Asbury Automotive Group, Inc. (ABG) Q1 2016 Earnings Report, Transcript and Summary

Good day and welcome to the Asbury Automotive Group Q1 2016 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Matt Pettoni. Please go ahead, sir. Matt Pettoni - Vice President & Treasurer: Thanks, operator, and good morning, everyone. Welcome to Asbury Automotive Group's First Quarter 2016 Earnings Call. Today's call is being recorded and will be available for replay later today. The press release detailing Asbury's first quarter results was issued earlier this morning and is posted on our website at asburyauto.com. Participating with us today are Craig Monaghan, our President and Chief Executive Officer; David Hult, our Executive Vice President and Chief Operating Office and Keith Style, our Senior Vice President and Chief Financial Officer. At the conclusion of our remarks, we will open the call up for questions and I will be available later for any follow-up questions you might have. Before we begin, I must remind you that the discussion during the call today is likely to contain forward-looking statements. Forward-looking statements are statements other than those which are historical in nature. All forward-looking statements are subject to certain – to significant uncertainties and actual results may differ materially from those suggested by the speakers. For information regarding certain of the risks that may cause actual results to differ, please see our filings with the SEC from time to time including our Form 10-K for the year ended December 2015, any subsequently filed quarterly reports on Form 10-Q and our earnings release issued earlier today. We expressly disclaim any responsibility to update forward-looking statements. It is my pleasure to hand the call over to our CEO, Craig Monaghan. Craig? Craig T. Monaghan - President, Chief Executive Officer & Director: Good morning, everyone. This morning we announced record adjusted earnings per share of $1.36 for the first quarter, a 5% increase over last year. From an industry perspective, the quarter started out relatively robust. However, the SAAR for March fell off substantially to 16.6 million units. We believe that the industry performance in March was negatively impacted by Easter weekend which typically falls in April but occurred in March this year. Despite relatively flat retail sales and continued new vehicle margin pressure in the quarter, we are seeing some positive signs. Our used vehicle margins improved substantially versus the last few quarters as a result of operational improvements we made in the fourth quarter of 2015. Our F&I business continues to deliver excellent results. Our front end yield continued to improve sequentially and is up approximately $100 per vehicle from our low point in Q2 of last year. And finally, our operations team delivered exceptional parts and service customer pay gross profit growth of 11% with overall parts and service gross profit up 8%. As always, we are focused on becoming a stronger and more efficient company. We continue to work closely with our general managers to make sure that we are achieving our operational metrics and maximizing the potential of our stores. We have made great progress in the areas of used vehicles, F&I and parts and service, and we expect to deliver continued growth in these areas. From a capital allocation perspective, we repurchased $102 million of our common stock during the quarter. In April, we repurchased an additional $60 million of our stock bringing our year-to-date repurchases to approximately 10% of outstanding shares. Finally, I want to take a few minutes to discuss our progress with Q auto. As I'm sure you are aware, in February, we closed one of our three Q auto stores. This was our largest format store where we struggled to achieve profitability. We are pleased with the progress of our two remaining stores, which were both profitable for the quarter. Overall, our Q auto initiative broke even, even after giving consideration to the associated overhead. Based on the progress we have made and our continued expectation that we can achieve excellent returns on investment, we have decided to expand our Q auto operations. We will focus on increasing our market presence in the Greater Tampa area and expect to launch two additional small to mid-size format stores by the end of the summer. We look forward to sharing our progress with you in the future as we continue to expand the Q auto brand. In summary, we continue to execute on our two-part strategy, driving operational excellence and deploying capital to its highest returns. Now I'll turn the call over to Keith to bring us through our financial highlights. Keith? Keith R. Style - Chief Financial Officer & Senior Vice President: Thanks, Craig, and good morning, everyone. This morning we reported record first quarter adjusted EPS of $1.36. This represents a 5% increase from last year. Our results for the quarter were adjusted for a $3.4 million pre-tax real estate related charge, or $0.09 per diluted share. There were no adjustments to income for the first quarter of 2015. For the quarter, same store revenue increased 1% and same store gross profit increased 2%. Turning to SG&A, our ratio as a percentage of gross profit came in at 69.5%. As a company, we had difficulty adjusting our expense structure to the significant decline in March retail sales. And as a result, our SG&A ratio for the quarter increased 100 basis points from last year. There are a couple of expense items worth discussing as it relates to the quarter's performance. First, insurance expense was up $1 million due to the impact of a significant hailstorm in Texas. And second, employee benefits costs rose $500,000 due to increased enrollment in our employee health insurance plans. While we consider the hail damage to be an isolated event for the quarter, we expect that the increase in employee benefits costs will