KAR Auction Services (KAR) 3 Nov 212021 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the KAR Auction Services, Inc.

Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your host today, Mike Eliason, Treasurer and Vice President of Investor Relations. ahead. go Please

KAR morning, will for Good conference you joining concluding performance for Today, September quarter Thanks, XXXX. questions XX, KAR and from Global today After of financial the the will commentary, earnings for third us the we ended we Michelle. our discuss thank Global take quarter call. XXXX 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 Peter 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 Peter Kelly. Now this Peter? part I’d KAR like to over Global, CEO,

you Thank provide Global. an everybody. good here our I’m of at morning, with you, KAR all to and this update Mike, delighted to morning be performance on

of provide our our structure. a TradeRev. our with with finance businesses, and update close continued relating AFC, the performance plan and next out to to focus and our update in some I’ll expect acquisition on business an dealer-to-dealer I I’ll to end the about what call, an volumes and on on provide results. and digital updates year. between today’s on solid updates cost seller provide CARWAVE now dealer-to-dealer of see the also third commercial business, our growth So speak our on quarter BacklotCars the of I’ll I’ll we

that like to quarter were are start a quarter. off-lease quarter third but And category, challenging the the spoke of third the These with tied no question to morning. and challenges seller detail disruption commercial all I’d these in tied I back So I to was specifically principally the to to vehicles. to Analyst at Day vehicle the that production. don’t volume this challenges repeat dynamics related new And volume here industry-wide there’s and in September. plan event our

at time. say However, that I situation the will largely that described I as remains

operating from results. very So an the we third achieved vehicle of despite in constrained environment supply following quarter, in commercial sellers, the

purchased a $XX.X For excluding operations million for in of the KAR We million. which revenue, was year. million, overall, QX generated representing a EBITDA. $XXX was generated million generated XX.X% $XXX quarter of of total from in adjusted gross decline revenue, last of profit $XX we XX% generated Cash We vehicles. from

segment, facilitated over ADESA representing billion sale vehicles, XXX,XXX in of the Within gross proceeds. auction a we $X

basis. this from BacklotCars platforms our to and the a TradeRev versus QX and sold XX% commercial year. the similar our locations, the by quarter XX% actually and consigned year. volume last of was sales on QX experience of that, Within half is down off-premise last are vehicles our volumes down dealer total these third Now this XX% year, first volume total versus in in XXX,XXX our of by on XX%. were combined of increased We

million last segments. Key And year the losses. expect line to gross AFC also higher, and sold credit profit performance was profit driven digital volume reasons, auction by is lower the active the segment. per and the new vehicle the records for given active normal in AFC current values in levels per last we QX vehicle business strong part also well drivers per sold the in service increase see to strong year Canada continues quarter. and combined current in than $XXX its dealer-to-dealer this driven $XXX efficient expected. to on We generated vehicle of that ADESA delivery. by of the had and U.S. was both This an million in car year. XX% same the year AFC performance $XX quarter. We platforms sellers these as total last of segment was from conditions was I market This in continues those versus lower buyers XXX,XXX the was a of have down set revenue this third first was loan SG&A X% grow the the with higher than be terms of to gross in AFC of I for year. the from $XXX AFC more levels than as million vehicle this total and QX $XXX reengineered continued transaction all per in ADESA experience environment. SG&A statistic quarter. transactions the from higher our the per half pleased of overall with operations. in that risk QX XX% had of at greater than strong were and generated of was for and it business business same Revenue processes quarter. with And of to loan for quarter the higher continue

a dynamics speak to marketplaces, sellers. supply about within vehicles for moments like our particularly I’d So commercial the used supply from of few

to marketplaces. the commercial quarter So of across as I see were challenges our the it, seller volumes lack our tied in

our same the within close X assessment being of last both a Day, earnings commercial last in commercial XX% commercial volumes with the of our disruption, and industry. meaningful of I supply Analyst Most at call subsequently by of went XX% were down in the do My is categories. we’re year. the versus volumes. which I disruption historically into has of approximately in have quarter In vehicles at not to detail volumes, mentioned, believe drivers auctions quite the vehicle I the our vehicles seller our total represented supply that fundamental on rental the off-lease changed. As to very terms off-lease KAR and seller bottom physical in lot

also with normal. of analysis the have indicate repossessed market levels we normal say XX% I our quarter. repossession results vehicles at of volumes remain that sellers now. quarter’s would relatively below And Now our in that are volumes share commercial maintained about stable of the right

next Analyst we we constraints that an vehicle What seller increase time. the to for production, In the the we the allow vehicle used wholesale expect said changed. to new second at half. vehicles that So to to as end of in to we expected to not still continue more conversations reduce for believe be to flow that the our year, is commercial normal ongoing remain some a vehicle expect remain high XXXX. first and bottom, implies volumes half business to half of half, improvement to it year we first very the need well In but I assessment in with improve start improve expected for the continue sufficient here we see while we of below in new values to as continued should our see order has our next volume into small marketplaces may channel. that to through that the on increase, production second analysis and to our the our the customers, and towards expect we in throughout current Based Day, off-lease

