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AUTONATION, INC. (AN)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered resilient execution: revenue $6.69B (+3% YoY), diluted EPS $4.45 (-1% YoY), and adjusted EPS $4.68 (+4% YoY), with record After-Sales gross profit ($568M) and strong same-store new unit growth (+7%) .
  • Results modestly benefited from late-March tariff-related demand pull-forward, while management emphasized cushioning effects from cross-shopping and OEM actions; new vehicle unit profitability moderated to $2,803 per unit as mix and pricing normalized .
  • Capital allocation remained assertive: $225M repurchases (~1.4M shares at ~$165/share), leverage 2.56x with $1.6B liquidity; adjusted free cash flow conversion robust at 129% .
  • Versus S&P Global consensus, AN posted an EPS beat ($4.68 vs $4.38*) and a revenue beat ($6.69B vs $6.64B*); mix strength in Premium Luxury (+14% units) and record After-Sales supported the print while OEM incentives aided BEV/hybrid volumes (~+50% YoY) [GetEstimates; Values retrieved from S&P Global] .
  • Near‑term catalysts: clarity on tariff structures and OEM pricing strategies, continued AN Finance scaling (inaugural ABS subsequently completed at $700M, 98% advance rate), and potential ongoing buybacks supported by strong cash conversion .

What Went Well and What Went Wrong

  • What Went Well

    • Record After-Sales gross profit and margin expansion (48.8%, +140 bps same-store) on stronger parts/labor rates, efficiency, and higher-value orders; “record After-Sales profits” highlighted in prepared remarks .
    • Used vehicles execution: unit profitability up 13% YoY to $1,662 with improved sourcing, reconditioning, velocity, and pricing; sequential improvement vs Q4 .
    • New vehicles unit growth across segments (+7% same-store; Premium Luxury +14%, Domestic +6%, Import +2%), aided by incentives and pre‑tariff demand pull‑forward .

  • What Went Wrong

    • New vehicle GPU compressed to $2,803 (-$525 YoY) as pricing normalized; gross profit share from new vehicles fell to 14.3% of total .
    • SG&A as % of gross profit increased to 67.4% (67.5% adjusted) vs 65.6% prior year adjusted, reflecting timing/nonrecurring items; management guides 66–67% for FY .
    • Non‑operating items: other income(loss) swung to $(13.2)M (losses on minority equity investments and COLI) contributing to lower net income YoY .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$6.586 $7.213 $6.690
Diluted EPS ($)$4.61 $4.64 $4.45
Adjusted Diluted EPS ($)$4.02 $4.97 $4.68
Total Gross Margin (%)18.0% 17.2% 18.2%
Operating Income Margin (%)5.3% 4.7% 5.0%
SG&A / Gross Profit (%) (Reported)68.6% 67.1% 67.4%
SG&A / Gross Profit (%) (Adjusted)67.4% 66.3% 67.5%
SegmentQ1 2024 Revenue ($MM)Q1 2025 Revenue ($MM)YoY %Q1 2024 Segment Income ($MM)Q1 2025 Segment Income ($MM)YoY %
Domestic$1,756.7 $1,717.4 -2.2% $75.2 $69.0 -8.2%
Import$1,979.5 $2,047.3 +3.4% $128.8 $126.2 -2.0%
Premium Luxury$2,414.9 $2,576.5 +6.7% $171.6 $178.7 +4.1%
KPIQ3 2024Q4 2024Q1 2025
New Retail Units (000s)63.150 71.434 62.387
Used Retail Units (000s)66.454 64.829 68.000
New GPU ($/vehicle)$2,804 $2,969 $2,803
Used GPU ($/vehicle)$1,589 $1,538 $1,662
F&I PBR ($/vehicle)$2,588 $2,686 $2,703
After-Sales Gross Profit ($MM)$558.2 $558.4 $567.7 (record)
New Days Supply52 39 38
Adjusted FCF ($MM)N/AN/A$236.8
Adjusted FCF Conversion (%)N/AN/A129%
Estimates vs Actuals (S&P Global)Q1 2025 ConsensusQ1 2025 Actual
Primary EPS Consensus Mean ($)4.377*4.68*
Revenue Consensus Mean ($)6,644.99MM*6,690.40MM*
# of EPS / Revenue Estimates11* / 11*—

Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
SG&A as % of Gross ProfitFY 2025N/A66%–67%Established range
After-Sales Growth TrajectoryMulti‑yearN/AMid‑single digit annual growthEstablished trajectory
Leverage TargetOngoing2–3x EBITDA (long‑term target)Maintain 2–3x; Q1 at 2.56xMaintained
Floorplan Interest OutlookQ2 2025N/AModel similar pace to Q1 until impacts clearerClarified
ABS Funding Program (AN Finance)Next couple of quartersPlanning inaugural ABSTarget >$500MM; subsequently executed $700MM at 4.90% and ~98% advanceRaised/Executed
Formal Revenue/EPS GuidanceFY/QtrNoneNoneMaintained none