continue to impact our future SG&A expense. It goes without saying that competing against quarters with significantly higher new vehicle margins is difficult from an SG&A perspective. Taking a look at our sequential performance better demonstrates the progress we are making on our cost structure. With first quarter gross profit relatively flat with the fourth quarter of 2015, we reduced our SG&A ratio 100 basis points. We expect to further improve our expense ratio as we head into the summer selling season. In terms of capital deployment, CapEx totaled $10 million for the quarter. For 2016, we are planning for $80 million of CapEx, which includes $45 million associated with our core annual CapEx planned and $35 million of CapEx associated with acquisition renovations and construction which will enable us to move out of facilities that are currently under lease. In addition to executing on our CapEx plan, we also purchased property during the quarter totaling $7 million, the majority of which was previously leased. Going forward, we will continue seek opportunities to purchase real estate currently under lease and acquire properties in connection with future dealership relocations. Turning to share repurchases, during the quarter, we returned $102 million to our shareholders through share repurchase. With the additional $60 million of shares we repurchased in April, we now have 22.2 million shares outstanding and our current board authorization stands at $138 million. From a liquidity perspective, we ended the quarter with $4 million in cash, $93 million available in floor plan offset accounts, $100 million available on our used vehicle line and $165 million available on our revolving credit line. We ended the quarter with $946 million in outstanding debt. And as a result of our $200 million bond add-on in the fourth quarter and additional mortgages in 2015, our interest expense was up $3.1 million in the quarter. Our total leverage ratio stands at three times, which is at the higher end of our targeted range of two-and-a-half to three times. On a net basis, our leverage ratio was 2.4 times. And adjusting on a pro forma basis for our April share repurchase activity, our net leverage is closer to 2.6 times. Going forward, we are committed to remaining in our targeted range while maintaining flexibility to deploy capital on an opportunistic basis. Now I'll hand the call over to David to discuss our operational performance. David? David W. Hult - Chief Operating Officer & Executive Vice President: Thanks, Keith. Despite a challenging market, we increased total revenue 1%, grew total gross profit 2%, increased our total gross profit margin 20 basis points to 16.8% and delivered an adjusted operating margin of 4.7%. For the balance of my remarks, I would like to remind you that all comparisons to the first quarter will pertain to same store retail performance compared to the first quarter of 2015 unless otherwise noted. Our new vehicle unit sales were relatively flat with last year due to a softer than expected March. We continue to operate in a very competitive market with new vehicle margins down 70 basis points from last year. Specifically, a number of our domestic stores chased but failed to achieve very aggressive stair-step programs, resulting in significant declines in our domestic grosses. However, both our luxury and import new vehicle margins have continued to increase on a sequential basis from the fourth quarter of 2015. We ended the first quarter with 808 million of new vehicle inventory or an 81-day supply on a trailing 30-day basis. Our overall inventory levels were negatively impacted by a slower than expected March and having 16 million of stop sale vehicles in inventory. Looking forward, we believe we are well positioned for the spring and summer selling months. Turning to used vehicles, our unit sales were down 2% from last year as the quarter presented a few challenges, including a disrupted sales phase in March and many of our operators working through the stop sale issue which tied up approximately 10% of our inventory. Despite these challenges, with better used vehicle management, we were able to improve our gross per unit by $19 to $1,761, our highest level in over a year. And taking into consideration our improved wholesale performance, total used gross profit was up 2%. Our used vehicle day supply was 33 days, which is in the middle of our targeted range of 30 days to 35 days. This includes $14 million of stop sale inventory. Turning to F&I, our team continues to deliver strong results, delivering F&I per vehicle retail of $1,425, up $43 from last year. The lending environment remains favorable. Before I turn to parts and service, I'd like to summarize our front-end performance. During the quarter, we were able to offset a portion of our new vehicle margin decline with better execution on used vehicle grosses and improved performance in F&I. Despite new margins being down, our total front-end yield, which includes new, used and F&I gross profit, was down only $67. And more importantly on a sequential basis, our total front-end yield was up $20 from the fourth quarter of 2015. Our goal is to build on this momentum as we head into the summer selling season. Turning to parts and service, in the first quarter, we delivered parts and service revenue growth of 9% and gross profit growth of 8%. Our overall gross profit performance was driven by an 11% increase in customer pay, a 4% increase in reconditioning cost and a 7% increase in warranty. For the full year 2016, we believe we can continue to grow our parts and service gross profit in the mid-single digit range. Finally, we would like to express our appreciation to all of our teammates in the field and in our support center who continue to produce best-in-class performance in many areas; again, thank you. We'll now turn the call over to the operator and take your questions. Operator?