We expect to the XXXX see an volume in recovery in acceleration beyond. and

update an dealer-to-dealer on the like vehicle So our provide now progress I’d category. to in

volume So sold mean and the XXX,XXX we look and dealer third year. first combined, of we That QX in last to total of an our KAR’s of if volumes total KAR XX% dealer consigned vehicles all, at which by quarter. physical represented at compared I increase digital consignment in dealer

volume across that driven XXX,XXX XXX,XXX of the increase If of exist for our our that the given type vehicles dynamics by volume we at acquisition metric The was by is of I’m -- we of sold. QX XX%, to our the of XX,XXX. pleased QX supply BacklotCars, able was year last category digital comparable but overall increase dealer-to-dealer look industry. were only, that Some

our digital volume dealer-to-dealer XXX%. by total we grew So

However, XX%. the We approximately in we QX if KAR BacklotCars digital And last growth sellers of Canada of in QX. record then year both part include in was year. numbers is of number, saw participating dealer-to-dealer not in U.S. and on BacklotCars platforms last our buyers year’s and

growth on continued well in perform closed October. spend average strong CARWAVE. about the solid sold volumes business both Canada in profitability. of and CARWAVE delivering saw the in acquisition of a on I’d our in We to And the finally, in the TradeRev very continued moments to U.S. of We consecutive second like TradeRev value BacklotCars vehicle Canada, acquisition few early also in quarter

new do and BacklotCars, smallest volume acquisition we strength that I automotive look and an are higher the statistics, to digital registrations market. strength in strong imagine, excellent the in it increases network diligence, for of is creating our map more buyers. combine any course, combined. If acquisition sold for the on the as new many than of CARWAVE powerful So delivers the the next And business believe United sold our footprint from more given in not BacklotCars acquisition The depth buyers. than a you before average and Texas of an team. annum. our middle that best leading year within now reflect as the value Also, States, largest West stronger California per Florida both platform also there volumes CARWAVE. markets, also offering a terms sold approximately states registrations and X a and market. a in have means effect and both see for our to market. the any has we opportunity vehicles California, brings ever businesses, might of CARWAVE originated The and higher is each vehicle an sellers profitable. ever on CARWAVE and and dealer-to-dealer U.S. registration platform the out had in at vehicle XXX,XXX which XX sellers our is almost geography sold are Ultimately, the the California X CARWAVE per that dealers combined. the strengthens is in as and QX of large generates CARWAVE performance than vehicle new Based bringing in we vehicle revenue California vehicle CARWAVE the

opportunity per drive larger and stronger sold further to number increases continue see unit margins. of to and will revenue move vehicles. turn higher-value This also upmarket We in sell an help a in

the needs is solution integration preferences dealers in single platforms. economic envision market, technology ongoing. best functionality solution of our with our a and the we leverages So features, both planning But aligns that the of a and and model ultimately,

changes, for an annum grow. extent all sold we’re addition have, momentum the to don’t given that that strength and of close We customers. of is to the businesses our per run that we current of take to before delivering the longer Now case than vehicles the that little our very and that positive better we we continuing a the likely XXX,XXX with transactions would the is execute make our both to and with make this businesses digital migration. experience dealer-to-dealer customers than was now sure CARWAVE finally, disrupt rate means to And of trade want both

achieving our dealer-to-dealer transactions we are XXXX. of well target on million digital X.X that by So towards way Day annually our I on Analyst the established

discussed on reality I’d on earnings our a our commercial a and on again likely to much reducing and of cost strategic Analyst to structure spend our reflect that recent top digital a remains our of Day the through moments few the focus talking more for than seller priority structure. focus So XXXX marketplace. to team. cost costs On our The persisting we’ve call management like lower means event, for volumes me normal continued transition about

like update on I’d an So provide that. to

and significant for areas and last also initiated a the at that operating digital volumes accelerating future we lower-than-normal During go-to-market Analyst work and aimed SG&A. are are toward to experiencing. them X the there currently project of evolution to our our our this committed to follows: of operations, I while recap and are that more prioritizing our but initiative sales model refining here our management in growth address investments these principal towards refer service the commercial a as Day, seller opportunities, overall We’ve technology streams. quarter, our resources we and

the assessment and project, made nearing the end we’ve this on believe good phase. progress I we’re So very of now

fact, In will next it be completed couple of weeks. the within

the all their to all expect team like call. know number and to forward that Rather a look and future the I be timing I full before work, committing Now you the opportunity in-depth the to our to our more report, to have I’d than this. of providing scale assessment a allow will I interested on complete

However, materials report that in I opportunity to $XX million. pointed comfortable the opportunity analysis SG&A am Day enough our SG&A following: the of these the I’m terms sizing with least be at preliminary Analyst of opportunities, amount. an confident our of to will that first,

of However, is part the SG&A just one mix.

accelerating also we’re important as of reduce our areas. that to addition that at costs. we growth will well. be of improve to improve direct We’re These And these that target believe also overall monetization looking do in key also an be have opportunities so in while services opportunities the I at to revenue and number. part looking to finally, will the opportunities and our

there we to and way in of In held impacts those. be our in reengineering terms our want be from to of these our the of be manage short-term and setting track. make initiatives, do and describing following current quarter, and are reducing changes place of be expect all And that. from sure don’t I impact the And clear expect specific the in cost do we first long the model myself the to years in cuts, or to will see stay permanent operating accountable I cost expect clear what term. but timing, business, over goals, we to our and positive a communicate to of process measure the impact see and the XXXX in I strategy looking I’m finally, at serve I will on to team to our we’re not cost all, but here course, to an management structure, terms in this temporary ultimately that

to look I My precise more greater expectations call. quarter. the forward future and a remarks current to few make So is in point detail providing a our metrics on for last

