KAR Auction Services (KAR) 5 Aug 202020 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the KAR Auction Services, Inc. Q2 2020 Earnings Call. At this time all participant lines are in a listen-only mode. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mike Eliason, Treasurer and Vice President of Investor Relations. Thank you. sir. ahead, go please And

KAR Thanks, will Justin. today Earnings for us concluding performance thank Call. June quarter XX, XXXX. questions morning, the KAR from and After of financial for the XXXX commentary, we’ll you for Global the Today, ended we joining our discuss Good Global take Second Conference Quarter participants.

forward-looking provision discussion, forward-looking of you that the call company statements contains and statements Before business, Reform the such uncertainties XXXX. disclaims remind update to safe expressly providing our Private may operations, prospects fully Act Jim this are affect In Investors detailed that the to in harbor kicks Securities Litigation any obligation involve are I’d KAR’s like risks statements. off and risks such SEC of these of within our meaning the and statements, of results filings. that conference cautioned forward-looking

this the and of be that in will is conference available the be mention we also found financial non-GAAP section press financial the financial our me non-GAAP applicable of measure measures to can in that night, issued throughout which Let Relations last GAAP call, also we the GAAP Investor measures. release website. both referencing Reconciliations

turn to Jim Hallett. Now, this Jim? call I’d KAR like to over Global’s CEO,

business. workforce, impacting period for that needed the Thank COVID-XX spoke, accomplished be I used to update today what ladies have good to how about can provide performance to an cadence and and we time of you transformation changes My through operations tell second of our a want the quarter, morning, throughout The our with Today, you, of is I actions close to that the includes performance impacting of would progress our our within for performance. last in an see to our this we update overview will on how you digital business I we an of challenge excited with genuinely agenda monthly that taken provide and on walk future We our our accelerate financial share of was Michael, the our I’m our want gentlemen, transformation have you an world. go in we review the and I and TradeRev. call. the with and I you welcome what how this including forward. concerned the to with have on update us quarter,

locations America, business. to by the auction of operations our of with auction open start all In me status are The our for North sites Let the access location. varies throughout world. physical our

we for We’re permitted are our in from previewing some the building. vehicles cases, allowing customers on-site bidding – and inside

However, Simulcast and our all sold vehicles through Simulcast, TradeRev. OPENLANE, of Plus platforms, our are digital being

on few signed probably have months, digitally last dealers the the during never dealers Over quarter. is of of accomplishments up This that digital we bought cars platforms thousands second of our used and tens technology have biggest previously. of our our one have thousands

auctions. across not at any any the are physical our We block vehicles running of

services our lot our division. one The ancillary by full all inspections that restrictions end-of-lease that minimal, physical PAR on to audits area of locations at and American continues to strength. business handled inspection [ph] providing are our our lag We back are and is and is businesses are and repo North

Our areas. customers consistently in not most yet repossessions are processing

and begin as to into the repos returning operations are normal In we number up third to running. quarter. expect Europe, of our go the We levels

the the has in America. operations third auction digital been be Europe quarter. would back Europe all are in in our say normal to the businesses prior-year than North expect I to to bit platforms. that European I been levels it would little a sometime in levels has of And return slower Our activity

offices Our essential continue for to be corporate activities. open

We ability much as remotely. field with support as strongly I’ve possible. while corporate the employees been our encouraging pleased working home personnel are to are from work our to our corporate office

to we required we and to While without were many a would it nobody the the remote was significant workforce, at when move any need prepared have of functions needs disruption level. anticipated that organization met

our Now, let me performance. review second quarter

declined First, expected. and last AFC in declined than that of to me X% the in loan Vehicles seems I compared XX% transactions XX% the better sold say very to will it odd number ADESA I was decline EBITDA the a year say for segment in quarter. at and adjusted

on locations unit and from Online limitations the also due our physical restrictions services at per were auctions declines vehicle We to increased only we off-premise per slightly. on revenue in that to permitted offer experienced revenue physical our activities.

the shut We businesses explain transaction all of and quarter units per that better We than This also loan unit revenue. in at started I saw the were our let me all why down. in revenue a XX% to With led reduction with expected. declines said, AFC. results our all

We continue beginning the the to X% actually remainder transactions saw of [Technical expected And at this in we prepared vehicles the prior and the have June gradual of be where used above to continued the and of to the perhaps of strong. Obviously, picked values volume was for up the minimal small was in year. volume was week our mid-April, to year. and What a Difficulty] were over disruption to volumes markets be recovery have improve consistently take happened week, we April. and number through beginning continue

in year-over-year across I’m were second our We June. than generated higher values in vehicles is fact, late adjusted this heading year our of back quarter to expected, furlough, from conversion all per increase April by we cautious still and performance per platforms. improve, significant in in we from third using progressed in our We then had into the adjusted profit EBITDA a and quarter. supported generally sold evident to June. levels. and and but In the This rates transaction move money are below our we losing the platforms high performance vehicle May sellers seeing in employees May in calling EBITDA digital gross increased in and prior higher And the has encouraged quickly. auction

continue trends too it say While confidence, how see we will a is we accelerated positive months of from digital is in wholesale of to industry, things level few early What with can look for to transformation any predict I now. the our business. the

We XXX% are online. of vehicles our selling

support the introducing profit margins EBITDA improved the our and pace products, functions cost We gross have of marketplace. lead structure have permanent digital features changes to accelerated made should adjusted and we And that to new going forward. to