Our first question comes from Rick Nelson with Stephens. Please go ahead. Your line is open.

Thanks. Good morning. Craig T. Monaghan - President, Chief Executive Officer & Director: Good morning, Rick. Keith R. Style - Chief Financial Officer & Senior Vice President: Good morning.

Follow up on the inventory as it stands today where you're light, where you're heavy and how long you think it's going to take for the industry and Asbury to reposition the inventory. David W. Hult - Chief Operating Officer & Executive Vice President: Rick, this is David. I actually think we're in an overall good position even with the stop-sale vehicles. Since the last quarter, our ratios have improved as far as our car-truck mix and our total inventory, and we feel like we're pretty well positioned overall for the upcoming quarters.

And you made reference to a weak March; any commentary on April would be helpful. I know we've got five weekends here in April. Is that tracking stronger than March? Craig T. Monaghan - President, Chief Executive Officer & Director: Hey, Rick, it's Craig. Let me take a shot at that. David might want to follow-up and maybe a little more about our inventory levels. So we ended the quarter inventory 81 days, but I think we've got to remember that March was disrupted. I think that makes 81 days look a little higher than it might really be. Add to that we've got all the stop-sale inventory. That's probably another three or four days. So I think if you were to make the adjustments for that, our inventory levels effectively would be in the 70s and that's why we say that heading into the summer selling season that we don't feel like we're in that better shape. Of course, there are some brands and some models where we have far too much inventory, but broadly speaking, we think we're okay. April is – it started out – I would say it started off pretty well. I mean we all see the analyst forecasts in the industry talking about numbers in the mid-17 million feels a whole lot better than what we saw at March in the mid-16 millions and I'd add to that that not only do the sales feel a little better, the margins continue to be stable. So I think we feel like we're in pretty good shape. Don't know that that continues for the quarter, but right now we feel good about what we're seeing.

Okay. Thanks for that color, Craig. Finally if I could ask you about Q auto, how that performed in the quarter and as you kind of add two more units there; if you could provide some of the economics around that business, that would be helpful. Craig T. Monaghan - President, Chief Executive Officer & Director: Sure, Rick. Q auto we just feel strategically with all of our knowledge about used cars, the capital that we can bring to play, the marketing expertise we have in house, IT, what we can do with the websites, it just seems to be an initiative that makes a lot of sense and it's very much worth our time and effort to try to figure out that model. Just to give you a sense, in the large format store, it just didn't work. We couldn't generate enough volume to that store to get it to break even on a standalone basis. But the smaller volume stores seem to be working. In fact, the store that we've had open the longest, our store in Brandon, has been profitable now for four quarters. Our store in Fort Myers has been profitable for two quarters. And this quarter, those two stores made enough money to essentially completely offset the overhead that they're carrying. So that's what led us to break even. We're learning. We're learning that brand is far more important than we thought it was. We can make up for some of that lack of brand with effective Internet marketing. We think SEO is very important in that world, and we're spending a lot of our efforts on that. But we think putting a couple more stores in the Tampa market where we can get some – start to get some mass could prove to be very beneficial. We can bring those two additional stores online in that market without really spending a lot of additional money on advertising. One of the stores is essentially a satellite store that will come online. And we're very interested to see how that plays out. We think that will bring us some efficiencies. So we continue to be excited about it. Like Keith said, we think it's a model that we can generate an attractive ROI. We're still learning. We've still got a long ways to go, but we think as shareholders it's a good use of capital. And we're going to continue to see if we can make this successful.

All right. Thanks a lot, Craig. Good luck moving forward. Craig T. Monaghan - President, Chief Executive Officer & Director: Thank you, Rick.

And our next question comes from Irina Hodakovsky with KeyBanc. Please go ahead. Your line is open.

Actually, this is Brett Hoselton standing in for Irina. Good morning. Craig T. Monaghan - President, Chief Executive Officer & Director: Good.

So, let me just start off with the Q auto question and just kind of longer term – okay, so I'm thinking about CarMax and some of these skills that they've built up over time, their ability to call a car, their ability to manage inventory, et cetera, et cetera, obviously a lot of data there, a lot of databases, et cetera, et cetera. Do you think that you can develop a system and maybe a brand that is robust as CarMax's? Craig T. Monaghan - President, Chief Executive Officer & Director: Brett, we're not – CarMax has been at it well over 20 years. They're the 800-pound gorilla; we're not trying to duplicate CarMax. That's beyond us. I think we look at it a little differently, and we send almost 40,000 cars a year to auction. A large percent of those cars are retail cars that quite frankly end up on a CarMax lot or another competitor's lot. And so fundamentally the question we ask is with all the skills that we've got in house, isn't there some way that we can build a distribution channel and retain those profits for the Asbury shareholders? And we don't have to duplicate CarMax to do it. I think we just need to be smart. I would tell you that fundamentally there's – what we're learning is brand is important, but we think we can augment the lack of a brand with intelligent web-based approach to the market. And we're seeing some real success there. We've also learned that it's very important to restrict the amount of capital that we invest. We think the key to this model is to have a relatively small format where we don't tie up a lot of capital, but we move a lot of inventory through that store. And then the third critical leg of this thing is sourcing inventory. We source some of that inventory essentially from our core stores that we believe would have gone to auction otherwise. But we're also sourcing inventory in the local market in the way of trades. And we do get some cars from auction. But we like what we see. We feel like we're making very good progress. And we want to see how this Tampa market experiment that we're moving forward with plays out. If it works, we think it's a model that we could take to other markets. It's still in its infancy, but it's making progress.

