Press release·03/03/2025 00:02:42

Overview of AutoNation’s Financial Performance

AutoNation, Inc. is one of the largest automotive retailers in the United States, owning and operating 325 new vehicle franchises across the country. The company’s core business segments are Domestic, Import, and Premium Luxury, which sell new and used vehicles, provide parts and service, and offer automotive finance and insurance products.

In 2024, AutoNation reported net income of $692.2 million and diluted earnings per share of $16.92, down from $1.0 billion and $22.74 respectively in 2023. This decrease was driven by several factors:

Revenue and Profit Trends

• New vehicle gross profit decreased 27% due to a decline in gross profit per vehicle retailed (PVR) as new vehicle inventory levels improved and margins moderated.
• Used vehicle gross profit fell 14% due to a decrease in unit volume and a shift towards lower-priced entry-level vehicles.
• Finance and insurance gross profit declined 4% due to an increase in retail vehicle sales financed through AutoNation’s captive finance company.
• Parts and service gross profit increased 3%, benefiting from higher warranty service and customer-pay service revenue.

Overall, AutoNation’s total gross profit decreased 7% in 2024 compared to 2023. The company was also impacted by a system outage in June 2024 due to a cyber incident at its dealer management system provider, CDK, which it estimates reduced 2024 earnings per share by approximately $1.75.

Inventory Management

AutoNation closely monitors its new and used vehicle inventory levels. New vehicle inventory increased to 42,600 units at the end of 2024, up from 35,300 at the end of 2023, as supply improved. The company’s new vehicle inventory was net of $2.0 million in cumulative write-downs at the end of 2024.

Used vehicle inventory was net of $7.8 million in cumulative write-downs at the end of 2024, down from $12.2 million a year earlier. Parts, accessories, and other inventory was net of $8.3 million in write-downs.

Critical Accounting Estimates

AutoNation highlighted a few critical accounting estimates in its report:

Goodwill: The company performs annual impairment testing on the goodwill of its reporting units. In 2024, no impairment charges resulted from these tests, though the fair value of the Mobile Service reporting unit only exceeded its carrying value by 25%.

Franchise Rights: AutoNation also tests its indefinite-lived franchise rights for impairment annually. While no impairment was identified in the April 2024 testing, the company did record $12.5 million in franchise rights impairment charges in Q4 2024 for two underperforming stores.

Segment Results

AutoNation’s Domestic segment saw revenue decline 5.7% in 2024, with segment income down 38.6%. This was driven by decreases in new and used vehicle gross profit, as well as lower finance and insurance results.

The Import segment grew revenue 3.5% but segment income fell 24.9%, impacted by lower new vehicle gross profit per unit.

In the Premium Luxury segment, revenue declined 1.2% and segment income was down 19.2%, also due to compression in new vehicle margins.

AutoNation’s captive finance company, AutoNation Finance, reduced its loss in 2024 compared to 2023 as the business continued to scale and improve credit performance.

Liquidity and Capital Resources

AutoNation ended 2024 with $59.8 million in cash and cash equivalents, as well as $1.9 billion available under its revolving credit facility. The company also had access to $0.4 million in secured used vehicle floorplan facilities and $1.1 million in non-recourse warehouse facilities.

During 2024, AutoNation repurchased 2.9 million shares of its common stock for $460.0 million, excluding a $4.2 million excise tax accrual. The company had $860.8 million remaining under its current share repurchase authorization as of year-end.

Capital expenditures totaled $328.5 million in 2024, down from $410.3 million in 2023, as the company invested in maintaining and upgrading its existing facilities. AutoNation did not complete any acquisitions in 2024 but divested seven Domestic and one Import store.

Debt and Covenants

AutoNation had $3.15 billion in non-vehicle long-term debt as of December 31, 2024, including senior notes, finance leases, and other debt. The company repaid its $450 million 3.5% Senior Notes due 2024 in November of that year.

AutoNation also had $630 million in commercial paper notes outstanding at the end of 2024. The company’s revolving credit facility serves as a liquidity backstop for the commercial paper program.

AutoNation was in compliance with the leverage ratio and interest coverage ratio covenants in its credit agreement as of December 31, 2024. Its leverage ratio was 2.45x versus a maximum of 3.75x, and its interest coverage ratio was 4.24x versus a minimum of 3.00x.

Outlook and Analysis

AutoNation faced several headwinds in 2024 that pressured its financial performance. The moderation of new vehicle pricing and margins, a shift in used vehicle mix towards lower-priced models, and the impact of the CDK system outage all contributed to the decline in profitability.

However, the company’s diversified business model, with significant contributions from parts, service, and finance and insurance, helped to partially offset these challenges. AutoNation’s parts and service gross profit grew 3% in 2024, demonstrating the resiliency of this higher-margin segment.

The company’s captive finance arm, AutoNation Finance, also showed improvement, reducing its loss as the business scaled and credit performance strengthened. This provides an opportunity for AutoNation to generate additional revenue and profit streams beyond the traditional vehicle sales.

Looking ahead, AutoNation will need to navigate the evolving automotive retail landscape, including the continued normalization of new vehicle inventory and pricing. The company’s ability to maintain its market share, optimize its product and service mix, and leverage its finance capabilities will be critical to driving long-term shareholder value.

Overall, AutoNation remains one of the industry’s leading players, with a diversified business model, strong liquidity, and a track record of prudent capital allocation. However, the company faces ongoing challenges that will require disciplined execution to overcome in the coming years.