Welcome to AutoNation's Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the presentation we will conduct a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now, I will turn the call over to Andrew Wamser, Treasurer and Vice President of Finance for AutoNation. Please go ahead.

Thank you, operator, and good morning, and welcome to AutoNation's third quarter 2017 conference call and webcast. Leading our call today will be Mike Jackson, our Chairman, CEO and President; Lance Iserman, our EVP of Sales and Chief Operating Officer; Scott Arnold, our EVP of Customer Care and Brand Extensions; and Cheryl Miller, our Chief Financial Officer. Following their remarks, we will open up the call for questions. Robert Quartaro and I will also be available by phone following the call to address any additional questions that you may have. Before we begin, let me read our brief statement regarding forward-looking comments. Certain statements and information on this call constitute forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks which may cause the actual results or performance to differ materially from such forward-looking statements. Additional discussions of factors that could cause actual results to differ materially are contained in our press release issued earlier today and our SEC filings, including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. And now, I'll turn the call over to AutoNation's Chairman, CEO and President, Mike Jackson.

Good morning, and thank you for joining us. Third quarter of 2017 was unprecedented with two major hurricanes disrupting our business in two of our largest states by revenue, Texas and Florida. I would like to take this moment to thank the entire AutoNation family for coming to the aid of their fellow associates before and after the hurricanes. We saw an outpouring of support for all our associates, and we also made sure that every associate in the impacted areas were paid during these disruptions. Today, we announced our multi-year strategic partnership with Waymo, Alphabet's self-driving technology company. AutoNation's franchised stores, AutoNation USA stores and other AutoNation locations will provide strategic capabilities to maximize Waymo self-driving vehicles' lifetime across the United States, AutoNation service and maintenance's long-term focus, leveraging our technical and cosmetic expertise with the goal of maximizing the useful life and appearance of Waymo's vehicles. Our partnership begins in California and Arizona and will expand with Waymo as they add additional markets and brands. Our joint mission is to keep people safe whenever they are in a vehicle. Turning to our third quarter results, today reported EPS of continuing operations of $1.00. Same-store gross profit for the quarter totaled $832 million compared to $822 million in the same period a year ago. Third quarter 2017 same-store used vehicle gross profit was up 9% compared to third quarter 2016, and same-store retail used vehicle unit sales were up 7% compared to the same period last year. As we discussed in the second quarter, we experienced challenges with our centralized One Price strategy. We had made key improvements, as forecasted in the third quarter, driven by the AutoNation Pre-Owned 360 (03:55), our internal framework, which includes technology, processes and procedures that govern our pre-owned business. As a result, our same-store used vehicle gross profit per vehicle retail increased $160 per car compared to the second quarter of 2017. And we expect continued improvement in our used vehicle gross profit sequentially in the fourth quarter. AutoNation's total retail vehicle unit sales for the quarter were up 1%. On a same-store basis, retail vehicle unit sales were up 2%. The hurricanes caused significant disruptions of up to a week in some stores during the quarter. In the third quarter of 2016, we shared with you our next phase of our customer-focused comprehensive brand extension strategy for both retail vehicle sales and customer care. And we continue to expect they earn approximately $100 million of incremental gross profit from our parts initiatives in 2018. Including this benefit, we expect to generate high single-digit customer care gross profit growth in 2018 on a same-store sales basis. Pace will start slower and accelerate throughout the year. I now turn over to our Chief Financial Officer, Cheryl.

Thank you, Mike, and good morning, ladies and gentlemen. During the third quarter, we repurchased 9.2 million shares representing over 9% of our float for $400 million at an average price of $43.28 per share. AutoNation has approximately $114 million of remaining board authorization for share repurchase. As of October 31, there were approximately 91 million shares outstanding. This does not include the dilutive impacts of stock awards. For the third quarter, we reported net income from continuing operations of $98 million or $1 per share versus net income of $108 million or $1.05 per share during the third quarter of 2016, a 5% decrease on a per share basis. We estimate that Hurricane Irma negatively impacted net income from continuing operations for the third quarter of 2017 by approximately $8 million or $0.08 per share. In the third quarter, revenue declined $135 million or 2% compared to the prior year, and gross profit grew $10 million or 1%. SG&A as a percentage of gross profit was 71.8% for the quarter, which represents 110-basis-point increase compared to the year ago period due to pressure on gross profit from lower vehicle margins and new unit sales, as well as investments related to our brand extension strategy. We currently expect fourth quarter SG&A to gross to be in line with our year-to-date average of approximately 73%. At the end of September, we had $2.9 billion of non-vehicle debt, an increase of $290 million compared to June 30, 2017. Our non-vehicle debt fixed to floating mix was approximately 62% fixed and 38% floating. In October, we amended our $1.8 billion unsecured credit agreement by extending our maturity by three years to 2022 and adding in additional covenant flexibility for year one. We continue to maintain an excellent group of supportive banking and captive…

