REVENUE

As discussed in Note 1, “Interim Financial Information”, the Company’s material revenue streams are the sale of new and used vehicles; arrangement of associated vehicle financing and the sale of service and other insurance contracts; the performance of vehicle maintenance and repair services (including collision restoration); and the sale of vehicle parts.

The following table presents the Company’s revenues disaggregated by revenue source:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017 ⁽¹⁾		2018		2017 ⁽¹⁾
	(In thousands)
REVENUES:
New vehicle retail sales	$	1,539,498	$	1,710,241	$	4,608,658	$	4,496,222
Used vehicle retail sales	792,405		743,038		2,394,828		2,089,914
Used vehicle wholesale sales	86,570		104,827		283,453		308,361
Total new and used vehicle sales	2,418,473		2,558,106		7,286,939		6,894,497

Vehicle parts sales	83,773		81,273		254,326		234,369
Maintenance and repair sales	270,728		261,920		807,819		760,153
Total parts and service sales	354,501		343,193		1,062,145		994,522

Finance, insurance and other, net	116,084		110,993		343,462		314,297
Total revenues	$	2,889,058	$	3,012,292	$	8,692,546	$	8,203,316

⁽¹⁾ As described in Note 1, “Interim Financial Information”, prior period amounts have not been adjusted under the modified retrospective approach.

The following tables present the Company's revenues disaggregated by its geographical segments:



	Three Months Ended September 30, 2018								Nine Months Ended September 30, 2018
	U.S.		U.K.		Brazil		Total		U.S.		U.K.		Brazil		Total
	(In thousands)								(In thousands)
REVENUES:
New vehicle retail sales	$	1,196,551	$	278,046	$	64,901	$	1,539,498	$	3,433,386	$	971,085	$	204,187	$	4,608,658
Used vehicle retail sales	572,011		200,058		20,336		792,405		1,727,848		600,715		66,265		2,394,828
Used vehicle wholesale sales	40,724		41,696		4,150		86,570		137,507		134,408		11,538		283,453
Total new and used vehicle sales	1,809,286		519,800		89,387		2,418,473		5,298,741		1,706,208		281,990		7,286,939

Vehicle parts sales	72,935		9,546		1,292		83,773		220,964		29,537		3,825		254,326
Maintenance and repair sales	216,399		44,271		10,058		270,728		641,773		135,417		30,629		807,819
Total parts and service sales	289,334		53,817		11,350		354,501		862,737		164,954		34,454		1,062,145

Finance, insurance and other, net	101,610		12,319		2,155		116,084		295,239		42,199		6,024		343,462
Total revenues	$	2,200,230	$	585,936	$	102,892	$	2,889,058	$	6,456,717	$	1,913,361	$	322,468	$	8,692,546



	Three Months Ended September 30, 2017 ⁽¹⁾								Nine Months Ended September 30, 2017 ⁽¹⁾
	U.S.		U.K.		Brazil		Total		U.S.		U.K.		Brazil		Total
	(In thousands)								(In thousands)
REVENUES:
New vehicle retail sales	$	1,296,267	$	334,772	$	79,202	$	1,710,241	$	3,458,287	$	824,827	$	213,108	$	4,496,222
Used vehicle retail sales	562,031		158,076		22,931		743,038		1,620,171		401,851		67,892		2,089,914
Used vehicle wholesale sales	63,363		38,647		2,817		104,827		200,384		99,604		8,373		308,361
Total new and used vehicle sales	1,921,661		531,495		104,950		2,558,106		5,278,842		1,326,282		289,373		6,894,497

Vehicle parts sales	71,667		8,190		1,416		81,273		209,276		20,648		4,445		234,369
Maintenance and repair sales	212,248		38,593		11,079		261,920		628,496		99,966		31,691		760,153
Total parts and service sales	283,915		46,783		12,495		343,193		837,772		120,614		36,136		994,522

Finance, insurance and other, net	96,383		12,448		2,162		110,993		276,754		31,260		6,283		314,297
Total revenues	$	2,301,959	$	590,726	$	119,607	$	3,012,292	$	6,393,368	$	1,478,156	$	331,792	$	8,203,316

⁽¹⁾ As described in Note 1, “Interim Financial Information”, prior period amounts have not been adjusted under the modified retrospective approach.

New and Used Vehicle Sales

Specific to the sale of new and used vehicles, the Company has a single performance obligation associated with these contracts - the delivery of the vehicle to the customer, which is the point at which transfer of control occurs. Revenue from the sale of new and used vehicles is recognized upon satisfaction of the performance obligation (i.e., delivery of the vehicle to the customer). In some cases, the Company uses a third-party auction as an agent to facilitate delivery of used vehicles to the customer. Incidental items that are immaterial in the context of the contract are accrued at the time of sale. The transaction price for new and used vehicle sales (i.e., the amount that the Company has the right to under the terms of the sales contract with the customer) is the stand-alone sales price of each individual vehicle and is generally settled within 30 days of the satisfaction of the performance obligation. In many new and used vehicle sales transactions, a portion of the consideration applied by the customer to the satisfaction of the total transaction price is a used vehicle trade-in (i.e., noncash consideration). The Company measures such noncash consideration at fair value. Revenue recognized from the sale of new and used vehicles is reflected in New vehicle retail sales, Used vehicle retail sales, and Used vehicle wholesale sales in the accompanying Consolidated Statements of Operations. With respect to the cost of freight and shipping from its dealerships to its customers, the Company’s policy is to recognize such cost in the corresponding cost of sales category. With respect to taxes assessed by governmental authorities that are imposed upon new and used vehicle sales transactions and collected by the Company from its customers, the Company’s policy is to exclude such amounts from revenues.

