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…

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…

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…

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.