TradeRev. to speak me let Now,

to we when TradeRev auctions physical down shut in bring activity operate our volumes sales rest April decline Like furloughs Although workforce retail in April, were minimal. our early through activity. of the able was adjusted in business, the to TradeRev the network headcount line our the saw was with as

markets assisting found We late during May, focused disciplined improved of leverage early and we with vehicles setting April, with our adjusted We the to market in customers on to our maintained the began the people of expectations. in this a realistic the inspecting of in meet and imaging rebound the the TradeRev needs recovery. processes, approach As pricing fewer people. completing our

revenue by primarily extended for volume saw was June, TradeRev due The about Our in month, in the was year-over-year. Canada. this to we shutdown year-over-year, volumes in the was a second down results TradeRev. our but the grow recovery Canada total The on and achieve of quarter Canadian U.S. lagged this XX% sales TradeRev profit the June, this achieved gross each line that approximately the team combined allocation to for May better bottom to and was We able $XXX. per than includes and of breakeven cost unit

conversion TradeRev Our was well rate were incentive above XX%, costs and low. at our

Now grow on heavy I that winning be the to digital focus can model want have market. and TradeRev it we the proven can incentives, that dealer-to-dealer without profitable

workforce wrap my comments, and I we��ve of now. Before headcount taken actions to right a stands with I want where give our the that up you summary our

of that activities the we As employees business we by had a furloughed restrictions XX,XXX most time, orders and the home early limited quarter, activities were April, on deemed little full-time At both geography entered we This more Every about business XX,XXX worldwide. the than nonessential. were employees. impacted. time. and was In serve includes part state we

of us locations recalling we furloughed for began to employees auction reopen reality began and began needed. as experiencing activities all our world limited at to to adjust pandemic, As the new of a

our how During and social appropriate these the customers, identified about shutdown have operations. could adjust spent needs determining process of our By the maintain many called made that we employees and of of to our the meet and time in we end protect the quarter, back considerable eliminated. are permanently operations, employees, our X,XXX our and permanent we customers distancing our to X,XXX changes positions we we of

we today, on X,XXX of about still have furlough. employees As

we October, that The not services remain employees back they adjusted direct called be positions their these be eliminated. structure of and more lean. will while work to notified We have cost line This both if our SG&A. have furlough, cost by is on is much are they to bottom

adjusted gross business forward. and margins margins higher We EBITDA expect our generate should going higher profit

of change a you strategic the very provided COVID-XX reviewed to compressed KAR’s make frame, consistent changes with in we beginning our that the catalyst While objectives an at unfortunate this time year. are with

transformation me around industry. conclude Let of my digital the the commentary

past First, outlined this I KAR years. the of has have been for couple vision over a strategic that

can With prepared within our COVID-XX and us sale. Simulcast able is with selling Plus group platform can auction from was planned digital offered. sales specific digital are Simulcast us Plus, Our a and a back that the to to and same end to for vehicles vehicles in that auctioneer. transformation offerings less Hertz migrated of actioner Simulcast to to timing, buyers being auction investment in sold focus to two completely of locations. we Plus We that being a that We’ve we automated multi-location for working ago, move in aggressively a a have been may wholesale ADESA March. This to have critical About recent the meet our we accelerate on conditions. had geographies years our Hertz market old of we XXXX. where you late a for we week the pilot technology interest computerized needs locations, Simulcast have a on any industry this order of than over uses that instead buyers our production. of a bring and both multiple digital were sale physical year, have vehicles and XXX% in live announcement sellers platform the all in to This seen by now And XX situation have this from respond from in from able the

functionality results the industry themselves. in additional platform most provide to the flexibility able are and and efficient for operating the We while speak

to dealer-to-dealer that up offer vehicle platform every Simulcast is XX% used of cars needs segment and from Our auction off-premise simulcast above now and been can TradeRev XXX serve We can wholesale any platform, the OPENLANE Plus digital properties market. rate transaction, cars, and other can strong. off-lease for for Simulcast or have the our plus a of high-value for have conversion prices physical per seller, the on hour we the for or on-premise the and meet transactions auctions dealer. commercial that

the The platforms needs, meet less costs. lower lower have also sale operating costs. has labor In labor day to reduced addition is to cost cost having a realized developed in model the that we customer

into SG&A us and efficiency drive also that organization. our swift actions to reduced their businesses. back-office at by functions we support caused drastic for our support through that take of corporate the could change field the cost overhead streamlined we field all have organization accelerated and have process streamlined pace our COVID-XX the our and driving ADESA, We that have

in costs opportunities great organization, made people progress eliminating from significant and have well. have we We permanently other the as

on centralization are we of inspections, processes. even Examples looking that title of vehicle efficiency. our at to processing focusing throughout the business are: We further more areas drive and checkout functions are

the to over that will past We in I’m made I’m the about even progress I to look the technology we continue excited and about from interfaces to future. months, more back three the everything excited opportunities improve the for see have support. customer office

confidence beginning not you again expected benefits in of with third of the results of professional support are our most of Although immediately, challenging reduced quarter, to quarter are overhead picture paint our month-to-month of impact clear the second me direct our and the to the through due did careers. of period us we of be Thank your a COVID-XX lower any the gives performance today our progression results the have on business, through the at quarter the the costs beginning that seen evident quarter. where especially in labor for KAR

made Global Our exceptional is so forward. The KAR and over period. innovation say KAR properly within let thank we going that the are in delivering that team And it focused to me industry. post initiatives balance the strong, will results support additional position COVID in financial With we sheet employee entire growth could every commentary personal leader to KAR now now beyond on to be finally, and is positioned a our organization questions. be to before a technology for has that, auction and and take I the Eric sacrifices turn wholesale your in in you

Jim. Thank you,

pointed just quarter second an has the in remarks, unusual Jim three-month out his As been period.

