KAR Auction Services (KAR) 17 Feb 222021 Q4 Earnings call transcript

Good day and thank you for standing by. Welcome to the KAR Auction Services, Inc. Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. advised conference be being Please Instructions] that is today's recorded. [Operator Relations. to I and conference Investor would Instructions] hand Vice now of Treasurer [Operator Eliason, like the Michael over President to Please go ahead.

participants. concluding Global take you Thanks, Good us the XX, earnings the we'll morning December call. thank financial questions KAR After fourth Norma. the for performance quarter XXXX quarter ended our of and today will joining for Today, from commentary, discuss we conference KAR Global XXXX. for

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

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

call this CEO, Global's KAR to Peter to like over Peter? I'd turn Now, Kelly.

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

of quarter trends continued our provide solid cost the provide volumes commercial fourth of plan an close some digital about updates quarter AFC. I particularly update volumes I'll and record will from quarter our the our in dealer-to-dealer I will specifically volumes sold, I morning's on on our acquisition in on a in this out CARWAVE provide structure. I industry, call, platforms. our on our speak our and in off-premise also finance record performance of the our business, So off-premise update sold business dealer will growth on with an volume dealer updates sellers. results. to

I'll on So quarter performance. update an our fourth start with

QX, remained in our with volumes the challenge. a face that seller pleased in challenge the We following in commercial I of was While performance the quarter. results achieved

this an KAR revenue. For quarter XX.X% X% an purchased the was from full $X of XX% the of quarter generated generated in represented of revenue, million, of increase We prior And QX of from total year, $XXX That generated adjusted increase $XXX vehicles from XXXX. or net QX was overall, EBITDA. profit million gross profit revenue. from And we generated gross of the XX excluding a XX% of for of We an same from year. prior generated operations was Cash was cash million. $XX.X operations million. year. million the for $XX increase of That

this and year. single commercial the from of down year, our auction ADESA XXX,XXX driven which our in $X QX quarter our XXX,XXX sale volumes vehicles continued theater facilitated sold were QX date QX vehicles, gross were In by the consigned by volumes by our digital total highest were seller of metric. in over segment, dealer prior this strain double-digit business, strong in versus digital off-premise in channels. QX increased growth platforms. billion however, This mainly versus sales We dealer-to-dealer to for locations. prior driven the versus the was of of representing XX% proceeds. the of is year our XX% volumes, down on XX% Within the XX% we Those prior off-premise

metric our ongoing that in In same we consignment of total gross That transactions ADESA time XXXX. this And business the here milestone for solid quarter. year, $XXX generated had KAR. to management expected. the transformation dealer and with fourth XX% vehicle loan half is ever. quarter growth the our XX% our results year Revenue best the any of be same in digital performance that vehicle was first per was also of risk. and prior pleased in profit of than at versus at also profit fact, quarter vehicle in generated drivers per was than transactions is dealer and of off-premise date. nearly our line sold. first segment, in an than represented to quarter greater a the This $XXX I This XXXX per loan Across that continued over continue X% that AFC in higher quarter. with we of of credit QX XXX,XXX our were AFC important levels the was transactions gross Key increase with QX segment. the for had transaction XX% and higher prior higher values

the and our from to vehicles dynamics to supply like those I'd speak within sellers. used particularly So turn marketplaces, commercial of

approximately at also seller in categories. the off-lease as vehicles disruption various physical industry So remained of that to low across volume have I which our have in and commercial with Most marketplaces. lack principally repossessed our QX tied stable was relatively normal believe in Volume of supply to XX% of auctions off-lease seller vehicles remained still XX% volumes. rental to at at the vehicles we're our with terms represented prior below normal meaningful historically bottom the volumes challenge in disruption, the both of but total the quarter, KAR at XX% about levels. all-time is of volumes, of across levels our commercial

increase This we've some analysis in pressure, to production during see we're the necessary market a that the being And elevated quarter's modest nine vehicle take again, past in in little decline beginning a in sign. as still XX% have increased know, we're in supply well vehicles, I you category. is the increased historical new volume are NAFTA production, see that maintained industry for vehicle new our vehicle XX% commercial drive a first improvement from of with within new positive inventory I increased it's QX. with, which, evidence in commercial starting our share of of To positive end sellers. increase volumes over under modest a September new at increase ingredients below We of this January while share vehicle new think inventory increased results dealerships. sign. vehicles seller of a used an levels, region of believe we will reflected as QX production now versus of end And remain slightly for automotive in by customers. indicates all the dealerships with the months. a that to ultimately an have the that believe Although reports. price And the fact, start I that the that to the over been with very is in

