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    AN
    Earnings call· Mar 2026(Q1 FY26)

    AUTONATION Q1 FY26 earnings call AN

    May 1, 2026 Source

    Executive summary

    AutoNation Q1 FY26 — Fifth Consecutive Quarter of Adjusted EPS Growth

    AutoNation delivered its fifth consecutive quarter of adjusted EPS growth in Q1 FY26, driven by record aftersales gross profit and strong performance in Customer Financial Services and its captive finance arm. Despite industry headwinds from affordability and challenging year-over-year comparisons, the company maintained disciplined capital deployment and robust cash conversion. Management anticipates continued SG&A investments while aiming for moderation in subsequent quarters, and expects used vehicle business improvements as lease returns increase.

    Highlights

    5

    • Adjusted EPS grew for the fifth consecutive quarter to $4.69.

    • Aftersales gross profit increased 5% to a Q1 record of $593 million, with customer pay up 8% and warranty up 7%.

    • Customer Financial Services (CFS) per unit profit increased 6% year-over-year, offsetting unit volume decline.

    • AutoNation Finance generated $9 million in profit, nearly equaling all of 2025's profit, with the portfolio scaling to $2.45 billion, up $1 billion YoY.

    • Adjusted free cash flow was strong at $256 million, representing 155% of adjusted net income.

    Concerns

    5

    • Total revenue decreased to $6.6 billion from $6.7 billion in Q1 FY25 due to challenging year-over-year comps and lower industry volumes.

    • BEV sales declined more than 50% year-over-year, particularly impacting the premium luxury segment.

    • Adjusted SG&A as a percentage of gross profit was 69.8%, higher than the targeted 66%-67% range, due to marketing investments, customer experience initiatives, and unfavorable self-insurance experience.

    • New vehicle unit sales were down 9% same-store and 8% total store, in line with the market.

    • Used retail unit sales decreased 5% same-store and 3% total store, with sub-$20,000 category declining 9%.

    Guidance & targets

    7
    CategoryTargetConfidence
    Full-year Capital Expenditures
    $300 million to $325 million
    medium materiality
    High
    SG&A as a percentage of gross profit
    down 150 basis points from what we saw in the first quarter
    medium materiality
    Medium
    Used Vehicle Gross Profit Per Unit (GPU)
    moving towards $2,000 a unit
    high materiality
    Medium
    Used Vehicle Business Performance
    improvements
    medium materiality
    High
    Aftersales Business Growth
    benefit
    medium materiality
    High
    New Vehicle Industry Volume
    below that 5% forecast
    high materiality
    Medium
    Used Vehicle Supply
    still be constrained
    medium materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Aftersales
    Delivered solid mid-single-digit growth despite adverse weather impact. Same-store revenue increased 4% and same-store gross profit increased 3%. Focus on technology, hiring, developing, and retaining technicians.
    Customer pay gross profit: up 8%Warranty gross profit: up 7%Internal reconditioning gross profit: declined 6%Wholesale and retail parts: increased 10%Repair order count: higherValue per repair order: higherLabor productivity: improvedSame-store franchise technician headcount: increased >3% YoYGross margin: 48.6%
    		increased 5%5%—$593 million
    Customer Financial Services (CFS)
    Delivered outstanding quarter with record per unit profit. Growth offset year-over-year decline in unit volume, driven by improved vehicle service contract margins and consistent product attachment.
    Products purchased per vehicle: >2Extended service contracts: leading mixFinance penetration: growing to ~3/4 of units soldDilution from AutoNation Finance: ~$160 per unit (5%)
    		———per unit profit up 6%
    AutoNation Finance
    Profitability gaining meaningful traction as portfolio matures. Portfolio quality continues to improve. Expect delinquencies to normalize towards 3% range over time.
    Profit in Q1: $9 million (up from $0.1 million in Q1 2025, up sequentially from $6 million in Q4 2025)Portfolio size: $2.45 billionOriginations: ~$460 million in Q1Customer repayments: ~$213 million in Q1Origination penetration: 17% of all deals financed in Q1 (up from 14% in Q4)Average FICO scores on originations: 70030-day delinquency rates: 2.1% at quarter endDebt funding as % of total portfolio: 90% (up from 74% a year ago)
    		—up $1 billion year-over-year—$9 million
    New Vehicle
    Unit sales declines in line with industry, impacted by BEV decline and tariff-related pull-ins in prior year. Profitability improved sequentially, driven by higher per-unit profits in import and premium luxury segments.
    Unit sales (same-store): down 9%Unit sales (total store): down 8%BEV unit sales: declined >50% YoYPremium luxury unit sales: decreased 16% YoYDomestic and import sales: down mid-single digitsInventory: 46 days of supply (up 8 days YoY, up 1 day from Dec end)Profitability: up 5% versus Q4
    		—down 9%—$2,500 per unit
    Used Vehicle
    Solid performance, improved inventory position and younger average age. Mix shift towards higher-priced vehicles contributed to increased average selling prices.
    Retail unit sales (same-store): decreased 5%Retail unit sales (total store): decreased 3%Used to new ratio: 1 (highest in 2 years)Sub-$20,000 category sales: declined 9%Vehicles priced above $40,000 sales: increased 7%Average selling prices: increased 5% YoYUnits ready for sale: >25,000Total units in used inventory: 32,600Inventory aging: in terrific shapeProfitability: increased by more than $150 sequentially
    		—decreased 5%—just under $1,600 per unit

