AUTONATION INC

Previous wording

AutoNation, Inc., through its subsidiaries, is one of the largest automotive retailers in the United States. As of September 30, 2024, we owned and operated 328 new vehicle franchises from 243 stores located in the United States, predominantly in major metropolitan markets in the Sunbelt region. Our stores, which we believe include some of the most recognizable and well known in our key markets, sell 32 different new vehicle brands. The core brands of new vehicles that we sell, representing approximately 88% of the new vehicles that we sold during the nine months ended September 30, 2024, are manufactured by Toyota (including Lexus), Honda, Ford, General Motors, BMW, Mercedes-Benz, Stellantis, and Volkswagen (including Audi and Porsche). As of September 30, 2024, we also owned and operated 52 AutoNation-branded collision centers, 23 AutoNation USA used vehicle stores, 4 AutoNation-branded automotive auction operations, 3 parts distribution centers, a mobile automotive repair and maintenance business, and an auto finance company.

Current wording

AutoNation, Inc., through its subsidiaries, is one of the largest automotive retailers in the United States. As of March 31, 2025, we owned and operated 322 new vehicle franchises from 244 stores located in the United States, predominantly in major metropolitan markets in the Sunbelt region. Our stores, which we believe include some of the most recognizable and well known in our key markets, sell 30 different new vehicle brands. The core brands of new vehicles that we sell, representing approximately 88% of the new vehicles that we sold during the three months ended March 31, 2025, are manufactured by Toyota (including Lexus), Honda, Ford, General Motors, Mercedes-Benz, BMW, Stellantis, and Volkswagen (including Audi and Porsche). As of March 31, 2025, we also owned and operated 52 AutoNation-branded collision centers, 26 AutoNation USA used vehicle stores, 4 AutoNation-branded automotive auction operations, 3 parts distribution centers, a mobile automotive repair and maintenance business, and an auto finance company.

Previous wording

We offer a diversified range of automotive products and services, including new vehicles, used vehicles, “parts and service” (also referred to as “After-Sales”), which includes automotive repair and maintenance services as well as wholesale parts and collision businesses, and automotive “finance and insurance” products (also referred to as “Customer Financial Services”), which include vehicle service and other protection products, as well as the arranging of financing for vehicle purchases through third-party finance sources. We also offer indirect financing through our captive finance company on vehicles we sell. We believe that the significant scale of our operations and the quality of our managerial talent allow us to achieve efficiencies in our key markets by, among other things, leveraging the AutoNation retail brand and advertising, implementing standardized processes, and increasing productivity across all of our stores.

Current wording

We offer a diversified range of automotive products and services, including new vehicles, used vehicles, “parts and service” (also referred to as “After-Sales”), which includes automotive repair and maintenance services as well as wholesale parts and collision businesses, and automotive “finance and insurance” products (also referred to as “Customer Financial Services”), which include vehicle service and other protection products, as well as the arranging of financing for vehicle purchases through third-party finance sources. We also offer indirect financing through our captive finance company on vehicles we sell.

Previous wording

At September 30, 2024, we had three reportable segments: (1) Domestic, (2) Import, and (3) Premium Luxury. Our Domestic segment is comprised of retail automotive franchises that sell new vehicles manufactured by Ford, General Motors, and Stellantis. Our Import segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Toyota, Honda, Hyundai, Subaru, and Nissan. Our Premium Luxury segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Mercedes-Benz, BMW, Lexus, Audi, and Jaguar Land Rover. The franchises in each segment also sell used vehicles, parts and automotive repair and maintenance services, and automotive finance and insurance products.

Current wording

At March 31, 2025, we had four reportable segments: (1) Domestic, (2) Import, (3) Premium Luxury, and (4) AutoNation Finance. Our Domestic segment is comprised of retail automotive franchises that sell new vehicles manufactured by Ford, General Motors, and Stellantis. Our Import segment is primarily comprised of retail automotive franchises that sell new vehicles manufactured by Toyota, Honda, Hyundai, Subaru, and Nissan. Our Premium Luxury segment is primarily comprised of retail automotive franchises that sell new vehicles manufactured by Mercedes-Benz, BMW, Lexus, Audi, and Jaguar Land Rover. The franchises in each of our Domestic, Import, and Premium Luxury segments also sell used vehicles, parts and automotive services, and automotive finance and insurance products. AutoNation Finance is our captive auto finance company, which provides indirect financing to qualified retail customers on vehicles we sell.

Previous wording

For the nine months ended September 30, 2024, new vehicle sales accounted for 47% of our total revenue and 16% of our total gross profit. Used vehicle sales accounted for 30% of our total revenue and 9% of our total gross profit. Our parts and service operations, while comprising 18% of our total revenue, contributed 47% of our total gross profit. Our finance and insurance sales, while comprising 5% of our total revenue, contributed 28% of our total gross profit.

