Autonation, Inc.: Form 10-Q for the period ended Mar 31, 2026

The following discussion should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and notes thereto included under Part I, Item 1 of this Quarterly Report on Form 10-Q. In addition, reference should be made to our audited Consolidated Financial Statements and notes thereto and related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our most recent Annual Report on Form 10-K.

Overview

AutoNation, Inc., through its subsidiaries, is one of the largest automotive retailers in the United States. As of March 31, 2026, we owned and operated 324 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, 2026, are manufactured by Toyota (including Lexus), Honda, Ford, General Motors, Mercedes-Benz, BMW, Stellantis, and Volkswagen (including Audi and Porsche). As of March 31, 2026, we also owned and operated 52 AutoNation-branded collision centers, 25 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.

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.

At March 31, 2026, 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, and Subaru. 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.

For the three months ended March 31, 2026, new vehicle sales accounted for 46% of our total revenue and 12% of our total gross profit. Used vehicle sales accounted for 30% of our total revenue and 10% of our total gross profit. Our parts and service operations, while comprising 19% of our total revenue, contributed 49% of our total gross profit. Our finance and insurance sales, while comprising 5% of our total revenue, contributed 29% of our total gross profit.

Market Conditions

In the first quarter of 2026, U.S. industry retail new vehicle unit sales, which includes sales in markets in which we do not compete, decreased approximately 8%, as compared to the first quarter of 2025, primarily due to accelerated consumer demand in the later part of March 2025 following tariff-related announcements, as well as consumer caution stemming from macroeconomic factors.

The tariffs announced by the U.S. government beginning in the first quarter of 2025 on vehicles and parts imported from other countries by our suppliers could indirectly increase our costs and limit the availability of inventory and/or reduce demand for the products and services we offer, which in turn could have a material adverse effect on our business and results of operations. While we have not observed a meaningful increase in our costs or other adverse impacts as a result of such tariffs to date, the policies and announcements regarding tariffs on imported goods are evolving and remain highly fluid. The ultimate impact of any tariffs is uncertain and will depend on various factors, including whether the tariffs are maintained and/or implemented, the duration of the tariffs and the timing of their implementation, the amount, scope, and nature of the tariffs, and the related responses from other countries, manufacturers, and/or consumers.

Results of Operations

During the three months ended March 31, 2026, we had net income of $205.4 million and diluted earnings per share of $5.85, as compared to net income of $175.5 million and diluted earnings per share of $4.45 during the same period in 2025.

Our total gross profit was relatively flat during the first quarter of 2026 compared to the same period in the prior year, driven by decreases in new vehicle gross profit of 17% and used vehicle gross profit of 2%, largely offset by an increase in parts and service gross profit of 5%, each as compared to the first quarter of 2025. New vehicle gross profit was adversely impacted by a decrease in new vehicle unit volume as the prior year benefited from accelerated consumer demand following tariff-related announcements, as well as a decrease in gross profit per vehicle retailed (“PVR”) resulting from higher average vehicle costs, a shift in mix away from Premium Luxury vehicles, and moderation of margins following post-pandemic elevated levels. Used vehicle gross profit was adversely impacted by a decrease in used vehicle retail unit volume and a decrease in gross profit PVR resulting from an increase in acquisition costs, partially offset by improvement in wholesale gross profit. Parts and service results benefited primarily from increases in gross profit associated with customer-pay service, wholesale parts sales, and warranty service.

SG&A expenses increased primarily due to acquisitions, an increase in advertising costs to support vehicle sales, and investments targeting customer experience.

Net income for the three months ended March 31, 2026, benefited from an after-tax gain of $40.8 million related to changes in fair value of certain minority equity investments. Net income for the three months ended March 31, 2025, was adversely impacted by an after-tax loss of $8.7 million related to changes in fair value of a minority equity investment.

Inventory Management

Our new and used vehicle inventories are stated at the lower of cost or net realizable value in our Unaudited Condensed Consolidated Balance Sheets. We monitor our vehicle inventory levels based on current economic conditions and seasonal sales trends.

Our new vehicle inventory units at March 31, 2026 and 2025, were 42,440 and 39,300, 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 $0.6 million at March 31, 2026, and $1.2 million at December 31, 2025.