Thank you, Cheryl, and good morning. My comments today will be on a same-store basis as compared to the prior year unless otherwise noted. Gross profit for variable operations was $464 million, up 1%. Variable gross was $3,243 on a per vehicle retail basis compared to $3,304 in the same period last year. Same-store retail unit volumes were up 2% compared to the third quarter last year. Used vehicle gross profit was $83 million, up 9%, compared to the third quarter of 2016. Used vehicle retail was 58,000 units, up 7%. Used vehicle gross profit was $1,437 on a per vehicle retail basis, which was an increase of $160 compared to the second quarter of 2017. As Mike mentioned, the sequential increase in our used vehicle gross profit per vehicle retail was driven by our internal framework AutoNation Pre-Owned 360. AutoNation Pre-owned 360 (09:31) includes our technology, processes and procedures for One Price, We'll Buy Your Car, training, systems and reporting. We have made progress toward finding the right balance between margin and volume and we will continue to fine-tune our strategy moving forward. New vehicle gross profit was $142 million, down 9%. We retailed 85,200 new vehicles, a decrease of 1%. New vehicle gross profit was $1,669 on a per vehicle retail basis, down 8%, primarily driven by domestic margin pressure. Customer financial services total gross profit was $239 million, up 6%. We set an all-time record in customer financial services gross profit on a per vehicle retail basis of $1,668, an increase of $61 or 4%. The AutoNation Vehicle Protection Plan, or VPP, was the first AutoNation branded product rolled out. We continue to see the benefit of this branded product as well as opportunities in our overall customer financial services. I'll now turn the call over to Scott Arnold, our Executive Vice President of Customer Care and Brand Extensions.

Thanks, Lance, and good morning, everyone. My comments today will be on a same-store basis and compared to same period a year ago unless otherwise stated. Customer care gross profit for the quarter was $362 million, up 1.5%, compared to $357 million in Q3 2016. We estimate that the disruptions, closures and loss selling days due to both hurricanes negatively impacted customer care gross profit by approximately $9 million, or 2.5%, as compared to the third quarter of 2016. Customer pay gross was $151 million, up 5% year-over-year. Warranty gross was $78 million which was flat year-over-year and collision gross was $30 million, down 3%. As noted before, we estimate that each of these were negatively impacted by the hurricanes. I'd like to provide a brief update on our customer care brand extensions. Since October of 2016, we have built or acquired six additional AutoNation collision centers. This brings our collision center network count to 73 collision centers from coast-to-coast. We expect to open two additional collision centers by the end of this quarter and we have signed an agreement to acquire three additional collision centers which we expect will close by year-end. AutoNation is among the largest collision providers in the country. Including our parts initiative, which we anticipate will contribute approximately $100 million in incremental gross profit next year, we expect to generate high single-digit same-store gross profit growth in customer care in 2018. The pace will start slower and will accelerate throughout the year. I'll now turn the call back to Mike Jackson, our Chairman, Chief Executive Officer and President.

Thanks, Scott. It's really an exciting time at AutoNation. Our brand extensions have become an integral part of AutoNation sales and service. Our strategic partnership with Waymo along with our brand, our expertise and innovation have uniquely positioned us to lead our industry towards the future of mobility and enhance the car buying experience and ownership experience for our customers. We're now delighted to take your questions.

Thank you. We will now begin the question-and-answer session. Our first question comes from Brian Sponheimer from Gabelli. Your line is open. Brian C. Sponheimer - Gabelli & Co.: Hi. Good morning.

Good morning.

Good morning, Brian. Brian C. Sponheimer - Gabelli & Co.: Going to the Waymo partnership, can you talk about just the genesis of how talks began and really where this all started?