COVID-XX It number including regions U.S. prior high our levels any opening this current the things in for around in and businesses, guidance car or time. clear business we industry, are impact will used by is year. is somewhat the how used to spread through of operate. the not the support government start for remainder up continues of been periods even retail where year at the have above confirming operations. maintain dependent throughout There impact U.S., Retail the that KAR Unemployment many not to the industry sales There is Canada businesses could their providing recently. geographic future imminent me usual Europe. Let be uncertainty are car on XXXX is that that and as any strong, of

continued the significantly. third of in stimulus the used for helped say second are slow much consumer fourth also activity stimulus quarter. Without to the We it activity. United car the the better set car have possible would believe level will and packages United used enhanced current government government and than quarter is States, up be States in the well the we I

of have Canada the has increases Canada lagged taxes early continue in from but significant we reached Europe we and second the the recovery are pre-COVID and in in levels prior XX% half in in a in are recently. signs in U.S., seeing While results the Europe COVID-XX activity America Europe very XXXX. the do recovery North recovery Canada in and year. approaching are expect that there will quarter, is in lagging We of that still shutdowns in significantly July. cash seeing are as the a Activity the third recovery year, result reduced

continue at second moving result capital recovery or in hold of delayed expenditures had we than going have the are beginning a our will business also in year environment. of changes from in number We performance provided canceled gross evident business of mentioned, summary and quarter, on our the is will Jim on Jim believe one higher the second a With changes operating believe the given lower capital margins, that with a projects we quarter. confidence profit the COVID-XX and have late headcount. said, cost that that year. of the we the expected EBITDA we some in margins adjusted projects margins in in has thing put will forward structure second in permanent you our And that we half the in in our as us forward. The post

direct that me Let SG&A. reduce some million. This an by a the X,XXX basis in total eliminations combination and those The positions. approximately of numbers behind elimination labor positions include both is facts. on our keep put Please compensation annual $XX of expense part-time will full mind and job

these Our eliminations severance is million. total job $X approximately for

the our of cover topics Now, let results impacted in second quarter. couple a me financial that

we in throughout million. KAR of and all value other period with time have that our determined business review goodwill business seen ADESA network year, and we on of the we This we operations. the business of We reacting intangibles coincided of carrying completed this evaluation the for UK., impact assets COVID-XX First, totaling of recorded dealer our intangible UK changes $XX.X to units. changes Annually, UK were the intangible goodwill assets other write-off the outlook the the no in this the except in and impairments term. UK. were ADESA any evaluation In near that units, there for

a UK. quarter of result, for written goodwill assets in a all and of portion Adesa off have second As the intangible we the

Another at second in the performance of level loan item note our of is losses quarter AFC.

the managed increased loan for provision for X.X% losses Our to of quarter. receivables average

to have We portfolio. performance continued see strong throughout credit our

change are down car Our current provisions credit statistics Delinquencies half almost since industry, in year-end. lower our the the expect for in April. is and relatively XXXX. in the change cause cash me of we low in loan generate since our to call year. major to the the portfolio believe million is used could following were remainder in worth the we is credit that absent for will lower we negative The flow an One retail adverse losses second highlighting cash the losses of earnings $XXX able be last business operations

able generate operating quarter, the to from For positive activities. we cash were

May You had in may available $XX We cash from able in and cash $XXX by XX, raised the million. cash million available an excluding in available of the $X We was of billion million cash. our our used were of $XXX earnings capital additional At Pipe $XXX month June the closed available the that transaction. approximately million over increase call month our with July in we recall balance June, May April. balance to in

well and private part improved strengthened Obviously, the in structure, have believe position June. any positioned we get We to is face. issues may in capital future million our are to investment completed through due we the company’s we capital $XXX

will is stock May XX-Q Form X-K at were included Apax on pandemic of June per into today. the that we convertible we COVID-XX about Periphas At filed be concerned of filed we terms our navigate investors, The by in that and million disclosed be business. $XXX the preferred having materially issuance The were have Form investments preferred will the share. closed Partners in in new KAR, that $XX.XX stock. capital evaluating uncertainty created private in adequate our the Capital to time impacted Our were convertible and and common

business we today. a of we have in accelerate digital balance While since sheet we seen to are transaction, completion that the the results position have the our much transformation better improved of strength this with

on This In our credit and use to to terms and near in the shareholder of of our created plan puts repurchases. amendment allocation, restrictions capital some have share by facility. future the payments limitations capital We amendment fuel of we term, revolving value. dividends create acquisitions, growth

focus our We digital continue and continued on to of business. current transformation operations the our

your As be for strong will my the used so back going a the thank forward. few capital our markets is outlook priority. and today. turn vehicle, us Justin, balance over for joining setting for That concludes I will can becomes commentary. this next take retail wholesale our time, questions, you priorities sheet we maintaining and quarters, clear we to allocation At it

from our Instructions] from Thank you. comes [Operator question And first Ryan JPMorgan. Brinkman

line Your open. now is

thanks Hi, Are set quarter. quarter additional volumes the thanks exceed the on intra-quarter which disclosure on X% to in the July? growth for Are for year-over-year volume to subsequent June? my trend this helpful you comment question, in able too the was in and taking trend the to

the very, pleased rates your remained morning, we with do as good Yes, for into business would continue the through go question. well to the we strong in and you, tell strong, expect go you July, conversion in as quarter. thank third Listen, prices I remained we to we June. Ryan, saw very we’re results that – and welcome, and obviously