Current wording

For the three months ended March 31, 2025, new vehicle sales accounted for 49% of our total revenue and 14% of our total gross profit. Used vehicle sales accounted for 29% of our total revenue and 10% of our total gross profit. Our parts and service operations, while comprising 17% of our total revenue, contributed 47% of our total gross profit. Our finance and insurance sales, while comprising 5% of our total revenue, contributed 29% of our total gross profit.

Previous wording

In the third quarter of 2024, U.S. industry retail new vehicle unit sales decreased approximately 2%, as compared to the third quarter of 2023. Although still below historical levels, industry new vehicle inventory levels continued to increase during 2024 due to higher levels of manufacturer vehicle production. The increasing supply and availability of new vehicle inventory, which varies by make and model, has resulted in moderation of new vehicle unit profitability, which we expect will continue throughout 2024, but is stabilizing. Additionally, the increased availability of new vehicles and an increase in manufacturer new vehicle incentives, including low-interest financing and customer rebates, has resulted in a shift in mix from used vehicles to new vehicles. Lower new vehicle sales in recent years has also resulted in lower availability of used vehicle inventory, particularly for late model vehicles.

Current wording

In the first quarter of 2025, U.S. industry retail new vehicle unit sales, which includes sales in markets in which we do not compete, increased approximately 8%, as compared to the first quarter of 2024, partly due to higher levels of manufacturer vehicle production compared to the prior year, as well as an increase in consumer demand, which further accelerated in the later part of March 2025 following U.S. government tariff-related announcements. The higher levels of manufacturer vehicle production over the past several years have led to an increasing supply of new vehicle inventory, which has varied by make and model and has resulted in moderation of new vehicle unit profitability over the past several years. While new vehicle unit profitability has recently started to stabilize, we expect that it may continue to moderate throughout 2025 and may be further impacted by the recently announced tariffs. Additionally, the increased availability of new vehicles and an increase in manufacturer new vehicle incentives to customers, including low-interest financing and customer rebates, have resulted in a shift in mix from used vehicles to new vehicles. Lower new vehicle sales in recent years have also resulted in lower availability of used vehicle inventory, particularly for late model vehicles.

Previous wording

During the three months ended September 30, 2024, we had net income of $185.8 million and diluted earnings per share of $4.61, as compared to net income of $243.7 million and diluted earnings per share of $5.54 during the same period in 2023.

Current wording

During the three months ended March 31, 2025, we had net income of $175.5 million and diluted earnings per share of $4.45, as compared to net income of $190.1 million and diluted earnings per share of $4.49 during the same period in 2024.

Previous wording

Our total gross profit decreased 9% during the third quarter of 2024 compared to the third quarter of 2023, driven by decreases in new vehicle gross profit of 29%, used vehicle gross profit of 13%, and finance and insurance gross profit of 9%, each as compared to the third quarter of 2023, partially offset by an increase in parts and service gross profit of 2%. New vehicle gross profit was adversely impacted by a decrease in gross profit per vehicle retailed (“PVR”) resulting from increasing supply and availability of new vehicle inventory, which has resulted in moderation of margins. Used vehicle gross profit was adversely impacted by a decrease in used vehicle unit volume, particularly for mid- to higher-priced used vehicles, due in part to the shift in mix from used vehicles to new vehicles. Finance and insurance gross profit was adversely impacted by the decrease in used vehicle unit volume, an increase in retail vehicle sales financed through our captive auto finance company, and a decrease in product penetration. Parts and service results benefited primarily from increases in gross profit from warranty service. In addition, floorplan interest expense increased primarily due to higher average floorplan balances.

Current wording

Our total gross profit increased 2% during the first quarter of 2025 compared to the first quarter of 2024, driven by increases in finance and insurance gross profit of 5%, used vehicle gross profit of 12%, and parts and service gross profit of 2%, partially offset by a decrease in new vehicle gross profit of 11%, each as compared to the first quarter of 2024. Finance and insurance gross profit benefited from higher realized margins on certain vehicle protection products and an increase in vehicle unit volume. Used vehicle gross profit benefited from better alignment of used vehicle inventory with market demand. Parts and service results benefited primarily from an increase in gross profit from warranty service. New vehicle gross profit was adversely impacted by a decrease in gross profit per vehicle retailed (“PVR”) resulting from an increase in supply and availability of new vehicle inventory, which has resulted in moderation of margins following post-pandemic elevated levels. In addition, SG&A expenses increased primarily due to an increase in performance-driven compensation expense.

Previous wording

Our new vehicle inventory units at September 30, 2024 and 2023, were 46,090 and 27,544, respectively. We have typically not experienced significant losses on the sale of new vehicle inventory, in part due to incentives provided by manufacturers to promote sales of new vehicles and our inventory management practices. We monitor our new vehicle inventory values as compared to net realizable values. Our new vehicle inventory was net of cumulative write-downs of $3.6 million at September 30, 2024. We had no new vehicle inventory cumulative write-downs at December 31, 2023.

