Hello, everyone. Thank you for joining us, and welcome to AutoNation, Inc.'s second quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Derek Fiebig, VP of Investor Relations. Derek, please go ahead. Thanks, Kenneth, and good morning, everyone. Welcome to AutoNation's second quarter 2026 conference call. Leading our call today will be Mike Manley, our Chief Executive Officer, and Tom Szlosek, our Chief Financial Officer. Following their remarks, we'll open the call to questions. Before beginning, I'd like to remind you that certain statements and information on this call, including any statements regarding our anticipated financial results and objectives, constitute forward-looking statements within the meaning of the 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 are contained in our press release issued today and in our filings with the SEC. Certain non-GAAP financial measures, as defined under SEC rules, will be discussed on this call. Reconciliations are provided in our materials and on our website located at investor.autonation.com. With that, I'll turn the call over to Mike. Yes. Thank you, Derek, and good morning, everybody. Thank you for joining us today. As usual, we're going to provide a detailed discussion of our second quarter results, after which we'll take your calls on Q&A. Once we've finished the Q&A session, I'm going to share with you some thoughts on our performance over time and our expectations going forward. Please don't disconnect after the Q&A. Slide three is a quick summary of our main messages. We think the industry and consumers are in good shape. The June SAAR is the highest June in four years. Consumer sentiment is improving every month. Our banking partners are reporting a 20% increases in applications and originations, and their delinquencies continue to improve. After sales was once again solid. In our workshops, internal pay was moderately down, broadly in line with our unit volumes. In our workshops, internal pay was moderately down, but broadly in line with our unit volumes. However, customer pay, which for us is the more relevant indication of after sales performance in our market, was up, delivering a gross profit that increased by 7% in total and 4% on a same store basis. Our strategy to grow and develop our parts wholesale is also gaining traction and starting to pay off. Our wholesale businesses saw revenues increase by 16% during the quarter. Moving to vehicle sales, you will see that unit profitability in both new and used has remained within a tight band over the last four quarters, and our Customer Financial Services team once again had an industry-leading quarter. We're looking forward to the second half when the volume comparison headwinds from 2025 relating to tariff and EV credits lapse. As always, SG&A management is front and center, and you will see meaningful progress in Q2 and a path to our 66%-67% expectation range by year end. AutoNation Finance continues its growth, generating $11 million profit for the quarter. Free cash flow, frankly, has been excellent. We're up 11% year-to-date and continue to deploy our cash in a consistent shareholder-focused way, investing $317 million on attractive M&A and $457 million on share repurchases. With that opening, let me get into the details by business. Moving to slide four. For the quarter, we reported adjusted EPS of $5.56, which was up from $5.46 a year ago, marking our sixth consecutive quarter of year-over-year growth. Results were again led by after sales, which drives half of our profits and delivered record gross profit of $607 million, increasing both sequentially from the first quarter and year-over-year from a very tough comparison. This revenue and income stream is durable, has a recurring nature, and is high margin. It's also an important driver of customer engagement and retention. Our repair order volume was strong, and customer pay fueled our revenue growth, increasing 7% from a year ago. As I previously mentioned, we had 16% growth in wholesale parts. Overall, after-sales performance reflects disciplined execution as we continue to grow this portion of the business while offsetting lower internal reconditioning activity tied to our used vehicle stocking mix and volume. In Customer Financial Services, the team delivered strong second quarter results with CFS per vehicle profitability of $2,800. This represents a 3% increase from a year ago, even after accounting for increased loan originations from AutoNation Finance, which, as we've discussed before, bring a headwind to CFS profit in the quarter, but a significantly improved profit per unit over the term of the loan to AutoNation Finance. Tom, I know you'll give everyone on the call more details on that. Yeah, of course. Our CFS team continues to run a value-driven customer-focused process that provides our customers with critical products and services. Once again, customers purchased on average two products per vehicle, with extended service contracts again leading the mix, clearly supporting future after-sales revenue and customer retention. Finance penetration also continues to grow from a year ago, with roughly three-quarters of units sold with a finance contract. We continue to see sequential stability in our profit per unit for both new and used vehicles. New vehicle per unit profitability of nearly $2,400 represents the fourth consecutive quarter of stability. As expected, new unit sales were lower versus a year ago, which benefited from tariff-related pull-forward activity and higher BEV sales. BEV sales were down by more than 30% year-over-year. Importantly, our market share remained relatively consistent with the first quarter in the markets we serve. In used vehicle sales, we continue to see strength in unit sales for vehicles priced above $40,000. Our volume was slightly impacted by a lower mix of vehicles priced below $20,000 than we would like, and we continue to work to improve our accessibility to vehicles priced in this range. Used vehicle profitability remained stable at approximately $1,600 per unit. Total gross margin was just under 18% of revenue for the quarter, which represents consistent top-tier performance for the sector. Turning to slide five. Adjusted free cash flow continues to stand out, including more than $180 million generated in the quarter and $439 million for the first half of the year. The year-to-date conversion rate was 125%. We continued to deploy capital in a disciplined manner. During the first half, we reinvested $443 million in the business through CapEx and acquisitions, and we returned $457 million to shareholders through share repurchases. The acquisitions we made were Toyota of Newnan, Georgia in the Atlanta area and three premium luxury stores in the San Francisco Bay Area. These will add additional scale to