So I visited Waymo six years ago when it was GoogleX. I was probably one of the first industry people in the door, and had – spent a day debating and discussing their approach to autonomous and had one of their earliest vehicles going down the 101. And I've been going there ever since on – every year or 18 months, and I developed a deep admiration for the rigor and discipline of thought and principle; they had the whole approach to autonomy where you have to under-promise and over-deliver rather than over-promise and under-deliver when it comes to autonomy and safety. And in there, there was an epiphany which I confirmed from my own experience and my understanding of customers that this idea that you can have an autonomous system that someone – the driver has to supervise and be prepared to intervene at any moment doesn't really work. It's almost against human nature that you have to pay strict attention and be prepared to intervene. So they said they don't need 99.9% perfection, they need 100% perfection, which means you need redundancy, duplication and sophistication. So then, my friend John Krafcik became CEO and he and I had a running discussion that, obviously, these are some of the most sophisticated vehicles on the road and for – to realize the value of the investment in a vehicle, they need to perform at a high level for literally hundreds of thousands of miles. And we both agreed that AutoNation was uniquely positioned to provide those capabilities, both with our scale and our expertise. Also, with – now, you combine our Parts initiative with our discussions with Waymo, of course, it had to be done cost-effectively and this was a – with this in mind was another reason for the brand extension particularly in Parts. So you put that together and you now have a strategic partnership to realize this vision of a shared vehicle that is operating autonomously, but at the highest levels of safety, and we think we have significant value. And I believe Waymo is the leader in this ambition to have a shared autonomous vehicle operate on a commercial basis with customers in the marketplace. So it's the beginning of the journey. As they add markets and as they add brands, because we can manage any brand, we've the technical expertise to do it, we will grow together. Brian C. Sponheimer - Gabelli & Co.: That's incredibly exciting. I guess just more about the current environment, your thoughts on both new and used gross inventory and the balance between cars, SUVs, crossovers and trucks.

Things are much better than earlier in the year; the pace is pretty good. Some of that is hurricanes coming and going. But we've had two good months in a row where from an industry point of view, we see that for October reflected in our sales, also the pace is pretty good. And so, I think the year will end high 16 million if not 17 million units, and I expect much the same next year. The mix is better, as far as what the inventory is and the inventory is more in line. The manufacturers did a pretty good job in model year changeover. Now, my view still is that the new vehicle business as, far as a humble retailer trying to make money at it, has its challenges. It's very competitive out there and hence I think the validity of our strategy of brand extension will become more and more compelling as the results roll in. So I'm very pleased in the pre-owned market that we are in that magic place where we have a consumer offer that they've embraced, so our volume went up 6%, 7% and sequentially, on an operating basis, with our new 360 (18:32) process, we're able to sequentially improve gross profit. Scott's talked about the brand extension. I wouldn't pay too much attention to the customer care figures in the third quarter. Obviously, when you close your – well, I don't know, Cheryl, how many dealerships did we have closed at the peak (18:52)? 125? Something like that. You can't make up that lost time in customer care, because it's all based on hours term, but we said we see high single-digits as a benefit of our brand extension in customer care and collision next year. Brian C. Sponheimer - Gabelli & Co.: Outstanding. Thank you very much, and best wishes for (19:19).

Thank you.

Our next question is from Bret Jordan from Jefferies. Your line is open.

Hey. Good morning, guys.

Morning.

On the Waymo, is there much of an investment as far as tooling or talent? Obviously, LiDAR is not something most dealerships have a whole lot of exposure to right now. Or is this really sort of are they going to provide you with sort of the backend, the help on technology and tooling to get you up to speed in this category?

So we have tremendous technical expertise and we have the ability to learn any new systems quickly. And so, we are willing to go through an investment period with Waymo to set the stage for future growth. Obviously, they're in an investment period. We'll be in an investment period. And this is my call. I think Waymo is the leader. I think they have absolutely the right concept of how to do this. They have the discipline to do it the right way for the long-term and I think that just in the partnership they'll grow and we will determine exactly who does what as the relationship develops.

Our next question is coming from David Lim of Wells Fargo. Your line is open.

Hi. Good morning, everyone. Just the question I have is can you talk about the acceleration that you saw in September related to new and used vehicles? And what you're seeing so far at the early part of Q4 given the replacement demand and the deferred demand stemming from the hurricanes?

Lance, could you take that, please?

Sure. So we saw, in September, we saw significant improvement in the Texas market, Houston in particular. I mean that was a market that was under extreme pressure prior to the hurricanes. So we saw very good rebound with that. And I think that that will probably wane as the fourth quarter moves forward. So I don't think we'll see any of that in the next year, but we still see strong volume coming out of Houston in Texas in Q4. And for Florida, we didn't have the bounce back in September but we're certainly seeing some of it now in October, not to the extent that we're seeing in Texas, but certainly strong recovery.

