-single-digit growth in customer pay because there is a durable demand out there, and it is a recurring revenue profile. And that focus that we talked about on customer retention, technician capacity, for example, we talked about that as well and their productivity is going to serve us well. Customer Financial Services continues to deliver sustained performance and that does reflect the disciplined execution it is around product penetration, and we touched on that point as well during the call. And it is around that value that we provide to our customers and the processes we use to explain the value inside it. We do continue to scale with AutoNation Finance the ongoing portfolio growth and improving year-over-year profitability contribute to the strength and diversification of our earnings profile. And with more stable and unit profitability, growth in CFS and after sales, lower shares outstanding, we do expect adjusted EPS growth in the second half. So as I said, 6 consecutive quarters of EPS growth, with the capital allocation strategy that we deploy on behalf of our shareholders, and we expect that to continue certainly in the next half. And capital allocation, obviously remains shareholder focus. And it is around an emphasis on disciplined investment, obviously, optimize our portfolio and continue with that lens on returns to our investors. And taken together, I think, our business model, the cash generation the disciplined deployment of that cash and focus on our operational execution position are going to continue to deliver attractive returns. So listen, on behalf of our team, I want to thank you for being part of the call. Thank you for your questions, and we'll see you in a quarter's time. Operator: This concludes today's call. Thank you for attending. You may now disconnect. 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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. AutoNation (AN) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved record aftersales gross profit of $607 million, driven by a 7% increase in customer-pay revenue which management views as a more durable indicator of market health than internal reconditioning. Maintained a tight band of unit profitability for both new and used vehicles over the last four quarters, reflecting a strategic shift toward total economic value per unit rather than chasing volume at any cost. Expanded the wholesale parts business by 16% through the orchestration of a single supply chain across all brands, capturing market share from non-franchise aftermarket suppliers. Prioritized customer lifetime value by focusing on high-margin service contract attachments, which seed future aftersales revenue and improve long-term retention despite temporary acquisition costs. Scaled AutoNation Finance to $11 million in quarterly profit, utilizing the captive arm to capture a larger share of the finance value chain while absorbing short-term CFS headwinds for long-term yield. Attributed new vehicle volume declines to tariff-related pull-forward comparisons from 2025 and a 30% drop in battery electric vehicle (BEV) sales, while maintaining consistent market share. Improved technician retention and increased same-store head count by 2%, identifying workforce capacity as the primary constraint and driver for mid-single-digit aftersales growth. Expects adjusted EPS growth to continue through the second half of 2026, supported by lower share counts and the lapsing of 2025 headwinds related to tariffs and EV credits. Targets an SG&A-to-gross-profit run rate of 66% to 67% by year-end, driven by productivity initiatives, advertising discipline, and portfolio optimization actions. Anticipates a meaningful acceleration in off-lease vehicle supply during the second half of the year, which is expected to improve sourcing for the used vehicle department. Projects continued mid-single-digit growth in customer-pay aftersales, assuming the resilience of the consumer and improving affordability trends observed in early 2026. Maintains a capital allocation framework that prioritizes maintenance CapEx and high-ROIC M&A, with all residual free cash flow directed toward share repurchases. Acquired four stores in Georgia and California representing $600 million in annual revenue, focusing on markets where existing density allows for synergistic parts and service operations. Noted a cyclical softness in internal repair orders due to a shift in used vehicle stocking mix toward higher-priced units requiring less reconditioning. Reported a 125% free cash flow conversion rate for the first half of the year, providing the liquidity necessary to fund $457 million in share repurchases. Acknowledged a 'COVID hole' in the 3-to-10-year vehicle park that temporarily limits the addressable market for certain aftersales services, though penetration gains are currently offsetting this gap. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management argues that GPU stability is driven by faster time-to-market and a focus on return on invested capital (ROIC) rather than just volume. High-end used vehicles (over $40,000) yield double the profitability of lower-priced units, and management will continue to prioritize this mix while supply remains tight for sub-$20,000 cars. The 16% growth in wholesale is attributed to 'commercial wins' where AutoNation acts as a single-vendor solution for collision shops across multiple brands. Management views this as a high-growth, share-gain opportunity that leverages their existing physical footprint to compete against non-franchise aftermarket distributors. Management stated they will pass on M&A deals that do not meet strict ROIC hurdles, preferring to return cash to shareholders if private market valuations are too high. The 'synergistic play' of AutoNation's scale now allows them to find value in acquisitions that might have been marginal for smaller groups. Increased loan originations through the captive finance arm create a 2% drag on immediate CFS profit per unit. This is a deliberate trade-off, as the company expects significantly higher total profit over the full term of the loan compared to traditional third-party commissions.