Europe, worldwide is consolidated volume a add. Ryan, June to And we’re to a which in I mentioned, number. going That see also number as in pickup starting was

and growth and that really well. trigger are will Canada So, more as some up Europe picking

and of I think are relative back specifically volume deferred is rental were of I repossessions. And some able Okay, not puts on returns car to and back also coming takes curious providing you’re and know guidance, for dispositions? the the outlook in lease you be could some of sense the discuss to but thanks. maybe half, your to some And there

all think to is as expiring be some being surprising, uptick there? they GM On payments, of low, record could about of subsiding. net that maybe think? volume half the calls, really or How the by almost talked Ford you does cash supported delinquency government very lows, Do will there do be you but back in and which out the sort that an which

Yes.

a with in to especially think line there from I result started your put in we now. restrictions up repossess this certain companies able repossessions. were that – on say with being financial And climate really Ryan, and go would assessment Repossessions haven’t to right yet. think we probably is dealing on So, as show the that cars we’re of what it’s

as have opportunity Plus and segment that’s of of into on using throughout the Rental that Simulcast talked will an So, us, very, has balance Rental always well. I win start flowing and as year. the we terms is impact here commercial smallest about repossessions product the there’s been quarter especially the this think commentary, very will I the mentioned good in a I enter car interesting. for Hertz situation our our certainly volumes third And cars our my been that in sell. we a it

rental other a business more seeing little We’re companies. from rental car some of bit the

there. success. and be cars auctions, TradeRev are as be very So, being small continue we’re to I a well. it good would would grow say, continues And positive at physical uptick seeing there to sold

see we spoke the barring expect about I second to overall, comes balance of good different say volume would I in that of as look good something his about the at And the to the the from, unforeseen all into finish as it feel where Eric in our we go a year we So, and comments, I here. segments think, half year. that would

question... just then last and Okay quick

I investors because of lot a Yes, ask if this. us – Ryan, if could,

is deferrals, also and originations. in whether the half back through going lease very off-lease returns, a but of expect We lease number large at strong second it looking maturities be there XXXX

to car to industry. a be rental expect contributor We our

will consolidated lighter. But Dealer they’ve consignment very with inventory, for – July more was been us, could are good year-over-year the tight, that consignment area That’s was being it doing it dealer retailing quite well so retailers year-over-year. that be a light very bit repossessions. – while grow will us. grow think because we the trades up on they’re for on We but

I next have summary though, that dependent that walking visibility. on think, – months How still the that the off-lease segments. murky lease the will wanted to there’s economy. six looking just lot through area into So beyond more a the is do highly a do It’s we give different pretty where know of returns. I XXXX unemployment figures in

that’s in such the pile? raised large in just is acquisition, I execution. Thank How as other better and to in think cash desire now. now anything own end that even Okay, given strategic helpful. conservatism the if liquidity, by maybe very on are you. it of the about I mean, you if some we plentiful motivated improvement your for a capital overcapitalized, maybe lastly market than Was cetera? slip expected than et should particularly one If could I quite reasonable ask really wonder it’s

Well, Jim, of you did having I anything in $X.X transformation, we pursuing to describe did And aggressively is, $X especially add as recovery we that? want news that and expect period in the increases Ryan, had, in our the quick that would our honest, confidence a industry. the we’re when where describe to cash, again, the to we I overcapitalized. as capital transformation billion raised – might digital good of June. not it line, debt we it be and not did of generously now capitalized billion of

would to and overnight. we terms and – we’ve and this an guess, strength knowing and liquidity Ryan, financial And the just make at many were it I how the was referred it concerned this it, get going we have sure not just us quite we none it our to long going to times, company to stability looked taking in Yes, with, And this right? I we had like I as that saw said of of saw we say, to insurance financial had whatever business shock coming about was to policy XX% was, through this awe, disappear were of as deal I of last. was the

obviously about a we strong had we what to about interest the very are out else, went something effect what and that. about So little you bit a And thinking I company. we asked the kind with think of, in

taken with all money, boxes the I we investment about take products and one, that the who and had took very, best think this investors. understood support digital a and to believed looking limit were brick-and-mortar also, for look I on partners And think feel maximum XX% were an had experience thinking those day, good get We we who product we about, for digital to that our a we economic could checked of very that. who felt who the taken got. investor – in at into we transformation. investor we our had our we strategy along space, also that the a had who digital we number And outcome wanted But wanted at we the put a an would of and dilution the end we strategy. of then,

our confidence, short-term was a a XXXX. in in Ryan, raised band-aid. period for And future create was time. long-term did intended That a be can It we one It with was not long-term of view over with but capital to capital I’ll It thing. shareholder for we operations how with used raised value the close, we give mind. us never

Very helpful, thank you.

welcome. You’re

America. comes Bank John Murphy of from question our and you. next Thank from

open. Your line is now

guys. on is Yarden Good Amsalem morning, for This John.

you. Thank

a credit question improve throughout vehicles demand was in on for I your of retail significantly the at AFC. some still terms pressure used guess quarter, first we on, but independent dealer buyers, saw there performance

So dealer with continue? And to buyers? discuss you think can smaller your what AFC the potential extent do you can state losses of

a That’s good question.