Current wording

Our new vehicle inventory units at March 31, 2025 and 2024, were 39,300 and 38,200, respectively. We have typically not experienced significant losses on the sale of new vehicle inventory, in part due to incentives provided by manufacturers to promote sales of new vehicles and our inventory management practices. We monitor our new vehicle inventory values as compared to net realizable values. Our new vehicle inventory was net of cumulative write-downs of $1.3 million at March 31, 2025, and $2.0 million at December 31, 2024.

Previous wording

We recondition the majority of used vehicles acquired for retail sale in our parts and service departments and capitalize the related costs to the used vehicle inventory. We monitor our used vehicle inventory values as compared to net realizable values. Typically, used vehicles that are not sold on a retail basis are sold at wholesale auctions. Our used vehicle inventory balance was net of cumulative write-downs of $7.2 million at September 30, 2024, and $12.2 million at December 31, 2023.

Current wording

We recondition the majority of used vehicles acquired for retail sale in our parts and service departments and capitalize the related costs to the used vehicle inventory. We monitor our used vehicle inventory values as compared to net realizable values. Typically, used vehicles that are not sold on a retail basis are sold at wholesale auctions. Our used vehicle inventory balance was net of cumulative write-downs of $7.4 million at March 31, 2025, and $7.8 million at December 31, 2024.

Previous wording

Parts, accessories, and other inventory are carried at the lower of cost or net realizable value. We estimate the amount of potentially damaged and/or excess and obsolete inventory based upon historical experience, manufacturer return policies, and industry trends. Our parts, accessories, and other inventory balance was net of cumulative write-downs of $9.2 million at September 30, 2024, and $7.8 million at December 31, 2023.

Current wording

Parts, accessories, and other inventory are carried at the lower of cost or net realizable value. We estimate the amount of potentially damaged and/or excess and obsolete inventory based upon historical experience, manufacturer return policies, and industry trends. Our parts, accessories, and other inventory balance was net of cumulative write-downs of $9.9 million at March 31, 2025, and $8.3 million at December 31, 2024.

Previous wording

We prepare our Unaudited Condensed Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles (“GAAP”), which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. We evaluate our estimates on an ongoing basis, and we base our estimates on historical experience and various other assumptions we believe to be reasonable. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our Unaudited Condensed Consolidated

Current wording

We prepare our Unaudited Condensed Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles (“GAAP”), which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. We evaluate our estimates on an ongoing basis, and we base our estimates on historical experience and various other assumptions we believe to be reasonable. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our Unaudited Condensed Consolidated Financial Statements. For additional discussion of our critical accounting estimates, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K.

Previous wording

Goodwill for our reporting units is tested for impairment annually as of April 30 or more frequently when events or changes in circumstances indicate that the carrying value of a reporting unit more likely than not exceeds its fair value. We may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. When assessing goodwill for impairment, our decision to perform a qualitative assessment for an individual reporting unit is influenced by a number of factors, including the carrying value of the reporting unit’s goodwill, the significance of the excess of the reporting unit’s estimated fair value over carrying value at the last quantitative assessment date, the amount of time in between quantitative fair value assessments, macroeconomic conditions, automotive industry and market conditions, and our operating performance.

Current wording

We may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. When assessing goodwill for impairment, our decision to perform a qualitative assessment for an individual reporting unit is influenced by a number of factors, including the carrying value of the reporting unit’s goodwill, the significance of the excess of the reporting unit’s estimated fair value over carrying value at the last quantitative assessment date, the amount of time in between quantitative fair value assessments, macroeconomic conditions, automotive industry and market conditions, and our operating performance.

Previous wording

As of September 30, 2024, we have $222.8 million of goodwill related to the Domestic reporting unit, $519.1 million related to the Import reporting unit, $482.2 million related to the Premium Luxury reporting unit, $140.5 million related to the Mobile Service reporting unit, $78.4 million related to the AutoNation Finance reporting unit, and $4.6 million related to the Collision Centers reporting unit.

Current wording

As of March 31, 2025, we have $223.0 million of goodwill related to the Domestic reporting unit, $524.3 million related to the Import reporting unit, $482.1 million related to the Premium Luxury reporting unit, $140.5 million related to the Mobile Service reporting unit, $78.4 million related to the AutoNation Finance reporting unit, and $4.6 million related to the Collision Centers reporting unit.

Previous wording

Our principal identifiable intangible assets are individual store rights under franchise agreements with vehicle manufacturers, which have indefinite lives and are tested for impairment annually as of April 30 or more frequently when events or changes in circumstances indicate that impairment may have occurred.