Our used vehicle inventory units at March 31, 2026 and 2025, were 32,615 and 34,281, respectively. 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 $5.2 million at March 31, 2026, and $5.8 million at December 31, 2025.

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 $9.1 million at March 31, 2026, and $9.5 million at December 31, 2025.

Critical Accounting Estimates

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.

Goodwill

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.

If we do not perform a qualitative assessment, or if we determine that it is not more likely than not that the fair value of the reporting unit exceeds its carrying amount, we calculate the estimated fair value of the reporting unit using an “income” valuation approach, which discounts projected free cash flows of the reporting unit at a computed weighted average cost of capital as the discount rate. The income valuation approach requires the use of significant estimates and assumptions, which include revenue growth rates and future operating margins used to calculate projected future cash flows, weighted average cost of capital, and future economic and market conditions. In connection with this process, we also reconcile the estimated aggregate fair values of our reporting units to our market capitalization, including consideration of a control premium based upon our stock price and/or average stock price over a reasonable period as of the measurement date. We base our cash flow forecasts on our knowledge of the automotive industry, our recent performance, our expectations of our future performance, and other assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. We also make certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of our reporting units.

As of March 31, 2026, we have $219.4 million of goodwill related to the Domestic reporting unit, $531.0 million related to the Import reporting unit, $498.8 million related to the Premium Luxury reporting unit, $75.2 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 Center reporting unit.

Other Intangible Assets

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 may first perform a qualitative assessment to determine whether it is more likely than not that a franchise right asset is impaired, or alternatively, we may bypass the qualitative assessment and proceed directly to a quantitative impairment test. The quantitative impairment test for franchise rights requires the comparison of the franchise rights’ estimated fair value to carrying value by store. Fair values of rights under franchise agreements are estimated using unobservable (Level 3) inputs by discounting expected future cash flows of the store. The forecasted cash flows contain inherent uncertainties, including significant estimates and assumptions related to growth rates, margins, working capital requirements, capital expenditures, and cost of capital, for which we utilize certain market participant-based assumptions, using third-party industry projections, economic projections, and other marketplace data we believe to be reasonable.

Reported Operating Data

Historical operating results include the results of acquired businesses from the date of acquisition.

($ in millions, except per vehicle data)

29

30

Same Store Operating Data

We have presented below our operating results on a same store basis to reflect our internal performance. The “Same Store” amounts presented below include the results of our stores for the identical months in each period presented in the comparison, commencing with the first full month in which the store was owned by us. Results from divested stores are excluded from both current and prior periods. Therefore, the amounts presented in the 2025 column may differ from the same store amounts presented for 2025 in the prior year. We believe the presentation of this information provides a meaningful comparison of period-over-period results of our operations.

($ in millions, except per vehicle data)

31

The following discussions of new vehicle, used vehicle, parts and service, and finance and insurance results are on a same store basis. The differences between reported amounts and same store amounts in revenue and gross profit of these lines of business in the tables below are related to acquisition and divestiture activity, as well as the opening of AutoNation USA used vehicle stores, as applicable.

New Vehicle

($ in millions, except per vehicle data)

First Quarter 2026 compared to First Quarter 2025

Same store new vehicle revenue decreased during the three months ended March 31, 2026, as compared to the same period in 2025, due to a decrease in same store unit volume primarily as a result of the prior year period benefiting from accelerated consumer demand in the later part of March 2025 following tariff-related announcements, a decrease in electric vehicle unit volume due in part to the phasing out of EV tax credits at the end of the third quarter of 2025, and consumer caution stemming from macroeconomic factors.

Same store new vehicle revenue PVR increased slightly during the three months ended March 31, 2026, as compared to the same period in 2025, reflecting an increase in average selling prices in all three segments, largely offset by a 3% shift in mix away from Premium Luxury vehicles, which have relatively higher average revenue PVR.

Same store new vehicle gross profit PVR decreased during the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to an increase in average vehicle costs and the shift in mix away from Premium Luxury vehicles, which have relatively higher average gross profit PVR. Same store new vehicle gross profit PVR was also adversely impacted by moderation of margins following post-pandemic elevated levels. New vehicle unit profitability appears to be stabilizing as evidenced by modest quarterly sequential improvement in gross profit PVR since the third quarter of 2025.

