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    AN
    Earnings call· Jun 2026(Q2 FY26)

    AUTONATION Q2 FY26 earnings call AN

    Jul 31, 2026 Source

    Executive summary

    AutoNation Q2 FY26 — Strong Aftersales and Capital Allocation Drive EPS Growth

    AutoNation delivered its sixth consecutive quarter of adjusted EPS growth, driven by robust aftersales performance, particularly in customer pay and wholesale parts, and disciplined capital allocation. Despite headwinds in new vehicle sales from BEV declines and a tight used vehicle supply for lower-priced units, the company maintained strong unit profitability and advanced its captive finance arm. Management expects continued EPS growth in the second half, supported by ongoing operational execution and shareholder-focused capital deployment.

    Highlights

    5

    • Adjusted EPS of $5.56, up from $5.46 a year ago, marking the sixth consecutive quarter of year-over-year growth.

    • Aftersales gross profit increased 7% in total and 4% on a same-store basis, reaching a record $607 million.

    • Wholesale parts revenue increased 16% during the quarter, driven by commercial wins and share gains.

    • Adjusted free cash flow was $180 million in the quarter and $439 million year-to-date, an 11% increase year-over-year.

    • Deployed $317 million on attractive M&A and $457 million on share repurchases in the first half.

    Concerns

    3

    • New unit sales were down 4% year-over-year, primarily due to a decline of over 30% in BEV sales.

    • SG&A as a percentage of gross profit was 68.2%, up from 66.2% a year ago, though showing a 160 bps sequential improvement.

    • Used vehicle volume was slightly impacted by a lower mix of vehicles priced below $20,000.

    Guidance & targets

    4
    CategoryTargetConfidence
    SG&A as a percentage of gross profit
    66% to 67% target range
    medium materiality
    High
    Capital expenditures
    approximately $325 million
    medium materiality
    High
    Aftersales customer pay gross profit growth
    mid-single-digit growth
    high materiality
    High
    Adjusted EPS growth
    adjusted EPS growth
    high materiality
    High

    Segment performance

    1
    SegmentRevenueYoYQoQMargin
    Aftersales
    Aftersales delivered record gross profit, reflecting continued growth in a durable, recurring, and high-margin part of the business. The decline in gross margin to 48.1% from 49% in the prior quarter was primarily related to the higher mix of lower-margin wholesale parts. Customer pay and wholesale parts drove revenue growth, offsetting cyclically lower internal repair orders.
    Gross margin: 48.1%Customer pay revenue growth: 7% YoYWholesale parts revenue growth: 16% YoYCustomer pay repair orders: up 5%Warranty repair orders: up 8%Franchise technician headcount growth: >2% YoY
    		$1.26 billion3.3%—$607 million

    Operational metrics

    41
    Adjusted EPS
    $5.56up from $5.46 Q2 FY25
    Q2 FY26
    Diluted EPS
    $1.56vs $5.46 Q2 FY25; vs $4.69 Q1 FY26
    Q2 FY26
    CFS per vehicle profitability
    $2,799up 3% from $2,712 Q2 FY25
    Q2 FY26
    CFS gross profit
    $358 millionvs $368 million Q2 FY25
    Q2 FY26

    Lower retail unit volume more than offset stronger per unit profitability.

    New vehicle per unit profitability
    $2,381vs $2,785 Q2 FY25
    Q2 FY26

    Reflecting higher vehicle costs.

    Used vehicle per unit profitability
    $1,582vs $1,622 Q2 FY25
    Q2 FY26
    Total gross margin
    17.8%
    Q2 FY26

    Represents consistent top-tier performance for the sector.

    Adjusted SG&A expense as % of gross profit
    68.2%vs 66.2% Q2 FY25; vs 69.8% Q1 FY26
    Q2 FY26
    Adjusted operating income
    $343 millionvs $369 million Q2 FY25; vs $312 million Q1 FY26
    Q2 FY26
    Operating margin
    5%
    Q2 FY26
    Weighted average shares outstanding
    33.8 milliondown 4.5 million or 12% YoY
    Q2 FY26

    Reflecting share repurchase activity.

    AutoNation Finance profit
    $11 millionvs $9 million Q1 FY26; vs $2 million Q2 FY25
    Q2 FY26

    Continued to profitably scale this business.

    AutoNation Finance portfolio
    $2.67 billionup 52% from $1.76 billion Q2 FY25
    Q2 FY26
    AutoNation Finance penetration
    11%
    Q2 FY26
    AutoNation Finance debt funded status
    91%up from 83% Q2 FY25
    Q2 FY26

    Increased after closing a $550 million ABS transaction in June 2026.

    New vehicle unit sales
    63,240 unitsdown 4% YoY
    Q2 FY26

    Principally driven by a decline in sales of battery electric vehicles.

    BEV sales
    >30%down YoY
    Q2 FY26
    Import unit sales
    1%increased
    Q2 FY26
    Domestic unit sales
    12%declined
    Q2 FY26
    Premium luxury unit sales
    4%declined
    Q2 FY26
    Used retail unit sales
    lowerYoY
    Q2 FY26
    Used vehicle mix >$40,000
    10%up
    Q2 FY26

    Unit profitability in this category is more than double that for the rest of the used business.

    Used vehicle internal sourcing
    90%
    Q2 FY26
    Free cash flow conversion
    125%up from 100% H1 FY25
    H1 FY26

    Reflecting focus on working capital and cycle times.

    Capital deployed
    $900 millionvs $478 million H1 FY25
    H1 FY26
    Share repurchases
    $457 million
    H1 FY26
    M&A spend
    $317 million
    H1 FY26
    Capital expenditures
    $126 million
    H1 FY26
    Total capital deployed as % of adjusted cash from operations
    159%vs 87% H1 FY25
    H1 FY26

    Reflecting significant reinvestment in the business and continued returns to shareholders.