September that September, is wholesale We in in time. vehicles not volume our predict until market I’m discussed and supply at to it difficult QX EBITDA, quarter, I’m referring levels. With that said, we would quarter I typically our the our this our by of the in As in than fourth fourth experience and some providing less improves. performance, seasonal visibility impacts be withdrew into which expect guidance adjusted will the guidance to

continue. key the my challenges today, commercial believe from summarize the at well to year. messages but So clearly, continue the challenges next will now, into we’re volume think volume bottom that I I

repossessed of will the before should strong longer-term take when vehicles beneficiary My this also over off-lease, one that view see time, a However, not The improvement of some has it’s me happens. recovery outlook for to clear levels. we end volume I to increasing time, ultimately I be we returning historical will but it the expect next year. that believe changed. be and of will rental

are In volume growing combined we versus digital up physical our volume last of terms with same our the dealer-to-dealer, year. XX% quarter and

we sold vehicles our per means annum yet platform, and of now we close delivered CARWAVE our I’m an gross low both had vehicle addition XXX,XXX growth annual quarter able terms terms of Canada. pleased and dealer-to-dealer of quarter to solid deliver marketplace rate in record in In transactions that U.S. of run best per sold. we were participation in a the in we’re of The digital terms profit growing. that despite at volumes, to and

Canada exist us, for for on to focused Notwithstanding continue the very strong We growth and at TradeRev be that a performance saw we costs. profitability levers AFC. also in solid

initiative We have through and committed to to more updates we going initiated it. a following providing are look forward significant with We forward.

purpose our things our And hand to want KAR Board over observer Directors. Sanjeev before our to an Sanjeev I Board I Eric, Mehra to transaction. XXXX on the XXXX. he officially from served became to just in Board XXXX Finally, previously Global type to participation of on Capital’s welcome

more You background can X-K. our in about read Sanjeev’s

and deep and his vocal our on stockholders. for have be knowledge to fortunate for industry to strategic very his will advocate And a confident our Global mindset board. are continue he I’m We KAR

with for quarter. provide So review more will of financial Eric? Eric that, now our detailed results a the

Peter’s Thank you, to have to today. Peter. things I add commentary a few

would primarily vehicle commercial I for First, like we point some spots to bright current constrained are the business. out all vehicles is in facing. situation We the wholesale that supply our know

vehicle led vehicle in price consignment a $XX,XXX ago. of across fees year. high dealer-to-dealer to of for strong per to third price The the at at fees this represent OPENLANE in private OPENLANE all platform has in fees compared has been led BacklotCars caused car off-premise auction average compared the last the $XX,XXX only that on used to sale $XX,XXX primarily our commercial quarter QX the of decline to auction The -- higher $XX,XXX was Gross an has percentage to Digital on-premise one This label being pricing. dealer dealer at average per compared of grounding segments selling selling transaction marketplace situation seen per record in includes purchases marketplaces. all has programs. an significant $X,XXX transaction our auction However, and of year XXXX. The business. is segment transactions mix third third XX% decline in quarter. pricing auctions, year-over-year this quarter price levels proceeds our in our TradeRev strong $XX,XXX And which in average to of of and a commercial are

lack services vehicles ADESA The compared to a year, the especially segment, the Another if gross performance. of like per reduces to focused our coming from mix profit transportation revenue unit higher-margin third reflects prior per services in this off-lease positive increasing a $XXX. gross profit the QX our services. than of prospers I gross was lower-margin strong than more in car cost more are profit $XXX the improving revenue on want there be clear, historical transactions though, revenue This other commercial per positive are with achieving business lower over sold very supply, end-of-lease per were of our $XXX and in even auction from in quarter we gross while profit vehicle was inspections. and structure when unit, and levels, lower-margin

ADESA, reduce transaction, revenue quarter the The Auto number from an royalty an the XX%, vehicles EBITDA, from in X%, over metrics noninsurance key dealer-to-dealer at on in segment of in loan third its by in and loan increase months. the number Insurance compared year. last the in Auctions QX did XX growth revenue The performance a was AFC to XX%. improve SG&A AFC performance Consistent with increase able based as previous transactions, adjusted of received volume at per was channel the benefit saw of positive sold IAA increase an And in AFC. and all to

lending turns inventories retailers has Low and used its loan very prices. the and supply remarketing of situation values these made increasing levels. floor are industry, losses factors revenue plan means floor And higher levels at car in importantly, majority Average most loan high car fees same earnings. a lending While are to of on the pressure put low wholesale at interest faster car have not current due used at profitability. plan used our has perform very

quarter, quarter. of the previously loans off recoveries the in experienced fact, during losses exceeded the third loan written In

typically by losses estate, see on of all As is obtained the plan real personal when collateralized floor When are dealer lending judgments for of a We guarantees lines. by assets the recovery monetized realized, the reminder, including principles. are principles. business the dealer vehicles assets, plan losses we substantially floor all and our

Most real prior recovery. benefiting X that high are losses to real in currently the actual estate losses. We to This occurred estate us years strong the values. allows market X recover are and past to recoveries

was our overall completed. positives Now performance due of in highlighted, challenging still have the number low the that despite performance I to our transactions