Current wording

Our principal identifiable intangible assets are individual store rights under franchise agreements with vehicle manufacturers, which have indefinite lives and are tested for impairment annually as of April 30 or more frequently when events or changes in circumstances indicate that impairment may have occurred. We are scheduled to complete our annual impairment test of our franchise rights as of April 30, 2025.

Previous wording

The following table details net new vehicle inventory carrying benefit (expense), consisting of new vehicle floorplan interest expense, net of floorplan assistance earned (amounts received from manufacturers specifically to support store financing of new vehicle inventory). Floorplan assistance is accounted for as a component of new vehicle gross profit in accordance with GAAP.

Current wording

The following table details net new vehicle inventory carrying expense, consisting of new vehicle floorplan interest expense, net of floorplan assistance earned (amounts received from manufacturers specifically to support store financing of new vehicle inventory). Floorplan assistance is accounted for as a component of new vehicle gross profit in accordance with GAAP.

Previous wording

Premium Luxury segment income decreased during the three months ended September 30, 2024, as compared to the same period in 2023, primarily due to a decrease in new vehicle gross profit due to continued moderation of margins resulting from the increasing supply of new vehicle inventory, and an increase in floorplan interest expense due to higher average vehicle floorplan balances.

Current wording

The net new vehicle inventory carrying expense decreased during the three months ended March 31, 2025, as compared to the same period in 2024, primarily due to a decrease in floorplan interest expense due to lower average interest rates, partially offset by higher average vehicle floorplan balances.

Previous wording

Same store retail used vehicle revenue decreased during the three months ended September 30, 2024, as compared to the same period in 2023, due to a decrease in same store unit volume and a decrease in same store revenue PVR. The decrease in same store unit volume, particularly for mid- to higher-priced used vehicles, is resulting from the shift in mix from used vehicles to new vehicles due in part to lower availability and levels of late model used vehicles, as well as increasing supply of new vehicle inventory, an increase in manufacturer new vehicle incentives including low-interest financing and customer rebates, and moderation of new vehicle pricing. In addition, the pace of our used vehicle inventory turnover was adversely impacted by the CDK outage, resulting in less than optimal levels and mix of used vehicle inventory at the start of the third quarter of 2024 and an adverse impact on used vehicle unit volume during the third quarter of 2024.

Current wording

Same store retail used vehicle revenue decreased during the three months ended March 31, 2025, as compared to the same period in 2024, due to a decrease in unit volume, particularly for mid- to higher-priced used vehicles, resulting from a 2% shift in mix from used vehicles to new vehicles. The shift in mix from used vehicles to new vehicles was due in part to lower availability and levels of late model used vehicles, as well an increase in supply of new vehicle inventory and an increase in manufacturer new vehicle incentives to customers, including low-interest financing and customer rebates. Wholesale used vehicle revenue decreased during the three months ended March 31, 2025, as compared to the same period in 2024, due to a decrease in revenue per unit wholesaled resulting from a shift in mix to lower-value used vehicles.

Previous wording

Same store used vehicle revenue PVR and gross profit PVR decreased during the three months ended September 30, 2024, as compared to the same period in 2023, primarily due to a shift in mix towards lower-priced entry-level vehicles, which have lower average selling prices and gross profit PVR. In addition, gross profit PVR was adversely impacted by less than optimal levels and mix of used vehicle inventory at the start of the third quarter as a result of the CDK outage.

Current wording

Same store used vehicle gross profit PVR increased during the three months ended March 31, 2025, as compared to the same period in 2024. Used vehicle gross profit PVR in the prior year was adversely impacted by certain actions taken in the first quarter of 2024 to support our used vehicle inventory initiatives and achieve a more optimal inventory supply. The increase in gross profit PVR was partially offset by a shift in mix towards lower-priced entry-level vehicles, which have relatively lower average gross profit PVR.

Previous wording

Parts and service revenue is primarily derived from vehicle repairs paid directly by customers or via reimbursement from manufacturers and others under warranty programs, as well as from wholesale parts sales, the preparation of vehicles for sale, and collision services.

Current wording

Parts and service revenue is primarily derived from vehicle repairs and maintenance paid directly by customers or via reimbursement from manufacturers and others under warranty programs, as well as from wholesale parts sales, the preparation of vehicles for sale, and collision services.

Previous wording

During the nine months ended September 30, 2024, same store parts and service revenue increased compared to the same period in 2023, primarily due to increases in revenue associated with warranty service of $60.0 million, customer-pay service of $23.0 million, and the preparation of vehicles for sale of $16.6 million, partially offset by a decrease in revenue associated with wholesale parts sales of $21.9 million.

Current wording

During the three months ended March 31, 2025, same store parts and service revenue increased compared to the same period in 2024, primarily due to an increase in revenue associated with warranty service of $33.7 million, partially offset by a decrease in wholesale parts sales of $14.5 million. In addition, same store parts and service revenue per service day for the three months ended March 31, 2025, increased 4% compared to the same period in 2024.