Are you seeing like an abnormal amount of acceleration in used vehicles? I guess what I'm trying to get at here is the people who are trying to replace their vehicles from a used vehicle standpoint. They probably haven't gotten their insurance checks until as of late. So are you seeing kind of a more of a bump up in October versus, let's say, September?

No.

Okay.

We saw strong used vehicle demand immediately after Harvey, probably slightly better than our new vehicle demand in Texas.

Got you. Great. Thank you so much.

Our next question is from Chris Bottiglieri from Wolfe Research. Your line is open.

Hi. Thank you for taking the question. I want to talk about your portfolio optimization efforts. Looks like you're down about 10 dealerships year-over-year. I think your original goal was $250 million proceeds. By our math, you're almost there. So wanted to get a sense kind of how you think about that. Are you pruning bottom performers? Is it geography based, brand based? And then, as it relates to Waymo, think about national scale, I know we're probably a decade away, but – or depending how the rollout is, but how do you think about your store growth in the future, like, in relation to this Waymo initiative?

Chris, on your first question regarding the divestitures, as we talked about, we will self-select assets and redeploy that into the brand extension initiative. We generated proceeds of about $250 million from 2015 to 2016. We talked about the additional $250 million in divestitures from 2017 to 2018. We're partway through that, so just on the quarter, we continued to do some of those select dispositions. I'll observe that it's not only one specific geography. What we do is we look at the lower performing parts of our portfolio, sometimes, with respect to demographics that have changed and we look to redeploy that into assets that have a higher return opportunity, namely, in this case, the brand extension, particularly on the Parts side of the house.

So on Waymo, and I don't want to speak for them, but I'll just see what I observed. They've obviously launched operations in sunny climates. I think that makes eminent sense since obviously inclement climate raises complicating issues that need further work. AutoNation's footprint is extremely strong in a sunbelt climate, all the way from Florida to California. So I think we're well-positioned or well into the foreseeable future, to grow together. Obviously, we will have internal discussions with Waymo as to what their launch plans are on various markets. That will be confidential information, not for me to say, but we will be prepared whenever they come to a market to provide the care that those vehicles will need in those markets. We are committed for this partnership long-term, to make it win-win, good for them, good for us. I think we bring unique capabilities, I think they're a unique leader. I think this is something that we'll develop, but for the foreseeable future, the issue you raised, in my observed opinion, is not an issue.

Got you. Okay. Thank you. And then, just well, one unrelated one, the GPU is obviously very strong sequentially. If I heard you right, you expect them to further improve next quarter. I guess one, like, how far are you along in developing and implementing the pricing algorithms for One Price? Do you think we're approaching kind of like the new run rate? I mean it's bigger picture, what you have is fully implemented, does this reduce the volatility of your GPUs and how do we think about that?

Yes. We're looking to reduce the volatility around gross profit per unit. We endeavor to see more incremental improvement sequentially in the fourth quarter from the third quarter. That is not by raising prices, but it's both what it costs us to acquire vehicles and what it costs us to recondition vehicles. And again, this then goes back to the Parts initiative where we're now able to recondition vehicles at a lower cost point. So that's a win for our – we're using our scale. It's a win for our customers and a win for the company. So I think all of that's doable and we see our ambition is another step in the fourth quarter, and then, we'll see where we're at.

Got you. Very helpful. Thank you.

Our next question comes from James Albertine from Consumer Edge. Your line is open.

Very good. Thank you, and good morning to everyone.

Morning, Jamie.

Good morning.

Just a point of clarification, apologies if I missed this in your prepared remarks or in the release. I didn't see it in there. Is there an element of exclusivity with respect to your Waymo partnership? I recall that others have perhaps announced similar partnerships, but I want to understand how this might be differentiated from those that we'd heard in the past.

No, there's no exclusivity. We have to earn our way, every step of the way. But I'm optimistic. If I look at the win-win benefits on both sides and unique capabilities that we bring and Waymo's unique leadership position, I think this is a partnership that will work. But it will all have to be earned. You have to earn your way in life. I did not ask for exclusivity nor was it offered.