And then the – along the lines of the airbag recall, and again, first, can you just quickly remind how much of your new car inventory was tied up? But then secondly and more broadly speaking, do you think it had a negative impact on your new and used vehicle sales? And is there any sense of how you might be able to quantify it if it actually did? And then also, I know I'm asking a multi-part question here, but also timing of parts, we are hearing mixed thoughts. Some dealers are telling us that it may be a year before they actually get parts or airbags for their Audis, for example. And then finally, have the OEMs stepped up and said, hey, we will actually compensate you in some way shape or form for the fact that we're tying up inventory here? David W. Hult - Chief Operating Officer & Executive Vice President: This is David. I'll hopefully remember all the points in there and take my best shot at it and others can jump in. If I miss something, please let me know, Brett. On the new car side, it's essentially a couple days supply for us that we have tied up. So it's not a significant amount. It's impacting certain brands more than others, Acura being one of them. And we feel like it's certainly hurt us a little bit in sales, tough to quantify how much. We really think March has more to do about the four weekends and Easter than anything else. And really April feels like March. It almost feels like the months have flipped. On the used car side, we do think it was more of an impact because that affected all of our stores as far as cars coming in and what they had on the ground. It did have an impact to our sales. It was 10% of our inventory. I'm not sure how to quantify what we would have sold had we not had it, but it's fair to say we did miss opportunities because of them. To touch on the inflators that are coming in, we have started to receive them in small quantities from Honda and Acura so far and not from any of the European brands. We're told later in this quarter we'll start to see more significant volume from both Honda and Acura with those inflators, so we think that'll pick up fairly quickly in the second quarter and it'll be a little bit slower roll for the Europeans. Mid to late summer is our best guess and they're going to service the States with the hot and humid weather first. So potentially it could certainly go into fourth quarter or first quarter next year depending upon where the stores' locations are.

Yes. And then finally just from an OEM standpoint, obviously this is a big issue. Have the OEM stepped up in some way shape or form and offered you floor plan assistance or slush funds, et cetera? David W. Hult - Chief Operating Officer & Executive Vice President: Correct. We're – really on all the stop-sale vehicles, we are being compensated. They all vary a little bit depending upon value, depending upon models, depending upon age, but there is compensation across the board on all stop-sale vehicles.

Okay. Thank you very much, gentlemen. Craig T. Monaghan - President, Chief Executive Officer & Director: Thanks, Brett.

And our next question comes from Bret Jordan with Jefferies. Please go ahead. Your line is open.

Good morning. I was a little slow on the sign in; did you say anything about the M&A environment, maybe what you're seeing out there as far as opportunities or is anything changing as sales have just slowed (24:52) for the independents? Craig T. Monaghan - President, Chief Executive Officer & Director: This is Craig. We're not seeing a lot of activity on the M&A side. I mean there's always a conversation happening somewhere, but it feels to us that with the prices of the publics where they are today and we'll speak specifically to ours and you see it by our action, we think we're far better off buying our own stores via share repurchase than we are going out and paying a significant premium for somebody else. We're buying our stock at a seven times EV-to-EBITDA multiple, and we hear about car stores coming to market with blue sky numbers that are bigger than that. So we're happy to buy our own stock when that situation happens.

Okay. Thanks. And one question is and this is obviously probably not a big issue for you guys given your exposure, but how do you think about the Tesla Model 3 as it comes to market and obviously 400,000-plus people have committed or hope to commit to that. Its impact longer term on maybe the 3 Series BMW and the Mercedes. Are you seeing, I guess, on a shorter term maybe less interest in those cars because people have committed to some car out on 18 month or 24 month future? Craig T. Monaghan - President, Chief Executive Officer & Director: Well, I'll start with the whole electric hybrid market. It's 3% of the total market. Still to this day, it's a very small portion of the market. Obviously, we don't sell Tesla. We don't feel at this point that it's really having any significant impact on our stores.