    Operational metrics

    17
    Total Revenue
    $6.6 billiondown from $6.7 billion in Q1 FY25
    Q1 FY26

    Compared to Q1 FY25 which benefited from tariff-related volumes.

    Adjusted Operating Income
    $312 milliondown 7% from a year ago
    Q1 FY26

    Remains nearly 100 basis points above prepandemic levels as a percentage of revenue.

    Gross Margin
    18.5%improved 30 basis points
    Q1 FY26

    Driven by mid-single-digit growth in aftersales and strong CFS performance.

    Adjusted Operating Margin
    4.8%nearly 100 basis points above prepandemic levels
    Q1 FY26

    Calculated as adjusted operating income as a percentage of revenue.

    AutoNation Finance Portfolio
    $2.45 billionup about $1 billion year-over-year
    Q1 FY26 end

    Reflects the scaling of the captive finance company.

    Adjusted EPS
    $4.69up from a year ago
    Q1 FY26

    Fifth consecutive quarter of year-over-year growth. Excludes net after-tax gain of approximately $40 million related to equity investments.

    Capital Deployed
    $350 million
    Q1 FY26

    Includes share repurchases and CapEx.

    Share Repurchases (YTD)
    $400 million
    YTD Q1 FY26

    Additional repurchases made since end of March.

    New Vehicle Inventory Days of Supply
    46 daysup 8 days from Q1 FY25
    Q1 FY26 end

    Up 1 day from end of December. Management remains disciplined in inventory management.

    Used Vehicle Inventory (Total Units)
    32,600
    Q1 FY26 end

    Inventory aging is in terrific shape.

    Net After-Tax Gain (excluded from adjusted results)
    $40 million
    Q1 FY26

    Related to strategic equity investments in Waymo and TrueCar.

    Capital Expenditures to Depreciation Ratio
    0.9xcompared to 1.2x a year ago
    Q1 FY26

    CapEx was a little light in the quarter due to timing.

    Leverage Ratio (Net Debt to EBITDA)
    2.57xalmost identical with 2.56x EBITDA at end of Q1 FY25
    Q1 FY26 end

    Remains comfortably within the long-term target.

    Non-Vehicle Interest Expense
    increased $6 millionyear-over-year
    Q1 FY26

    Reflecting higher average balances and slightly higher blended borrowing rate due to maturities of lower-cost debt.

    Floor Plan Interest Expense
    decreased $5 million10% year-over-year
    Q1 FY26

    As borrowing rates moderated and disciplined inventory management.

    AI-driven Savings
    $5 million
    FY25

    Generated in customer service contact centers and back office. Expected to continue into FY26.

    Sales per Associate
    close to 10up from ~9 a year earlier
    Q1 FY26

    Driven by better training, technology, and performance-based incentives.

    Industry KPIs

    6
    MetricValueDetails
    Sg a OPEX ratio69.8%%
    Comparable sales4%%
    Gross margin drivers30 basis pointsbps
    Net debt to adjusted EBITDA2.57xx
    Share buyback capital return$300 millionUSD
    Inventory position markdown risk46 daysdays

    Deals & partnerships

    1
    Investors (via ABS transaction)Nonrecourse debt funding for AutoNation Financeapproximately $750 million

    Second ABS issuance completed in January, reflecting lender and market confidence in the portfolio.

    Risks & headwinds

    7
    Challenging Q1 industry environmentQ1 FY26

    year-over-year comps

    Mitigation: Strong operating performance, cash conversion.

    Decline in BEV salesQ1 FY26

    declined more than 50% year-over-year

    Mitigation: Focus on overall new vehicle profitability, which improved sequentially.

    Affordability headwinds for consumersOngoing, particularly Q1 and Q2 FY26

    average transaction prices are up roughly 40% on us since 2019, increased insurance costs... up roughly 50%

    Mitigation: Expectation that some margin compression could stimulate volume; aftersales business benefits from deferred purchases.

    Geopolitical factors and economic uncertaintyforeseeable quarters

    Industry volume "below that 5% forecast" (original impact forecast)

    Mitigation: Focus on a balanced business model (aftersales as anticyclical), disciplined capital allocation.