XX% unit not concern not year-over-year excluding XX% per our that decrease commercial due a as growth with was to cost supervisory the out, going growth is in structure is As is gross volumes costs was profit to begun in labor in dealer-to-dealer we of profit in be percent change prior gross I in to to though vehicles a revenue, to Even contributor gross cost largest pressure at to determine purchased low digital direct ADESA gross decline the the percent services. volumes our profit year’s in the fixed cost have pointed the our could compared is forward. The on QX and as to costs, as profit. the first Peter declined $XXX, My the this volumes that determined After have that dealer-to-dealer. see of facilities QX. in just of included our leveraged analyzing most strong relates

experienced on were demand. customer losses wage in our a the the acquired QX meet are We item vehicles these increase also believe losses months Canadian of purchased vehicles, compared activities. one increased be we that arbitration to XX as increased which We push is last sell costs the employee loss through to the to unique as vehicles permanent subsidy. quickly will primarily inherited to The

though that volumes longer on increase going profit forward. in to no a as profit percent to increase million This back early our requirements be and for second or in I benefiting increase and receive effective do subsidized begin XXXX quarter program million the to the impact XX since per of represents have XXXX quarter Canadian recurring. $X XXXX, were is business cost to be in the going from -- in will of Canada. subsidy. decrease July subsidies the X, bp Changes approximately qualified $X.X gross We less to remain Canadian about expect in been the gross cost direct gross these

and Turning to capital sheet balance allocation. our

performance EBITDA. over leverage This X.Xx adjusted the to moved total the past months. at above Our is has low Xx XX due

$XXX months million. last EBITDA Our is XX adjusted

or target completed on We We we QX. in to cash CARWAVE. purchase the $XXX price the end, less. with continue acquisition not have shares of hand. Xx quarter did Subsequent any leverage million purchase We funded of car to a

to We authorization have that repurchase through December existing our expire $XXX October. Directors has of authorization XXXX. the of set XX, at end million remaining share was The repurchase on Board our share extended

so acquisition used our leverage temporarily the our substantial a We after though. balances the above constraint, net amount our have Xx. total cash is Even and CARWAVE times available That conversion strong of of the cash CARWAVE generally everyone queue for of business free for In remain Michelle, acquisition, funding our concludes Q&A it cash first supply I will today. joining the turn begin to up can back my thank improves. portion remarks, call. our operator, I to Michelle, our you us of caller? the

from it didn’t John It’s Murphy I America. of Bank out. get

So guys. guess me turned she make I and didn’t on an announcement. I’m sorry,

about think that do purely When very network the the this do building you’re normalizes How be as argue you effect say, think, might hey, be a skeptic versus or And and of it’s making need may potential a overlapping a core business is Peter, optimist of first just the will much over this to question. acquisitions, what how network acquisition, an going. you flywheel customers? incremental the time. of it about significant overlapping think these duplication we get sort effect bit the CARWAVE you they duplicative So could little to or

I the question rather. the Thank you, John. call -- appreciate

real in on is I the effect when looking that you marketplace as attractive marketplaces to want have you’re businesses, a it, generally, very, when digital digital market network view And Sorry the important. proposition. at think point guess, because it’s technical and my #X you’re of a model, for when set that not But -- difficulties there. digital I you very John, if marketplace you’re your or be #X -- outside of really

scale over customer I be quite matters. can think think early habits on formed I time. quite And really So gets persistent sticky, scale and

think early think been lot So disruption, stage the has a of entrants. market was evolving. I of I -- a an we lot new of It

now that the market. we’re think I through in stage

defined. the established have geographical number and becoming market. They of a patterns strength of in established there’s think relationships, more I those customer players are areas

I outside BacklotCars additive plus So I duplicative. combine and together, say, if of CARWAVE lean get parts. more the very, base example, really Well, have -- Because them but of that for heavily very at, very and strong in than California, X a if and strong you are towards so you of more BacklotCars think not we -- sum a actually these look does. the of It’s by market. it’s think just CARWAVE, I doesn’t buyer

bringing now by a in and onto liquidity also platforms theory buyer more creates those buyers. which So audience customers for obviously those get outcomes supply new those you of improved California, and together, sellers both greater vehicles in the brings inventory to

So types of matter really things sort acceleration in see really, you dynamics And of I think often those an over those you positive marketplaces. of digital time as get scale.

along. these industry, the bringing into digital then into was world? in been I clear thesis other are all they Are what are new on marketplaces this our on formal traditional sort auction disrupting of So that’s marketplace this. I’ve happening a think doing? think kind just of Or they what And the on I physical Candidly, variety industry? vehicles

they’re I both. doing think

I they’re opportunity continue. are that of think in as we And they new think vehicles legacy data as will move in businesses a the vehicles for bringing also channels that digital out more and greater I some well. says us there’s competing direction. like in But

a then And second question. Okay.

you’re very gaining believe in what’s curious, debate made call whether very statement the using market your quarter. was that’s difficult happening share that opaque a great that market commercial the maintaining, I’m as just I interesting share, to or mean, and You a it’s that are the that consistent and in you denominator analysis? figure gain be are maybe is the out? even maintain you’re ascertaining How real-time to comes you call market are difficult going shares to as back? market how you you comfortable to that mean, to market And or doing able on basis. commercial a that there what some I is

and Yes. a we’ll John, we will share it Analyst results, commercial around commercial commercial [ph] -- we our XX XX, share market relates go back again, least volumes, market to our our thesis see recovery And if that I at our as and was, Day, maintain to delivers think, in volumes.