Right. But 400,000 people who might have been 3 Series buyers in that sort of entry luxury now going to that product is not changing any customer interest or traffic on your side? Craig T. Monaghan - President, Chief Executive Officer & Director: From a bigger perspective at any given point in time, there's going to be a hot model that's going to displace other models. I mean that's just the nature of the industry. But so the i8 is not as hot as – I mean, the i8 is a great example, came out red hot, and in a six-month period, it cooled down. Right now, it's the Tesla that seems to be red hot, but who knows where that will be in six months. And who knows what the next vehicle, one of the other major manufacturers might bring out that's going to go head-to-head with the Tesla. So, I just think there's so many unknowns out there that it's hard to say what's going to happen.

Okay, great. Thank you.

And we'll take our next question from Mike Levin with Deutsche Bank. Please go ahead. Your line is open.

Good morning, guys. I wanted to just dig into the customer pay growth little bit. The 11% number was bigger than I can kind of remember going back a couple of years. Was there anything in there in particular in the comp or any kind of one-offs around getting customers in who are on recall or anything like that we should kind of think about for Q1? David W. Hult - Chief Operating Officer & Executive Vice President: No. This is David. I would just tell you, Mike, since the first quarter of last year, as a team, we've been very focused on fixed operations and customer pay. And I think we are just starting to see the benefits of the plan that's been put in place.

Got it. Craig T. Monaghan - President, Chief Executive Officer & Director: Hey, Mike, I just got to hop in here and say the work that David's done and the team have done has been – it's just done a phenomenal job. What you don't see is the work that they've also done on the collision side where the growth is even better than the 11%.

Got it. Okay. You mentioned the domestic stair steps in Q1 and saw gross profit decline similar to Q4. How should we think about what brings stabilization to the new margins going forward, and how does that progress over the next couple quarters? David W. Hult - Chief Operating Officer & Executive Vice President: This is David. I'll take a shot at that. It changes month by month. So it's kind of tough to predict that. I'll tell you where we are in April. We feel really good and we see April as positive and up from a margin perspective on domestic at this point. That can change in any given month depending upon what the targets are that are put out there in front of us.

Understood. And then I guess just lastly kind of looking at the current demand and competitive environment, are you guys comfortable being at the high end of your leverage range or you're thinking that something closer to the 2.5 is maybe a little bit better going forward? Keith R. Style - Chief Financial Officer & Senior Vice President: Hey, Mike. This is Keith. We've always said 2.5 times to three times is where we want to be and we've worked over the last year and half to get there. Like I said, with the share repurchase in April, we're at about 2.6. Well, we're pretty comfortable at that level and we're just going to remain flexible and opportunistic going forward.

Appreciate it, guys. Thanks. Craig T. Monaghan - President, Chief Executive Officer & Director: Thank you.

And our next question comes from Tony Cristello with BB&T Capital Markets. Please go ahead. Your line is open. Anthony F. Cristello - BB&T Capital Markets: Hi. Thank you. Good morning. First question I have is sort of a bigger picture and it has to do with hearing more and more about the leasing of CPO and used vehicles, and I just wanted to get your understanding. I imagine it would be good from your standpoint. How does that over the long-term potentially influence new vehicle sales and then how does that influence just the general thought of how you approach the business longer term as well if that is adopted by most of the manufacturers down the road? David W. Hult - Chief Operating Officer & Executive Vice President: Yes. This is David. We've had – we've seen this before with Toyota and Lexus. Any time you can have an alternative and financing something and give someone the opportunity for lower payments, that's obviously a positive thing. It's tough to quantify down the road what the impact is on new. But traditionally speaking these cars coming on lease for the folks that do end up leasing these vehicles, we view them no differently than any other premium customer. We see them as a good parts and service customer, good finance customer and clearly good potential future customer. Whether that translates back into a new vehicle or used, I'm not sure at this point. Anthony F. Cristello - BB&T Capital Markets: Do you – when you look then at the opportunity for service and we talked – I heard commentary here on the customer pay side and I'm assuming that you're going to see more business as these recalls continue to be repaired. How do you view the service opportunity with Q auto and isolating that as a used-only knowing that a lot of those customers may not identify going back to the dealer for service, but how do you approach that and try to capture that market share as well? Craig T. Monaghan - President, Chief Executive Officer & Director: At this point, the service business within Q is immaterial. We're starting to – okay, we've got to step back. Q is in its infancy. We're still in the process of developing the brand. We are starting to see repeat customers and referrals, but that's primarily on the sales side. We are starting to see some repeat business in the service drive there. But quite honestly, most of the work we do in the service drive at Q is essentially reconditioning. We think that can come over time. The stores that we put in place have the capacity to do service, but we're way too early in the game for that to be a material part of that business model. Anthony F. Cristello - BB&T Capital Markets: So if you offer – do you offer a warranty product, and is that warranty then serviced at that location? Or are you sending those customers to your other dealerships to have that type of warranty work performed? Craig T. Monaghan - President, Chief Executive Officer & Director: No. We do offer a warranty product, and it can be performed at those locations. Anthony F. Cristello - BB&T Capital Markets: Okay, great. And then one last question: when you look at your ability to adjust and you talked about April doing better, should we think about the SG&A as a percent of gross to then come back from the levels we saw in the prior quarter? Or are there still some inefficiencies related to sales and inventory that will just sort of prolong until you can get a sell-through of all those stop sales that are sort of pent up? Keith R. Style - Chief Financial Officer & Senior Vice President: Hey, Tony. This is Keith. I'll start and maybe David might want to jump in. But we've always been a very cost-conscious company. You can see that in our ratios compared to our peers. We're not going to stop that process. And it's a constant process of measuring and monitoring productivity and setting our expectations. That goes from a store base level and also goes from a shared service perspective as well. I think everybody knows we've had our shared services in place now for about a year. And we're seeing some incremental efficiencies as we go forward with those teams. There's still more technology we could deploy to improve our processes, support of our stores and also improve our efficiencies in that area as well. David W. Hult - Chief Operating Officer & Executive Vice President: The only thing I would add to that is Craig has created a great culture with the operators in the stores, and they're fantastic at what they do. And they're constantly looking for ways to improve both on the production side and on the expense side. So they're always ahead of it and the culture is out there to constantly get better at what we do. So they're focused on it. Anthony F. Cristello - BB&T Capital Markets: Very helpful. Thank you for your time. Craig T. Monaghan - President, Chief Executive Officer & Director: Thank you.