    ROIC
    14%up from 9% 6 years ago
    Current
    Capital returned to shareholders
    $6.5 billion
    Last 6 years
    CPO sales
    20%vs 15% H1 FY25
    H1 FY26
    Lease returns
    30-40%increase vs H1 FY26
    H2 FY26

    Expected to accelerate meaningfully.

    SAAR
    highestin 4 years
    June
    Banking partner applications and originations
    20%increase
    Q2 FY26
    Wholesale parts gross profit
    9%increased
    Q2 FY26
    Technician headcount
    >2%YoY
    Q2 FY26
    New vehicle inventory day supply
    73 days
    Q2 FY26
    New vehicle inventory day supply
    66 days
    Q2 FY26
    New vehicle inventory day supply
    34 days
    Q2 FY26
    Customer lifetime value
    —
    Ongoing

    The company is very focused on customer lifetime value, balancing acquisition costs with providing value and services to customers to build long-term relationships.

    Industry KPIs

    6
    MetricValueDetails
    Sg a OPEX ratio68.2%%
    Gross margin drivers48.1%%
    Net debt to adjusted EBITDA—
    Share buyback capital return$457 millionUSD
    Inventory position markdown risk—
    Distribution supply chain cost economics—

    Deals & partnerships

    2
    Toyota of Nuna GeorgiaAcquisition of a Toyota dealership in the Atlanta area.

    Adds additional scale to a market where AutoNation already has meaningful presence.

    Three premium luxury stores (unnamed)Acquisition of three premium luxury stores in the San Francisco Bay Area.

    Adds additional scale to a market where AutoNation already has meaningful presence.

    Risks & headwinds

    3
    Lower mix of used vehicles priced below $20,000Q2 FY26, ongoing

    Used vehicle volume was slightly impacted

    Mitigation: Continue to work to improve accessibility to vehicles priced in this range.

    Volume comparison headwinds from 2025 tariff and EV creditsQ2 FY26, expected to lap in H2 FY26

    New unit sales were lower versus a year ago; BEV sales were down by more than 30% year-over-year.

    Mitigation: Expects these headwinds to lap in the second half of the year.

    Cyclically lower internal repair orders in aftersalesQ2 FY26, temporary

    Internal pay was moderately down; internal gross profit was down.

    Mitigation: Offset by strong customer pay and wholesale parts growth; viewed as temporary due to mix shift in used vehicle stocking.

    What to watch in Q3 FY26

    4

    SG&A as percentage of gross profit

    by year-end
    Current68.2%
    Target66% to 67%

    Why it matters

    Reaching this target is a key driver for operating leverage and profitability 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.

    Q&A highlights

    6

    Why is aftersales gross profit growth decelerating despite strong customer pay, and when can it return to mid-single-digit growth?

    Mike Manley explained that the deceleration is due to a mix shift in internal pay (less reconditioning for higher-priced used cars) and warranty mix (higher volume, lower content per RO), which are temporary. He highlighted strong underlying customer pay performance and wholesale parts growth (16% revenue, 9% gross profit) as indicators of health and market share gains.

    “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.”

    asked by Rajat Gupta · answered by Michael Manley

    2 min read6 chapters

    Detailed Narrative

    01

    Aftersales Performance and Strategy

    Aftersales delivered record gross profit, with customer pay revenue up 7% year-over-year and wholesale parts up 16%. The company is focused on improving penetration in the market, especially for older vehicles, by packaging value and communicating competitive offerings against non-franchise players. Investments in technology and technician workforce development are key to sustaining mid-single-digit growth in customer pay aftersales, offsetting temporary declines in internal and warranty repair orders due to mix shifts.

    02

    Customer Financial Services and AutoNation Finance

    CFS per vehicle profitability increased 3% to $2,799, even with a 2% drag from increased AutoNation Finance loan originations. AutoNation Finance generated $11 million profit in Q2, with its portfolio growing 52% to $2.67 billion. The company emphasizes the long-term profitability of its captive finance arm and its contribution to overall unit economics, with compelling offerings driving healthy customer takeup and attractive returns on equity.

    03

    Vehicle Sales Dynamics

    New vehicle unit sales were down 4% year-over-year, largely due to a 30%+ decline in BEV sales, but market share remained consistent. Used vehicle sales saw strength in units priced above $40,000, which have higher profitability, though supply for lower-priced units remains tight. The company expects off-lease supply to accelerate meaningfully in the second half, which should improve inventory mix and support used vehicle profitability.

    04

    Capital Allocation and Shareholder Returns

    AutoNation generated $439 million in adjusted free cash flow in the first half, with a 125% conversion rate. The company deployed $900 million of capital, including $457 million in share repurchases and $317 million for M&A. Recent acquisitions of a Toyota dealership and three premium luxury stores add $600 million in annual revenue and enhance scale and density in existing markets, reflecting a disciplined approach to maximizing shareholder value.

    05

    SG&A Management and Efficiency

    SG&A as a percentage of gross profit improved sequentially by 160 basis points to 68.2% in Q2. Management expects to reach its target range of 66% to 67% by year-end, driven by productivity initiatives, more disciplined advertising spend (which was heavier in the first half), and recent portfolio actions. These efforts aim to enhance operating leverage and overall profitability.

    06

    Customer Lifetime Value Focus

    The company emphasizes a focus on customer lifetime value, balancing acquisition costs with the ability to provide a range of products and services. This approach considers the long-term relationship and recurring revenue streams from aftersales and CFS, rather than solely short-term unit profitability. This strategy aims to build customer loyalty and maximize value over the entire customer journey.

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