Previous wording

Revenue on finance and insurance products represents commissions earned by us primarily for the placement of: (i) loans and leases with financial institutions in connection with customer vehicle purchases financed, (ii) vehicle service contracts with third-party providers, and (iii) other vehicle protection products with third-party providers. We sell these products on a commission basis, and we also participate in the future underwriting profit on certain products pursuant to retrospective commission arrangements with the issuers of those products.

Current wording

Revenue on finance and insurance products represents commissions earned by us primarily for the placement of: (i) loans and leases with third-party financial institutions in connection with customer vehicle purchases financed, (ii) vehicle service contracts with third-party providers, and (iii) other vehicle protection products with third-party providers. We sell these products on a commission basis, and we also participate in the future underwriting profit on certain products pursuant to retrospective commission arrangements with the issuers of those products.

Previous wording

As we continue to grow our AutoNation Finance business and increase our finance penetration rates associated with vehicles sold through our stores, we expect that income related to arranging customer financing will shift to AutoNation Finance and that the resulting decrease in finance and insurance gross profit will be offset by greater profitability generated by our AutoNation Finance business. Interest income on financing provided through AutoNation Finance is recognized over the contractual term of the related loans. See “Corporate and Other” for additional information related to AutoNation Finance.

Current wording

As we continue to grow our AutoNation Finance business and increase our finance penetration rates associated with vehicles sold through our stores, we expect that income related to arranging customer financing will shift to AutoNation Finance and that the resulting decrease in finance and insurance gross profit will be offset by greater profitability generated by our AutoNation Finance business. Interest income on financing provided through AutoNation Finance is recognized over the contractual term of the related loans. See “AutoNation Finance” for additional information.

Previous wording

Same store finance and insurance revenue and gross profit decreased during the three months ended September 30, 2024, as compared to the same period in 2023, due to decreases in finance and insurance gross profit PVR and used vehicle unit volume. Finance and insurance gross profit PVR was adversely impacted by an increase in retail vehicle sales financed through our captive auto finance company and a decrease in product penetration. Product penetration was adversely impacted by the CDK outage as certain ancillary systems and integrations related to the finance and insurance sales process were not fully restored until mid-July 2024.

Current wording

Same store finance and insurance revenue and gross profit increased during the three months ended March 31, 2025, as compared to the same period in 2024, due to increases in finance and insurance gross profit PVR and new vehicle unit volume, partially offset by a decrease in used vehicle unit volume. Finance and insurance gross profit PVR benefited from higher realized margins on certain vehicle protection products, partially offset by an increase in retail vehicle sales financed through AutoNation Finance.

Previous wording

Domestic revenue decreased during the three months ended September 30, 2024, as compared to the same period in 2023, primarily due to decreases in new and used vehicle revenue. New vehicle revenue decreased largely due to the continued moderation of pricing resulting from the increasing supply of new vehicle inventory. Used vehicle revenue was adversely impacted by a decrease in unit volume due to the shift in mix from used vehicles to new vehicles, and a decrease in revenue PVR due to the shift in mix towards lower-priced entry-level used vehicles, which have lower average selling prices. Domestic revenue was also adversely impacted by the divestitures we completed in the third quarter of 2024, as well as the residual effects of the CDK outage.

Current wording

Domestic revenue decreased during the three months ended March 31, 2025, as compared to the same period in 2024, primarily due to a decrease in used vehicle revenue, approximately 80% of which was due to lower used vehicle unit volume and 20% was driven by a decrease in average selling prices, with used vehicle revenue PVR down $480 compared to the prior year. Approximately $36 million of the decrease in used vehicle revenue was related to the divestitures we completed in the third quarter of 2024. The decrease in used vehicle unit volume was due in part to a 3% shift in mix from used vehicles to new vehicles. The decrease in used vehicle revenue PVR was primarily due to a shift in mix towards lower-priced entry-level used vehicles. Domestic revenue was also adversely impacted by decreases in parts and service revenue associated with wholesale parts sales of $21.9 million and customer-pay service of $5.2 million. The decreases in Domestic revenue were partially offset by an increase in new vehicle unit volume as a result of an increase in supply and availability of new vehicle inventory, an increase in manufacturer incentives to customers, including low-interest financing and customer rebates, and sustained consumer demand, which accelerated in the later part of March 2025 following tariff-related announcements.