that portfolio, in what is potential pandemic. very given seeing quite which first and we quarter in are smaller the taken independent our credit at recognize strong actually predominantly find And as the recognize approach did I them the are done in that were is statistics you the car in loan dealers careful that year. would this in and But the losses size. And of We’re will point portfolio hope second the conservative AFC losses, first performance used looking we’ve good. early. year the half look at time, plays our in out, very We

stimulus recognized and about portfolio, However, how year. out if I the government if and we’ll stimulus, the of small amount that. would see probably or I for by providing than pressure the I am losses see first performance argue, we would slows painted picture the and more the concerned of strength the dealers the in And the the half, independent is rest the dealer, think delinquencies to on reduce keep prepared that that stronger credit business. plays the of we’re do in these you

I XXXX? through it do thank vehicle Or for likely expectations And you levels? current my a you. the the second think the about I of talk remain actually I per will basis at the trend your you revenue trend could second question, rest with online-only half can Okay, guess, on positively, – can mean in the year? guess, quarter? consolidated ARPU of

to reduce investors quarter, going deepest – the goes ancillary grow. you’re it hear the right in trend transaction ancillary isn’t couldn’t are services because one it car We just selling And the from of coming seeing in services the back. true. to continuing vehicle. that the it��s cut I think anything Those misconceptions our month-to-month as sell early other of now, to Well, revenue I were it business. do is from positively primarily online, were and and We’re than that’s a

we’re have technology. getting the Plus transaction all-digital of really getting the are gross right. auction. the other when in we’re is the That’s rates actually the thing physical products There’s auction mix Our because Jim, of profit. the add? And cost fixed getting platforms to doing off you per had are because conversion good, fees. maintain it. really to you rates conversion higher Simulcast And same great High anything revenue in we no the is reductions Simulcast the infrastructure and that a leverage able what’s powerful, driving want we’re that’s do

Eric. it, got you think I

prices actually vehicle XQ? the expect year, rates and through in improve used if the of strong relatedly, remain end do guess, you XQ can conversion I

norms. Conversion how to would, but maintain as be conversion fourth the Indeed, conversion an not we right through the well than go much are get where just I would quarter. can higher rates I’m rates we increase? Yes. historic excited are Would rates sure above we those And take they now.

now. you But quickly. great the rate. looks because got is twice, And a know cars selling like high correct. that supports that’s they continuing They don’t a price. it they are conversion Strong pricing And right trend that run the sellers

from much. so you end. my That’s Thank it

And you. comes Kennison from Baird. Thank next Craig from our question

line now is Your open.

if questions my traditional And needs? how XXX% Thanks for dead? Jim, estate terms now as well. does taking auctions. in-person auction of you so, the Is change your real digital mentioned in your that

KAR the tell focused has the and lot But great now, to a around one auction very I from is right, say brick-and-mortar continues. dead. going transformation. you that Craig, would of question digital It we conversation that. – that traditional answer standpoint, on question would I not are your

We’re our on a our to and platforms standpoint. all all digital customers very focused being of from of serve able

and we is auction. we also getting a money lane. expense, in a certainly those $XXX,XXX proposition of these I year, it in through physical last much access sold platforms. said of I saves I cars last to None we’ve million There’s demonstrated have broader reach And think And vehicles. and X.X value customers, is more in went vehicles efficient the to real a in frankly, our them of it with first saves time here. sold Not more the vehicles ran only – and quarter, quite in my none the commentary, quarter, half think those the As the right? through

was think that vehicles in independent reach. I the happen different states. may I into auction of that Hertz at although sale sale, of auction mentioned have was one kind location, kind XX doesn’t those sold site locations, that That and or you we As one an from there XX get

the that, back that estate I about, businesses. them. We go need that demonstrated there’s we’ve onto if ancillary cars asked lane. real I Eric about believe future. and to customers through within This looking that role. still has point them for, car would We talked that the get always launched you, way to So, time. to believe There’s platforms. still our inventory be tell you a can to is different is organization real what reason customers that traditional is I estate. We of my KAR have. vision, was that most to brick-and-mortar within important would is other take to something to need in need something them inspect at done. still some from we With think any place this I would assets I just play real the these in the our don’t of estate This our to image estate in are is outcome services, need the And always running for create the we’re the seeing standpoint, the auction going been my one cars. a those that Real important. we hope

to second and TradeRev. has Thanks question with do

the are in you dealer-to-dealer channel. on focused said winning You

proven could I back any guess, share to Now I’m drive you that go that share can profitable, win you’re does mean think you’ve both market do and that Or to TradeRev? forgo curious, subsidies? TradeRev to in subsidies prepared you market be

Yes.

desire you So, we back the past. go have to no up that speak incentives to from

to continue to going We’re business. this run

and we delivering in I and your that you’re on I and record think months in paid June. make running business the mentioned sound critical. – demonstrated money. demonstrated is that running for on May getting we’ve can had We’ve to the business discipline we and footing customer that value the the had

spend through our marketing spend way the to not will won’t of up would that not up and more be value ramp the be and and ramp that’s But sales promoting over marketing we marketing say It platform. incentives. the through we the our Now itself time. platform

very thing need selling competitors the Craig, if our just this million that about cars. understand all I’ll in think expand position. here, you a I little and less one take feeling good still than we that to we’re the bit, say, So space, it’s probably

on like you, know certain we’re we early else, a absolutely close that space. the this as we very, in in with I the of and assets we we this will But also nobody leader in go very we innings collection we and on tell know unmatched have are the that profitable, now that prize. can leadership We’re industry, space. forward, are We that am focus – can I not gap. position. the And that My eyes of

one just And I’ll add Craig, thing.