Understood, understood. And if I may maybe shift to the F&I segment. Very, very strong, it seems, results again in the third quarter. You've been above that $1,600 PVR level for some time. Just want to understand sort of the next phase, as you see F&I from here, given there is a little bit of, I think, undergoing a mix shift to used from new and just wanted to kind of see what you are gleaning from investor appetite for some of the products, particularly on the I side.

Yes, I'll have Lance answer that, but in principle, this is a brand extension. We use our scale to work with various partners to put together what we think is a compelling offering for our customers. And then, we put our brand on it which the customers trust, and we have a very high – with that formula, we have a very high adoption rate. So Lance, now, you can talk about the state of the business to-date.

So I think if you look at it from perspective of our growth, we still have underperforming stores that we concentrate on, our quartile four stores that we still have a lot of runway. If we get those up to the average, we have more room to continue to grow there. So that's how I sort of look at it. Performing at a very high level, our vehicle service contract is well received and we're doing well what that in penetration.

Understood. Thank you, again, for taking the questions and best of luck in the fourth quarter.

Thank you.

Our next question comes from John Murphy from Bank of America Merrill Lynch. Your line is open.

Good morning, guys. This is Aileen Smith on for John. To ask another question on the Waymo agreement, do you believe this opens the door to further service agreements with other non-traditional industry participants and tech players? And could you even see a model in the future, as new mobility services become more prevalent where the dealers could function, in some ways, as operators of their own fleets?

My view is there's Waymo and everybody else. I think they're clearly the leader. And as I said, this is not a new relationship from my point of view, it's something that's been underway for six years. Now, around that, can there be other interesting things to talk about? You know, me, I'm out there. I'll talk to everything, look at everything, but I think this is the one that is the leader and I like partnering with the leader. Now, that's a judgment on my part. Some people may agree, some people may disagree, but that's the big decision we've made. This is a big commitment on the part of AutoNation and a big partnership with Waymo.

Great. That's helpful. And then, the significant ramp-up in share purchases in the quarter, is this representative in any way of a change in the capital allocation strategy, particularly away from ongoing investment in the AutoNation USA initiative? Or is it just more a function of relatively strong cash flow inflows from the business divestitures which are helping, which is allowing you to opportunistically take advantage of the share price?

The keyword there is opportunistic. That's the one we use every time this question comes. I think Cheryl said this 500 times over the years. And if you look at our track record, that is our view. I understand. We had operational difficulties in the second quarter that, we said, would resolve in the third quarter, but I understand investors want to wait and see if that does indeed happen. And I look at that and say well at $42 a share, I'm confident that we do have our arms around this, then, we opportunistically buy the shares. So I put my money where my mouth is. So now, we've made that move. We've repurchased 9% of the company at $42 a share. And I think it was a good investment on the part of the company and a statement of confidence about the future.

Great. Thank you very much. That's helpful.

Our next question comes from Rick Nelson from Stephens. Your line is open.

Thanks a lot. Good morning. I'd like to follow up on Cheryl's comment about the SG&A expense ratio, 73% expected for the fourth quarter. You are at 71.8% this quarter. Is that seasonality or increased spending expectation, what is driving that change?

Yes, there's a few factors on that, Rick, but I would say also continued investment in brand extensions. We have an ambitious agenda for next year. Certainly, we're putting all the pieces in place to accomplish that. And so, we expect you'll see some of that in the Q4, but we're very happy with the sequential improvement in SG&A in the third quarter and I think that demonstrates the continued discipline and opportunity with the stabilization of the used PVRs, you see better flow through in our main SG&A numbers and we're glad to report that for the third quarter. In the fourth quarter, we would love to do the continued investment in the brand extensions for next year.

The used car segment had really bounced back here in the third quarter, changed primarily operationally, and do you see this One Price selling as more of a volume driver or margin driver? We obviously saw with volume, more so with volume this quarter?

Hi, Rick. This is Mike Jackson. I would say the AutoNation branded One Price experience for pre-owned drives tremendous traffic and interest through our website and through our stores. So the One Price sale has to be competitive in the marketplace. So therefore, on the margin side, we have to have really strong operational execution. That was not there in the second quarter. We had some issues. I was very forthright about that. We've comprehensively addressed them, and yes, I see more stability in that going forward. So that's how I see it. The One Price is an experience and a brand attribute that customers like and draws us a lot of business. Sales associates are very enthusiastic about it, particularly millennials that we're now able to attract to work for us, so they don't have to negotiate. And then, we on the operating side have to bring in the gross margins. That's the formula.