And our next question comes from Michael Montani with Evercore ISI. Please go ahead. Your line is open.

Hey. Good morning. I just wanted to ask if I could on the improvement that we've seen in GPUs particularly on the used side. I think there was a comment earlier that there were some changes that may have been made operationally in the fourth quarter of 2015 and I just wanted to try and understand a little bit better how sustainable is this level of improvement, and is it wholesale? Is it reconditioning? Just if you could give some added color on what's changed there would be helpful. David W. Hult - Chief Operating Officer & Executive Vice President: This is David. We haven't changed anything as far as our internal perspective in how we handle that or how we come to market with our vehicles. It's just been really more of a focus internally that growing our margin and we may have suffered a few sales or lack of sales from that trying to find the right balance, but again it speaks to the talent that we have in the marketplace and in the stores. They're the ones that are producing these fantastic results and clearly they should get all the credit. Our key now is to keep that momentum on the GPU that we have and find a way to increase volume at the same time. But with that, we'll get the finance, we'll get the internal parts and service business and we think we're well positioned to move forward.

Okay, got it. And then if I could just follow-up, David, you mentioned some perhaps encouraging signs. It's still early but in April from the domestic GPU front on new, is there anything you could add in terms of luxury as well as imports just because so I was a little surprised to not see further improvement on the import side given some of the feedback has been pretty positive on RAV 4 and some of the crossover product there. David W. Hult - Chief Operating Officer & Executive Vice President: Some of our import lines did increase quarter-over-quarter. I understand overall you're seeing a different situation than that, but again, I think the domestic has improved and will improve year-over-year in April for sure. We are seeing positive signs when we compare April to last year to April of this year from margins across the board both in luxury and in import as well. We think it's a timing issue too a little bit with luxury. There's been a lot of lower entry models that have come out with less margins involved and later this year coming into the second, third quarters, there'll be newer models coming out with a little bit more margin, so we see some opportunity.

Thank you.

