All right, Tom, Derek, thank you for joining us. My name is Daniela Haigian. I am the auto retail analyst at Morgan Stanley. I have to read some quick disclosures here, and then we can kick it off. For important disclosures, please see the Morgan Stanley Research website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley representative. With us today, we have Tom Szlosek, Chief Financial Officer, and Derek Fiebig, VP IR. Thank you for joining us, and I will kick it over to Derek for some other disclosures. Yeah, thanks, Daniela. Great to be here. This is being webcast and I would like to remind people that certain statements made during this presentation, including any statements regarding our anticipated financial results and objectives, constitute forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks that may cause our actual results or performance to differ materially from such forward-looking statements. Additional discussions of factors that could cause our actual results to differ materially as contained in our filings with the SEC. Thank you. All right. Thank you. Yeah. Tom, why do not we kick it off with you? What are some key messages you want to share with investors here today, key strategic priorities? What is the AutoNation story? Thanks, Daniela. Thanks for having us here. I have no disclosures to read. We are excited to be at the conference. It is always great to come out and enjoy the atmosphere here and see colleagues. I think AutoNation is, as everybody appreciates, one of the leading retailers. When you ask about what is important to us, I know we will get into a little bit more description of the business, but for us, meeting customers where they are is probably the most important part of our business. What that means is there is an ongoing shift in the way people buy cars. It is not always they are going to walk into a dealership. It starts all the way back in the research that they are doing and the online activity that they go through. For us, it is to understand that, influence that, but just to meet them where they are and then transact the way they want to transact. It is not always just a physical transaction. There is a lot that is done online these days. There is more that can be done online. We are investing in that, but I think that is a big part of the strategy that we have in place. I think secondly, I would say that we have a very attractive and growing installed base. When I say installed base, these are vehicles that we have sold over the years, over the last two, three decades. We track every single vehicle we have sold, and we want to know where customers are in their vehicle usage cycle and where they are in their buying cycle. We want to look for opportunities to be the first one they think of when they are trading out a car, trading up, when they need servicing, when they need financial products. I think that is probably our second most important priority. I would say thirdly, it is running the business well. We have important constituents, the most important of which is our customers. We want them thinking highly of us, we want them to have a good experience. Our OEMs are very critical to us as well. We represent roughly 30 OEMs, and being in good stead with them is critical. I think if we are doing the first thing I mentioned, treating our customers well, I think the OEMs will be happy. For us, that means being able to get allocations of vehicles, that means being able to participate in M&A activity because at the end of the day, they have a say in who gets to buy which franchise. So doing that well. Then our people, our associates. When you look across AutoNation, you have 25,000 associates. Many of them are customer-facing, whether you are a customer service technician or advisor, and our sales teams. Treating them all well, compensating them the way they need to be compensated, and keeping them motivated is critical. So, those are, I think, the three things that we are working on to continue the growth path that we have. That's really helpful, and we're going to unpack all of that throughout this discussion. I think first point you brought up was really interesting in that I think the AutoNation story today is very different from the one in 2019, where it's not just selling a car to a customer, and that's the end of your relationship. Can you walk us through maybe to some of us who are a bit newer to the story, what does that customer life cycle look like? You sell a car, but then what goes on top of that, the parts of it? Yeah, I think that's a great question. If you take a step back and look at, I always look at it from a financial perspective, and you look at an auto retailer, like us, our profitability might not surprise you, but only 20% of our profit really comes from the actual margin on selling a vehicle, whether it's a new or used vehicle. 