nature right? So of if those into channel. we we upstream give look know data high, OPENLANE an contracted those what exclusive you’re sources And at most but at at some them how us not We know are with great, converting that current relationships, the given know at on not -- we’ve let you lost rates insight platform. of at we the do world, also in customers me are are customers we we customers, are And right, those the our exclusive. any obviously, our assessment. all-time are the or haven’t If sort they’re and we if that any, look dynamics. And our lost frankly, conversion then can of

our source. obviously, physical an into So because the we that bit that we independent channel say that’s increased volumes, across commercial already actually us. know known selling we have probably our I share through strong insight And physical when we’re world, maintain, share. in where proportionately our volumes statistic own third-party industries to commercial in right? But we data -- that’s a a then have more So

picture say that obviously there we can I’ll closely. there a that on we look think we data and some those perfect how we we their potential that’s that the industry I data the right? a that I at good very we’ve numerator -- need. set, but and analysis, denominator once pretty of are, get Are John, do we don’t got can make statement can So guess, and there we edge track, a neither are sources, caught cases have on

confident am sorry, as volumes yes. I our on confident -- John, that, back. the recovery come I’m we can maintain absolutely On share

of all it bit Then They’re just go you to on of maybe might in activity not if And recovery new be in? that is on an as right you ramp they’re repos we’re if now, give the And on really where little XXXX. update repo a think picking production. because relief, create tick for just waiting through could production activity repos vehicle up. just where dependent lastly will this before they can -- curious dependent us I’m

It’s normal normal, I that been means independent agree is is segment below to months XX normal, that XX% What is and I get or repossession I grow situation stable insight, so with months. level. its the of current another about the And good from segment. been so very of XX% potentially at do has to that a that the level. mentioned the XX XX% you. back is can to that’s for think think and I of sort as production last one John, commercial you, it

happen our that We were happen, track over assignment So there there’s do RDN. time. it I if and expect a to repossession upside industry, volume will good for to

a XX-ish have weeks, as be but seen We uptick, platform view percent might the seasonal. somewhat so through it’s or small X I that last positive or X possible a in that assignments that over that, also

But recover to want don’t potential think count I other segments. to comments than that So I your on yet. agree I that sooner repo the with has

dealer get like that not mean at stuck But I those a go repo auction. good, fluidly they ground would directly right? statement? units would auctions. to a lease more come into fair directly a your Is they would like It’s

Repossessions cut much I I to that absolutely well Day. through that physical you’re bunch went as Analyst whole I of right. on sorry, -- exclusively John, mean off downstream there, reasons but make absolutely vehicles sell repossessed you pretty for point into. to didn’t channel you’re -- And a our Absolutely. the tried

would So directly auction. flow yes, they to

Research. our of line And from with question next comes Gary the Prestopino Barrington

have of platform. digital now within of then the your of And as the digital U.S. majority with just point, dealers Canada and U.S. the cars? done listing in franchise what at coverage really Peter, in you’ve space you majority the on dealers the this the do for

thank you. Gary,

say to questioning digital dealer-to-dealer relating specifically platforms. question our yes. absolutely, I would yes, -- So

coverage We -- nationwide the I when well, really states. mean have lower say in U.S., I XX the

probably same XX coast true have, We’re absolutely, of the can is and Canada we strong in to dealer coast a as all say, and the not in with I TradeRev presence [Technical states, in Difficulty] but states, any strong in the any platform. serve state, we would

short -- yes. to So question The answer that is

and if U.S. add our was I growing a did we record the in sellers maybe I participation I of full coverage. fact and both little levels about the more very that, third have the can pleased in saw quarter. buyers record number quarter. Canada We bit speak the And just marketplace that detail. in to to

that they’re relative won’t I prior to we’ve I but below in had of quarters. little, supply of that So the attribute to keep actually trade-in little getting, a in constraint a we feel say that to or would X out supply below vehicles about business. the to of they’re trade-ins. a track really I them want the retail fewer industry. normal some are dealer, constraints on them commercial And likely real saw more we that the a that. the about quarter posted I vehicles number there’s or third good talked okay? more the say headwind normal So in number of for getting just fact seller. sort also negative or there average Dealers those that X And per

I’m the our of I the and those terms quarter customer market out of of third seen kind attributes results spite the think So we there. generally pleased what base of in in we’ve delivered with growth in

And our Truist. with next of the comes line Stephanie Moore question from

might longer traditional specifically of impact then expectations might off-lease years to as How through off-lease accustomed shift be do come your grounding you change in model to and that Do wanted I near-term and well? down and touch us And the these there to so you could vehicles that just auction getting on a to in vehicles. kind see environment, they’re as as dealer find keeping a of behavior channels maybe this just new not environment? can if this on just walk when new we vehicles the in improve? leasing much due lower

Stephanie. you, Thank

questions X there. So

Let the first. one me first take

it is dealership of became over on and for Stephanie, buying of selling. part and a trend record referenced one rate bigger questions all, online of as First that true conversion conversions that Generally, earlier. my seen it we’ve time I up bigger we’re on OPENLANE. seeing high just our sellers have

think way we’re pre-COVID viewed years, probably dimensions do trended back with and ongoing conversions that they those was increases production do currently guess very step my post-COVID or rate on has normalize, I to supply an I fall But believe is prices change in they on, because high function there the sort that multiple our that is were there going multiple a fall up. seeing the COVID constraint. where will with industry. of back. And as won’t all this digital transformation So conversion over online then

a lot grounding they’ll think talk fall from -- is the it about quite are the a between because the opportunity dealers -- the and buy of they today, penetration pricing when very high by dealer I do the driven a car by get the I big grounding right same think of bit to driven the interrelationship but value that value lot environment. market back [indiscernible]. A where So of vehicle as part is the residual of residual way now. really in we And dealers

residual being more those sort market numbers together above to see as often we a So move and start usually, normal in close values X of environment. more

our is, impact that the say channel, it the comes obviously, conversion last when upstream I rate And on think I’d So will open then as comment well. I’d to -- say that flow to they we of exclusive us. anyway to up and vehicles, drive private -- adesa.com exclusively into actively rate sort that’s channel off conversion that the because those an label try