Previous wording

Domestic segment income decreased during the three months ended September 30, 2024, as compared to the same period in 2023, primarily due to decreases in new vehicle gross profit, finance and insurance gross profit, and used vehicle gross profit, as well as an increase in floorplan interest expense. New vehicle gross profit was adversely impacted by a decrease in new vehicle gross profit PVR due to continued moderation of margins resulting from the increasing supply of new vehicle inventory. Finance and insurance gross profit was adversely impacted by the decrease in used vehicle unit volume and a decrease in finance and insurance gross profit PVR, which was adversely impacted by an increase in retail vehicle sales financed through our captive auto finance company and a decrease in product penetration. Used vehicle gross profit decreased primarily due to a decrease in same store unit volume, particularly for mid- to higher-priced used vehicles, due in part to the shift in mix from used vehicles to new vehicles. The decreases in Domestic segment income were partially offset by a decrease in SG&A expenses, which benefited from the divestitures we completed in the third quarter of 2024.

Current wording

Domestic segment income decreased during the three months ended March 31, 2025, as compared to the same period in 2024, primarily due to decreases in new vehicle gross profit and parts and service gross profit. New vehicle gross profit was adversely impacted by a decrease in new vehicle gross profit PVR due to continued moderation of margins, which decreased 200 basis points, resulting from an increase in supply and availability of new vehicle inventory as compared to the prior year. Parts and service gross profit was adversely impacted by decreases in gross profit associated with wholesale parts sales of $4.4 million and customer-pay service of $3.1 million. The decreases in Domestic segment income were partially offset by a $13.4 million decrease in SG&A expenses related to the divestitures we completed in the third quarter of 2024. Domestic segment income also benefited from an increase in finance and insurance gross profit PVR of $172 largely as a result of higher realized margins on certain vehicle protection products.

Previous wording

Import segment income decreased during the nine months ended September 30, 2024, as compared to the same period in 2023, primarily due to a decrease in new vehicle gross profit PVR due to continued moderation of margins resulting from the increasing supply of new vehicle inventory, and a decrease in finance and insurance gross profit PVR primarily due to an increase in retail vehicle sales financed through our captive auto finance company and a decrease in product penetration. In addition, Import segment income was adversely impacted by an increase in SG&A expenses, largely due to the acquisitions we completed in 2023 and the one-time compensation paid to commission-based associates during the CDK outage, as well as decreases in gross profit resulting from the CDK outage. The decreases in Import segment were partially offset by increases in parts and service revenue associated with the preparation of vehicles for sale and warranty service.

Current wording

Import segment income decreased during the three months ended March 31, 2025, as compared to the same period in 2024, primarily due to a decrease in new vehicle gross profit PVR of $304 due to continued moderation of margins, which decreased 100 basis points, resulting from an increase in supply and availability of new vehicle inventory. In addition, Import segment income was adversely impacted by an increase in SG&A expenses of $11.3 million, largely due to an increase in performance-driven compensation expense. The decreases in Import segment income were partially offset by an increase in parts and service gross profit associated with warranty service of $16.0 million.

Previous wording

AutoNation Finance, our captive auto finance company, provides indirect financing to qualified retail customers on vehicles we sell. This business provides us an opportunity to extend our relationship with the customer beyond the vehicle sale and participate in the customer’s entire vehicle ownership cycle. As a result, we are able to diversify our sources of income and create a low-volatility earnings stream, generate additional profits, cash flows, and sales, and increase customer retention. AutoNation Finance operating results include the interest and fee income generated by auto loans receivable less the interest expense associated with the debt issued to fund these receivables, a provision for estimated credit losses on the auto loans receivable originated or acquired, direct expenses, and gains or losses on the sale of loans receivable. Interest income on auto loans receivable is recognized over the contractual term of the related loans.

Current wording

AutoNation Finance (“ANF”), our captive auto finance company, provides indirect financing to qualified retail customers on vehicles we sell. This business provides us an opportunity to extend our relationship with the customer beyond the vehicle sale and participate in the customer’s entire vehicle ownership cycle. As a result, we are able to diversify our sources of income, generate additional profits, cash flows, and sales, and increase customer retention. Prior to October 2023, ANF also purchased retail vehicle installment sales contracts through third-party dealers.

Previous wording

Our Selling, General, and Administrative (“SG&A”) expenses consist primarily of compensation, including store and corporate salaries, commissions, and incentive-based compensation, as well as advertising (net of reimbursement-based manufacturer advertising rebates), and store and corporate overhead expenses, which include occupancy costs, outside service costs, information technology expenses, transportation-related costs for parts and service customers, legal, accounting, and professional services, and general corporate expenses. The following table presents the major components of our SG&A expenses.

Current wording

Our Selling, General, and Administrative (“SG&A”) expenses consist primarily of compensation, including store and corporate salaries, commissions, and incentive-based compensation, as well as advertising (net of reimbursement-based manufacturer advertising rebates), and store and corporate overhead expenses, which include occupancy costs, outside service costs, information technology expenses, service loaner and rental inventory expenses, legal, accounting, and professional services, and general corporate expenses. The following table presents the major components of our SG&A expenses.