80% of the profit comes from service, and it comes from the financial service products that we have, including AutoNation Finance. That's a fundamental tenet. It's the focus of everybody on the upfront, the movement of the vehicle into the installed base where you then can get the service activity, sell financial services products and have a relationship with a customer over their lifetime. That's the way we think of it and the way we approach it. I think the other important aspect to appreciate if you're not familiar with retail auto is the way the balance sheet is like a CFO's dream. When you sell a car, our vehicle sales are probably close to, how to say, 20 out of our $27 billion in revenue, roughly, order of magnitude. We get paid in two or three days. So there's not a lot of credit exposure on our balance sheet. Services, as I said, a large part of our profitability, we get paid that day. So I don't have a significant amount of credit exposure receivables on my balance sheet. On top of that, when you look at inventory, we have a lot of vehicles. We carry 25,000 used vehicles. We have more than that on new vehicles, but they're financed. There's floor plan financing, and so the toll on your balance sheet is quite limited. It's like a net working capital of zero or sometimes a negative. The business model that I described with having a customer purchase a vehicle, giving us the opportunity to sell them products and services for that vehicle, and then having the opportunity to service them over the life of that vehicle is the name of the game for us. All places are important, but the end result is a P&L and a balance sheet that is, I think, quite attractive. We will get into the balance sheet later, but you brought up an interesting point on the vehicles in operation or vehicles in service. I think that is a little bit of a different way you think about the business now versus before. Can you talk to us a little bit about how you are proactive in assessing who might need to be coming in for service or how you do predictive maintenance in some of your stores today? Yeah, it is a great question. I think of it as it is like a doctor relationship with your doctor, right? They do a number of preventative things to prevent bad things from happening. They are also doing scanning and checking blood tests and whatnot to see if there is actually anything that you should be worried about. Similar with your vehicle. You will have a maintenance program that you sign up for on a new vehicle and even on a used vehicle. We make sure that our customers have a strong awareness programmatically of how to service their cars. That is the preventative part of it. There has been such a great development in the actual scanning of vehicles and the technology that every vehicle that comes in, we have the opportunity to scan that vehicle and check right away within 30 seconds of a customer dropping off his vehicle. They can walk over to the service associate they have on their iPad, just like you, a report. It checks for things like tire wear, brake wear, alignments, and the like. It is an opportunity right away for that customer to point out some of the things that the scanning is telling us that they need. For the most part, we are successful. Our customer associates, our service associates have a strong experience in using that technology to and it gives them more confidence to sell. You have clear evidence from a scan, "Hey, you really need to think about that." I am really excited about our service business. As I said, it is half of our profitability. When you look at it from a, if it were just a standalone business, this would be a 50% gross margin business. It probably is a 20%, 25%, 30% operating income type business embedded in the P&L that you see for us. The trends, it is a mid-single digit grower for us. Historically, it has grown between 4% and 6%. We have been able to drive the margin rate in a nice way, in an attractive way. There are really three or four elements to the service business. Customer pay is the most important one when it comes from a size perspective, it is 40% of the business. Another 20% is warranty, where if there is a recall or other warranty issues, it is typically done at the dealership, and that is part of the business. Thirdly, they are preparing vehicles, whether new or used, for display and for sale. When you look at the trends in each of the three lines of business, overall, it is going to continue to track mid-single digits. Right now, I think as I said, the customer pay piece of it, the traffic has been great. I think customers are being a little more selective in this environment. I think you saw the interest rate action yesterday. I would say consumers are spending very nicely when you look at the day-to-day things that they buy. But when it comes to big capital purchases and maintenance of their capital items, I think there is a little bit of more discretion going on. We have seen these patterns of deferral, and it is deferral because it always comes back. That is the question. Yeah Does it come back and is that T + 1 or two? Yeah. Our history has been we have been through cycles where there has been elective activities that have been pushed out. But then you will end up seeing a nice surge the other way that tends to offset it. So where we are historically 5%, 6% growth on the customer pay side, we are more modest. It is still positive, but it definitely is, in this environment, contributing to a little more moderation in that growth. I think warranty is always going to be cyclical for us. And last year, we were doing significant heavy mechanical type of warranty actions around engines and powertrain. That is heavy technician use. You get a lot of hours out of those. I think there has been a moderation in that type of activity. We are seeing more over-the-air type of warranty activity, where you can do things sometimes even remotely. But again, we've been through cycles like this before, but I think that's an aspect. Then thirdly, our internal business. It always thrives on the volume of new and used vehicles that we're selling. We'll get into it probably, but the industry is down roughly 4% on retail new vehicle sales, and we're keeping in line with that. But year-over-year, you have fewer vehicles that need to be prepped for sale or for delivery to the customer or reconditioned used vehicles. I think that's an important point there because I think throughout this conference, all year, everyone's been saying how SAR has been so resilient. Yeah. It has been, the headline