    SG&A above target rangeQ1 FY26, expected to moderate in subsequent quarters

    69.8% for the quarter, a bit higher than our targeted range of 66% to 67%

    Mitigation: Investments in marketing and customer experience, AI-driven productivity, expected 150 bps reduction in Q2-Q4.

    Used vehicle supply constraintsa period to come

    still be constrained for a period to come

    Mitigation: Focus on sourcing from various channels, improving reconditioning and inventory velocity.

    Delinquency rates in AutoNation FinanceOver time

    expect delinquencies to continue to normalize as the portfolio matures, migrating towards the 3% range over time

    Mitigation: Loss reserving methodology incorporates this expectation; portfolio quality continues to improve (average FICO 700).

    What to watch in Q2 FY26

    5

    SG&A as a percentage of gross profit

    Q2 FY26 through Q4 FY26
    Current69.8%
    Targetdown 150 basis points from Q1

    Why it matters

    Management expects significant moderation in SG&A after Q1's elevated levels, which is critical for profitability.

    I think in second quarter through the fourth quarter, we should probably expect us to bring it down 150 basis points from what we saw in the first quarter.

    Q&A highlights

    7

    Why was the 2026 outlook removed, and what are the expectations for vehicle profitability?

    The outlook was removed due to a different macro environment (inflation, fuel prices, geopolitics) impacting the industry, which is now expected to be below the initial 5% impact forecast. Management expects some margin compression in new vehicles to drive volume, which they are comfortable with. Aftersales is expected to benefit from deferred purchases.

    “I think the industry will be below that 5% forecast that we originally had coming in until some of those impacts get dissipated.”

    asked by Rajat Gupta · answered by Michael Manley

    2 min read7 chapters

    Detailed Narrative

    01

    Strong Q1 Performance Despite Industry Headwinds

    AutoNation reported its fifth consecutive quarter of year-over-year adjusted EPS growth, reaching $4.69, despite a challenging Q1 for the industry marked by difficult year-over-year comparisons and declining BEV sales. The company's strategy of disciplined capital deployment and strong cash conversion enabled this performance. Total revenue decreased to $6.6 billion from $6.7 billion in Q1 FY25, primarily due to lower industry volumes and challenging prior-year comps.

    02

    Aftersales and Customer Financial Services Drive Profitability

    Aftersales delivered a record Q1 gross profit of $593 million, growing 5% overall, with customer pay up 8% and warranty up 7%. This segment demonstrated durability and high margins, contributing nearly half of the company's gross profit. Customer Financial Services achieved a 6% increase in per unit profit, driven by improved vehicle service contract margins and higher finance product penetration, offsetting unit volume declines.

    03

    AutoNation Finance's Rapid Growth and Profitability

    The captive finance arm, AutoNation Finance, generated $9 million in profit for the quarter, nearly matching its entire 2025 profit, and up sequentially from $6 million in Q4 FY25. Its portfolio scaled to $2.45 billion, up $1 billion year-over-year, with originations representing 17% of all financed deals. The company also improved its funding profile with a second ABS transaction, enhancing nonrecourse debt funding to 90% of the portfolio.

    04

    New and Used Vehicle Market Dynamics

    New vehicle unit sales declined in line with the industry, down 9% same-store and 8% total store, significantly impacted by a >50% year-over-year drop in BEV sales. New vehicle profitability improved sequentially to over $2,500 per unit. Used vehicle performance was solid, achieving the highest used-to-new ratio in two years, with sequential improvements in per-unit profitability to just under $1,600 and improved inventory aging.

    05

    Strategic Investments and SG&A Management

    AutoNation is making strategic investments in upper-funnel marketing to build national brand awareness and in technology, including AI, to drive productivity and enhance customer experience. While these investments led to adjusted SG&A at 69.8% of gross profit (above the 66%-67% target), management expects moderation in subsequent quarters, aiming to reduce it by 150 bps from Q1 levels by Q4 FY26, supported by AI-driven savings.

    06

    Capital Allocation and Balance Sheet Strength

    The company deployed $350 million in capital during Q1, including $300 million in share repurchases, and has repurchased nearly 2 million shares year-to-date. Its balance sheet remains strong with a leverage ratio of 2.57x EBITDA, comfortably within the 2x-3x target. This robust cash flow generation and strong balance sheet provide significant flexibility for future capital deployment and shareholder returns.

    07

    Mobile Repair Service Integration and Productivity

    AutoNation has integrated its mobile repair service into existing AN USA businesses, establishing hubs to significantly improve productivity and consistency. After initially slimming down technician numbers due to low productivity, the company has learned about dynamic booking and is now building layers of business to extend remote products and services efficiently, adding value to customers and partners.

    AI-generated summary of the company’s earnings call. Not investment advice.