Thanks, Mike. If I could ask you about Hurricane Harvey, you've quantified the negative impact of Irma. I'm curious if Harvey was, in fact, a positive and how much that may have added.

So here's a way to approach it, Rick. So first, let's not talk about the impact on store profit or loss on a running basis. Let's just talk about direct cost, because you had a hurricane. Cheryl, do you want to talk about insurance cost, emergency pay, deductibles, that sort of thing?

Yes, Rick. So as I think about it, and that's the reason why we called at Irma specifically and Lance alluded to the fact that you really didn't have a bounce back certainly in the third quarter related to Irma. So that was a big store closure event, not only on the days it was closed, but you lose traffic on the days before the storm and the days after the storm. So think of that one was a wind event and you didn't have as much property damage. In the case of Harvey, we had some property damage. A lot of that was covered by insurance, some was not. We had store closures. We did benefit in September for some of the rebound. So when we look at, Irma was a very clear negative and we spoke about that. On Harvey, you had definite out-of-pocket expenses, but given the fact that we made that up, we did not call that out specifically. You can argue about what the run rate would have been without the storm. It's harder to specify it, but I think on average, we say that Harvey was not a net negative. It was a net positive probably to the full magnitude, hard to separate it from the base financial results.

Got you. Thanks a lot, and good luck.

Thanks, Rick.

Our next question comes from David Tamberrino from Goldman Sachs. Your line is open. David Tamberrino - Goldman Sachs & Co. LLC: Mike, how do you think about the revenue opportunity and margin profile per vehicle in this Waymo deal?

So we want to be at the absolute intersection of autonomy, sharing, and electrification. What is electrification have to do with it? Well, to run the autonomous systems, the vehicle cannot be on a standard electrical system in a car. So these are hybrid vehicles from Chrysler and the level of electrification will change increasingly going forward. So here, you have, in my view, an intersection of electrification, sharing, and autonomous, with a company that has been working on it for six, seven years and we've been there, as I said, from the beginning. So I like the idea of partnering with Waymo from the beginning that we can really each understand the optimal line of what we do and what they do to ensure the maximum utilization and lifecycle of these vehicles. Obviously, they are in test market in Phoenix, some other activities in California. So to me, the level of revenue generated and the level of gross profit generated will not be material, because we're in the infancy. However, when all questions are resolved in a constructive way, to move forward, then, we will move forward with them. And I think if we play it out, we're here involved on the ground floor with the leader on the future of electrification, sharing and autonomous. And we're going to have a tremendous added value and really partner with Waymo to see that. So if I think about this in 5 to 10 years' time, I think this is a very important relationship for AutoNation and its future, and we are committed to it as they are. I wouldn't increase next quarter's EPS. David Tamberrino - Goldman Sachs & Co. LLC: Yes. And that's not what I'm obviously suggesting or thinking about. I'm just trying to understand if I think about your traditional Parts and Service business, it's a 50% margin.

Yes. David Tamberrino - Goldman Sachs & Co. LLC: If I try to think about typical Parts and Service revenue, I mean is that the right way to go about it? And does that change at all after Waymo moves from development to deployment?

Yes. All that. So let's say we're in the development phase here, and I'm looking to cover my cost and position our sales for gross (40:50) together. Now, I don't determine the growth rate. That's really up to Waymo, but they certainly haven't made this investment over the past six years to just be in a few markets, and when everything is validated, this works everywhere in the United States. So I think when I look at Waymo and Google as a company, I say, okay, here's a company that has huge resources. It has two founders who are committed to the principle that there is a way to comfortably move people from point A to point B safer than what's done today and thereby save lives, and they've committed this as part of their legacy to do. And they're executing it in a very disciplined, thoughtful, long-term way. So this isn't a company – and massive problems have been solved. So I don't want to put an exact percentage. That's not for me to say, but massive problems have been solved and sorted out. So they are on the cusp of taking other steps, but that's for them to say. So I look at this and say I want to be part of it, and I want AutoNation to be part of it, because our principles are in alignment. Our brand is Drive Pink and Drive Safe, and we mean it. So now, we have Ride Safe, you add that too. So that's what's behind it, and I think companies – when I look at, again, the future of mobility will revolve around to a certain extent sharing, electrification and autonomous. We think we can play a vital role in that, and in my view, Waymo is the company I want to do that with. David Tamberrino - Goldman Sachs & Co. LLC: Completely understood. As I think about the relationship evolving, do you think at some point in time down the line that you'd help them from an asset ownership perspective where you would own the vehicles and rent them out to Waymo? Or is it just strictly the maintenance side and the service piece of it?