And our next question comes from James Albertine with Stifel. Please go ahead. Your line is open. James J. Albertine, Jr. - Stifel, Nicolaus & Co., Inc.: Great. Thanks and good morning, and apologies in advance for the background noise here. Hopefully you can hear me okay. Wanted to ask on the Q auto side if I may very quickly, what can you share if anything at this point on the return on invested capital metrics of that business. Given that you have made some comments that smaller stores have been profitable for the last few quarters, just maybe in context of your ROIC on the traditional auto retail business? Craig T. Monaghan - President, Chief Executive Officer & Director: We believe our target is to get to returns that are greater than what we can get if we buy a franchise in the marketplace. We're not there yet. We know from watching what some of the other competitors do in the space, it can take up to four years for a store to reach maturity. We're trying to hold ourselves to a higher standard. We'd like to get to double digit returns sometime in the second to third year, and that's what we're targeting. We're not there yet. But like I said earlier, we're making progress and think this is something that's worth seriously pursuing. Keith R. Style - Chief Financial Officer & Senior Vice President: Hey, Jamie; this is Keith. Just to give you a context of these two stores, if you look at these two new stores, we're going to invest a total of $10 million including working capital investment in those two stores. So really once again, as Craig mentioned earlier, minimizing the amount of investment in these stores and then pushing the volume, and we think we can get to the ROIs we expect like Craig said within a couple of years. James J. Albertine, Jr. - Stifel, Nicolaus & Co., Inc.: Okay, great. And just wanted to clarify, you made some comments, Craig, I believe, in your prepared remarks as it relates to the importance of brand, some SEO, I believe, investments. I just want to know should we be modeling in incremental SG&A in the coming quarters as it relates to that, not only the existing Q autos, but also the new stores you've got planned? Craig T. Monaghan - President, Chief Executive Officer & Director: I don't think you need to do that. The stores – like we said, the stores and the associated overhead was a push, was a break even in the first quarter. There will be some incremental cost as these two stores come on, but we think the two existing stores will continue to make progress. I think for modeling purposes, you can almost ignore it and just give it some time to continue to see how this plays out. James J. Albertine, Jr. - Stifel, Nicolaus & Co., Inc.: Okay. Thank you for that. And again your patience for one more question if I may sneak one in: we have received a lot more questions in the last few months on recession sort of proofing our models or at least sensitizing to a potential recession, not necessarily believing that one exists or is looming. But one of the things that we've had a trickier time understanding is you've been making a lot of improvements on the F&I side from an execution perspective. If we did see a reduction in demand for new vehicle sales, hypothetically, how do you think F&I would trend over the course of that downturn? Because it's hard to look at history and use it as a judge given that you're a much improved company since the last time we went through this. Keith R. Style - Chief Financial Officer & Senior Vice President: Sure, Jamie. This is Keith. I think keeping in mind F&I, one-third is financing and two-thirds is related to product sales. I think what it comes down to in a recessionary environment is the customer's ability to pay, and so that's going to come down to employment levels, the overall economy, how much money people have in their pockets and what they're willing to afford as far as monthly payment, and it's a monthly payment aspect that potentially could impact our ability to push warranty sales volumes. David W. Hult - Chief Operating Officer & Executive Vice President: The only thing I would add to that in looking back to the last recession that was very steep and clearly we don't see anything like that coming anytime soon, the consumer's ability was still there to pay. It really comes down to the financial institutions and their ability to lend, and it certainly appears that they're in much better shape now than they were back then. So I don't think the impact from an F&I per vehicle standpoint would be significant. James J. Albertine, Jr. - Stifel, Nicolaus & Co., Inc.: That's all extremely helpful color and maybe, Keith, you and I can follow up on some more details off-line, but thank you again, gentlemen, for taking the questions. Craig T. Monaghan - President, Chief Executive Officer & Director: Thank you.

And we'll go next to John Murphy with Bank of America. Please go ahead. Your line is open.

Good morning. Just to – a first question, I mean, the discussion around the lost Easter weekend or the sort of the placement of the Easter weekend in the first quarter as opposed to the second quarter has been largely isolated to the new vehicles business. But I was curious if you could just maybe talk about what impact you thought it might have had on the used vehicles business as well as losing a weekend on service bays and parts and service. Keith R. Style - Chief Financial Officer & Senior Vice President: John, I haven't honestly calculated down to that point in time. I can tell you traditionally what we normally do on an average weekend compared to that particular weekend. Our sales were down almost 40% for that particular weekend. On the fixed operation side, there wasn't much of an impact at all because of Easter.

Got you. Okay. And then just second question, Craig, I mean, the capital allocation here seems to have gotten obviously a lot more aggressive on buybacks and there was a great opportunity and probably still is in your stock. I mean obviously you're bumping up against sort of your range on leverage. I mean would you consider given where the stock is right now getting even more aggressive and potentially going to the high end of the range on your leverage on targets and could even go above that? Craig T. Monaghan - President, Chief Executive Officer & Director: John, I think Keith said it well. We've committed to this two-and-a-half to three times leverage number. We look at them on a net basis, so including any excess cash we might have on the balance sheet or floor plan or unutilized used vehicle line and like Keith mentioned we're at 2.6. I think in the market that we're in today where there's still a lot of uncertainty. I mean we – I would just go back to the first quarter and I would tell you that January started weak and then we saw a very strong February. We almost felt like we were off to the races in February, and then March got sloppy again. I think in this environment we've got to maintain our flexibility. And leverage, net leverage at a 2.6 number I think is a good place to be. We're comfortable there. We've got a lot of dry powder. We see great opportunities, whether that be to buy our own stock or we see an opportunity to buy an attractive – to pursue attractive acquisition, we've got the flexibility to go after it. And so, I'd come back to what Keith was saying earlier. I think we're in a good spot, and let's just see how things play out from here.