Jim dealer-to-dealer with of is mentioned we’re collection available aren’t all TradeRev, with are to transaction the from It’s unmatched. everything of the platforms competing competing that We the assets KAR. do; for we capabilities our dealer.

you said, Well thank very much.

welcome. You’re

from Stephanie question Truist. comes from next Benjamin our And

open. now is line Your

Hi, good morning.

Good morning, Stephanie.

Good morning, Stephanie.

to prepared you at improve half? that in the did what in more to between look discrepancy on break this about your to some Just about kind TradeRev and maybe recovery mentioned or use saw pick detail as the I out the the, helpful TradeRev then performance on follow-up U.S. Canada of last as you question you Canada up? we maybe back I really want would guess, can started to when intra-quarter talk that U.S. be and remarks in started Could

most complete longer of near kept almost the month Yes, shutdown, a a than U.S. Canada basically Stephanie.

once recovery of question. mean in gate started. the I so it will the quicker much Canada fast. because Canadian really without that’s out is say TradeRev I – And leading but And the came platform was they dealer-to-dealer

call were dealers in that still platform. were it, activity, on, so the using And when they light person

really very might steady was was great Canada June. the been we it a a as up even Europe it. of gradual, it picking last couple to pace behind that But well. which early and late, activity, if where of the much it week picked Europe, quicker, it. describes but recovered was May similar increase of have started mid-April up of terms in had was And in And U.S. the more weeks that to Canada, So

And us you. those back those services, on and where or then in walk of the services there through just Thank you any – could services throughout a ancillary we services or helpful. quarter just stand of on you the worth we third having it’s now kind were similarly, stand continue going Just would online and you. standpoint profitability an this from either where be margin evaluated process update on realized that maybe not Thank forward? to

I’ll we we well. as stop in your normal XXXX, Stephanie, I’ll assets the you’re and were and answer and all the not sellers and Oftentimes we market, of those last – important oftentimes, in an question, in When start, offering saw talked necessary services strong, and talked plan using in our did some about. they Eric would do part services here that collection as deemed your reconditioning of rates and nor To hot to. that So do no, weigh I any the back of of about, prices let strong, part not did conversion are circumstances. do are stop detailed a – this under we’ve recession of

still intact, operate perform. inspections, services were well. services and still were have Those right? we still were continue transportation, and some our doing we to were and done cars, doing they ancillary we to continue quite still Now, still Obviously, financing operating of were

ancillary paint our result, the a body on-site of done. as near that and get services, body work, mechanical heavy some call some work paint what more work, we the of the and of XXX%. didn’t Some work, to some back of aren’t And would reconditioning revenues the

maybe We’re can lagging bit a a that. on more you speak little bit little Eric, there. And

Yes. is that quickly. due because taking wants But and hot done probably We fast And that longer, return are us being if car that each looking taking the ARPU was other, we the able people time with expect would to saying, no I our the to year-over-year. it’s in mostly ticket if start related at up. of you to at second remember, work quite to in point sellers X% mean, quarter, we – with because, from more over prices It’s were is to and shutdowns average locations April, because selling services it the there we They’re sold a okay, doing if restrictions to it takes Even June. that that the related It’s to giving the we Most we’re an were now in to go work on the not quarterly primary vehicles back restrictions May at think for right to the number. number issue area, get take to many proximity get in said, seller would work, related so April to allow we soften I but the vehicles. work, done, little would how without in would time. and have were I’ll And down on come so how still physical Jim we longer be the time, of the can saw mentioned. some strong. all that normal all. we available are any to do I’m to can market do people process again, longer a –

might what Thanks, Eric. when be? bit some And going additional forward. helpful. to That’s little those specifically a initiatives you very some allocation, planned of capital digital it spoke highlight have lastly, Could just you you additional then comes Thanks. initiatives transformation

my mentioned pulled I remarks, capital back we as in little a Well, bit expenditures. on

Our is these number making technology the one continue investments advancing to platforms. we’re expenditure capital

half of into XXXX. year the pick especially on going that in us see and probably You’ll up second the

our our though, The need talk and helping the about, technologies time. other, us other looking to are And on add eye businesses there are marketplace, to we with Periphas case, an the that in be are on, really specific used would add digital partners, car are we leader in a Apax what of to to over do the focused offerings to but that wholesale be is marketplace. nothing the KAR people

go to focus in it of be ideas beyond. at transformation coming and stabilizing point continuing to some than other of But digital and the And recap for to on as on transformation making capital let’s commentary that hand, XXXX we digital we the I in moves it’s in take talked balance was plan looks some like this all what of to year, let’s our – drive care and at this right – is into now, forward care our sheet that, of time, the this that continue company, take XXXX. think is, with And strengthening we’ll about just our balance allocation XXXX. business you the let’s

much. so Thanks

You’re welcome.

Bob CJS Thank question from next our you. Labick And comes Securities. from

now line Your is open.

morning. Good

Good morning, Bob.

I a Thanks ARPU from want to details. ago. minute I follow – discussion the for to up follow the just hi, up on want

of said ARPU I you most was think April. the decline

So, how was lack we’re was how levels? as normal back the May and Is ARPU strong going forward? I’m trending given so that ancillary to curious to June just of services?