New Vehicle Inventory Carrying Expense

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 interest rates are variable and, therefore, increase and decrease with changes in the underlying benchmark rates. See Note 7 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information. Floorplan assistance is based on a percentage of the manufacturer’s suggested retail price or a flat rate per vehicle and is accounted for as a component of new vehicle gross profit when the related vehicle is sold, in accordance with GAAP.

($ in millions)

First Quarter 2026 compared to First Quarter 2025

The net new vehicle inventory carrying expense decreased during the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to a decrease in floorplan interest expense as a result of lower average interest rates, partially offset by higher average vehicle floorplan balances.

Used Vehicle

($ in millions, except per vehicle data)

First Quarter 2026 compared to First Quarter 2025

Same store retail used vehicle revenue was relatively flat during the three months ended March 31, 2026, as compared to the same period in 2025, reflecting a decrease in same store unit volume due to tightening supply in the used vehicle market, largely offset by an increase in same store revenue PVR. Wholesale used vehicle revenue increased during the three months ended March 31, 2026, as compared to the same period in 2025 due to an increase in used vehicle wholesale values.

Same store used vehicle revenue PVR increased during the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to an increase in the average selling price of used vehicles sold in all three segments and a shift in mix to higher-priced used vehicles.

Same store used vehicle gross profit PVR decreased during the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to an increase in acquisition costs. Wholesale used vehicle gross profit increased during the three months ended March 31, 2026, as compared to the same period in 2025 due to an increase in used vehicle wholesale values.

Parts and Service

($ in millions)

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.

First Quarter 2026 compared to First Quarter 2025

Same store parts and service revenue increased during the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to increases in revenue associated with wholesale parts sales of $26.1 million and customer-pay service of $21.6 million, partially offset by a decrease in revenue associated with the preparation of vehicles for sale of $8.0 million.

Same store parts and service gross profit increased during the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to an increase in gross profit associated with customer-pay service of $13.4 million, wholesale parts sales of $4.9 million, and warranty service of $4.5 million, partially offset by a decrease in gross profit associated with the preparation of vehicles for sale of $9.0 million. Gross profit as a percentage of revenue decreased during the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to a shift in mix to wholesale parts sales, which have relatively lower margins.

Parts and service revenue and gross profit associated with customer-pay service benefited from an increase in repair order volume, due in part to an increase in technician headcount, and higher value repair orders. Wholesale parts revenue and gross profit increased primarily due to an increase in volume. Parts and service revenue associated with warranty service benefited from higher value repair orders and improved parts and labor rates. Parts and service revenue and gross profit associated with the preparation of vehicles for sale was adversely impacted by lower new and used vehicle unit volume and margin compression primarily resulting from a shift in mix to service work outsourced to third parties.

Finance and Insurance

($ in millions, except per vehicle data)

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.

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.

First Quarter 2026 compared to First Quarter 2025

Same store finance and insurance revenue and gross profit slightly decreased during the three months ended March 31, 2026, as compared to the same period in 2025, reflecting a decrease in vehicle unit volume, largely offset by an increase in finance and insurance gross profit PVR. Finance and insurance gross profit PVR benefited primarily from higher realized margins on vehicle service contracts.

Segment Results

In the following table of financial data, revenue and segment income of our reportable segments are reconciled to consolidated revenue and consolidated operating income, respectively. The following discussions of segment results are on a reported basis.

($ in millions)

38

Domestic

The Domestic segment operating results included the following:

($ in millions)

First Quarter 2026 compared to First Quarter 2025

Domestic revenue was relatively flat during the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to decreases in new and used vehicle unit volume, largely offset by increases in new vehicle revenue PVR of $868, used vehicle revenue PVR of $1,108, and finance and insurance revenue PVR of $295. New vehicle unit volume decreased primarily due to the prior year benefitting from accelerated consumer demand following tariff-related announcements and used vehicle unit volume decreased due to tightening supply in the used vehicle market. Domestic revenue also benefited from an increase in used vehicle wholesale revenue of $6.2 million, and increases in parts and service revenue associated with warranty service of $7.4 million and customer-pay service of $7.3 million.

Domestic segment income increased during the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to increases in parts and service gross profit associated with warranty service of $5.4 million and customer-pay service of $5.1 million, as well as an increase in finance and insurance gross profit PVR due to higher realized margins on service contracts. These were partially offset by an increase in SG&A expenses of $6.3 million.

