Financial Data and Key Metrics Changes - AutoNation reported a solid fourth quarter with a 3% revenue growth and an 8% adjusted net income growth, leading to a 16% increase in adjusted earnings per share [3][11] - Adjusted free cash flow exceeded $1 billion, up approximately 39% from 2024 [3][9] - Adjusted net income for the full year increased by 8% to $757 million, while adjusted EPS was $20.22, a 16% increase from 2024 [16][17] Business Line Data and Key Metrics Changes - Same-store unit sales of new vehicles decreased by 10% in Q4, with a 60% decline in battery electric vehicles and a 10% decline in hybrid powertrain vehicles [5][17] - Used vehicle gross profit increased by 5% for the full year, with retail profitability per unit in line with 2024 [6][19] - Customer Financial Services (CFS) unit profitability grew by 8% year-over-year, with record gross profit per unit [7][21] Market Data and Key Metrics Changes - The fourth quarter faced tougher sales comparisons due to a surge in sales in Q4 2024, resulting in a light vehicle SAR of 16.7 million [4] - New vehicle inventory amounted to 45 days of supply, up 6 days from the previous year [18] - The used vehicle market remains tight, with a focus on acquiring vehicles through internal channels [20] Company Strategy and Development Direction - AutoNation expanded its presence in key markets by acquiring several dealerships, including Ford and Mazda in Denver and Audi and Mercedes in Chicago [10][29] - The company aims to maintain a balanced capital allocation strategy, with significant investments in both CapEx and share repurchases [29][30] - The focus remains on improving after-sales performance and customer retention through enhanced service offerings [8][79] Management's Comments on Operating Environment and Future Outlook - Management expects the market to be slightly down in 2026 compared to 2025, with potential benefits from tax changes and depreciation [32] - The used vehicle market is anticipated to show year-over-year improvements, while new unit profitability is expected to remain stable [32][33] - Affordability pressures are a key concern, with expectations of OEMs providing more affordable models to address consumer sensitivity to monthly payments [77][78] Other Important Information - The company deployed over $1.5 billion in capital, with half reinvested in the business and half returned to shareholders through share repurchases [29][30] - The balance sheet remains healthy, with leverage largely unchanged from the prior year at 2.44x EBITDA [30] Q&A Session Summary Question: Regarding the new car business and weaker unit numbers - Management noted a reduction in OEM dealer-facing incentives and a significant drop in EV volume, which contributed to the decline in unit sales [38][40] Question: On AutoNation Finance's profitability cadence - Management expressed confidence in continued profitability growth, with a strong starting point for 2026 [42][43] Question: Capital spending and M&A market outlook - Management indicated that 2026 capital spending levels would be similar to 2025, with ongoing opportunities in the M&A market [52][54] Question: Impact of lease returns on dealership business - Management believes OEMs have prepared for increased lease returns and expects this to benefit the dealership business [71][73] Question: Consumer credit availability and after-sales behavior - Management acknowledged affordability pressures and noted that consumer behavior in after-sales has become more price-sensitive [77][79] Question: Used market strategy and mix shifts - Management highlighted strong performance in higher-priced used vehicles and the need to balance inventory across price segments [82][83]