The Yes, year-over-year probably, being mix to close question. very good Bob. comparable That’s is physical. at a It’s changing.

remember, the So locations, an business. portion would our physical of only I’m giving online you that ARPU the exclude from and

is all is the performance sellers, cost the pricing not slightly of denominator you, these the is that we same sellers the for looking basis. I’m quick – have recover, year-over-year. conversion even it the to or rate the especially because car item they’re the in name used And ability to going pressure game seeing good we’re the the our right a services. proposition strong, the value sell so The forward for high-valued So services of a the always always strong High to Speed I And continue And services that’s slower, car biggest unit per lead and normal. good are much numerator for ways. would to thing growing really will tell commercial thing, but under really now. that’s performance. of probably sure closer that the pretty revenue how

super just earlier back? normalized inventory trying quarter, sense of were like how sales recovery to little are of lack get bit more? And you inventory given in July right And April I right. where like quite the in overall or a kind not low level of as was and from just and is the the us now overall trending June, the looked, unsold catch-up of trends said, where, dealers which And kind or May? from likewise, the snap from the Was market a All how closures holding if of dramatic. then throughout the quarter now is June perhaps some stands a give from the on volume

Yes.

in as lease of lot us So, that inventory March, were some your point backup a coming to were had coming cars back there and go April. vehicles inventory. there off off-lease We at is that was we were

conversion then a capacity the that at enough to and created our we in. no high over kind rate. thought And we And the with may a to to As didn’t has have additional low acquiring have we as fact, quite have weren’t to of going handle levels. land, coming had land. heard And capacity talk week were We selling kind was as we we hit our that acquire And point. sell matter volume the any of record volume as us constraints. we actually the result, cars week, of about we started capacity week-over-week, sure started you cars frankly, been additional

right to we’re would that’s be the and April now inventory. into which that – levels. companies fall, activity right one lot platform, is. I’d is be up, the inventory repossessing processed, – where finance our up expect on they’re more here repos now come vehicles. segment May. The you states, picking it. down, through a there’s is through, potential And repo normal us shows and And an in, little a was about market overstocked is early in at for not notwithstanding can It’s up still question. normal And causing. we’re has in feel what we is hung like waiting And it RDN repo we we is good activity we those and and just a backed we the those delayed execution. Yes. delinquency in that earlier repo. is when in When had up tell of Bob, work we many spot, statistics repos moratoriums that been We think that repossessions what have back backlog say in the March area to the April, in picks of healthy. I they’re there insights the think what talked did and backlog And light It of a

Thank very it, Got much. you okay.

You’re welcome.

Gary from Prestopino next Research. our And question from comes Barrington you. Thank

open. is now line Your

gentlemen. Hey, good morning,

Good morning, Gary.

questions couple of Kind here. of

company? from put number permanent you got what about a reductions $XX cost But million with the in total what are of of you’ve you First you positions. all, the across reductions can Eric, eliminating pandemic, on overall, said cost some done the

probably give long-term the have some – to the reopen, had furlough other I’m hesitant the what but jobs number. be back. million, other cost know I going this who – we hundred it We to That’s say you, of number done that’s because number all – I’m several our structure in reopen, and quantify to were took just employees, point headcount time the until when not who in it’s And things, could on temporary I start offering don’t of we’ve the tangible because $XX services. do are coming addition we at

– another you I’m number, that how millions get names not we performance dollars many X,XXX. how heavily costs. impact ultimately that’s be the and at weighted many compared towards business additional time. was on the will that’s average That The going more might on the be X,XXX be to salary would But will remain that be but to back giving October even upon until when How That much million we tens not in the decide come based that time. that be? part towards might So positions that be of of know $XX we that eliminated of is it furlough. as what

would SG&A numbers headcount eliminated, I’ll the in – in lower, relationship, view. And a in bit be the in it our quarter. a it say And areas. then – So but it’s the all little non-labor comparable be in the it’s my in a little other could that’s the down was other is numbers if

here. quick questions more two then And Okay.

TradeRev, when and $XXX itself you’re gross sales, that that the – ticket XX% is What getting is in profit you You profitable said out sales – your expenses? marketing of marketing profit expenses? a million backed Or gross on per car. is TradeRev include it

we not breakeven said, an were, we marketing, and well our May, We in include on sales were just but in above above and basis. breakeven were as above total June breakeven. profit EBITDA We does performance. Gross

by remainder revenue. fees, get the So is profit. And accomplishment. over performance. $XXX that revenue. two-month – that XX% quite about to the the know, way by million is as that’s That million, fact that transportation the you includes positive was we And, the that transportation XX% $XXX outstanding that were EBITDA Of And able is an auction period. gross driven is

can long a on imagine, that tell breakeven above been we’re Gary, as you I’ve waiting to time TradeRev. you

like a where here, down? waiting vehicles XXXX been look fairly too thought XXXX, And of with of of back there to this so. the lastly, car big Yes, the pretty given yes. supply maybe fact they’re to sales what to was We’ve whole dramatically actually, new process vehicle coming be year, because kind to are looking of down just happened that mini-repeat then going we new in just that a at auction, impact going a phenomenon sales

that that supply, in But may focused about in impact that material high-XX got million-ish. by of – to There’s SAAR car million, vehicle million, and that we really the million, basis, been overall if trade-ins maintain retail between and annual the of right, turn a XX% number significant they A It to million vehicles effect on on the to retail. it sales. more I XX% a we us. and kind hold right, less takes have the be you to – rather the on vehicle a down if that the the may a he and impact of at effect that dealer keeps that small change a dealers and the the vehicles an couple retail things normally on to number to somewhere how car material the XX X always cars the that that they mention churn, that SAAR market, XXX,XXX, between doesn’t park, to I focus an always It’s dropped get with used that been We is, you to cars to try that use There Gary. Yes, XX we SAAR wants trade, on. you number. we us. hands look it’s on don’t as and example, XX would think have as a wouldn’t that direct question on no those focus becomes has correlation of think we many position there is between is it, – have try have