Import

The Import segment operating results included the following:

($ in millions)

First Quarter 2026 compared to First Quarter 2025

Import revenue was relatively flat during the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to an increase in parts and service revenue primarily associated with wholesale and retail parts sales of $12.0 million, as well as increases in new vehicle revenue PVR of $736, used vehicle revenue PVR of $493, and finance and insurance revenue PVR of $139. These were largely offset by a decrease in new vehicle unit volume primarily due to the prior year benefitting from accelerated consumer demand following tariff-related announcements.

Import segment income decreased during the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to an increase in SG&A expenses of $8.0 million, a decrease in new vehicle gross profit PVR of $217, and a decrease in new vehicle unit volume. The decreases in Import segment income were partially offset by an increase in finance and insurance gross profit PVR due to higher realized margins on service contracts.

Premium Luxury

The Premium Luxury segment operating results included the following:

($ in millions)

First Quarter 2026 compared to First Quarter 2025

Premium Luxury revenue decreased during the three months ended March 31, 2026, as compared to the same period in 2025, due to a decrease in new vehicle unit volume, partially offset by a $25.7 million increase in revenue from the acquisitions we completed in the third quarter of 2025 and an increase in new vehicle revenue PVR of $2,083. New vehicle unit volume decreased primarily due to the prior year period benefiting from accelerated consumer demand in the later part of March 2025 following tariff-related announcements and a decrease in electric vehicle unit volume due in part to the phasing out of EV tax credits at the end of the third quarter of 2025. The decrease in new vehicle revenue was partially offset by increases in parts and service revenue associated with customer-pay service of $15.3 million and wholesale and retail parts sales of $8.9 million.

Premium Luxury segment income decreased during the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to a decrease in new vehicle unit volume, a decrease in new vehicle gross profit PVR of $299, and a $5.8 million increase in SG&A expenses, partially offset by increases in parts and service gross profit associated with customer-pay service of $8.2 million and warranty service of $5.6 million.

AutoNation Finance

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.

ANF income includes the interest and fee income generated by auto loans receivable less the interest expense associated with the debt issued or used to fund these receivables, a provision for estimated credit losses on the auto loans receivable originated or acquired, and direct expenses. Interest income on auto loans receivable is recognized over the contractual term of the related loans. ANF income does not include amortization of intercompany discounts or intercompany dealer participation fees.

We use non-recourse funding facilities, including warehouse facilities and asset-backed term funding transactions, as well as free cash flows from operations to fund the auto loans receivable of ANF. See Notes 6 and 9 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information about our auto loans receivables and related non-recourse debt, respectively.

The following table presents the components of ANF income:

($ in millions)

The following tables present selected loan origination and loan performance information:

($ in millions)

42

($ in millions)

First Quarter 2026 compared to First Quarter 2025

ANF recognized income of $9.4 million during the three months ended March 31, 2026, and $0.1 million during the three months ended March 31, 2025. The current year period benefited from an increase in interest and fee income from the growth in average managed receivables of $1.1 billion as we continue to grow our ANF business and increase our finance penetration rates associated with vehicles sold through our stores. ANF continues to realize operational efficiencies as the portfolio scales, resulting in reduced direct expenses as a percentage of the managed portfolio. We expect our portfolio delinquency rates will continue to normalize and trend upward as our portfolio seasons.

Selling, General, and Administrative Expenses

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.

($ in millions)

First Quarter 2026 compared to First Quarter 2025

SG&A expenses increased during the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to the impact of acquisitions, net of divestitures, of $10.1 million, an increase in advertising costs to support vehicle sales, and investments targeting customer experience. The increases in SG&A expenses were partially offset by a $6.7 million decrease in performance-driven compensation expense. As a percentage of total gross profit, SG&A expenses for the three months ended March 31, 2026, increased as compared to the same period in 2025, primarily due to the increases in SG&A expenses as described above and moderation of gross profit.

Other Expense, Net (Operating)

Other Expense, Net generally includes asset impairments, gains or losses associated with business/property divestitures, and legal settlements, among other items.

Non-Operating Income (Expense)

Floorplan Interest Expense

Our floorplan facilities utilize Prime-based and SOFR-based interest rates, which are variable and, therefore, our floorplan interest rates increase and decrease with changes in the underlying benchmark interest rates.