markets where we already have a meaningful presence. These acquisitions bring approximately $600 million in annual revenue and around 9,700 in new and used unit sales. AutoNation Finance continued to scale, with the portfolio growing to $2.67 billion from $1.76 billion a year ago. Funding also continued to improve, with debt-funded status increasing to 91% from 83% a year ago. Overall, it was a solid quarter, and as I mentioned, it was the sixth consecutive quarter where we have delivered year-over-year increases in adjusted EPS. With that introduction, I'm going to turn you over to Tom for a closer look at the quarter's financial results. Thanks, Mike. Turning to slide six, I'll walk through our quarterly P&L. Total revenue was $6.93 billion, essentially in line with the $6.97 billion in the second quarter last year, as after-sales growth helped offset tariff and BEV-related headwinds. Revenue was also up 6% sequentially from $6.55 billion in the second quarter. Gross profit was $1.23 billion, compared with $1.28 billion a year ago and $1.21 billion in the first quarter, representing 17.8% of revenue and continued top-tier performance. Adjusted SG&A expense was 68.2% of gross profit, compared with 66.2% a year ago and 69.8% in the first quarter, reflecting a 160-basis point sequential improvement. We expect SG&A as a percentage of gross profit to reach our 66%-67% target range on a run-rate basis by the end of the year. AutoNation Finance continued to scale, with profitability increasing to $11 million in the quarter, compared with $9 million in the first quarter and $2 million a year ago. Adjusted operating income was $343 million, compared with $369 million in the prior year quarter and $312 million in the first quarter, delivering a consistent operating margin of approximately 5%. Weighted average shares outstanding of 33.8 million were down 4.5 million shares or approximately 12% year-over-year, reflecting our share repurchase activity. Diluted EPS was $5.56 per share, compared with $5.46 in the prior year quarter and $4.69 in the first quarter. The year-over-year adjusted EPS growth reflects our continued operating execution and disciplined capital allocation. Moving to slide seven. After-sales remains our largest gross profit contributor and delivered record gross profit in the quarter. After-sales revenue increased to $1.26 billion from $1.22 billion a year ago, reflecting continued growth in a durable, recurring, and high-margin part of the business. Gross margin was 48.1%, compared with 49% in the prior quarter, with the decline primarily related to the higher mix of wholesale parts, which, as Mike indicated, were up 16% in the quarter. Margin was stable sequentially versus the first quarter. Revenue growth reflected continued strength in customer pay, which increased 7% year-over-year. As I said, wholesale parts increased 16%, driven by recent commercial wins. Repair order growth was strong in the key customer-facing categories, with customer pay repair orders up 5% and warranty up 8%. This more than offsets cyclically lower internal repair orders. Total after-sales gross profit increased $9 million from the second quarter of 2025, including the benefit of acquisitions. This was led by customer pay, which increased 7% year-over-year, and wholesale parts, which increased 9%. Warranty increased slightly and internal gross profit was down, reflecting cyclical softness. We remain focused on deploying technology to drive additional volume and productivity and on hiring, developing, and retaining technicians. These efforts increased same-store franchise technician headcount by more than 2% year-over-year, reflecting improved retention. Growing our technician workforce is key to consistently delivering mid-single-digit growth in after-sales gross profit. I'm now on slide eight, customer financial services. The momentum in CFS continued with Q2 per-unit profitability of $2,799, up approximately 3% from $2,712 a year ago, while absorbing an approximately 2% drag from increased AutoNation Finance loan originations. Total CFS gross profit was $358 million, compared with $368 million in the prior year quarter, with lower retail unit volume more than offsetting the stronger per-unit profitability I mentioned. Results were supported by continued robust product and finance penetration along with improved service contract and commission profitability. This performance reflects continued execution by the team and the strength of our value-driven, customer-focused process. Slide nine provides an update on AutoNation Finance, our captive finance company, and its continued solid performance. AutoNation Finance delivered another record quarter, generating $11 million of profit in the second quarter and $20 million for the first half of 2026, compared with $2 million in 2025, as we continue to profitably scale this business. Total interest margin increased $11 million, or 35%, year-over-year, driven primarily by continued portfolio growth. Delinquencies and reserve rates remained stable, reflecting disciplined underwriting and continued portfolio performance. Originations were $485 million for the quarter, and AutoNation Finance penetration was 11% of our total vehicle sales and 18% of our vehicle sales financed during the quarter. The AutoNation Finance portfolio grew to $2.67 billion, up from $1.76 billion a year ago, an increase of approximately 52%. We also closed our third ABS transaction in June 2026 for approximately $550 million, increasing the portfolio to 91% debt-funded, compared with 83% in the second quarter of 2025. To close on AutoNation Finance, our compelling offerings are driving healthy customer take-up, and we continue to expect attractive returns on equity as profitability grows and equity investment requirements moderate. Slide 10 provides some color on new vehicle performance. New vehicle unit sales were 63,240 units, down 4% from a year ago, principally driven by a decline in sales of battery electric vehicles. As Mike mentioned, our market share performance remained consistent with the first quarter in the markets we serve. By segment, import unit sales increased 1%, partially offset by declines of 12% in domestic and 4% in premium luxury. Premium luxury was down 1%, excluding the battery electric vehicle impact. New vehicle gross profit per unit was $2,381, compared with $2,785 in the prior year quarter, reflecting higher vehicle costs. Importantly, new unit profitability has been relatively stable sequentially over the last four quarters. Inventory days supply is healthy, with domestic at 73 days and luxury at 66 days, while import remained at 34 days. Turning to slide 11, as Mike mentioned, used vehicle supply remains tight for lower-priced units, and the team executed well, balancing sourcing, unit volumes, and