This article first appeared on GuruFocus. Release Date: July 31, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Adjusted EPS grew year-over-year for the sixth consecutive quarter, reaching $5.56 in Q2 2026. After-sales gross profit hit a record $607 million, with customer pay revenue up 7% and wholesale parts up 16%. Customer Financial Services (CFS) per vehicle profitability rose 3% to $2,799, despite a drag from AutoNation Finance originations. AutoNation Finance scaled profitably, generating $11 million in Q2 profit and growing its portfolio 52% year-over-year to $2.67 billion. Adjusted free cash flow was strong at $439 million for the first half, with a 125% conversion rate, supporting $457 million in share repurchases and $317 million in M&A. New vehicle unit sales declined 4% year-over-year, impacted by a 30% drop in BEV sales and tough comparisons from 2025 tariff pull-forward. Used vehicle unit sales were lower year-over-year, with a tight supply of vehicles priced under $20,000 affecting volume. SG&A as a percentage of gross profit increased to 68.2% from 66.2% a year ago, though improving sequentially. After-sales gross profit growth decelerated to 3% due to a mix shift toward lower-margin wholesale parts and lower internal pay. New vehicle gross profit per unit fell to $2,381 from $2,785 a year ago, reflecting higher vehicle costs and competitive pressures. Warning! GuruFocus has detected 6 Warning Signs with AN. Is AN fairly valued? Test your thesis with our free DCF calculator. Q: Can you provide more color on the parts and services gross profit deceleration, and when can we expect growth to recover to the mid single-digit cadence?A: Mike Manley, CEO, explained that the deceleration is temporary and driven by mix, specifically lower internal pay due to a shift in used vehicle mix and warranty mix changes. He emphasized that customer pay, a more relevant indicator, grew 7% and gross profit increased 7% in total and 4% on a same-store basis. He views the internal pay and warranty softness as point-in-time, not structural, and highlighted the 16% growth in wholesale parts as incremental share gain. He expects customer pay growth to continue in the second half. Q: What is driving the expected improvement in SG&A to the 66-67% range by year-end?A: Tom Slozic, CFO, stated that the improvement will be driven by improved gross profit, productivity initiatives including AI applications, moderation of investments made in the first half, and portfolio actions. These multiple factors are expected to move the SG&A rate in the right direction. Q: Is the stabilized variable profit per unit in the $4,500 range the new normal, and what is driving that stability?A: Mike Manley, CEO, confirmed that the focus is on total unit profitability, which has been stable over the last four quarters. He noted that CFS per vehicle profitability grew 3% year-over-year to $2,800, and the team continues to perform well, even while absorbing a headwind from increased AutoNation Finance originations. Tom Slozic, CFO, added that the strong CFS performance, particularly in extended service contracts, seeds future customers for service departments. Q: How sustainable is the used vehicle GPU improvement, and what are the key drivers?A: Mike Manley, CEO, stated that GPU improvement comes from multiple areas, including faster time-to-market, better control over reconditioning costs, and favorable mix. He emphasized that the focus should be on return on invested capital rather than just unit volume, noting that higher-priced used vehicles (above $40,000) generate better returns. He believes the key drivers are under control and the performance is sustainable. Q: How big can the wholesale parts business become, and where is the share being taken from?A: Mike Manley, CEO, explained that the company is orchestrating the business to manage all products and brands through one supply chain, leading to meaningful commercial wins and a 16% growth in the quarter. Tom Slozic, CFO, added that this centralized approach allows for scaling with a stable cost base and improved margins. The growth is primarily from share gains in the collision and non-franchised aftermarket, and the vast majority of growth is in OE parts. Q: Can you provide your view on the new vehicle market in the second half and the balance between volume and GPU?A: Mike Manley, CEO, stated that affordability is at its best level in years, with stable SAAR and improving consumer sentiment. He expects the industry to be in a good place in the second half, absent any shocks. He emphasized the focus on customer lifetime value, where the company may accept short-term margin pressure to acquire customers and build long-term relationships through products and services like its finance company and insurance pilots. Q: What is the strategy for driving customer pay growth and competing with independent repair shops?A: Mike Manley, CEO, explained that the focus is on improving penetration in the 3-10 year vehicle park and increasingly the 10+ year park, where they compete with non-franchise players. The strategy involves packaging and bundling value, communicating it effectively, and focusing on the initial impression in the 0-3 year period to establish relationships. He noted that customer pay grew 7% in the quarter, and the team is focused on demonstrating competitive value for older vehicles. Q: How do you think about balancing M&A with buybacks, and how willing are you to pay a premium for high-margin dealerships?A: Tom Slozic, CFO, stated that the company has clear measures on ROIC expectations that dictate what they compete for. Mike Manley, CEO, added that the focus is on the best use of each dollar for shareholders, and the company has delivered six consecutive quarters of EPS growth. He noted that while revenue growth may not match others who bolt on acquisitions, the synergistic benefits of density, such as in wholesale parts, make acquisitions more attractive. The company remains disciplined and will pass on deals that don't meet return thresholds. Q: Are there deals large enough