Previous wording

SG&A expenses decreased during the three months ended September 30, 2024, as compared to the same period in 2023, primarily due to a decrease in performance-driven compensation expense and divestitures. These decreases were partially offset by an increase in deferred compensation obligations of $11.9 million as a result of changes in market performance of the underlying investments and newly opened stores. As a percentage of total gross profit, SG&A expenses increased to 68.6% during the three months ended September 30, 2024, from 63.3% in the same period in 2023, due to the moderation of gross profit, as well as the decrease in gross profit resulting from residual effects of the CDK outage.

Current wording

SG&A expenses increased during the three months ended March 31, 2025, as compared to the same period in 2024, primarily due to an increase in performance-driven compensation expense, an increase in advertising expenses to support vehicle sales, an increase in insurance-related expenses of $4.7 million, and newly opened stores. The increases in SG&A expenses were partially offset by divestituresand a decrease in deferred compensation obligations of $8.7 million as a result of changes in market performance of the underlying investments. As a percentage of total gross profit, SG&A expenses increased to 67.4% during the three months ended March 31, 2025, from 66.2% in the same period in 2024, primarily due to the moderation of gross profit and increases in SG&A expenses as described above.

Previous wording

Other (Income) Expense, Net includes gains associated with business/property divestitures, legal settlements, and asset impairments, among other items, and the results of our captive auto finance company, including net interest margin, the provision for expected credit losses, direct expenses, and gains or losses on the sale of loans receivable. See “Segment Results - Corporate and other” above and Notes 5 and 8 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information about our auto finance company.

Current wording

Other Income, Net includes gains or losses associated with property divestitures and asset impairments, among other items.

Previous wording

Other interest expense was $44.9 million for the three months ended September 30, 2024, compared to $48.8 million for the same period in 2023. The decrease in interest expense of $3.9 million was driven by lower average interest rates and lower average debt balances.

Current wording

Other interest expense was $42.3 million for the three months ended March 31, 2025, compared to $44.6 million for the same period in 2024. The decrease in interest expense of $2.3 million was driven by lower average debt balances.

Previous wording

We recognized a net gain of $8.4 million and a net loss of $4.2 million for the three months ended September 30, 2024 and 2023, respectively, and a net gain of $16.1 million and $4.9 million for the nine months ended September 30, 2024 and 2023, respectively, related to changes in the cash surrender value of corporate-owned life insurance (“COLI”) for deferred compensation plan participants as a result of changes in market performance of the underlying investments. Gains and losses related to the COLI are substantially offset by corresponding increases and decreases, respectively, in the deferred compensation obligations, which are reflected in SG&A expenses.

Current wording

We recognized a net loss of $1.9 million and net gain of $7.3 million for the three months ended March 31, 2025 and 2024, respectively, related to changes in the cash surrender value of corporate-owned life insurance (“COLI”) for deferred compensation plan participants as a result of changes in market performance of the underlying investments. Gains and losses related to the COLI are substantially offset by corresponding increases and decreases, respectively, in the deferred compensation obligations, which are reflected in SG&A expenses.

Previous wording

We recorded unrealized losses of $6.7 million and $1.0 million for the three months ended September 30, 2024 and 2023, respectively, and unrealized losses of $8.5 million and $2.3 million for the nine months ended September 30, 2024 and 2023, respectively, related to the change in fair value of the underlying securities of our minority equity investments. During the period that we hold our minority equity investments, unrealized gains and losses will be recorded as the fair market values of securities with readily determinable fair values change over time, or as observable price changes are identified for securities without readily determinable fair values. See Note 13 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.

Current wording

We recorded unrealized losses of $11.5 million and $0.4 million for the three months ended March 31, 2025 and 2024, respectively, related to the change in fair value of the underlying securities of our minority equity investments. During the period that we hold our minority equity investments, unrealized gains and losses will be recorded as the fair market values of securities with readily determinable fair values change over time, or as observable price changes are identified for securities without readily determinable fair values. See Note 14 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.

Previous wording

Income taxes are provided based upon our anticipated underlying annual blended federal and state income tax rates adjusted, as necessary, for any discrete tax matters occurring during the period. As we operate in various states, our effective tax rate is also dependent upon our geographic revenue mix.

Current wording

Income taxes are provided based upon our anticipated underlying annual blended federal and state income tax rates adjusted, as necessary, for any discrete tax matters occurring during the period. As we operate in various states, our effective tax rate is also dependent upon our geographic revenue mix. Our effective income tax rate was 25.0% for the three months ended March 31, 2025, and 2024.

Previous wording

We manage our liquidity to ensure access to sufficient funding at acceptable costs to fund our ongoing operating requirements and future capital expenditures while continuing to meet our financial obligations. We believe that our cash and cash equivalents, funds generated through operations, and amounts available under our revolving credit facility, commercial paper program, secured used vehicle floorplan facilities, and non-recourse warehouse facilities will be sufficient to fund our working capital requirements, fund the origination of auto loans receivable, service our debt, pay our tax obligations and commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future. Depending on market conditions, we may from time to time issue debt, including in private or public offerings, to augment our liquidity, to reduce our cost of capital, or for general corporate purposes.