overall profitability. Used retail unit sales were lower year-over-year, but mix remained favorable, with units priced above 40,000 up 10%, driving an 8% increase in revenue per unit. The unit profitability in this category is more than double that for the rest of our used business. Used vehicle gross profit was $1,582 in the second quarter, compared with $1,622 in the prior year, with unit profitability remaining stable over the last year. Our vehicle supply remains healthy, with approximately 90% of used vehicles internally sourced, and we expect the off-lease supply to accelerate meaningfully in the second half. Turning to slide 12 on free cash flow. Adjusted free cash flow was $439 million for the first half of 2026, compared with $394 million a year ago, an 11% increase. Conversion improved to 125% from 100%, reflecting our focus on working capital and cycle times to support robust free cash flow generation. For the full year, we remain on track for approximately $325 million of CapEx. Slide 13, our consistent cash conversion gives us flexibility to invest in growth and drive shareholder value. Through June 2026, we deployed $900 million of capital, compared with $478 million a year ago, including $457 million of share repurchases, $317 million for M&A, and $126 million of capital expenditures. The Toyota store in Georgia and three premium luxury stores we acquired in the San Francisco Bay Area represent attractive brands, have $600 million of combined annual revenue, and add to our scale and density in these markets. Adjusted cash from operations was $565 million through June 2026, compared with $548 million in the prior year period, and total capital deployed represented 159% of adjusted cash from operations, compared with 87% a year ago, reflecting significant reinvestment in the business and continued returns to shareholders. Our capital allocation approach remains the same. Fund CapEx, which is mostly compulsory maintenance-related spend, pursue selected M&A opportunities that add scale and density, return residual cash flow to investors, and maintain our investment-grade rating. Our balance sheet remains strong. Covenant leverage remains comfortably within our targeted two times to three times EBITDA range. The strength of our balance sheet and robust cash flow generation give us significant flexibility to continue deploying capital, driving shareholder returns, and growing earnings per share. At this point, we'll open the lines for your questions. Kenneth, if you could please remind the participants how to get in queue for the question and answer period. Thank you so much. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question today comes from the line of Rajat Gupta from JPMorgan Chase & Co. Your line is open. Please go ahead. Rajat, we can't hear you. Can't hear you, Rajat. Operator, can you check his line's open, please? Sorry, can you hear me now? Yeah, we can hear you. Yeah, sorry about that. I just wanted to start with parts and services. 3% revenue growth, but flat gross profit growth. It looks like there was a margin mix impact. It sounds like from your remarks that the consumer is fine in general, but curious, what's driving the overall gross profit deceleration? Is this just a temporary phenomenon based on some tough comps? When can we expect growth there to recover back to the mid-single digits cadence over the next few quarters? I have a quick follow-up. Yeah, Rajat, this is Mike. As I said, I am very, very pleased with the way the after-sales team continue to grow customer pay businesses, regardless of whether the comps are tough or not comps. I actually look at the penetration in the marketplace and how we're retaining our customers. Within the overall number, obviously, you're picking up a mix issue on internal pay as our mix shifted more towards $20,000, $40,000 cars and less towards the under $20,000 cars, which obviously has a different mix of preparation and reconditioning. We saw shifts in warranty mix. We moved much more towards higher volume, lower content per RO in warranty. I think all of those things are just point in time, very temporary. I look at the underlying performance in what really matters to me, which is the penetration in the park and customer pay. Notwithstanding the fact that if you look at the addressable market in the after-sales park, it's still working through the COVID hole in the 3 to 10-year park, which for us is obviously prime. Our after-sales teams have made that up with improved penetration, and I think that's very positive and that's going to continue. I would view any temporary drop in terms of internal pay and warranty as point in time. Nothing structural in there, and you should look at the underlying performance with the penetration in the park. We did take time to call out our wholesale performance. Obviously, that's at a lower margin, and therefore you're going to get an effect of that. That's all incremental business for us. We're up very, very significantly, and that is share gain in that marketplace. Again, I think that is a result of the work that the team has done. All in all, encouraged by the performance in after sales and believe that we can continue that in customer pay, not just in the next half, but also continue it forward. Got it. That's helpful color. I just want to follow up also on the SG&A comments. If I heard correctly, I think you mentioned 66%-67% exiting the year. That's a pretty meaningful improvement versus the levels today. I know you've talked about some investments you were making on customer experience. Is it just that some one-time expenses that are more weighted towards the first half go away that's driving the improvement? Curious on the drivers there. Thanks. I think what you'll see as the drivers, Rajat, is improved gross profit, a number of productivity initiatives that we have, including those involving the application of AI. We've got some programs around discipline or around advertising that we've invested more heavily in the first half. I think that begins to moderate. You also saw that we took some portfolio actions, and that will also help the SG&A rate. A number of oars in the water that are moving in the right direction. Got it. All right, great. Thanks for taking the question and good luck. Thanks, Rajat. Your next question comes from the line of Michael Ward with Citigroup. Mike, your line is open. Please go ahead. Thanks. Good morning, everyone. I wonder if you could talk a little bit about variable gross. It looks like it's stabilized in the $4,500 per unit range, and it goes up and down, whatever, $50 or $100 depending on the quarter and mix, et cetera. Is that the new normal? When I look at it, new units are down, but F&I is strong. What could disrupt that trend? What are the things that are really driving that