expectations a well. very percent on sales say respect as opportunity per be to where we high car leasing as profit So strong. And question share channel maximize continues numbers we’re then in second a I’m looking to that for market get The to continues penetration that with really to conversion leasing. trying vehicle at, getting be sold real new gross your of and there leasing

monthly the market the the compete residuals more as but then leasing the relationship set wants do reduce than sold they end they with going and their industry vehicles is in volume can with is over that say, compelling those of I’d the between see I the think more lower day, more way I as think not relationship offer guess and OEMs lease, of part market So a do and to of volumes a is aggressively again, we’ll the value and leasing rate, factor penetration have consumers. being other think what’s sort the at I of share, value in to of to and vehicle each to and payments in vehicles the we Stephanie, and of residual OEMs I portfolios. to absolute because win parcel normal back dealers retailers time, And order our the for overall, business. those values get those definitely -- And the issue right between now matter that to

dynamics think dynamic that leasing that vehicles. on and OEMs off-lease the be drives will more to I around ultimately So residual the aggressive long-term drive around

a Got answer, really it. was Thank you, Peter. That thorough. thoughtful

line Inc. comes And from the Stephens, of our next question Daniel with Imbro

wanted on CARWAVE I to acquisition. start the

that deal. First, closing congrats on

pretty the XXX,XXX for asset Eric, imply brought time you guys profitability you strong business, said that cars. the it of I the that would profitability of deal, think at some at kind dealer-to-dealer in incremental the margins of

of one market. margin leverage these SG&A you provide a more better margin, of it’s then you more And from contribution since EBITDA just gross is can on stronger or on what stronger expect implied kind any So color that? that

Daniel, thank I’ll numbers you. give to just but here, you directionally Daniel, going I’m specific not I how see give it.

performing well vehicle that a a As with, would the higher-value market, in Selling but big potential transaction. I say, leverage that things Strong channels, efficient our a unit was right, digital very and dealer-to-dealer see model. of of about regional we And more we very not right, in liked one California. economics, cost of delivery to really of but okay? strong a the potentially more mentioned, is too. I monetization broadly, CARWAVE one, And beyond service a CARWAVE only cost

what business. seeing to to a In our growing in now of some TradeRev in similar sort performance those all we’re and Canada. profitable contributed So respects, platform

P&L -- other kind could similar respects. you the look many at at to in X each side, of they quite I look side by look So

transition upmarket So I BacklotCars on we opportunity an about effects opportunities of to to addition sort underway. well here, in talked accelerate to see vehicles, further network higher-value of a situation which an lot answer earlier is the interesting that type

to already accelerate intent was the that seeing transaction, further growth Hopefully, average BacklotCars vehicle in significant along. strategic monetization value. of which of We’re our with the all opportunity part BacklotCars, an

really do outcome, good there think But both the to here together I dimension. best BacklotCars transaction. a our And the efficiency to By additive So cost way, is opportunity that then is the of and for we that. very the the our strong at of also fulfillment put business. customers deliver looking to very this really in see for and it also but best serve an around

this is Eric. Daniel,

eliminating would did a the and X and I ourselves transaction, inspection. this here in can And add put comes acquisition. the transaction. that’s across advantage me the mentioned where them very cost with confident to our resource on. of we In dealers self-inspect as vehicle, my that that taking Canada, those cost network, we typically we offshore early think when us. across is down, landed lower profitable It this have I’m support really situation platforms dealer-to-dealer the us I’m a very, And labor pleased around we offerings, cost an digital using CARWAVE, expected infrastructure Let to to the very I In lower that. taking they attractive support

would quarter-to-date. lastly, CARWAVE is Can Eric, we you impact here looking the mean, be you it I are cash that pro how leverage account And any net used you think, Got mentioned X.Xx. just think it. spent there? when there bought forma allocation? And leverage then for ended and to at on does be on leverage? I what How net capital -- provide then And are pro the forma you I quarter leverage what X.Xx. you us But CARWAVE, covenants?

Yes.

I although low very as pro will building QX potentially -- leverage We number bit quarter, could not I up Xx, have fourth right to expect up in a my the incurrence I just it in year. in -- actual, do And leverage meaningful revolver. up go don’t of it EBITDA much quarter will stay relative end LTM We’ve a really went calculations, And be major that’s from X.X, be than in it’s an pro could impact I below my is total pick the My leverage issue X.X think leverage. adjusted forma but and And there’s with on if EBITDA that’s net to a in acquisition tick would see tick above based senior -- still test. expect -- but now around adjusted will But of higher upon Daniel. up And secured there. the last total I issue ongoing. above no well, a the But -- to right I’m billion. $X.X It there by been cash not leverage limitation EBITDA little we added future since tests additional is our worried leverage at I -- Xx, the forma. terms about.

last then cut audio little earlier. think it. I my bit clarifier. And just out a Peter, Got

preliminary that cost the the to just cuts. on what quarter. and commentary impact about fourth quickly some providing said Can then you You’re future you repeat

I kind heard of but XQ think you out. mention cutting I was it EBITDA,

underway. an Okay. Apologies, about have that. didn’t initiative I we realize I talked is What

I obviously, call. We’re But think nearing company. across opportunities And transcript. future be we provide the detail phase and have the significant end specific more this of the we on the will they’ll assessment in

would performance expect we specific effects the And have Typically, on I On the quarter, than quarter, based in beyond to quarter in I’m plan that. less providing the seasonal guidance Daniel, performance but to. didn’t the don’t be we provide not some and third EBITDA guidance, EBITDA our fourth industry. those in our

the from Securities. CJS Bob line with question of next Labick our And comes

to Labick and AI inspection with partnership volumes It’s where about maybe is of and but to this -- start P&L? how investment kind overall. start Could product? where you’re really and your impacts wanted going you where you’ve now how inspection with and I digital with And CJS. ultimately, your want And from you dealer-to-dealer, and been, reports? your Bob are this talk I Ravin impacting your