number, mid-16 million. Yeah. The point you bring up on there is this split between retail and wholesale. Right that does make a difference for your end customers. So I guess thinking about parts and service being the profit engine for your- Right company, it is less cyclical than the new car business. Right. But if you do have a weaker base on which you can provide service to- Yeah does that then impact that mid-single-digit growth rate for 2027? I think we are seeing a little bit of moderation. Let's see how the rest of this year plays out. I would say that in the third quarter will be a little bit more modest growth, as I sort of alluded to. But I think that the installed base is there. And like I said, the volume of traffic is still there for us. So the opportunities are very resilient, and I think we will come through this quite nicely. Great. Derek, anything to add on the quarter for parts and service or yeah? No, I think just when you look at it, in the second quarter, we talked about how we had higher tickets for warranty as well as customer pay. That continues. The warranty comps are tough. That is going to continue here, but it is going to be a mid-single digit grower, but a little bit pressured here in the near term. But if you look back, Daniela, historically, there has been two years since 2008 that it has been negative. 2020, which makes sense for everyone. Right during the global financial crisis where it was down. So it is a growth business. It is just not going to be growing the way it has over the last couple of years. I want to switch gears a little bit into used. What are you seeing there? I think some of your peers continually talk about how supply is tight. It is tough to get enough inventory. Demand is there. We have this dynamic of off-lease supply coming back this year. So what are you seeing out there in the market? Yeah, it is a critical business for us. When you look at used, first of all, we are uniquely positioned when it comes to selling used vehicles. We have a source of supply, which is trade-ins, that not a lot of used-only players can take advantage of. That is generally 50% or more of the volume comes from trade. So we are excited to continue to be able to drive that. Of course, with the new volumes the way they are, you have marginally less in terms of the volume of trades coming through. We also have an active We'll Buy Your Car program, which also is probably 30%-40% of the volume. Then for the remainder comes off lease and we will go to the auction to the extent we need to. So I think if you talk about being able to get inventory, I think we have a unique positioning. We continue to leverage that. I think you are right regarding the different price points. I think if you look at it from a more expensive vehicle, anything over $40,000, we consider on the used side to be on the higher price side. The volumes have been great for us. Second quarter, I think we were mid-single digits, like 4% or 5% unit growth, and it is our most profitable segment from a used perspective. So that has been playing out well. If you go to the other end of the scale, vehicles that are $20,000 and less, that is our highest turn segment. We turn those probably 12, 13 times a year. You kind of always get a reset of your inventory position, your pricing, your cost position, and so forth. I would say there is a challenge in acquiring those vehicles. As a consequence, we have been down more pronounced than. It certainly is not growth, but the declines year-over-year really are a reflection of the ability to acquire those vehicles. We have a concerted effort and made some inventory corrections to enable us to be in a position to acquire more of those lower priced vehicles. With the turn activity that they have, I think it is going to put us in a pretty strong position. The other thing I appreciate on used is that we have vehicles that we acquire either through trade or We'll Buy Your Car that end up in retail, and for sale. Sometimes they retail out and sometimes they age out and we'll need to auction those. We've seen a growth in our inventory levels. We probably had more of the higher priced vehicles than we needed to support that growth and less of the lower price. We've been a little bit more active on the wholesale side, particularly this quarter. We've seen more of our vehicles come out of the system from a wholesale basis. That's not necessarily a profitable exit for us because you don't get the CFS and finance insurance products on it. It's typically a negative margin. As our inventory levels now corrected into September, we feel pretty good about where we are heading into the fourth quarter. There were some modifications on used, again, to reflect the conditions. I think the affordability conditions were a contributor to where you see the volume growth and so forth. Anyway, that's the way we're looking at the used. Again, the investment in technology that I referred to earlier is helping us to be a better operator on the used side. Whether it's the customer experience itself or the way we manage where the inventory is placed, how much we pay for it, how much reconditioning we put into it. The technology is a huge differentiator there. The unit profitability on used has been nice. It's been steady for the last. Is it because of that mix into the newer vehicles? I think mix has helped us, but I think we're also smarter about the way we're acquiring and how we're pricing trade-ins, how we're pricing We'll Buy Your Car activity. We're smarter and have more information on how much reconditioning to put into a vehicle. How much of it is really going to create more value? How much of it is not going to create value? You really stick to where