AutoNation Inc.

Overview Key strengths Key risks Resilient business model with diverse revenue streams. Risk of disruption from online competitors, direct-to-consumer sales models, and transition to electric vehicles. Strong history of solid operational execution. Exposure to the cyclical new vehicle sales market. Consistent free operating cash flow (FOCF) generation. Balancing expansion opportunities and share buybacks with maintaining appropriate credit metrics. S&P Global Ratings-adjusted EBITDA margins continued to normalize through the year. The company generated adjusted EBITDA margins of 5.7% for the 12 months ended June 30, 2024, from 6.8% at fiscal year-end 2023. This margin decline has largely been driven by normalizing new vehicle gross margins as new vehicle production has improved. We forecast new vehicle gross margins to normalize at a

...We continue to forecast EBITDA margins will normalize but remain above pre-pandemic levels due to stronger operating efficiency and parts and service (P&S) growth. S&P Global Ratings-adjusted EBITDA margins continued to normalize through the year. The company generated adjusted EBITDA margins of 5.7% for the 12 months ended June 30, 2024, from 6.8% at fiscal year-end 2023. This margin decline has largely been driven by normalizing new vehicle gross margins as new vehicle production has improved. We forecast new vehicle gross margins to normalize at a rate of about $100 per month through the rest of 2024. Used vehicle margins have also declined slightly due to elevated wholesale prices. We expect sourcing profitable used vehicle inventory will remain challenging in the near term due to the lack of new vehicle production over the past few years, resulting in fewer vehicles coming off lease and prices...

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