All of that is to be discussed. I'm not saying what's on the table, what's off the table. This is a strategic partnership. John and I go back 15 years. I think he's the right man for this to lead Waymo and the ambitions that it has and what it wants to realize, as it's now actively in the marketplace with consumers, we have tremendous understanding of consumer behavior and of the technical aspects around the optimization of the fleet's lifecycle. And we will find that optimal line that is of great value to them and rewarding to us. I'm sure of it. I just don't have all the answers today, but I know we don't join hands and start walking down the road together, you'll never find it. So it's a true sense of committed partnership and I'm excited by the prospects even though if you want to push me on numbers that's somewhat over the horizon. David Tamberrino - Goldman Sachs & Co. LLC: Completely fair. Just very intrigued by it. Appreciate all the color. Thank you so much.

Great. Thank you.

Our next question comes from Andrew Fung from Berenberg Capital Markets. Your line is open.

Hi. Thanks for taking my question. I guess somewhat related to Waymo and shared mobility, I wanted to get your sense on and views on third-party lead generators. Obviously, you guys have evaluated their use in the past and I guess more recently, you guys have been investing heavily in your digital footprint as well as brand. So I wanted to get a sense, do you have an updated view on their real longer-term and especially, I guess, given your views on shared mobility in the future?

Well, I think we're in a good place. First, I'm very encouraged and excited about our own capabilities around AutoNation Express and our own digital site, which we continue to invest in and continue to see better and – higher and higher traffic, better and better performance. And this puts us in a position to negotiate with third-party providers where we find again that that line that's good for them and good for us. If it's all one-sided, it's not sustainable, it's not going to work. So I'm very pleased with our partnerships with TrueCar and Cars and CarGurus and all the companies at Cox. We're in a good place.

Okay. Great. And then, I guess, just as a follow-up on used pricing, beyond the near-term sequential improvement you're calling for for fourth quarter, how do we think about, I guess, as you guys roll out more AutoNation USA stores, is there – I guess, how does used margin evolve perhaps as they become a larger portion of the mix?

Well, I think I already said earlier on the call, we hope to take another step in the fourth quarter sequentially, and then, we will have fully implemented all the measures that we drew up earlier this year to get us to a better place, and then, we'll sit down and have an internal discussion and say okay, what's next? What else is possible? And I'll be in a better position to give you a good answer then, if you just have a little more patience with me. The parade's moving in the right direction, but I can't really today call out if there's a next step today.

Okay. Great. I appreciate that. Thank you.

Our next question comes from Ali Faghri from Susquehanna. Your line is open.

Good morning. Thanks for taking my question. So a lot of focus on the used side, so I'll ask about new. New car GPU remained under pressure in the quarter, it was down I think about 6% year-over-year, and then, took sequentially a step-down from the second quarter. Those results are weaker than most of your dealer peers. I'm just trying to get a sense of what exactly is driving that, and then, how you think about new car margins as we head into 2018?

Lance, could you take that for me, please?

Sure. You're referring to new car margins specific, correct?

Yes, new car GPU.

So I think when you compare to our competitors, you have to take into consideration our brand mix. We're basically a third, a third, a third domestic, import, and premium luxury, and I don't think that our peers have that sort of brand mix. They're more skewed heavily towards premium luxury or in some other direction. So I think we're going to continue to face headwinds there. The domestics are still under tremendous pressure on the margin piece. The imports seem to have stabilized a bit and premium luxury was up a little bit for the quarter. So I think we're where we should be, not where we want to be, obviously. But we have to compete in the marketplace and represent the brand that we own. So we'll continue to push our volume on new to maintain our share and wherever that brings us on margin, we'll do the things obviously that we need to do to mitigate any other decrease, but I think we are where we should be.

Great. Thanks for the color.

Our next question comes from David Lim from Wells Fargo. Your line is open.

Hi, Mike. I just had a quick follow-up. Now, given your background and your industry knowledge, I wanted to get your opinion about autonomous. Now, there are a lot of suppliers developing turnkey technology and the OEMs are developing this technology. If an OEM uses a supplier for a full turnkey solution, who holds that liability, especially given the OEM's branding? And I know that you have deep knowledge about branding, obviously, given your background, just wanted to ask that question to you.