stability as we look at it? Yeah. Hey, thanks, Mike. Great question. Your question kind of reflects the focus that we have on total unit profitability. You can pick at whatever you want on individual PVR and so forth, but for us, it's a total economic equation, including the products and services that we offer from a CFS perspective. We think our trajectory is very strong. In fact, the last 4 quarters, as we've mentioned, you can look at the new unit profitability, used unit profitability, and see it's in a very narrow bandwidth, and we expect that to continue. You couple that with growth in CFS, which was essentially 5% in unit profitability, you end up with a pretty attractive performance and expectation going forward. We're looking at it comprehensively like you do and think that's the way it should be done. Yeah, let me also add to that, Mike, if I can. Tom, I think it was a great answer. I talked in my opening comments about the importance of CFS to us and the fact that we are really attaching very valuable products for our customers as well as for us. The main attach rate is in extended service contracts and warranties. That's very important for us. As we think about the overall economic balance that you mentioned, Mike, and Tom reinforced, within there, we know we're seeding future customers for our aftersales and our service departments, and that's very important to us, and the team continues to perform incredibly well. One thing that I don't think is discussed enough is that is a result which I think is not just incredible industry leading, but it's also a result that reflects temporary headwinds from our AutoNation Finance performance. Because as Tom has discussed on many occasions, as AutoNation Finance scales, that profit from that business is released over time and not point in time. Notwithstanding the fact that it is a great result in and of itself, if you also add to the fact that AutoNation Finance continues to grow and take that in context as well, overall, I think it is a very strong performance. Very helpful. Thank you. Secondly, what% do CPO sales represent of your used? I think you mentioned that you're going to start to see lease returns pick up a little bit in late 2026, 2027. I assume, it seems to me that on the used vehicle side, there is more financing going on. Is that another potential boost for the CFS? Well, yeah. I mean, our overall finance rate is something we track very carefully, and it's actually been very solid and stable. Our penetration, particularly on used vehicles, Mike, has continued to increase. We see incremental opportunity there as we go forward with that finance penetration through AutoNation Finance. We have a process in place that really looks to work in partnership with other finance providers for that credit type that frankly is not in our target grouping that we're looking for. That is holding up very well, and we think that there's incremental opportunity for us to drive that, not just in the second half, but all the way through 2027 as well. Tom, do you have the answer? Yeah. Mike, glad you asked that question. CPO continues to be moving in the right direction for us. We were roughly 15% last year in the first half. This year we're closer to 20%. We're happy with the progress that we're making there. You had asked about lease returns as well. The progress on or, sorry, the trends on lease returns will significantly increase in the second half from the first half, probably upwards of 30%-40%. Now these are overall relative to the unit sales that we have for a month. It's not like 10% or anything like that. It's a fairly modest number. The lease volumes definitely, the lease returns volumes definitely are going to start to trend really strongly in the second half. Yeah, I mean, you're beginning to see. We've now passed through the trough of lease returns. We're beginning to see some recovery. It's not back to pre-COVID levels, it is going to grow nicely in the second half, Tom, you're quite right. Yeah. Thank you very much. Your next question comes from the line of John Babcock with Barclays. John, your line is open. Please go ahead. Hi, good morning, and thanks for taking my questions. I guess just quickly, while we're on the off-lease side of things, any thoughts in terms of what% of off-lease vehicles are going to be kept by the grounding dealer this time around, just given everything that's going on with residual values and just broadly demand for off-lease? Yeah. Well, it's certainly increasing, John, because as you know, when we were going through that period where not just supply was restricted, you also saw significant increase in residual values and a lot of equity in returning leases, which customers quite rightly took advantage of. That's obviously beginning to normalize as well. The number of returns that come back to us that are either returned or bought out, which is our preference as we supply a new vehicle, has increased. It's still not back to the levels that it was before, but it's something that we have seen pretty steady progress on over the last few quarters. Okay. Thank you. Also, you're not the only dealer to report better GPUs on the used side of things. I'm just kind of curious, how sustainable do you think the increase in GPUs was this quarter, recognizing for you, it maybe was a little bit less than some of your peers, but also how sustainable is this at this level? Do you think there are any market factors or anything else that might lead to some pullback in the rest of the year? Frankly, GPU improvement comes from multiple places. It isn't just average transaction price, but there is a lot of opportunity for us to not just sustain what we're seeing, but also improve it. Clearly, mix is going to have an impact on that, but we're finding that our ability to drive our vehicles to market quicker, to turn them quicker. If you look at our relative turn rate compared to others in the marketplace, you'll see we sit at a very healthy turn rate. It is also around the mix because as we acquiring our vehicles through those channels that we have more control over, trade, for example, off-lease that we've just talked about, it impacts our average purchase price of those vehicles. We turn them, in what we consider to be a reasonable pace, thinking about our ability to replenish those vehicles. We very much look at return on invested capital in used cars, which is why I think sometimes this maniacal focus purely on used volume actually misses the point. The point is how will we invest in that capital and what return are we getting? We know that if we're able to replenish vehicles and turn, for example, plus $40,000 used cars at a reasonable rate, the actual return on invested capital for that segment is better than sub-$20,000 cars. Often that gets missed in