AUTONATION, INC.AN
AUTONATION, INC. Stock Compensation Disclosure
STOCK-BASED COMPENSATION
The AutoNation, Inc. 2017 Employee Equity and Incentive Plan (the “2017 Plan”) provides for the grant of RSUs, restricted stock, stock options, stock appreciation rights, and other stock-based and cash-based awards to employees. A maximum of 5.5 million shares may be issued under the 2017 Plan.
The AutoNation, Inc. 2024 Non-Employee Director Equity Plan (the “2024 Director Plan”) provides for the grant of stock options, restricted stock, RSUs, stock appreciation rights, and other stock-based awards to our non-employee directors. A maximum of 400,000 shares may be issued under the 2024 Director Plan.
Restricted Stock Units
On January 2, 2025, each of our non-employee directors received a grant of 1,497 RSUs under the 2024 Director Plan. RSUs granted to our non-employee directors are fully vested on the grant date and are settled in shares of the Company’s common stock on the first trading day of February in the third year following the grant date, unless the non-employee director elects to defer delivery in accordance with the terms of the award and the 2024 Director Plan. Settlement of the RSUs will be accelerated in certain circumstances as provided in the terms of the award and the 2024 Director Plan, including in the event the non-employee director ceases to serve as a non-employee director of the Company. Compensation cost is recognized on the grant date and is based on the closing price of our common stock on the grant date.
In 2025, our Board’s Compensation Committee approved a maximum annual grant to employees of 0.5 million RSUs including time-based RSUs, performance-based RSUs, and market-based RSUs, which will vest as described below. We account for forfeitures of stock-based awards as they occur.
Time-based RSUs vest in equal installments generally over three years. The fair value of each time-based RSU is based on the closing price of our common stock on the date of grant. Compensation cost for time-based RSUs is recognized on a straight-line basis over the shorter of the stated vesting period or the period until employees become retirement-eligible.
Performance-based RSUs cliff vest after three years subject to the achievement of a targeted measure of return on invested capital over a three-year period. The fair value of each performance-based RSU is based on the closing price of our common stock on the date of grant. Compensation cost for performance-based RSUs is based on the expected achievement level of the performance goals, which is evaluated over the performance period, and recognized on a straight-line basis over the shorter of the stated vesting period or the period until employees become retirement-eligible.
Market-based RSUs generally cliff vest after three years subject to a measure of total shareholder return over a three-year period relative to the shareholder return for a predefined group of companies. The fair value of each annual grant market-based RSU is based on a Monte Carlo simulation model on the date of grant using the following assumptions:
| 2025 | 2024 | 2023 | |||||||||||||||
Risk-free interest rate | 3.90 | % | 4.31 | % | 4.60 | % | |||||||||||
Expected volatility | 36.49 | % | 40.28 | % | 42.89 | % | |||||||||||
Dividend yield | — | — | — | ||||||||||||||
In 2025, we also provided a one-time grant of market-based RSUs to our Chief Executive Officer that cliff vest after five years subject to a measure of stock price performance targets. The fair value of the one-time grant is based on a Monte Carlo simulation model on the date of grant using the following assumptions:
| 2025 | |||||
Risk-free interest rate | 3.99 | % | |||
Expected volatility | 39.04 | % | |||
Dividend yield | — | ||||
Compensation cost for market-based RSUs is recognized on a straight-line basis over the shorter of the stated vesting period or the period until employees become retirement-eligible, regardless of whether the market condition is satisfied.
The following table summarizes information about vested and nonvested RSUs for 2025:
| RSUs | |||||||||||
| Shares | Weighted-Average Grant Date Fair Value | ||||||||||
| Nonvested at January 1 | 0.9 | $ | 140.18 | ||||||||
| Granted | 0.5 | $ | 176.41 | ||||||||
| Vested | (0.3) | $ | 111.52 | ||||||||
| Forfeited | (0.1) | $ | 167.17 | ||||||||
| Nonvested at December 31 | 1.0 | $ | 169.11 | ||||||||
The weighted average grant-date fair value of RSUs and total fair value of RSUs vested are summarized in the following table:
| 2025 | 2024 | 2023 | |||||||||||||||
Weighted average grant-date fair value of RSUs granted | $ | 176.41 | $ | 171.84 | $ | 139.11 | |||||||||||
Total fair value of RSUs vested (in millions) | $ | 56.5 | $ | 54.8 | $ | 76.0 | |||||||||||
The following table summarizes the total stock-based compensation expense related to RSUs recognized in Selling, General, and Administrative Expenses in the Consolidated Statements of Income and the total recognized tax benefit related thereto:
| 2025 | 2024 | 2023 | |||||||||||||||
Stock-based compensation expense | $ | 46.5 | $ | 36.5 | $ | 39.7 | |||||||||||
| Tax benefit related to stock-based compensation expense | $ | 4.6 | $ | 4.1 | $ | 4.5 | |||||||||||
Tax benefits related to vesting of RSUs and stock options exercised were $7.5 million in 2025, $6.9 million in 2024, and $9.0 million in 2023.
As of December 31, 2025, there was $47.6 million of total unrecognized compensation cost related to non-vested RSUs, which is expected to be recognized over a weighted average period of 2.13 years.
Stock Options
Prior to 2017, we granted non-qualified stock options with a term of 10 years from the date of grant that vested in equal installments over four years. All stock options were fully vested as of December 31, 2020. The intrinsic value of stock options exercised was $1.6 million during 2025, $1.0 million during 2024, and $3.5 million during 2023. We had no stock options outstanding as of December 31, 2025.About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.