We are starting the years. environment has to this see than weaker of characterized and of we've a some by pricing happening start been seen evidence XXXX in prior

used that of I consecutive quite yesterday's is accelerated week. this fact, the the In year has vehicle the time downward would report, indicated the for unusual And per industry. past Black seven values past over have trend report this weeks. say And the for just in weakened that Book our

for terms the and A segments, to refuse pay sellers to consider more long-term XXXX. may to declining often increased to used our most levels. I values we various repossession to our is accustomed for XXXX vehicles sold of signaled second those normal up than rates of some while And buyers it revert be in right profit, cause to in rates in weaken from customers over half did within as conversion on can to what have expect the levels in the gross by step is sellers KAR short-term now, they environment valuation that marketplaces lower off-lease discussions become second of Given significant. with vehicles of would expect that characterized although remarket and pressure higher time, expect more the commercial half continue time take some prices pricing very have lower high getting. conversion to prices the volumes I From they rental the gain

seller year. current in the constraints So first that this the we much will of half through of volume continue commercial summary, expect

We modest see improvement a to in expect the second half.

supporting in very expect recovery see repossessed that acceleration for volume automotive said in stated And XXXX this more which would defaults point And We I our with If consecutive yesterday that this have increased consecutive supply beyond. an sellers. vehicle another the thesis, of again, for share trend read later a market decade. positive on in than in seven be year. as I and given would loan higher that to an to calls, commercial now continues, streak longest row, this report this that increased is KAR also a months prior

-- to like in on turn provide our progress update I'd the vehicle category. So, dealer-to-dealer to now an and

of First, leader the of we That in volumes fourth XXX,XXX an total quarter. we and prior consignment look to the our if compared KAR, both total year. sold vehicles QX of dealer KAR's XX% at off-premise combined, represents volume on-premise increase in

increase quarter was the the at but a sold. our XXX,XXX constraints If deliver QX volume our Dealer without is That's the ever increase light comparable XXXX we look driven in total. that that acquisition, volume meaningful particularly only, $XX, XXX. The I'm we industry. the was of acquisition the CARWAVE, of category for in metric Off-premise of by to highest were Some CARWAVE able vehicles of core even across pleased

to acquisitions, an growth vehicles. if sold prior BacklotCars adjusting for at and rate dealer sold was Off-premise grew off-premise growth both pro year. we increase overall, total XXX% volume we year for the the XX% XXXX we compared total or That XX%. And Dealer XXX,XXX again, If include our we for XXX,XXX of the volumes CARWAVE you our in by So forma organic was the within annual XX% look periods.

dealer earlier, As sales represented I total by consignment the than more were transactions. of quarter in our off-premise mentioned XX%

highlight over volumes per percentage well, platform. of business vehicle in increased And I solid for our to gives and this perform quarter the to on-premise model. We remarks overall XXXX. off-premise the while continues also of sold quarter the in on very prior excess that on in second me quarter QX the for a versus strong confidence of off-premise expect further dealer principally dealer with volumes focused $XXX X% Canada, our This X% by time. our consecutive category, increased would have increased finally, XXXX In TradeRev that profitability EBITDA increase my for profitability, to been delivering same digital long-term relative by year above

the made good We've in October. the spend We on closed few early like I'd acquisition of progress acquisition CARWAVE. on So, to moments with a our integration.

format. within completed focusing this our has enhanced We've harmonizing initial a Our policies we both also inspection report the integration best CARWAVE Once leverage and developing platform and complete, experience forward into buyers the buyer functionality that move provide been quarter. be to condition possible. unified new our and of and the been will the vehicle then with that focus center reports on the sellers are one combines from and best features that those with will offerings will Backlot on

on It's currently are expect it we and to spend working quarter. I'd the teams by Our KAR, to high a of moments few complete AFC. for a this. on the have third end priority like initiative

a customers. its a continues improve levels also performed and has way operations. I This structure. our earnings Analyst digital at few to see current now and have performance AFC expect business our spend strategic overall. again market business. focus well XXXX AFC we AFC and to normal its AFC our updates and transition our and continued to discussed by strong on strong given calls moments in to further with profitability. event, marketplace cost more about service conditions, for his also helped earlier, from risk current delivery recent mentioned in disciplined processes lower AFC structure I to driven than like On of grow remarks. Day cost experience combined a our will talking has reflect reducing margins in have more to QX reengineer a the Eric to able provide to steady business on in efficient environment. I'd been As

on our aspects four that we progress to assessment our continue of to cost meaningful make and revenue relating QX, completed of In business. distinct opportunities front. We

our operations; our sales investments; fourth, our service technology and our our evolving go-to-market second, managing accelerating opportunities; First, third, SG&A. finally, focusing and