everybody's, as I said, maniacal focus on, "Don't you know your used volume's off 2%?" I think people should focus on return on invested capital and cash flow as a better proxy. It's coming from multiple areas, faster to market, good control over reconditioning, reasonable turn rates, so depreciation's not impacting it, some mix, and therefore, I think as a result of that, it's sustainable. You're going to get some cyclical at times when it's up, some when it's down, but the key drivers are under control and well managed. That's very helpful. Thank you. Your next question comes from the line of Bret Jordan with Jefferies. Bret, your line is open. Please go ahead. Hey, good morning, guys. On the wholesale business, it obviously got some ink in the prepared remarks. How much of parts and service is wholesale? I guess when you think about the margin of that mix, if we get a little bit more clarity, how big could it be? Where are you taking the share from, as you think about two or three years out, is this going to be a material piece of the business? Yeah. Thanks, Bret. Great question. As you know, our franchise stores have exclusive distribution rights on wholesale for parts. Generally, in our business, just historically, each store has been managing its own parts customer base, including the whole supply chain delivery for its single brand. With this distributed approach, we were missing out on opportunities for growth and synergies, cost synergy opportunities. We're now orchestrating the business such that all products in all brands are managed through one supply chain. Our customers appreciate the simplicity of dealing with a single vendor. For us, this has resulted in some meaningful commercial wins, some large commercial wins that have contributed to the 16% growth you mentioned in the quarter. As well as in the scaling of, we're able to scale a relatively stable cost base and inventory base. It should begin to help us improve margins as well. We have a central acumen as well that helps us to manage our supplier incentive programs. Doing that in one place with strong acumen will also help us to improve our yields there. We're going to continue to invest in the business and invest in technology and drive further efficiencies there. Yeah. I'm also going to talk about that because we talk about the fact that we're very focused in terms of our M&A, and that what we want to do is to build density in our clusters. This is a perfect example of why. I think the teams are now beginning to deploy this at scale. If you look at our growth, and remember that this is business being sold into collision shops around and largely non-franchised aftermarket suppliers, which are operating in the same vehicle park as we are. You all know that collision volumes are down because of various factors. The growth that we're seeing, you can clearly see the majority of that is coming from share gain, and I think that's really positive and healthy. I think the approach to have a virtual parts warehouse and distributed system that Tom described very well, by the way, Tom, is beginning to show the benefits, and I think there is more for us to go and get. Is this strictly OE parts that you sell into the aftermarket? I mean, seven or eight years ago, you were doing a private label import parts business as well. Are you selling the OE product or a mix of both? The vast majority of our growth is OE. Absolutely OE parts. Yeah. It's not after-sales. After-sales parts and margins in that business, compared to stocking costs are, for us, not as attractive as leveraging the assets that we naturally have, which is all of the fantastic brands we represent. Great. Thank you. Yep. Your next question comes from the line of Jeff Lick with Stephens Inc. Jeff, your line is open. Please go ahead. Good morning. Thanks for taking my question. Mike, I was wondering if we could get your point of view on the new business from a couple different angles. First, your same-store was down 4.7%, but when you look at that versus what you were up against on a two-year basis, it was up 2.7%, which is a better outcome than all of your peers, except for one by actually a decent margin. First, just curious your thoughts on the new market as we go into the second half, and also I was wondering, some might look at your new GPU came in maybe a little bit more than others. To what you were talking about earlier in terms of maintaining a customer. When you look at your service and parts same-store sales, still pretty strong given what you were up against. Internally, do you guys think about, hey, that marginal transaction, we don't want to lose, because that's our customer, so maybe you're willing to sacrifice a tiny bit of GPU to gain new volume? Jeff, I think your analysis is spot on. I think, again, often getting lost in the headlines that we see, which I think when people sit down and actually look at the performance, they're going to recognize that when you look at where AutoNation have come, that the results are very credible in the marketplace. Let me specifically answer your questions and I'm going to return to that at the end in terms of the how do we think about balance. I hear a lot about affordability in the marketplace and how they're impacting things. I think as Tom mentioned, the SAAR actually is at a healthy place and consumers are incredibly resilient given everything that is going on. From affordability perspective, we saw in Q1 the best affordability levels that you have seen over the last few years. If you take any of the external metrics and look at the difference in average transaction price incentives, but also wage growth, you will see the best balance that has been there since pre-COVID times, which really indicates that affordability is not back to pre-COVID times, but it is significantly improved over the last 24-48 months. That was largely stable Q1- Q2, and I think it's going to be stable as we get into Q3 and Q4, which means from my point of view, the underlying SAAR, absent a shock that none of us can see, I think is going to be in a good place as we get into the second half, and I think we're well-positioned to do that. Our share performance Q2- Q1 was in good shape, and I think that we're doing a number of things. That means we'll be able to not just maintain that, but we can also see opportunity for growth. It doesn't mean to say that the consumer isn't challenged. I think the consumer is challenged, but the results that we are seeing when you step back and look at all of the drivers in the industry, we had, as Tom said, very strong, growing SAAR. I think that that will continue and give us a tailwind as we get into the second half of the year, and I think we're positioned well as a result of that, and as I said, that's absent any shock. Now, just go back to your