Current wording

We manage our liquidity to ensure access to sufficient funding at acceptable costs to fund our ongoing operating requirements and future capital expenditures while continuing to meet our financial obligations. We believe that our cash and cash equivalents, funds generated through operations, and amounts available under our revolving credit facility, commercial paper program, secured used vehicle floorplan facilities, and non-recourse warehouse facilities will be sufficient to fund our working capital requirements, fund the origination of auto loans receivable, service our debt, pay our tax obligations and commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future. Depending on market conditions, we may from time to time issue debt, including in private or public offerings, to augment our liquidity, to reduce our cost of capital, or for general corporate purposes. In addition, we may seek to securitize auto loans receivable to provide funding for our auto finance company.

Previous wording

(1) At September 30, 2024, we had $0.8 million of letters of credit outstanding. In addition, we use the revolving credit facility under our credit agreement as a liquidity backstop for borrowings under our commercial paper program. We had $350.0 million of commercial paper notes outstanding at September 30, 2024. See Note 8 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.

Current wording

(1) At March 31, 2025, we had $0.8 million of letters of credit outstanding. In addition, we use the revolving credit facility under our credit agreement as a liquidity backstop for borrowings under our commercial paper program. We had $340.0 million of commercial paper notes outstanding at March 31, 2025. See Note 9 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.

Previous wording

In the ordinary course of business, we are required to post performance and surety bonds, letters of credit, and/or cash deposits as financial guarantees of our performance primarily relating to insurance matters. At September 30, 2024, surety bonds, letters of credit, and cash deposits totaled $122.2 million, of which $0.8 million were letters of credit. We do not currently provide cash collateral for outstanding letters of credit.

Current wording

In the ordinary course of business, we are required to post performance and surety bonds, letters of credit, and/or cash deposits as financial guarantees of our performance primarily relating to insurance matters. At March 31, 2025, surety bonds, letters of credit, and cash deposits totaled $129.4 million, of which $0.8 million were letters of credit. We do not currently provide cash collateral for outstanding letters of credit.

Previous wording

Our capital allocation strategy is focused on growing long-term value per share. We invest capital in our business to maintain and upgrade our existing facilities and to build new facilities for existing franchises and new AutoNation USA used vehicle stores, as well as for other strategic and technology initiatives. We also deploy capital opportunistically to complete acquisitions or investments, build facilities for newly awarded franchises, and/or repurchase our common stock and/or debt. Our capital allocation decisions are based on factors such as the expected rate of return on our investment, the market price of our common stock versus our view of its intrinsic value, the market price of our debt, the potential impact on our capital structure, our ability to complete acquisitions that meet our market and vehicle brand criteria and/or return on investment threshold, and limitations set forth in our debt agreements.

Current wording

Our capital allocation strategy is focused on growing long-term value per share. We invest capital in our business to maintain and upgrade our existing facilities and to build new facilities for existing franchises and new AutoNation USA used vehicle stores, as well as for other strategic and technology initiatives. We also deploy capital opportunistically to complete acquisitions or investments, build facilities for newly awarded franchises, and/or repurchase our common stock and/or debt. Our capital allocation decisions are based on factors such as the expected rate of return on our investment, the market price of our common stock versus our view of its intrinsic value, the market price of our debt, the potential impact on our capital structure, our ability to complete acquisitions that meet our strategic objectives, market and vehicle brand criteria, and/or return on investment threshold, and limitations set forth in our debt agreements.

Previous wording

As of September 30, 2024, $965.1 million remained available under our stock repurchase limit authorized by our Board of Directors.

Current wording

From April 1, 2025, through April 23, 2025, we repurchased 0.2 million shares of common stock for an aggregate purchase price of $28.9 million (average purchase price per share of $157.57). As of April 23, 2025, $607.0 million remained available under our stock repurchase limit authorized by our Board of Directors.

Previous wording

The decision to repurchase shares at any given point in time is based on factors such as the market price of our common stock versus our view of its intrinsic value, the potential impact on our capital structure (including compliance with our maximum leverage ratio and other financial covenants in our debt agreements as well as our available liquidity), and the expected return on competing uses of capital such as acquisitions or investments, capital investments in our current businesses, or repurchases of our debt.

Current wording

The decision to repurchase shares at any given point in time is based on factors such as the market price of our common stock versus our view of its intrinsic value, the potential impact on our capital structure (including compliance with our maximum leverage ratio, minimum interest coverage ratio, and other financial covenants in our debt agreements as well as our available liquidity), and the expected return on competing uses of capital such as acquisitions or investments, capital investments in our current businesses, or repurchases of our debt.