Over at the opportunity an that million presented total a revenue XX% remaining annualized indicates in be in representing our opportunity we which $XXX we of Analyst would million So XX% believe Day. analysis of that to cost monetization, $XXX is and of analysis and our mix represents opportunities excess which of the total. benefit, side this approximately that incremental of

in an started of QX process. that And revenue we million. addressed that implementation cost have opportunities annualized represent believe We improvement $XX alone, will we and approximately

continue We substantially have And represent XXXX. we I earnings highlight of calls. operational would in our and execute I a in to expect the that some future in will that report initiatives additional to early priority future these execution during our initiatives want say also made business, key performance. many phases. progress for planning our initiatives these progress contribute and on will continue to XXXX to we the quarter and to I

and and we're active integrate customers the platforms the and focus map represents on attached We that also some between increase rates for know to growth. discussions taking looking our various customers, opportunity And transaction. our also technology vehicle more road with are highest From to operations. services transportation the financing more steps of wholesale strategic to and that continue to continuity every better our the like we retail our with are create customers most long-term supporting

We and view to this, to we and beyond. this in to time. My support last our expand business our over point opportunities grow customers as is XXXX and are well morning about speak placed these

we QX. have with last As I'm withdrew market of that volume it was we our performance predict volumes our by we I until the improve. a until guidance I difficult are XXXX QX very improved business to our XXXX. commercial our vehicles that legal in that both those I should to lower able historic time. our believe and and operating than demonstrated encouraged further significantly in volumes. in At our that September, our believe the supply wholesale call, the on provide results at visibility starting same deliver industries supply despite guidance acknowledge performance time, discussed not to this started the We is

So those for we're want volumes waiting volume I QX headwinds return. didn't that shareholders to XX. that we on just December saw assure our end to in not

We are on business, structure segments across our accelerating our cost growth delivering transform more they I believe good can to goal market The maintaining we time and volumes future. growing highly business strong share more volume focused a that. on for through what flow focusing and our control higher performance controlling in digital model, and digital of and transform in is as will this efficient this making increase, progress lower so and a that our we're

I in following can net growth over believe XXXX, rates share. not Day presented per growth XX% viewed the deliver that the business While growth, we the we're providing annual guidance repeat on components that that operating call, intact. believe this our Analyst model key We of income the over what XXXX growth XX% in remains of today's EBITDA framework to X% adjusted represented. annual some on in as compound September to period revenue, for and adjusted net And in growth

more a we we XX%. that's business business this deliver continue consolidated revenue. based a can net strength the percentage cash that expect again, believe been strong this has of And addition, gross of margins always And deliver on that business. than flows, to finally, that of In something will

So, by Day intact and and I factors. it XXXX is following framework Analyst believe that supported the for is remains achievable, our

commercial in now setter presented. XXXX, we're that a with and how consistent we on volumes believe track see recovery I to Firstly, between

basis. rate, over expectation doubling is strong achieve an of volume years our and vehicles achievable. the momentum and This That by business believe I next that our on double category approximately is is QX Secondly, four a off-premise volume is that forward growth business in XXXX. our part to million sold X.X dealer the annualized

gross Third, $XXX Analyst materially than fourth profit and sold, modeled quarter, that the vehicle was million into we $XXX which our was in per Day XXXX higher the framework. our

this I our for be on improvements may have will opportunity into and that that important exceeds efficiency finally, some upside performance. Analyst modeled it long-term Day our the have amount mentioned that So as could possible models. on we we this And metric drive cost call,

XX% vehicles QX dealer We channels. which I was in volumes. our over QX off-premise adjusted sold. ever in per delivered delivered volume. lower challenge performance seller And messages our to in increased best an XX% profit my unprecedented with results, the despite We million today, We for with pleased face we quarterly had the year EBITDA best versus commercial of in of terms of year, vehicle by the consigned quarter key yet off-premise dealer transactions. So summarize X.X for gross prior were sold our our dealer our

a high continued Our at level. AFC very business perform to

communicated. opportunities cost that assessment the of Our previously exceeds we which

those We on more we're that closer for we is in first as there pricing. to new and XXXX Eric provide starting opportunities, finally, come. come, will have and better we see and will and volumes evidence more to will production, customers And those to that strong and inventory overall. review used are of and the Global. started positioned When to return, the of in than we quarter do recovery in performance a a volume declines know the to increases that dealer vehicle take necessary operating financial financial that, Eric? ingredients deliver vehicle ever support now recovered, results our action for volume the increases at been With KAR quarter we detailed have one such the are be