balance. This is something I think that we should talk about a lot more as we go forward. One of the things that we are very focused on is customer lifetime value. We look at customer lifetime value, our active customers, and period of activity in the business, that's something that we internally focus on. We have a view that what we're trying to do with our businesses is acquire customers, and then as they come into AutoNation world, that we build that relationship and retain them. We also grow the richness of that relationship for us and for our customers, because we are able to provide now a significant range of product and services with significantly good geography for our customers. As we continue to add to those products and services, whether it is through our Finco or, for example, our insurance pilots that we are running, we're able to grow that customer lifetime value. The acquisition cost to put customers into that ecosystem is something that we want to balance very much. You may see short-term pressure on margin, for example, because we want to, and we recognize that through other areas and through other means, we can maintain a strong customer lifetime value, even if the initial acquisition cost looks high, whether that's in marketing or whether that is in GPU that we retain. That is our entire approach, and it goes back to something that Tom alluded to. As I said, people are going to get, "Well, don't you know your volume is this and your volume is that?" Ultimately, it is how we are using the shareholder capital that they have given us, how we are thinking about the return on the capital that we have, and how we give that back to our shareholders. I'll talk at the end of this call, and I'll give you our scorecard, and you make up your mind. That's how we're focused on running the business. Lifetime value, absolutely. How much does it cost to acquire those customers, compared to how we can, through great products and services and execution, deliver value for them and value for us? Often missed, but that's the important thing. Thank you very much. I appreciate the thoughtful and thorough answer. Best of luck in the third quarter. Thanks, Jeff. Your next question comes from the line of Rob Saltzman with UBS. Rob, your line is open. Please go ahead. Thanks for the time, team. Just a quick question. Strong customer pay performance on the parts side, plus 7% in the quarter. Can you just talk a little bit about your strategy of driving that segment within parts and how you compete with independent repair shops and customer pay? You may be offering lower prices and how do you keep customers coming back to your shops, just in that customer pay segment? Thanks. Yeah, I think that's a very relevant question because we know the overall after-sales part, the overall vehicles in operation are going to grow over the coming years, particularly if the SAAR hangs in where it is, which I expect it to be. From a franchise dealer point of view, the addressable part for us or the historical addressable part for us will actually dip in the next 24 months, 12 months to 24 months. How you penetrate that part and how you add product and service to it is important, and that's what drives our teams. What we look at is how do we create the right balance to improve penetration, and we've been able to do that, and that's why we can see customer pay grow. We focus very much, obviously, on that initial impression in zero to three years. Hugely important to us because it establishes the relationship three through 10, and that's where we're seeing some improvement in our penetration, despite the fact that the addressable part is dipping, and will dip for a little bit of time. If we can unlock increasingly that 10-year-plus part, that's very important to us and where we compete with the non-franchise players. It's also, as you can imagine, on average, a bigger ticket price. How we do that is to focus on how we package and bundle value and how we communicate it. All that business is conquest. It's all conquest because it's gone somewhere else by the time you get to 10 years, if we haven't been able to retain it. Your growth and the work you do in that area pays off over time. Christian and the aftersales team are heavily focused on how we can communicate the value that we offer, how we can package for value and make sure that we are a very credible alternative to the loads of non-franchise businesses that are out there. I think they did a reasonable job in Q2, which drove our customer pay, which I was pleased with. As I said, +4. That's not just a one-off quarter thing. You look back over the quarters and how often they've done that. Their comps are not easy. +7 in total and the expectation of Christian and team from themselves, not just from me, but from themselves, is they can continue to do it. Very much focused on how we can package the services that we provide, demonstrate that it adds competitive value, particularly for those older vehicles. Not easy, that's a big focus for the team. Thanks so much. Just one follow-up. Technician growth headcount 2% in the quarter. If you can just talk a little bit to how you continue to compete with other dealerships to recruit technicians. When you think about that mid-single-digit parts and service algorithm, how much of that is continuing to add technicians in that tight labor market? Thanks. Yeah, without great people, you can't continue to maintain what you've got, let alone grow it. It is an incredibly competitive marketplace, as you know. What we focus on is we focus on the proposition that AutoNation can offer to the people in our organization, which is total reward. It isn't just around the level of pay that they can achieve. It is also how we think about other benefits that we provide to our technicians. It's how we recognize them. We've just come off of After-sales Technician Recognition Month, where we spend a lot of time thanking our technicians and our parts team, by the way, including our service advisors for what they've done in the business. We try and find ways to recognize them because often it is not top of mind, even though it is absolutely the generator of our consistent profitability. We do a lot of work making sure that we're competitive in the marketplace in terms of the total rewards that we provide for our team. We also like to provide them a good career journey for those that maybe want to become master techs in the business, but may also want to become general managers and regional directors. We try and find talent in all areas of the business, and when we find talent, we like to put that talent into situations that stretch them and grow them, and they can continue their career journey with us. As always, not one single thing can help, but 2% growth in terms of our technicians is