big if and retail about In XXXX. XXXX XXXX, In I big dropped fleet what and add, between that, dropped there Gary, of happening a SAAR $XX difference could is Yes. and happened to fleet SAAR $X in to And what’s million XXXX, million sales. supporter. there’s a was in about no

a purchases. million going We’re at be to SAAR the all of almost $XX with consumer

the reduced XXXX conducive in is you, the tell used in will XXXX. more to the reduced SAAR SAAR I than much car So, marketplace

of So, transactions is difference. Lease on all in down there XX% isn’t a Lease it number. back like XXXX. to a penetration – penetration lower dropped near

penetration. We’re high seeing lease very

SAAR a dropped. last this recession, you, bit the than where would situation healthier I little is So, tell

very Okay, thank much. you

Thanks.

you to one wanted more a let Justin, late, we could we take started in if questions know, little they’re two the we or probably queue.

sir. Understood,

Bret comes Our question Jordan from Jefferies. next from

is now Your open. line

good guys. morning, Hey,

morning, Good Bret.

morning, Good Bret.

think Vroom’s independent a going volume you public shift where obviously, see about population used dealers, bidder, the to of inventory. you independent? or car of And a market there out profile lot the is used of you When now the guess, retail car going? to larger the world needing auction the if share versus I the large small do of the Do used stories there more see Carvana’s

Yes.

in much fact. our probably, I five than you be miles, the and low buyers. reconditioned listen, at vehicles these very to call, buyers, and that are with of other older years; buying the high good good many very, vehicle companies would they’re end top a and in scale, the got can mentioned car They’re what high-end the independent CarMax dealer, they customers, Vroom very, you’ve lower-end the standards. vehicles; not cases. like, as very those buy and Carvana also very But So, high-end like Whereas

that right to and lot $X,XXX a that spot $X,XXX of car. In now fact, the you is buy I sweet people real for would tell

or If that And become focuses you especially of a $X,XXX on. think on $XXXX thing They going people COVID transportation, transportation. to that’s don’t about it, the car want want car that has public private on. independent be car this with very and kind the popular

– of that kind now still all based all doing kind you’re And going across I its look the dealer, market on network, on market So, of, on think our healthy each dealer marketplace. they’re has and focuses and they’re that we as in well. what’s

the In We’ve seen independent bought They in the business probably reduction short-term. market of dealers’ in But a independent short the we AFC. a of fairly we to saw very number a no as many dealers X,XXX customers time. back came reduction saw at in quickly. period quite XXXX, as

this in have Bret. We seen not that cycle,

Okay, The changes thanks. one in noted, in that network question. then happened quick the charge. the drove that the dealer you UK, What And there? over

now, – an us quite Bret on Well, supporting digital of a more that from what and opportunity sellers platforms in. we were weren’t we’re tell back dealers your a a more about And They in the would the issue to there. platform. invested we’re really, is was brick-and-mortar it’s seeing that our what as small a down opportunities focused business, can really Eric I frankly, speak are. to a saying, that of result, And, number say, auction. terms from accounting very us an UK the digital coming standpoint, more wrote people in seeing about what and tell But we

in XXX% an Central Eric at year. continued the is there say, we’ll with COVID think on. and more Europe. XX%, technology. to We resistance UK, going as to we sell beyond to nutshell, by There in it’s there, the I that end a is be believe continue in opportunity the situation just a huge – to the maybe opportunity more it and UK we’re a especially But back a So, cars. was Europe, of In in we’ll would and the said,

they there’s right to, so the broader right our referring the actively business the intangibles. it’s that and I’m And what the that has islands. of one Bret, – of inputs now don’t complete declined the a into in dealers specifically, than of are And the number drive, analysis cars a hand have a been shutdown, was market – major

the again, UK based near-term don’t the wrote we with I expect fewer in it’s but short-term. transactions dealers, performance So long-term, upon the think fewer we in off it

you. thank Great.

now, call And to Jim Hallett closing I like to remarks. for CEO, would And thank back the turn you. over

thank decisions company. experience acted making you Justin. crisis XX and and today. to quickly over our by time. and me change making I’ve – prepared. our really team and a years career how think call how dealt tell you, your XX this close I deal can this We well was our been early support with I was making has team, COVID and And crisis. ladies and and team being saying with continued the and our you, entire acted that our I on staying prepared thank courageously I’ve over really really management Great. dealt with them. we them period in And and pleased I’ll for quick your proud gentlemen believe decisions we of of in interest appreciate in our really really for with that, throughout lot my I I’ve throughout of business that years and just

now we’ve the really I rightsized where in position, think company. we’re a

through transformation. We’re the company in really a to grow position digital this

seeing a And cars vehicles liquidity the We and that we format?” we’ve this sell year. for have or will all our can digital talked digital a tell day in about. digital you path a quarter that the on format of XX, XX digital We have we’re you in investors the see a that sold forward. my XXX% some Eric on asked “Do I, adequate second channels I years, performance And always of like and last our in

position the and that and be have. believe customers I to the today our and going choice will here I satisfy value that’s more forward, that proposition than is that have we someday that’s continue a focus So, the and

excited we year. of quarter forward keep But up looking how in we’ll go on what about we’re in about second as the forward, the we’re doing. we’re more what half So, excited date and here happened to you to second the

about feeling good pretty things. We’re

on. for a So, thank it have great and being We appreciate you day.

gentlemen, Thank call. and you for this Ladies conference participating. today's concludes

disconnect. now may You