That’s Bob. good Thanks, Yes. question. a

the digital sense question, for but the it’s our it item a being ingredients of but critical. also We that are the of for and sure, no As sort success, but #X typically buyers, buyers, customers, poll what they there’s more think de-risk. kind about buyers are makes typically are business sellers, we is inspection and report

at a when up be to it’s looking we show that vehicle You’re given used that’s vehicle. delivered, the going a right, screen, how can it’s confident

So that. design well further the we including right sort have digital here to of for now the continue these report solution obviously, some the condition underway that in improve in platform. we’re to dealer-to-dealer initiatives And we CARWAVE of invest as And acquisition, do sort BacklotCars. with at

underway initiative that. there’s on So

should the our us to syndicate objectives the easily report is that call make of it inspection the of or of redesign more infrastructure. also across evolution, to inspection to own enable I more it, One

So the ADESA backlog like we vehicles into push from and seamlessly can things that. marketplace

to having car or So we the can the flow car. reinspect without move the data

work there. some we’ve frankly, done that’s to already be quite leveraging some proving with Canada, successful. in work So And TradeRev

Ravin some down investor on we’re minority of in that You of number with mentioned sort Ravin. with opportunities been sellers. side We focus had some a already business, They -- a commercial locked our opportunities that business. the has more -- the initial commercial already seller leveraging obviously Ravin of had

focus really as Ravin channel of first But seller again, digital number led captive themselves the say type some investment, dealer-to-dealer such been of well. opportunities. an and in and finance do initiative our on teed We’ve the months that. that this them other the as supporting a not machine introduced capabilities have are not yet aspects of delivery some AI learning to we customers. -- So new we bring to into And of is the by the commercial has them inspection over but certainly live I’d X commercial up, of

Okay, And other just me. really for great. one helpful. one then That’s quick

piloting physical hours? some meaning the locations same the is now? the up now the what could how to same same mentioned running You pre-COVID, How or profitability you’re of Analyst it again. revenues or you’re at to up running us impacted planes, And for many Day, locations from remind And you’re different you you? just and cars process number has

Thanks, question. Bob. Good Yes.

time to expand at U.S. have to up approximately locations I are do that. plans current not the beyond the We in XX

all locations. cars running not at are the We those

repossession focusing those consignment locations. on We’re vehicles dealer at and principally

locations staying who even the selling for And most would that adopted, sale. -- been coming towards didn’t of we’re we’re smaller migrated -- or locations, volume So interesting at the say power vehicle to are What maintain I digital. now to not, Day to markets. a increase some we’re those lane auctions me -- helping thing particularly are we -- at of and of dealers not So are who recall in I touched to. just a at those is with we on that in like never focus. And That’s if adopted and what’s I our for other trying come buying numbers. technology buyers to cars dealers seeing running certainly, are dealer it’s it think But us exactly safety. an not number is these model. the the additional we’ve just place relative in some seen do and also it in the Analyst lane, used we’ve -- digital consignment into sort to and providing purely running win where back even the digital, contributing those don’t okay? additional I further It’s this seeing these digital to is, selling on checks other some online we’re when the majority they dealers And who the back part we to increase lane, of doing cars in put sort

somewhat it demonstrate then supporting and obviously areas adds I are where can limited, we it it, view sellers like in as So keep to we but think it it. value our success, we’re trying we

And Bret Jordan line with comes our the Jefferies. from of next question

might across Backlot? of that’s like seems you Can being inventory the it real the leverage with able of might a far CARWAVE to integrating while. as be where be. incremental you tell I time as think volume said it the But show systems,

approvals that Bret, get deep the HSR, process can’t that Yes. certainly, planning I work the really in say, way discussion is of close. guess right pretty now. you we’re what and to into Owning I’d

really think really the And But bases to to customer we’ve the I specific I the customer discussion, some platforms I across and Backlot, and for migration enthusiasm. have kind really like timeline. very let’s almost customers. giving we’re of they having right? a lot I us, shutdown hard was trade sure we take make forward. feel very to on collaborative to really going a move just are on of want of akin on well risk acquired established our strategy don’t by positive when way. the the So whatever commit worked a platform When and good, with who That both a bring platforms, together, that right a today, now, we we got the X platforms we’re better on these solution want it

I set fundamentals more So like of say platform, long-term but part thoughtful committed model, maybe and one plan. all the little policies, we’re one time, one to expeditiously. are taking the key it we’re a a brand, just requires of and being that, little one moving that will pricing

I doing next and specific my but looking we’re of -- I to listen, that. middle this more give expectation, now in So most would to the a don’t would the of year be want think I say, at, between work timeline

by then that your buy or number? X.X ‘XX, to target that And here on million there more to cars is growth to get Okay. from to assume organic does

growth for Bret, my organic sure. focus is on

with to want we We growing. growth. now businesses -- the stable is marketplace industry continue from are the accelerate somewhat the this to these hopefully We a players. them, think -- we grow I know -- -- know

contemplating to is So organic be organic. focus. outside the I’m either, to of mind -- principally right closed that clearly is But want now. nothing our There’s any opportunity never but focus I

question believe then you more then go closing this go I -- person take Michelle, the and had question, remarks. for we’ll to and we’ll one