Vehicle Parts Sales

Related to the sale of vehicle parts, the Company has a single performance obligation associated with these contracts - the delivery of the parts to the customer, which is the point at which transfer of control occurs. Revenue from the sale of vehicle parts is recognized upon satisfaction of the performance obligation (i.e., delivery of the parts to the customer). The transaction price for vehicle parts sales (i.e., the amount that the Company has the right to under the terms of the sales contract with the customer) is the stand-alone sales price of each individual part and is generally settled within 30 days of the satisfaction of the performance obligation. Revenue recognized from the sale of vehicle parts is reflected in Parts and service sales in the accompanying Consolidated Statements of Operations. With respect to the cost of freight and shipping to its customers, the Company’s policy is to recognize such fulfillment cost in the corresponding cost of sales category. With respect to taxes assessed by governmental authorities that are imposed upon vehicle parts sales transactions and collected by the Company from its customers, the Company’s policy is to exclude such amounts from revenues.

Maintenance and Repair Services

As it relates to vehicle maintenance and repair services (including collision restoration), the Company has a single performance obligation associated with these contracts - the completion of the services. The Company has an enforceable right to payment in certain jurisdictions and, as such, transfers control of vehicle maintenance and repair services to its customer over time. Therefore, satisfaction of the performance obligation associated with the vehicle maintenance and repair services occurs, and the associated revenue is recognized, over time. The Company uses the input method for the measurement of progress and recognition of revenue, utilizing labor hours and parts applied to the customer vehicle to estimate the services performed for which the Company has an enforceable right to payment. The transaction price for vehicle maintenance and repair services (i.e., the amount that the Company has the right to under the terms of the service contract with the customer) is the sum total of the labor and, if applicable, vehicle parts used in the performance of the service, as well as the margin above cost charged to the customer. The transaction price is typically settled within 30 days of the satisfaction of the performance obligation, which generally occurs within a short period of time from contract inception. Revenue recognized from vehicle maintenance and repair services is reflected in Parts and service sales in the accompanying Consolidated Statements of Operations. With respect to taxes assessed by governmental authorities that are imposed upon vehicle maintenance and repair service transactions and collected by the Company from its customer, the Company’s policy is to exclude such amounts from revenues.

Arrangement of Vehicle Financing and the Sale of Service and Other Insurance Contracts

The Company receives commissions from finance and insurance providers, under the terms of its contracts with such providers, for the arrangement of vehicle financing and the sale of service and other insurance products. Within the context of the Company's contracts with the finance or insurance provider, the Company has determined that it is an agent for the finance or insurance provider and the finance or insurance provider is the Company's customer. The Company has a single performance obligation associated with these contracts for all commissions earned - the facilitation of the financing of the vehicle or sale of the insurance product. Revenue from these contracts is recognized upon satisfaction of the performance obligation, which is when the finance or insurance product contract is executed with the purchaser. The transaction price (i.e., the amount that the Company has the right to under the terms of the contract with the customer) consists of both fixed and variable consideration. With regards to the upfront commission for these contracts, the transaction price is the amount earned for each individual contract executed and is generally collected within 30 days of the satisfaction of the performance obligation. The Company may be charged back for unearned financing, insurance contract or vehicle service contract fees in the event of early termination of the contracts by customers. A reserve for future amounts estimated to be charged back is recorded, as a reduction of Finance, insurance and other revenue, net in the accompanying Consolidated Statement of Operations, based on the Company’s historical chargeback results and the termination provisions of the applicable contracts. In some cases, the Company also earns retrospective commission income by participating in the future profitability of the portfolio of product contracts sold by the Company. This consideration is variable (i.e., contingent upon the performance of the portfolio of contracts) and is generally settled over 5-7 years from the satisfaction of the performance obligation. The Company utilizes the “expected value” method to predict the amount of consideration to which the Company will be entitled, subject to constraint in the estimate. Therefore, the Company estimates the amount of future earnings that it will realize from the ultimate profitability of the portfolio and recognizes such estimate, subject to any constraint in the estimate, upfront when the product contract is executed with the end user, which is when the performance obligation is satisfied. Changes in the Company’s estimates of the amount of variable consideration to be ultimately realized are adjusted through revenue. Revenue recognized from the arrangement of vehicle financing and the sale of service and other insurance contracts is reflected in Finance, insurance and other, net in the accompanying Consolidated Statements of Operations and as a contract asset (reflected in Prepaid expenses and other current assets) in the Consolidated Balance Sheet until the right to such consideration becomes unconditional, at which time amounts due are reclassified to accounts receivable.