that you would pause share buybacks to pursue them?A: Tom Slozic, CFO, stated that while the basics of the M&A program are return on invested capital, the company would consider larger acquisitions if they come with significant EBITDA and synergy opportunities. He noted that the company could delever quickly and has an open mind to considering all opportunities. Mike Manley, CEO, added that the strong balance sheet provides immense flexibility to handle very large-scale acquisitions if they are the best use of dollars. Q: Can you comment on the direction of buybacks in the second half and the trend in online used vehicle purchases?A: Tom Slozic, CFO, stated that the company will continue to fund CapEx and pursue M&A, with residual cash flow going to buybacks, and they expect to spend all free cash flow. Mike Manley, CEO, noted that customers are increasingly leveraging online resources for pre-purchase and purchase, driven by generational changes. The company is investing in digital channels to provide the functionality customers want, and the trend is increasing. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

AutoNation (AN) came out with quarterly earnings of $5.56 per share, beating the Zacks Consensus Estimate of $5.43 per share. This compares to earnings of $5.46 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +2.39%. A quarter ago, it was expected that this auto retailer would post earnings of $4.71 per share when it actually produced earnings of $4.69, delivering a surprise of -0.42%. Over the last four quarters, the company has surpassed consensus EPS estimates three times. AutoNation, which belongs to the Zacks Automotive - Retail and Whole Sales industry, posted revenues of $6.93 billion for the quarter ended June 2026, missing the Zacks Consensus Estimate by 0.52%. This compares to year-ago revenues of $6.97 billion. The company has topped consensus revenue estimates just once over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. AutoNation shares have added about 4% since the beginning of the year versus the S&P 500's gain of 8.7%. While AutoNation has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for AutoNation was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $5.62 on $7.17 billion in revenues for the coming quarter and $21.41 on $27.95 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Automotive - Retail and Whole Sales is currently in the bottom 22% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, Titan Machinery (TITN), has yet to report results for the quarter ended July 2026. This agriculture and construction equipment seller is expected to post quarterly loss of $0.33 per share in its upcoming report, which represents a year-over-year change of -26.9%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Titan Machinery's revenues are expected to be $489.03 million, down 10.5% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AutoNation, Inc. (AN) : Free Stock Analysis Report Titan Machinery Inc. (TITN) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

For the quarter ended June 2026, AutoNation (AN) reported revenue of $6.93 billion, down 0.6% over the same period last year. EPS came in at $5.56, compared to $5.46 in the year-ago quarter. The reported revenue represents a surprise of -0.52% over the Zacks Consensus Estimate of $6.97 billion. With the consensus EPS estimate being $5.43, the EPS surprise was +2.39%. While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall Street expectations to determine their next course of action, some key metrics always provide a better insight into a company's underlying performance. As these metrics influence top- and bottom-line performance, comparing them to the year-ago numbers and what analysts estimated helps investors project a stock's price performance more accurately. Here is how AutoNation performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts: Retail vehicle unit sales - Total: 127,761 versus 132,444 estimated by four analysts on average. Revenue per vehicle retailed - New: $52,067.00 versus the four-analyst average estimate of $52,339.52. Revenue per vehicle retailed - Used: $28,674.00 versus the four-analyst average estimate of $27,051.50. Gross profit per vehicle retailed - Finance and insurance: $2,799.00 versus $2,769.02 estimated by four analysts on average. Retail vehicle unit sales - Used: 64,521 versus the four-analyst average estimate of 68,340. Revenue- Other: $5.1 million compared to the $4.53 million average estimate based on four analysts. The reported number represents a change of +18.6% year over year. Revenue- New Vehicle: $3.29 billion compared to the $3.34 billion average estimate based on four analysts. The reported number represents a change of -3.1% year over year. Revenue- Used Vehicle: $2.01 billion compared to the $1.95 billion average estimate based on four analysts. The reported number represents a change of +1.3% year over year. Revenue- Parts and service: $1.26 billion versus the four-analyst average estimate of $1.28 billion. The reported number represents a year-over-year change of +3.4%. Revenue- Finance and insurance net: $357.6 million compared to the $366.29 million average estimate based on four analysts. The reported number represents a change of -2.8% year over year. Revenue- Used Vehicle- Retail used vehicle: $1.85 billion versus the three-analyst average estimate of $1.84 billion. The reported number represents a year-over-year change of +0.3%. Revenue- Used Vehicle- Wholesale: $161.3 million compared to the $142.2 million average estimate based on three analysts. The reported number represents a change of +15.2% year over year. View all Key Company Metrics for AutoNation here>>> Shares of AutoNation have returned +15.2% over the past month versus the Zacks S&P 500 composite's -0.5% change. The stock currently has a Zacks Rank #3 (Hold), indicating that it could perform in line with the broader market in the near term. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AutoNation, Inc. (AN) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research