you have value creation on reconditioning. Then being smart about pricing, what's going on in the market, and moving the vehicles with speed. I think time is a killer when you have a big investment in inventory, so we need to be smart about pricing. The beauty of the business, though, as I said, is it's a high turning business. Yeah. It turns 10, 11 times in totality. You have a lot of unique data that you can price on. The data is, between our own systems and what we know in the marketplace, there's tons of sources. You have daily, hourly, even up-to-the-minute activity on any vehicle you want in terms of mileage and brand and model and pricing levels that are there. Before we get into the CFS and AutoNation Finance, is there anything that you're doing or implementing with AI new today that you couldn't do a year ago? Oh, yeah, for sure. Everybody talks about how it's making their business more productive. For us, we look for tangible impacts of AI. We've seen it the most on the customer service side, whether it's call handling in our business development centers where we have either inbound or outbound calls on the service side, as an example. Whether it's appointment making or parts availability, other things like that. In AutoNation Finance, which I know we'll talk about, the outbound collections activity, we've got a lot of AI-based technology there, and it's helping us. The third area I'd point out is in our back office. We have centralized a significant amount of activity that had once been in the dealerships, whether it's billing or paying your vendors, keeping your books. We've always used robotic technology in that space, but the advent of AI has enabled us to take that a step further and drive further automation. I'm excited about the impacts that it can have in all three of those areas, and there's probably a lot more that we're scratching the surface on. Absolutely. Going into the finance side, can you talk a little bit about CFS versus AutoNation Finance? How do you think about, are there trade-offs there? Yeah. Just to touch on CFS for a second. I said it's a component of that 80% of our profitability. It's probably 30% of our overall profitability comes from CFS, which is Customer Financial Services products. 2/3 of the offerings are actually product protection type things. Think of extended warranties, think of appearance protection, tire protection, and so forth. A third of it is financing products. Think of the loan itself. The margin on the business is 100% because it's a commission-based model. We have third-party providers that stand behind the products that we sell. We have third-party financing. I'll talk about AutoNation Finance in a second, how they play into that. But it's another example of hidden inside this business that we have is 100% gross margin business on top of a 50% service gross margin business. It's really attractive. The cash flow aspects are really good. When you look at AutoNation Finance, we realized a couple of years ago, and Mike really has led the charge for us on this, is that we have an opportunity to maintain that and even leverage better the relationship with our customers. We have 11 million, 12 million customers in our customer database. But we have now been able to develop another 70,000 within two years of customers that we have the direct lending relationship with. For us, if you've not seen our financials, the growth in AutoNation Finance has been really strong. They finance now roughly 18% of all vehicles that are financed in AutoNation. So we're up to roughly 18%. We think that number continues to go north. The portfolio now is approaching $3 billion. I think it'll double in two years if we continue to drive up that penetration rate. The profitability speaks for itself, and we disclose it every single quarter. But I think in the second quarter, we were probably $10, $11 million of operating income, where the year before we were probably $1 million or less. So that profit trajectory is going to continue for us. Over the life of a loan, an AutoNation Finance loan will be two to three times more profitable than if we had just stuck with the traditional model of third-party lender. But we value our relationships with our third-party lenders. It's an important part of reaching the customer base that we want to reach. I think your question on the interplay between CFS and AutoNation Finance is an interesting one because if you're moving from, as I said, a third of your CFS volume is financing, and if you're moving from 100% third parties on that and AutoNation Finance is coming into play a little bit, you get less of that upfront commission, and you're trading it off for having an asset and a portfolio that gives you that value over time. I said it's two to three times. It does have an upfront drag on CFS. We've talked about that extensively. I think it's something that is a long-term economic decision. It's superior for our shareholders. So we'll continue on that trajectory. We'll continue the growth path. In terms of current performance, I think AutoNation Finance is doing wonderful, and it's managed its interest margin very nicely in a not easy environment. We've got pretty good match funding between a fixed loan portfolio of receivables and the way we finance it. We've gotten really good support from the markets in terms of the ABS activity. We've gone out to finance the portfolio. We've done three ABS transactions now, and it has a meaningful impact on our cost of funds and supporting the growth in that portfolio. So all that is working well. CFS also on its own we judge it by both the volume growth, and that's totally dependent upon the number of vehicles we sell and its unit profitability, which