good. We need to continue that, and we obviously need to continue to retain them. Yeah. I'd also add, Mike, the amount that we're investing in our physical layouts and properties. It will grow to a meaningful portion of our CapEx spend, and that's improving tools, improving working conditions, and so forth. I think that's going to be a contributor as well. Thanks so much for the time, team. Really appreciate it. Your next question comes from the line of John Segreti with Evercore ISI. John, your line is open. Please go ahead. Hey guys, thanks for taking my call. I got cut off earlier, so I apologize if someone already asked this. All of the publicly traded dealers discuss and think a lot about being disciplined in their capital allocation, balancing acquisitions with buybacks. It feels like people are using different valuation or strategic metrics within that same type of framework. Can you frame out your thinking around your approach? There are certainly some private dealerships that are operating at higher margins than your overall book, how willing are you to pay a premium for those assets relative to your own valuation? How do you think about balancing a desire for growth and the network benefits from that overall customer flywheel versus just buying back your own stock, especially when it is trading at these valuations? Yeah. Thanks for the question, John. For us, it is important that you pay a competitive rate. You compete for properties that are attractive to you, and for us, that means they are generally in brands that we are strong in and in locations and areas where we have density. We feel like we can create the most value with those types of conditions. With that said, it is not just what you pay, it is the returns. We have very clear measures in terms of our expectations on ROIC, and that really dictates what we are going to compete for. Over time, perhaps our M&A spend has not kept pace with our return to shareholders, it really just is a reflection of where we think we can create value for the shareholders. We will end up passing on deals if we think we cannot meet the mark on ROIC, and return the residual cash to our shareholders is the way we think about it. Yeah, I am going to add to that, Tom. I think I may have mentioned on a couple of times the sixth consecutive quarter of EPS growth. I do not think anybody else has done that. Earnings per share is important because shareholders are individuals. I know we think about them as one particular group, they are individuals, so we think about the individual return that we can give our shareholders. Six consecutive quarters of EPS with our capital strategy, I think speaks very loudly. Therefore, we look at the biggest benefit we can give our shareholders for each dollar that we are going to invest. We are very clear on the maintenance CapEx that we have to invest because it maintains, obviously, a cash stream for us. Everything else, we look at the best use of those dollars and how competitively we can invest it. As we have grown, the synergistic benefits of coming into a group like AutoNation, it means that we can make acquisitions that in the past were marginal, that now actually yield a great result for us because we have proven that, for example, through the discussion we've had on wholesale, that is a synergistic play that we're able to do through the density we've been able to develop in the marketplace. You may see that some people get headline revenue growth, for example, and we may not grow our revenue in the same way. Six consecutive quarters of EPS growth for our shareholders, as I said, should speak loudly. We have shareholders that really push us on how we think about capital and how we deploy our capital, and I appreciate that from them. We are very much thinking of it from their perspective. Yeah, that means that sometimes our revenue may not grow as somebody who has been out and bought a load of other businesses and just bolted them in. That's inevitable. We have optionality, but it really is grounded in what's the best use of that dollar that we can deploy on behalf of our shareholders with their lens. Thanks. Very helpful, actually. Then just adding on to that, how do you think about sizing and leverage, and are there deals out there that are so large that you may decide to pursue them and pause share buybacks? Yeah. Thanks, John. Great question. Again, I would emphasize the return on equity or return on invested capital that is the basic focus of our M&A program. With that said, we're also managing our investment grade rating, and we have a very healthy balance sheet, good relationship with the rating agencies. No doubt, if we did a larger acquisition, it would come with a lot more EBITDA and a lot more synergy opportunity. It would depend on the return, and it would depend on the upfront leverage as well as the ability to de-lever. In general, with large acquisitions like that, our expectation is that we could de-lever very quickly. That's a conversation we're always willing to have. Size is important. You see a lot more flow in traffic on the small and medium-sized deals. Yes, with our return focus with our shareholders, we have an open mind to considering all the opportunities that might be there. Yeah, it goes back to the same thing that we just discussed. We have great balance sheet. We have phenomenal liquidity. If the investment gives the returns that we expect and it's the best use of our dollars, we will find a way to be able to deal with very large-scale acquisitions if it's the best use of our dollars. You've created, with your team and the work that our people have done, a great balance sheet that gives us immense flexibility in the marketplace. We'll use exactly the same lens as we do across other investments that we make. Yeah. Okay, great. Thanks so much, guys. The final question today comes from David Whiston with Morningstar. David, your line is open. Please go ahead. Good morning. Sticking on capital allocation, buybacks were up 80% year-over-year in the first half. I'm just curious, can you comment directionally for the second half? Is it going to be around that range or a lot less, or does that just all depend on the M&A environment? Yeah, thanks. Good question, David. Of course, our priorities are as what we've stated. We'll continue to fund CapEx, that's pretty much within a contained range. Pretty confident in those numbers. We do consider an ongoing pipeline of M&A opportunities. As I said, we've been very thoughtful, as Mike points out. Our residual cash flow will continue to go to share buyback. Is it going to be exactly what it was in the first half? I can't really comment on that, but it is an important priority for us, and you can think of us as spending all of the free cash flow that we have. Okay. On a different