First Quarter 2026 compared to First Quarter 2025

Floorplan interest expense was $41.8 million for the three months ended March 31, 2026, compared to $46.5 million for the same period in 2025. The decrease in floorplan interest expense of $4.7 million was due to lower average interest rates, partially offset by higher average vehicle floorplan balances.

Interest Expense

Other interest expense includes the interest related to non-vehicle long-term debt, commercial paper, and finance lease obligations.

First Quarter 2026 compared to First Quarter 2025

Other interest expense was $48.0 million for the three months ended March 31, 2026, compared to $42.3 million for the three months ended March 31, 2025. The increase in interest expense of $5.7 million was due to higher average debt balances and higher interest rates.

Other Income (Loss), Net

We recognized net losses of $2.9 million and $1.9 million for the three months ended March 31, 2026 and 2025, 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.

We recorded net gains of $54.0 million for the three months ended March 31, 2026, and net losses of $11.5 million for the three months ended March 31, 2025, related to changes 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.

Income Tax Provision

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 25.5% for the three months ended March 31, 2026, and 25.0% for the three months ended March 31, 2025.

Liquidity and Capital Resources

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 expect to periodically securitize auto loans receivable to provide funding for our auto finance company.

Available Liquidity Resources

We had the following sources of liquidity available:

(In millions)

(1) At March 31, 2026, we had $0.4 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 $320.0 million of commercial paper notes outstanding at March 31, 2026. See Note 9 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.

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, 2026, surety bonds, letters of credit, and cash deposits totaled $118.8 million, of which $0.4 million were letters of credit. We do not currently provide cash collateral for outstanding letters of credit.

In February 2025, we filed an automatic shelf registration statement with the SEC that enables us to offer for sale, from time to time and as the capital markets permit, an unspecified amount of common stock, preferred stock, debt securities, warrants, subscription rights, depositary shares, stock purchase contracts, and units.

In addition, we own a significant portion of our new vehicle franchise store locations and other locations associated with our non-franchised businesses, as well as other properties. At March 31, 2026, these properties had a net book value of $3.0 billion. None of these properties are mortgaged or encumbered.

Capital Allocation

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, 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.

Share Repurchases

Our Board of Directors from time to time authorizes the repurchase of shares of our common stock up to a certain monetary limit. A summary of shares repurchased under our stock repurchase program authorized by our Board of Directors follows:

(In millions, except share and per share data)

From April 1, 2026, through April 29, 2026, we repurchased 0.5 million shares of common stock for an aggregate purchase price of $90.9 million (average purchase price per share of $201.22). As of April 29, 2026, $685.1 million remained available under our stock repurchase limit authorized by our Board of Directors.

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.

Capital Expenditures

The following table sets forth information regarding our capital expenditures:

(In millions)

Acquisitions and Divestitures

We did not purchase any stores during the three months ended March 31, 2026. We purchased one Domestic store and one Import store during the three months ended March 31, 2025.

We divested one Domestic store during the three months ended March 31, 2026. We did not divest any stores during the three months ended March 31, 2025.

(In millions)

We regularly review our store portfolio and may acquire or divest stores to optimize our operations and footprint. We typically utilize proceeds related to asset sales, including business and real estate divestitures, to fund our capital investments and strategic initiatives or for other general corporate purposes.

Debt

The following table sets forth our non-vehicle long-term debt, as of March 31, 2026, and December 31, 2025.

(In millions)

We had commercial paper notes outstanding of $320.0 million at March 31, 2026, and $200.0 million at December 31, 2025.

A downgrade in our credit ratings could negatively impact the interest rate payable on our 3.8% Senior Notes and 4.75% Senior Notes, and could also negatively impact our ability to issue, or the interest rates for, commercial paper notes or other debt. Additionally, an increase in our leverage ratio could negatively impact the interest rates charged for borrowings under our revolving credit facility.

The following table sets forth our non-recourse debt, as of March 31, 2026, and December 31, 2025.

(In millions)

In January 2026, we issued non-recourse notes payable related to asset-backed term securitizations with an aggregate

principal amount of $749.2 million, a weighted-average interest rate of 4.25%, and maturity dates ranging from February 2027

to January 2034.