is dependent upon the number of products that we sell- Yeah attach the products. Our attachment rates, I think in July and August, seasonally come down, and then they'll typically spike in September. We've seen a little bit more of that moderation in July and August. But I think we've come back to really strong attachment rates so far here in September. But I do expect that if you look sequentially, you'll probably see a $50-$100 impact on unit profitability on CFS before it kind of. If you look at the run rate for September, I think we're back to normal levels. I want to switch gears a little bit and talk about capital allocation. Sure. Stock repurchases. Yeah M&A. How do you balance the two, and how do you think about the types of dealerships you might want to acquire? Yeah, great question. The beauty of capital allocation is that we generate a lot of cash. For the reasons I talked about earlier, the speed at which we get paid, the limited investment we have to make in our working capital. You have a significant amount of cash. There is a compulsory amount of CapEx that we have to spend to maintain our dealerships. Call it $300 million a year, $250, $300. That is really driven by the OEM relationship. They will always want to keep their storefronts up to date. They want to have the latest gen model. Every four or five years, you end up refacing a number of your dealerships, which is healthy, and it makes the experience for the customers strong. We will continue that. But that leaves a significant amount of cash to either deploy in M&A or return to our shareholders. For us, M&A is very much an opportunistic opportunity or opportunistic endeavor, I would say. Our focus is on acquiring dealerships in spaces that we have a good footprint. If you think of where we are geographically, I think of the Sun Belt, and I use the West and East Coast a bit. If you look at our footprint, 65%-70% of it is in California, Texas, and Florida. If we can acquire in those areas, we have a lot better chance of generating synergies. Right. We can go through all the types of synergies that you get, but basically when you have a footprint, you can drive more operating synergies. An example would be reconditioning. Instead of investing in the capital and the operating costs of reconditioning for a dealership, you can do it for the dealerships that are in the area. Your used vehicle inventory, instead of buying for one dealership, you can buy for an area, and you can move vehicles around- Right depending upon where they belong. Our decisions on M&A, and there are plenty of opportunities, we are in every single transaction you hear of. We get a chance, and we look at it from a return. Can we get the return that we require? If we cannot, we will pass. I think we have been disciplined. This year, we have deployed a fair amount of capital. We are excited about the acquisitions that we have done in California and on the East Coast. Great, attractive brands, and so far they are performing exactly how we had modeled them. The other attractive part is that we have continued to deploy capital into share repurchase. We are not going to be a dividend company for reasons we can get into, but really, returning the capital to shareholders has been a hallmark of our capital allocation. Being judicial with how we spend on M&A and returning the residual to our shareholders. I think of it as every penny of operating cash flow I generate, I'm either going to put into CapEx, or I'm going to do acquisitions, or I'm going to return it to shareholders. I'm not trying to build a cash stockpile. Happy with our leverage levels, although we continue to monitor that. We are the only investment grade-rated public dealership. That's important to us, so we'll continue to manage that as part of the equation. That's great. Derek, any thoughts on nuance for the quarter or for models we should be thinking about? No, I think just a lot of continuation of what we've seen. From a performance standpoint, Tom mentioned a little bit of softness on the product side of things for CFS. On the new side, it's affordability. We're seeing sales are tracking well on the retail side of things, but we're down versus some tough comps last year. Fourth quarter should see more of a seasonal swing that we would get because you had some pull ahead last year that impacted the premium luxury side of things. Margins are coming down a little bit. You'd expect that they would be coming down in the third quarter just because you have model year changeover. But we're having to meet the customer where they are and give a little bit more on price. We could be down about 10% or so sequentially on GPUs, but we should have that typical pickup as we roll into the fourth quarter here for new. Last lightning round, EVs, hybrids, extended range EVs. Oh. Is that something consumers want? Are we at the trough? What do people think about for next year? I think the incentives were really important. We saw last year with the expiry, it just drove a plethora of activity. I think without those incentives, we're seeing significant moderation on EVs. It was probably once 8, 9% of our volume, and it's come down to low single digits. I think the used EVs are still attractive, and I think that tells me that consumers are interested in the experience. I'm not a technical expert, but the limitations that have been there need to be addressed. I think we're well positioned. The OEMs that we're dealing with each have a different weighting of products that they're developing, but we'll be positioned to support that if the trends do improve and it becomes a higher weighting. All right. Thank you both for joining us. All right, Daniela, thank you very much.