Okay, great. Thank you very much. Craig T. Monaghan - President, Chief Executive Officer & Director: Sure thing.

And our next question comes from Paresh Jain with Morgan Stanley. Please go ahead. Your line is open. Paresh B. Jain - Morgan Stanley & Co. LLC: Good morning, everyone. Some of my questions, they have been answered. But a broader industry level question, are you seeing OEMs, particularly luxury OEMs, starting to adjust production schedules in any way or even adjust their production mix? David W. Hult - Chief Operating Officer & Executive Vice President: We've definitely seen and felt production mix from the last quarter. We've improved 4% on the truck side and decreased our car side 4%. So that was a nice shift for us. And we'll certainly feel the benefit of that. From a production standpoint, it doesn't feel like the foot has been taken off at all. We're not seeing that with any of the OEMs. Paresh B. Jain - Morgan Stanley & Co. LLC: That's good color. Then a follow-up on Q auto, clearly a preference for smaller format stores, however, in-store inventory selection is perhaps what makes the larger store format work for one of your bigger peers in this space. Could the smaller format capture share gains in the long run? Craig T. Monaghan - President, Chief Executive Officer & Director: I mean that's a fair argument. But when we concentrate stores in a market and we can quickly move inventory between stores, I think that becomes less of a concern. It gets back to why we want to concentrate these stores in a given market so we can do that. And then when we're online, we can offer all the inventory across all the stores within that marketplace to the consumer. So even though the store's format might be small, we can show them a much broader breadth of inventory. Paresh B. Jain - Morgan Stanley & Co. LLC: Got it. Thank you so much.

And our next question comes from David Whiston with Morningstar. Please go ahead. Your line is open.

Thanks. Good morning. Continuing with Q auto, Craig, you had mentioned earlier that there's still some things to learn. I was just curious if you could point out some key strategic areas. And somewhat related is on the large store versus small store format, if down the road Q auto had a much bigger brand equity in a market or even within a whole region of the country, is a larger source, something you're willing to revisit at that time. Craig T. Monaghan - President, Chief Executive Officer & Director: I don't think – well, I'll go back to my days at AutoNation, where we had 20-acre used vehicle mega stores. Those aren't going to work. They didn't work for AutoNation. I don't think they're going to work for anybody in this marketplace, so you will never see us build anything like that. When we say small or medium sized format, one of the things that we'll be experimenting within this Tampa market is one of these stores will actuarially be a satellite store. It will not have any onsite ability to do parts and service work. There is a moderate sized or medium sized store within 15 miles, 18 miles where we will do that work. So even though that's a moderate sized store, it's got a big enough parts – it's got enough base sitting behind it that it can do the work to take care of Brandon and it can do the work to take care of the satellite store and we think that could be a very attractive model for us. We've got to minimize the capital that we tie up and we've got to utilize those service space. Ideally you'd be utilizing this 7x24, but if we can drive that kind of productivity, I think these things can work and that's what we're trying to do.

Okay, thanks. And over to domestic gross profit per unit, I think it was David in your prepared remarks, you were talking about some sort of stair-step issue and I just didn't quite catch that. Could you repeat that real fast for me? David W. Hult - Chief Operating Officer & Executive Vice President: Sure. With all our domestics, we have our targets that we have to hit and the substantial money tied on a per car basis, up to $1,000 a car. When those targets are set at a store level, we chase those sales from the beginning of the month. We hope that we catch it by the end of the month to have that money wash back through. When we do not hit the targets and don't receive that money, there is a substantial impact. We had a lot of stores that just didn't get there in the first quarter. But again, April, it's the opposite scenario at this point. Craig T. Monaghan - President, Chief Executive Officer & Director: So, David, I could add some color if I could. So, you're running a large domestic store, you've got $1,000 a car. That's retro back to the first car that you sold. So you take off on the month and you're trying to drive volume and you're taking lower front end grosses, because it's all about volume and you think you get an extra $1,000 at the end of the month, it will all work out. When you don't hit the stair-step, you are punished twice. One, you didn't get the $1,000 stair-step and two, you spent the entire month giving, not giving away, but selling cars at price points below what you might have done otherwise. So, it's brutal and that's what you saw in our domestic PVRs.

Okay. And can you elaborate on why you weren't able to hit the volume? Craig T. Monaghan - President, Chief Executive Officer & Director: They were tough targets, and we just didn't get there.

Okay. Thank you. Craig T. Monaghan - President, Chief Executive Officer & Director: That wraps up our conversation for today. We appreciate all the questions and the conversation and look forward to getting again with you at the end of next quarter. Have a great day.