All with from the Ali right. line question Guggenheim. And last our of Faghri comes

your you about you wanted How dealer segment. those. on by to hoping had share losses is the to also us of quantify cars how mentioned first, and physical And much lanes? that market consignment. could to that much think run maybe So other ask do some auction I you losses not your I mean, decision share driven competitors through share I’m to maybe to digital previously, in competitors due help

tied started running stabilize using I over think, upward similar that but relative see specifically recollection data thought then sources think, was ultimately and there seen I where to mean, clearly, now, look we we QX, when our decision, post-COVID, in is, our And if QX, QX, we’ve gain talked cars, running auctions. to I I increase in to of I the what a were at slight and about, physical in last, our not share it’s cars, I other trend QX, I over at a -- me have and front market say Yes. of particularly share last we’ve our physical share. my in don’t the loss, and that data slight right some seen erosion competitors did some the quarters couple I the loss. guess in looking purely our I physical would the of driver lanes independent and that share share was market is what principal

it’s think stable. So I

our to obviously, already cars some think, I some locations I’ve has decision us run there. that. volume at back to win commented enabled on

on So and stable back dealer-to-dealer growing can. it focused XXXX of But we our digital we’re volume is plan. where principal think up obviously, it’s building I the driver our

helpful, Got And Peter. consignment here it. follow-up the That’s quick specifically. a on I if commercial of kind side,

some before customer questions this open had believe been for earlier And Volkswagen any had that but unless their I customers, getting upstream Manheim some they because marketing. or you public year haven’t in selected mentioned there Credit was I’ve mistaken. You lost I’m weren’t news

with hoping commercial me customers. that any lost commentary you you help that haven’t can square I’m So

Yes.

us renewed specifically comment despite talking event, XXXX. was Canada Credit earlier having Ali, perform. with -- So I’m there to let customer. Volkswagen so that a this on platforms access how was of year But other that its platforms me XXXX for agreement other and just knowledge

was So serve Canada. from positive that we’re a customer and in that to customer vote felt I excited to of continue confidence that

no time customer period which what about is -- is Ali, losses have saying, were there in talking XXXX. been here, there no I’m the So I’m

then spending helpful. your Got And one last outlook. here it. on That’s

you about out out positive, cuts costs talking potentially years. competitors digital have dealer-to-dealer cost of out EBITDA taken business. are potentially your of a But the business coming in significantly your further are digital lot You’ve and being about think, and spending I talking in there who

potentially to and talking take In IPOed one aggressive recently fact, in the more about is on getting share incentives market U.S. specifically.

able And so coming digital can competitors that in ensure compete like spend in you seems how planning are I’m you’re to where your a aggressively going wondering to to years? it be backdrop effectively

we watch competitive I think just go. Ali, have we’ll to as the environment,

go year I I breakeven essentially, at back our trend if from line, a in if those that. say, think seen heavily platforms to or close digital at platforms our I’d years, we’ve of look -- to, KAR, go dealer-to-dealer the current our we loss-making, very trend couple

we seen in steps watch our profitable. deliver. obviously, the we’ve and of is expectation things profitability direction plan execute CARWAVE my towards some can with and some about, the with talked we we always in growth very So But TradeRev positive competition. the that And profitable Canada, organic further

on of at think these me day, end for what they’re platforms my dealers the and results deliver are business. I the focused more for the

with values good seller, platforms in efficient If you’re easy process. are an a way, an delivering these

If of as we’ve competition and listen, through be on dealing those history, types month’s attributes, we’ll this long delivery But our we’re incentive. getting focused dealt with you’re buyer, and think on-time as business. good inventory less I’m nonetheless, in I now they’re competition a selection all actually with

So of that’s and part just parcel business. managing our

And Ali, let add. me

I offering efficient going on don’t out consistent providing keep providing And that Our anybody focus is anyone economical the focused transaction have proven is offering what know you it’s those that long-term win services really will that transaction ever services think we’re strategy And unless have are. I incentives more don’t a to just of a there a that’s than forward. on. cost we efficiently.

competitive right very on in across total. think now platforms we’re I pricing digital our

Yes.

Kelly, the for question-and-answer our turn to to conference conclude I And does this CEO, like back further And would Peter remarks. over session. any

for you, and you your your Thank morning and questions. time ladies thank Michelle, gentlemen, and for all, this

here with to just myself and start on what most forward. focused reinforcing dealer-to-dealer. just move I’ll I’d as like team the So are out we close

digital sellers successful situation clearly, this, buyers grow the million XXXX. of our will participation in We’re continuing increase at increasing focused BacklotCars volumes our supply U.S. on been significant I a marketplace integration overall dealer-to-dealer X.X and in help profitability. our turn, drive in a a as This, well ensuring drive our If to by and challenge. has towards the we’re Canada sold commercial focused of goal on and vehicles by To the U.S. CARWAVE volumes, look as current in

we’re on to this business, disruption service. using that temporary the the focused our a we with can profitable been and more And focused And say, believe also, ultimately of I that our but increased through and would reengineer in we opportunity the delivery our in lower had we’ve time the in importantly, as we cost disruption, as be cost remain past nature getting is However, is volumes volumes our goal an customers. method than lower support on even we’ve most return, volumes past. at than lowering

with of at purpose to is easy company believe the the our well, their us And reward we day successful. wholesale our have will future. end that make be customers more bright business and do customers a Our if so can that I our

So, call, very end all in forward reconnecting with Thank today’s look that, you XXXX. to and I we’ll early much.

Thank today’s you conference concludes for This participating. call.

may have now day. great You Everyone, disconnect. a