Well, I'm not sure I can really give you that answer today. I'll think about it and I'll work on it maybe we can talk about it again, right? In my mind, I think here is the bifurcation. You have level four, level five purely truly autonomous. And that's what Waymo is coming down the home stretch on. And there, you make the assumption that there is no driver or supervisor who is on standby to take over at any moment. And this requires a level of redundancy that is remarkable to get from 99% to 100%, and then, a default position if something happens. Now, here's the point. Everyone else, all level two, level three, you're a little bit in the twilight zone quite frankly. You're saying, enjoy and trust this system, never take your eyes off it. And if you take your eyes off of it, it's going to disengage. And the experience of Waymo is if the consumer truly trust it, then they stop paying attention. And if you don't trust it, then you have to pay attention all the time and you go, well, this is annoying as hell. I might as well drive the car myself. And I think this twilight zone is what the bigger industry is going to struggle with. And so, there it is. I can't tell you about the liability questions at the moment. I don't know.

Gotcha. Well, thanks for the insight. I appreciate that.

Yes.

Our next question comes from Colin Langan from UBS. Your line is open.

Thanks for taking my question. Can you just clarify the $0.08 impact from Irma, is that the cost of the damages and the lost profit from sales in Parts and Services? Or is it just damage cost? Just want to make sure I understood what the estimate was including.

So I would say that consists of damage. But keep in mind Irma was a wind storm event, and so, there wasn't the same level of physical damage in the parts of Florida that we operate in as what you might have experienced in terms of damage in Harvey where it was flooded. So I'd say it doesn't include a level property damage yet. I wasn't anywhere near as what some people experienced in Harvey to know. So I would say the biggest thing is we paid our associates while the stores are closed, that's important as a part of our principle. We also have lost sales in that period. You heard from Scott's remarks the lower customer care in part was driven by store closures, particularly on the service side where the business doesn't recover. There were not anywhere near the amount of damaged vehicles in Irma that you saw in Harvey so you don't have a big pickup in sales. So when you add the store closures from a sales and service perspective loss, when you add the associate pay which is part of the core principle to pay associates and you add a very minimal amount of property damage, that's what comprises that $0.08.

And so, it sounds like you don't think the full $0.08 will be recouped in Q4?

No.

Because (53:14) I would say the damages are only a part of the sale.

I think that unlike Harvey, you did not see the rebound in Irma. You also did not see the destruction of vehicles that require replacement anywhere near in the markets in Florida we operate versus what you saw in Harvey. And keep in mind that these days even 12 to 15 inches of flooding once they hit electronic and total vehicles, like you saw unfortunately happened to consumers in Houston, and there were not flood events of any magnitude in Florida or Georgia related to Irma.

And how should we think about the repair sort of Parts and Services benefiting Q4 from the two different storms?

Typically, when you have incidents like that, you really never fully recover the Parts and Service. You see that with major snowstorms and other incidents as well. When they're closed, sometimes, you'll take part of that back up, but I wouldn't think of that as something that's ever fully made up.

Got it. And just lastly, any push back from the OEMs on the private label Parts initiative? I imagine they're not too thrilled with -

Yes, there's been a discussion of course, and I say to them, I say, look, if I go back 10 years ago, we had frontend gross on new vehicle sales of 8%, 9%, cost of 4% or 5%, and now, today, we have frontend gross of 5% and new vehicle sales is almost a commodity pass-through business and that we have to make all our profits somewhere other than selling the new car. Now, I have a franchise, so I've agreed that we will do tremendous volume on new vehicles. I understand that. That's my responsibility, but then I say to the manufacturer, I say, by the way it's your stair steps and your margin programs that have brought us to this state and you're quite delighted with the fact that frontend gross margins are down to 5%. So you have to understand I've made this investment in this facility and I need a way to grow and to do that profitably. And a lot of business that I gave you in the past for relationship reasons, just only for relationship reasons, and partnership reasons, no longer make sense with a frontend gross of 5%. And the end of the conversation, I would say, is I have earned their respect and they said, if I was in your shoes, I'd be doing the exact same thing and I guess, we don't have to worry about it too much, because who else can do it other than AutoNation, so okay, and I'll take it. Okay. That's fine with me.

Okay. Right. Thanks for taking my question.

Right. Thank you, everyone, for joining us today. I appreciate it.

This concludes today's conference. Thank you all for joining.