See Note 9 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information on our non-vehicle long-term debt, commercial paper, and non-recourse debt.

Restrictions and Covenants

Our amended and restated credit agreement and the indentures for our senior unsecured notes contain customary covenants that place restrictions on us, including our ability to incur additional or guarantee other indebtedness, to create liens or other encumbrances, to engage in sale and leaseback transactions, to sell (or otherwise dispose of) assets, and to merge or consolidate with other entities. Our failure to comply with the covenants contained in our amended and restated credit agreement and the indentures for our senior unsecured notes could result in the acceleration of other indebtedness of AutoNation.

Under our amended and restated credit agreement, we are required to remain in compliance with a maximum leverage ratio and a minimum interest coverage ratio. The leverage ratio is a contractually defined amount principally reflecting non-vehicle debt divided by a measure of earnings. The interest coverage ratio is a contractually defined amount reflecting a measure of earnings divided by certain interest expense principally associated with vehicle floorplan payable and non-vehicle debt. The specific terms of the leverage and interest coverage ratios can be found in our amended and restated credit agreement, which is filed with our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.

As of March 31, 2026, we were in compliance with the covenants under our credit agreement and the indentures for our senior unsecured notes. At March 31, 2026, our leverage and interest coverage ratios were as follows:

Vehicle Floorplan Payable

The components of vehicle floorplan payable are as follows:

(In millions)

Vehicle floorplan facilities are due on demand, but in the case of new vehicle inventories, are generally paid within several business days after the related vehicles are sold. Vehicle floorplan facilities are primarily collateralized by vehicle inventories and related receivables. See Note 7 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information on our vehicle floorplan payable.

Cash Flows

The following table summarizes the changes in our cash provided by (used in) operating, investing, and financing activities:

(In millions)

Cash Flows from Operating Activities

Our primary sources of operating cash flows result from the sale of vehicles, finance and insurance products, and parts and automotive repair and maintenance services, proceeds from vehicle floorplan payable-trade, and collections on auto loans receivable for vehicles sold through our stores. Our primary uses of cash from operating activities are repayments of vehicle floorplan payable-trade, purchases of inventory, personnel-related expenditures, originations of loans receivable for vehicles sold through our stores, and payments related to taxes and leased properties.

We had net cash provided by operating activities of $22.2 million for the three months ended March 31, 2026, and net cash used in operating activities of $52.5 million during the three months ended March 31, 2025. This change was primarily due to a $104.7 million increase in collections on auto loans receivable, partially offset by the cash flow impact of accelerated consumer demand in the later part of March 2025.

Cash Flows from Investing Activities

Net cash flows from investing activities consist primarily of cash used in capital additions and activity from business acquisitions, business divestitures, property dispositions, originations of and collections on auto loans receivable acquired through third-party dealers, and other transactions.

We will make facility and infrastructure upgrades and improvements from time to time as we identify projects that are required to maintain our current business or that we expect to provide us with acceptable rates of return.

Net cash used in investing activities decreased during the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to a $69.6 million decrease in cash used for acquisitions, an $18.8 million decrease in purchases of property and equipment, and a $12.7 million increase in cash received from divestitures, partially offset by an $11.5 million increase in investments in equity securities.

Cash Flows from Financing Activities

Net cash flows from financing activities primarily include repurchases of common stock, debt activity, and changes in vehicle floorplan payable-non-trade.

During the three months ended March 31, 2026, we borrowed $1.1 billion and repaid $0.9 billion of non-recourse debt. During the three months ended March 31, 2025, we borrowed $407.0 million and repaid $153.0 million of non-recourse debt.

Cash flows from financing activities include changes in commercial paper notes outstanding reflecting net proceeds of $120.0 million and net payments of $290.0 million during the three months ended March 31, 2026 and 2025, respectively.

During the three months ended March 31, 2025, we issued $500 million aggregate principal amount of 5.89% Senior Notes due 2035.

During the three months ended March 31, 2026, we repurchased 1.5 million shares of common stock for an aggregate purchase price of $300.0 million (average purchase price per share of $200.99), including repurchases for which settlement occurred subsequent to March 31, 2026, and excluding the excise tax imposed under the Inflation Reduction Act. During the three months ended March 31, 2025, we repurchased 1.4 million shares of common stock for an aggregate purchase price of $224.8 million (average purchase price per share of $164.95), including repurchases for which settlement occurred subsequent to March 31, 2025, and excluding the excise tax imposed under the Inflation Reduction Act.

