John Saager

John Saager inquired about the specific factors contributing to the higher-than-expected SG&A as a percentage of gross profit in Q4, and the extent of dilution from M&A activity. He also asked for a projection on where SG&A could reach in 2026, given the 2025 year-end figure and longer-term targets.

Answer

Bryan DeBoer, President and CEO, attributed the Q4 SG&A increase to a continually weakening market and sales not materializing as expected in December, despite marketing pushes. Tina Miller, Senior Vice President and CFO, noted that North America's SG&A performance remained in the top quartile. Bryan DeBoer further explained that SG&A is primarily a function of Gross Profit Per Unit (GPU) and volume, making precise predictions difficult, especially with softening new car sales.

John Saager questioned the higher-than-expected SG&A as a percentage of gross profit in Q4, seeking specific drivers and the impact of M&A dilution. He also asked for a 2026 outlook on SG&A leverage towards the long-term 60-65% target.

Answer

Bryan DeBoer, President and CEO, attributed the Q4 SG&A uptick to a weakening market, especially in late December, and marketing spend not translating into expected volume or GPUs. Tina Miller, SVP and CFO, added that North America's same-store SG&A remained top quartile. DeBoer explained that SG&A is highly dependent on GPUs and volume, making precise 2026 forecasts difficult amidst softening new car sales, but emphasized the team's focus on cost structure adjustments.

John Saager asked about the decline in used vehicle Gross Profit Per Unit (GPUs) in the second half of 2025, specifically around the $1,600 level, questioning if it was a demand or supply issue and the outlook for 2026. He also sought an update on new vehicle GPUs and whether stabilization is continuing in the marketplace.

Answer

CFO Tom Szlosek and CEO Mike Manley acknowledged Q4 2025 as a low mark for used GPUs, expressing confidence in actions to return to prior norms and a longer-term target of $2,000 per unit. They cited the importance of efficient acquisition, reconditioning, and pricing in a tighter market, along with future investments in the customer journey. Mike Manley emphasized the strength of AutoNation's new car retailer status for sourcing quality used vehicles through trade-ins, which helps offset competition. For new GPUs, Tom Szlosek and Mike Manley noted sequential improvement from Q3 to Q4 2025 despite OEM incentive pressure and expect continued stabilization, particularly in H1 2026, driven by disciplined operations.

John Saager asked for a deeper discussion on the used market, specifically the decline in Gross Profit Per Unit (GPUs) in H2 2025, inquiring if it was a demand or supply issue and the outlook for 2026. He also sought insights into new GPUs, given the mentioned stabilization.

Answer

CFO Thomas Szlosek acknowledged Q4 2025 used GPU as a low point, attributing it to acquisition pricing, reconditioning, and day-one pricing, with a long-term target of $2,000 per unit. He noted a tighter market requiring speed in acquisitions and planned investments in the customer journey. CEO Michael Manley added that increased competition across sourcing channels has pressured used vehicle costs, partially offset by AutoNation's new car sales organization. Regarding new GPUs, Szlosek stated that 2026 plans anticipate continued stabilization, with Q3 to Q4 2025 showing improvement despite OEM incentive pressure, expecting stability from December to January. Manley reiterated the focus on balancing market pace with margins, expecting stability in new GPUs for H1 2026.

John Saager asked about the expected magnitude of future U.K. restructuring costs, specifically if they would be comparable to the $28 million incurred this quarter. He then sought guidance on post-restructuring trends or ranges for used vehicle Gross Profit Per Unit (GPUs) and SG&A as a percentage of Gross Profit for both the U.K. and U.S. operations, along with the timing to achieve these targets.

Answer

Daniel McHenry, CFO, stated that future U.K. restructuring costs are not expected to be anywhere near the $28 million, as significant work like DMS integration, property portfolio adjustments, and the JLR disposal were largely completed in 2025. Daryl Kenningham, CEO, mentioned that U.S. used GPUs are higher than pre-COVID but lower than a year ago, with expected upside in U.K. used GPUs. He targeted U.K. SG&A at 80% long-range, fluctuating with plate change quarters, while Daniel McHenry, CFO, projected U.S. SG&A to be in the mid-to-high 60% range annually.

John Saager inquired about the expected magnitude of U.K. restructuring costs for 2026, comparing it to the $28 million incurred in Q4 2025, and sought guidance on future used vehicle GPU and SG&A as a percentage of GP trends for both U.K. and U.S. operations.

Answer

Daniel McHenry, CFO, stated that 2026 restructuring costs are not expected to be comparable to the $28 million in Q4 2025, as significant 'heavy lifting' and costs related to DMS, property portfolio, and JLR disposal were completed in 2025. Daryl Kenningham, CEO, noted that U.S. used GPUs are higher than pre-COVID but lower than a year ago, with expected upside in U.K. used GPUs through improved discipline. For U.K. SG&A as a percentage of GP, the long-range target is 80%, fluctuating with plate change quarters. Daniel McHenry added that U.S. SG&A as a percentage of GP is expected to be in the mid-to-high 60s annually.

John Saager asked about the near-term demand for Mobileye's Drive system (Robotaxi) for 2027-2028, given the long-term forecast of 100,000 AVs by 2033, and followed up on whether AV customers pay for R&D in advance or if Mobileye has volume protection.

Answer

Amnon Shashua (CEO and Founder, Mobileye) and Nimrod Nehushtan (EVP of Business Development and Strategy, Mobileye) explained that initial deployments will involve thousands of vehicles across six cities expanding to 60 by 2027, with hundreds of vehicles per city. Nimrod added that Volkswagen's manufacturing capacity could scale significantly beyond 100,000 units if demand materializes. For payments, Nimrod confirmed that Mobileye receives engineering budgets covering direct development costs well before commercialization, providing confidence against potential volume downsides.

John Saager asked about the near-term demand for Mobileye's Drive system for 2027-2028, including expected volumes for phase one launches, and whether AV customers pay for R&D in advance or if there's protection against lower-than-planned volumes.

Answer

Amnon Shashua, CEO and Founder, mentioned plans to expand to 60 cities by 2027, including Los Angeles with Uber, and a high-volume program with Holon. He indicated initial deployments would involve thousands of vehicles. Nimrod Nehushtan, EVP of Business Development and Strategy, clarified that the 100,000-unit forecast by 2033 represents manufacturing capacity, with demand expected to be high once the technology matures. He estimated phase one launches would involve a few hundred vehicles per city. Mr. Nehushtan confirmed that Mobileye receives engineering budgets covering direct development costs well before commercialization, providing confidence against downside volume risks.