AutoNation Inc (AN) (Q1 2024) Earnings Call Transcript Highlights: Strategic Insights and ...

• New Vehicle Sales: Increased by 7%.

• New Vehicle Revenue: Rose by 2% despite a 5% decrease in average selling price.

• New Vehicle Margins: Decreased by $325 sequentially.

• Used Vehicle Sales: Same-store units down 2%, total units up 2%.

• Used Vehicle PVR: Improved to $1,473 in Q1.

• Customer Financial Services: Strong performance with solid product attachment rates.

• After Sales: Revenue up 8%, gross profit up 9%.

• Store Openings: Four new stores, increasing total to 23.

• Share Repurchases: $250 million in 2024, reducing share count by 4%.

• Additional Share Repurchase Authorization: $1 billion approved by the Board.

• Net Income: $190 million, down from $289 million a year ago.

• Earnings Per Share (EPS): $4.49, supported by share repurchase activity.

• Adjusted Free Cash Flow: $257 million for the quarter.

Release Date: April 26, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Q & A Highlights

Q: Can you discuss the opportunities for improving used GPU to potentially offset pressures on new GPUs? A: Michael M. Manley - CEO & Director, AutoNation, Inc.: Yes, there is upside potential in used vehicle margins, particularly as the market adjusts and aligns with vehicle availability and pricing strategies. The focus is on balancing transaction components to deliver value to customers, which can help improve margins across new and used vehicles as well as financial services.

Q: What is the strategy behind the timing and scale of share repurchases, especially given the recent increase in share price? A: Michael M. Manley - CEO & Director, AutoNation, Inc.: The strategy involves balancing potential M&A opportunities, share price levels, and capital allocation to maximize shareholder value. The company uses planned mechanisms to optimize share repurchases, especially during market fluctuations.

Q: Could you provide an update on AutoNation Finance's performance and expectations for loan loss reserves as the portfolio grows? A: Thomas A. Szlosek - Executive VP & CFO, AutoNation, Inc.: The portfolio is performing well with attractive interest margins and controlled delinquencies. As the portfolio grows, upfront charges for loan loss reserves are significant, but the overall performance is ahead of expectations. The focus is on increasing penetration and managing funding efficiently.

Q: What are the drivers behind the strong performance in parts and service, and what are the expectations for growth in this area? A: Michael M. Manley - CEO & Director, AutoNation, Inc.: Growth in parts and service is driven by increased traffic and higher value repair orders. The strategy includes expanding technician resources and enhancing service offerings to capitalize on the available capacity and drive further growth.

Q: How is the mobile service initiative contributing to parts and service growth, and what are the future plans for this initiative? A: Thomas A. Szlosek - Executive VP & CFO, AutoNation, Inc.: The mobile service initiative is gaining traction, introducing new customers to AutoNation and supporting service needs for AutoNation USA. While not yet profitable, it is expected to grow and contribute more significantly as integration and customer reach improve.

Q: Can you discuss regional performance variations and the impact on vehicle sales and service demand? A: Michael M. Manley - CEO & Director, AutoNation, Inc.: Performance is relatively balanced across key regions like California, Arizona, Texas, and Florida. The focus is on leveraging opportunities in these markets to enhance overall performance and customer service.

These insights from the Q&A session of AutoNation's earnings call highlight strategic initiatives and operational adjustments aimed at sustaining growth and enhancing shareholder value across various segments of the business.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.