Earnings Call Themes & Trends

TopicQ-2 (Q3 2024)Q-1 (Q4 2024)Q1 2025Trend
Tariffs / MacroNo tariffs; CDK outage residuals and OEM stop-sales; margin pressure Demand improving with OEM support; buybacks, leverage 2.4x Pull-forward demand late March; OEMs likely cushion via incentives and shared support; SAAR impact likely overstated Elevated focus; cautious but constructive
New Vehicles Mix & PricingNew GPU compression vs 2023; units +1% New units +12% same-store; GPU $2,971 Units +7% same-store; GPU $2,803; hybrids/BEVs ~+50% YoY Volume strength; GPU normalizing
Used Vehicles StrategySourcing/velocity intact; GPU $1,589 GPU $1,549; improved sourcing/pricing GPU $1,662; inventory raised, focus on sub-$20K Improving margin and mix
After-SalesRecord GP $558M; margin +50 bps Same-store GP +5% Another record; margin 48.8%; tech count +3% Structural strength
AN Finance$700M YTD originations; warehouse funding $1.1B 2024 originations; portfolio cleanup Q1 originations $460M; early profitability; ABS targeted >$500M; subsequent $700M ABS at 4.90% Scaling with attractive funding
Capital AllocationRepurchases YTD $356M; $965M auth remaining Q4 repurchases $104M; FY $460M Q1 repurchases $225M; YTD $254M; $607M auth remaining Ongoing buyback capacity

Management Commentary

  • “Our results for the first quarter were strong across the board… we delivered record After‑Sales profits.” – CEO Mike Manley .
  • “We benefited in March from a pull‑in effect as buyers accelerated… This trend continued into April, albeit at an increasingly moderating pace.” .
  • “Hybrid vehicle unit sales were up ~50% YoY… BEVs also up nearly 50%… BEVs ~8% of sales and inventory; hybrids ~20% of unit sales and ~10% of ending inventory.” – CFO Tom Szlosek .
  • “Adjusted SG&A… we continue to expect… between the 66% to 67% range for the full year.” – CFO .
  • “AN Finance… originated $460M… crossed over to profitability well ahead of when expected… credit quality continues to improve.” – CEO/CFO .
  • “Share repurchases… we have repurchased more than $250M YTD… reducing our share count by 4% from January 1.” – CEO .

Q&A Highlights

  • CFS profitability vs AN Finance ramp: AN Finance dilutes near‑term PBR by ~$150; warehouse capacity increased; inaugural ABS targeted “north of $500M” (later executed at $700M, 98% advance) .
  • Tariffs and pricing: Net transaction price is “last lever”; OEMs and dealers will share mitigation; cross‑shopping cushions SAAR impact .
  • Cash flow and seasonality: Some Q1 residual cash may carry into Q2, though taxes temper cadence; floorplan interest modeled similar pace in Q2 .
  • After-Sales drivers: Growth roughly 1/3 volume and 2/3 price/mix; mobile service contributes hours but is investment phase .
  • Parts exposure: ~40% captive vs 60% non‑captive parts; pass‑through not automatic due to insurance/total loss dynamics .
  • Capital allocation pace: Buybacks/M&A balanced by tested cash flow scenarios; continue deploying where returns highest .

Estimates Context

  • Q1 2025 beats: Adjusted EPS $4.68 vs $4.38* consensus; revenue $6.69B vs $6.64B* consensus, aided by Premium Luxury unit growth, incentives, and record After-Sales margin/GP [GetEstimates; Values retrieved from S&P Global] .
  • Potential estimate revisions: Strength in After-Sales and used GPU, plus lower floorplan expense YoY and share count reduction (39.4M diluted vs 42.3M prior year) could support upward EPS revisions despite new GPU normalization .

Key Takeaways for Investors

  • Resilient multi‑pillar model: After‑Sales and F&I offset new GPU normalization; watch these segments as continued profit anchors .
  • Volume momentum with mix: Premium Luxury led new unit growth; hybrids/BEVs rising on incentives—supports revenue while margins adjust .
  • Cash generation and capital deployment: 129% adjusted FCF conversion and active buybacks provide per‑share support; liquidity and leverage remain healthy .
  • Tariff path is the swing factor: Expect cushioning from cross‑shopping and OEM strategies; pricing increases are a “last lever,” limiting downside to volumes/margins .
  • AN Finance is a structural ROE driver: Early profitability, improving credit, and ABS funding (now executed at $700M) reduce capital intensity and support scaling .
  • Near‑term setup: Q2/Q3 watch for tariff clarity, SG&A control within 66–67%, floorplan expense trend, used inventory mix (sub‑$20K focus), and After‑Sales cadence .
  • Positioning: Constructive medium‑term thesis—multiple revenue streams, flexible cost structure, and balance sheet provide downside protection and optionality amid macro/policy volatility .