topic, just curious on the trend this year versus the past couple of years on new and used vehicle AutoNation customers buying a vehicle online. Has that leveled off? Is it increasing or trended down a bit? Well, like everybody else, we are continuing to see our customers in pre-purchase and purchase leveraging online resources increasingly, particularly as we get into, as you will all know, the generational change of buyers from my generation, which is basically towards the end, to a much younger generation that thinks about buying and buying habits in a very different way. Some of the things that we are investing in is to make sure that we can provide different options for our customers, depending upon their preference to do research, to purchase, and to get fulfillment of their vehicles. That means that we have to constantly invest in some of those digital channels to provide the functionality that they want. We continue to do that. The trends we are seeing in terms of that preference for buying, I think will continue. Because we're aware of that, we're obviously investing to make sure that we can provide those levels of access to the business that we have. Thank you. Yeah. Thanks, David. There are no further questions at this time. I will now turn the call back to Michael Manley for closing remarks. Yeah. Thank you. I thought a great set of questions, and thank you for that. We appreciate you being on the call, and we appreciate your questions. Listen, I'm going to talk about some things that'll actually speak to some of the answers that we've already given you. I'm going to take a few minutes just to share some reflections on our sustained performance. As always, I do want to give you some view on our forward expectations. Let's turn to slide 16. This is about how AutoNation has set the pace in the auto retail world. I think we have an outstanding set of brand offerings. We're attractively positioned from a geographic perspective. We have scale, and very importantly, should never be missed, we have a team of associates work in our playbook every day who are great, who are committed, and help drive our business forward. If you have a look, these have enabled significantly strong overall financial results in the space. I emphasize overall because our focus is on operating profits and cash flows, not necessarily being number one in each of the individual metrics referenced. We have a clear focus that Tom and I have talked about on many occasions. You can see that come through in the results that I'm showing you here. Approximately 80% of our profits come from CFS and aftersales, both are high margin, highly recurring earning streams, and our growth and position in gross margins reflects this attractive business mix, I think. Further, we consistently deliver amongst the highest operating margins of the group, meaning that not only do we have strong positions in attractive segments, but we also have a strong track record of operating them effectively. Our scale helps, of course, but it's really our strong measurement rigor. We bring operating standardization to our business, and we have excellent field leadership. I know all of our field and our leadership teams are on this call, and I thank you for the things that you do, and I thank you for your focus on measurement and rigor. Really that enables our results to stand out over the course of time. I think that's important, and that's what our shareholders look for over the course of time. If you look at page 17, it's clear from our ROIC that these operating results are being delivered in a capital efficient manner. In six years, we've gone from approximately 9% return on invested capital to around 14%. In this timeframe, we've generated over $6.3 billion in free cash flow, and we've returned $6.5 billion to our shareholders in the form of share repurchases. We think this is a strong track record, and we think we're well-positioned to continue it. Let me close on slide 18. We talked about this. We do have a diversified business model. We added AutoNation Finance, and you can see from our results, not only is it scaling, but it is producing great returns on equity. We're very pleased with the way the team are performing there, which is important. As I mentioned at the opening, consumer demand and industry sales do remain resilient. As such, we expect our unit sales to continue to track largely in line with the markets and brands we serve in both new and used vehicles. As we talked about on the call, we really remain focused on trying to balance volume, margin, inventory, and customer experience around that lens of customer lifetime value, what's our acquisition cost, and then how can we provide value and services to our customers. It is a blend. Sometimes you will see margins from a temporary lens move up. Sometimes you'll see them move down. It really is with that more longer-term focus on what we're trying to do. Frankly, our after-sales business, which was a lot of topic of conversation today, remains well-positioned for continued mid-single digit growth in customer pay because there is durable demand out there, and it is a recurring revenue profile. That focus that we talked about on customer retention, technician capacity, for example, we talked about that as well, and their productivity is going to serve us well. Customer financial services continues to deliver sustained performance, and that does reflect a discipline execution. It is around product penetration, and we touched on that point as well during our call. It is around that value that we provide to our customers and the processes we use to explain the value and sell it. We do continue to scale with AutoNation Finance, the ongoing portfolio growth, and improving year-over-year profitability contribute to the strength and diversification of our earnings profile. With more stable new and used unit profitability, growth in CFS and after-sales, lower shares outstanding, we do expect adjusted EPS growth in the second half. As I said, six consecutive quarters of EPS growth with the capital allocation strategy that we deploy on behalf of our shareholders. We expect that to continue certainly in the next half. Capital allocation obviously remains shareholder focus, and it is around an emphasis on disciplined investment. Obviously, optimize our portfolio and continue with that lens on returns to our investors. Taken together, I think our business model, the cash generation, the disciplined deployment of that cash, and focus on our operational execution position are going to continue to deliver attractive returns. Listen, on behalf of our team, I want to thank you for being part of the call. Thank you for your questions. We'll see you in a quarter's time. This concludes today's call. Thank you for attending. You may now disconnect.