Forward-Looking Statements

Our business, financial condition, results of operations, cash flows, and prospects, and the prevailing market price and performance of our common stock may be adversely affected by a number of factors, including the matters discussed below. Certain statements and information set forth in this Quarterly Report on Form 10-Q, including, without limitation, statements regarding our strategic initiatives, partnerships, or investments, including AutoNation Finance, and statements regarding potential tariff-related impacts and our expectations for the future performance of our business and the automotive retail industry, including the remainder of 2026, as well as other written or oral statements made from time to time by us or by our authorized executive officers on our behalf that describe our objectives, goals, or plans, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact, including statements that describe our objectives, plans or goals are, or may be deemed to be, forward-looking statements. Words such as “anticipate,” “expect,” “estimate,” “intend,” “goal,” “target,” “project,” “plan,” “believe,” “continue,” “may,” “will,” “could,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Our forward-looking statements reflect our current expectations concerning future results and events, and they involve known and unknown risks, uncertainties and other factors that are difficult to predict and may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these statements. These forward-looking statements speak only as of the date of this report, and we undertake no obligation to revise or update these statements to reflect subsequent events or circumstances. The risks, uncertainties, and other factors that our stockholders and prospective investors should consider include, but are not limited to, the following:

• The automotive retail industry is sensitive to changing economic conditions and various other factors, including, but not limited to, unemployment levels, consumer confidence, fuel prices, interest rates, and tariffs. Our business and results of operations are substantially dependent on new and used vehicle sales levels in the United States and in our particular geographic markets, as well as the gross profit margins that we can achieve on our sales of vehicles, all of which are very difficult to predict.
• Our new vehicle sales are impacted by the incentive, marketing, and other programs of vehicle manufacturers.
• We are dependent upon the success and continued financial viability of the vehicle manufacturers and distributors with which we hold franchises. In addition, we rely on various third-party suppliers for key products and services.
• We are subject to restrictions imposed by, and significant influence from, vehicle manufacturers that may adversely impact our business, financial condition, results of operations, cash flows, and prospects, including our ability to acquire additional stores.
• We are investing significantly in various strategic initiatives, and if they are not successful, we will have incurred significant expenses without the benefit of improved financial results.
• If we are not able to maintain and enhance our retail brands and reputation or to attract consumers to our own digital channels, or if events occur that damage our retail brands, reputation, or sales channels, our business and financial results may be harmed.
• We are subject to various risks associated with originating and servicing auto finance loans through indirect lending to customers, any of which could have an adverse effect on our business.
• New laws, regulations, or governmental policies in response to climate change, including fuel economy and greenhouse gas emission standards, or changes to existing standards, could adversely impact our business, results of operations, financial condition, cash flow, and prospects.
• We are subject to numerous legal and administrative proceedings, which, if the outcomes are adverse to us, could materially adversely affect our business, results of operations, financial condition, cash flows, and prospects.
• Our operations are subject to extensive governmental laws and regulations. If we are found to be in purported violation of or subject to liabilities under any of these laws or regulations, or if new laws or regulations are enacted that adversely affect our operations, our business, operating results, and prospects could suffer.
• We depend on information technology for our business and are subject to risks related to cybersecurity threats and incidents, including those affecting our third-party suppliers and other service providers. A failure of our information systems or any cybersecurity breaches or unauthorized disclosure of confidential information could have a material adverse effect on our business, disrupt our business, and adversely impact our reputation and results of operations.
• Our debt agreements contain certain financial ratios and other restrictions on our ability to conduct our business, and our substantial indebtedness could adversely affect our financial condition and operations and prevent us from fulfilling our debt service obligations.
• We are subject to interest rate risk in connection with our vehicle floorplan payables, revolving credit facility, commercial paper program, and warehouse facilities that could have a material adverse effect on our profitability.
• Goodwill and other intangible assets comprise a significant portion of our total assets. We must test our goodwill and other intangible assets for impairment at least annually, which could result in a material, non-cash write-down of goodwill or franchise rights and could have a material adverse impact on our results of operations and shareholders’ equity.
• Our minority equity investments with readily determinable fair values are required to be measured at fair value each reporting period, which could adversely impact our results of operations and financial condition. The carrying values of our minority equity investments that do not have readily determinable fair values are required to be adjusted for observable price changes or impairments, both of which could adversely impact our results of operations and financial condition.
• Natural disasters and adverse weather events, including the effects of climate change, can disrupt our business.

Please refer to this Quarterly Report on Form 10-Q and our most recent Annual Report on Form 10-K for additional discussion of the foregoing risks. These forward-looking statements speak only as of the date of this report, and we undertake no obligation to update any forward-looking statements to reflect subsequent events or circumstances.

Additional Information

Investors and others should note that we announce material financial information using our company website (www.autonation.com (http://www.autonation.com)), our investor relations website (investors.autonation.com), SEC filings, press releases, public conference calls, and webcasts. Information about AutoNation, its business, and its results of operations may also be announced by posts on AutoNation’s X feed (www.x.com/autonation (http://www.x.com/autonation)).

The information that we post on our websites and social media channels could be deemed to be material information. As a result, we encourage investors, the media, and others interested in AutoNation to review the information that we post on those websites and social media channels. Our social media channels may be updated from time to time on our investor relations website. The information on or accessible through our websites and social media channels is not incorporated by reference in this Quarterly Report on Form 10-Q.

Interest Rate Risk

We have market risk exposure on various instruments that are based on variable interest rates. Interest rate derivatives may be used to hedge a portion of our variable rate debt, when appropriate, based on market conditions.

We had $3.8 billion of variable rate vehicle floorplan payable at March 31, 2026, and $3.8 billion at December 31, 2025. Based on these amounts, a 100 basis point change in interest rates would result in an approximate change to our annual floorplan interest expense of $37.6 million at March 31, 2026, and $38.3 million at December 31, 2025. Our exposure to changes in interest rates with respect to total vehicle floorplan payable is partially mitigated by manufacturers’ floorplan assistance.

We had $320.0 million of commercial paper notes outstanding at March 31, 2026, and $200.0 million at December 31, 2025. Based on the amounts outstanding, a 100 basis point change in interest rates would result in an approximate change to our annual interest expense of $3.2 million at March 31, 2026, and $2.0 million at December 31, 2025.

Our fixed rate senior unsecured notes totaled $3.4 billion and had a fair value of $3.3 billion as of March 31, 2026, and totaled $3.4 billion and had a fair value of $3.4 billion as of December 31, 2025.

As of March 31, 2026, all auto loans receivable outstanding were fixed-rate installment contracts. Financing for these receivables was achieved primarily through both variable- and fixed-rate non-recourse debt. Non-recourse debt includes warehouse facilities and asset-backed term securitizations. Borrowings under the warehouse facilities are variable-rate debt and are secured by the related auto loans receivable. Certain auto loans receivable were funded through term securitizations, which issued notes payable that accrue interest at fixed rates, and are also secured by the related auto loans receivable.

Equity Price Risk

We are subject to equity price risk with respect to minority equity investments. Certain of our equity investments have readily determinable fair values. During the period that we hold these equity investments, unrealized gains and losses will be recorded as the fair market value of the securities changes over time. The fair value of these equity investments was $0.9 million at March 31, 2026, and $12.8 million at December 31, 2025. A hypothetical 10% change in the equity prices of these securities with readily determinable fair values would result in an approximate change to gain or loss of $0.1 million at March 31, 2026, and $1.3 million at December 31, 2025. We also have minority equity investments without a readily determinable fair value. These equity investments are measured using a measurement alternative as permitted by accounting standards and were initially recorded at cost, to be subsequently adjusted for observable price changes. During the period that we hold these investments, unrealized gains and losses may be recorded if we identify observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The carrying amount of our equity investments without a readily determinable fair value was $123.1 million at March 31, 2026, and $50.8 million at December 31, 2025. A hypothetical 10% observable price change for these equity investments would result in an approximate change to gain or loss of $12.3 million at March 31, 2026, and $5.1 million at December 31, 2025. The selected 10% hypothetical change in equity prices is not intended to reflect a best or worst case scenario, as equity price changes could be smaller or larger due to the nature of equity markets.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 (our “Form 10-K”), which could materially affect our business, financial condition, or future results.