Peter. Thank you,

of review. I metrics only As Peter and quarter, already have a on commented in our has performance additional to couple the many fourth financial of areas

by year for XXXX. performance full Let recapping our me start

discussed limited us others remarketing year, constraints all and for volumes the have have we industry. As wholesale supply in all

represented values transactions car by pricing a value the transaction. to of decline Off-premise average increases transactions commercial combined fees led marketplaces. auction year. a with in a fee per ADESA our XX% off-premise entities. various the for in to our is in vehicles Increased million fees transaction in business. increase XX% This for led targeted increase year increase through its vehicle transaction net during X.X of auction used the XX% KAR sold metric per we executed Strong in segment KAR, all For average of this

million be to gross the gains generate strategic revenue, increasing While basis. of clear, was values do values improved sellers fees platforms, net sale $XX car in transactions million, the of majority schedules. a XXXX volume was our a auction fixed realized and contribute the the $XXX This XXXX includes our profit the $XXX us is increased gross million as our generally private our expenses the consolidated percent with increase allow to the stock drove did down on of exception to car in used profit, performance XX.X% for of are Control customers. commercial XXXX businesses, an our higher Total these for X.X%. year. prior where our one on adjusted as To label for EBITDA of revenue up EBITDA fees to not of XXXX impact Because challenging. acquired also challenges, excluding part on held from of certain relationships used adjusted a

of the in second half in conditions We in actually guidance the was Early the marketplace As a it reminder, we withdrew is enterprises XXXX the go year. identified to and year. of this an monetize beginning happened investments. worsened second What private that provided practice in the in a these In of September. we a auto-related quarter summary, have XXXX, the of year the public, an the is in outlook wholesale marketplaces invested interesting number of change our for the the year. When in half recovery in third expectations contemplated small our enterprises. wholesale

sold X.X% in an SG&A with Given SG&A the cash our profit $X.XX of decreased the gross were from per added acquired prior the businesses. year-over-year, We And performance. $XXX generated operations dealt, increase from from vehicle to excluding I $X.XX the of million XX% We we in from million company XXXX, $XX year. increased our pleased year. prior hand of am

me and XXXX, In acquisitions. let We the items. includes This activities million CARWAVE Auction business in terms of Frontier. $XXX allocation allocated to capital summarize significant

the first half also million in year. the $XXX We stock of repurchased car during

million $XXX in we AFC of Our generated year. $XXX capital for the portfolio. expenditures in capital, loans. is cash This floorplan working the the in invest aggregated equity the increase And million growth in of to from our used operations

Our leverage adjusted our EBITDA. ratio senior and net secured X.XXx X.XXx is at total ratio leverage is

or continues Xx total target to of leverage be leverage net Our less.

increased Our acquisition CARWAVE cash the we of available used when fourth in complete leverage quarter. the to

any We the short-term have line arise $XXX revolving a year. million of that means available for credit cash during

Before I to comment further AFC finish, on I performance. want

We year. bad of low-risk our exceeded used credit $XX.X are a clearly by previously in and car offset used the debt $X.X for recoveries benefiting of car for retail losses, net was environment. We strong expectations for $XX demand, strong receivables. from the expense million AFC's year. million pricing of had written-off performance million provision This

When a recover we all loan the reminder, dealership our personal against to all is cases, are we a In recoveries rights our business, borrowers of assets. obtained full to repaid, substantially though incurred AFC. As they portion of entered a these judgments even loss judgments principles for from date. at unpredictable. balance of guarantees not routine we is These a this are the at document many and or later personal the

years, expect contribute than the admit recover forward to lower have we used car the over can values we compared result goals have begin. the forward in used adjusted a for we to AFC two at to adjusted the the our be to I recovery positioned to current we confident future. when to a the in EBITDA And are structure to conclusion, marketplace will I am growth car for In volumes the rates ADESA. bad I in must the total contribute well achieve future. has I of to XXXX. cost interest I and growth future last years, expect in set rate EBITDA gradually percent continue looking improved This increase. As at our AFC XXXX. I in recovery of it fewer believe to will look did debts we as could decline, KAR's environment, lower of operating

some Q&A. don't a earlier While XX-K our time. think we some nothing before of would we I to was prefer it's has have item unexpected I happening, to one Monday I because see go at recovery than this outlook earned signs is in to housekeeping next up our give a you delay. there holiday, you file expect week, heads to so changed wanted

So turn my I'll to to Thank remarks, operator, you. begin that concludes it and our back Norma, Q&A.

Murphy question Thank you. Our Instructions] [Operator comes America. with Bank of from first John

Your now open. line is

of I just wanted to there touch on mix the that what mix. cost and juxtapose commercial execution as of think in I'm in just the here, quarter happened versus a curious, as well you commercial as up sort much dealer shift and there. dealer very cost with about was that significant the and I and cutting margins and it's how was I of your all your net of just mean that? of kind ability go cost XX%. after down much impact to how XX% mean intertwined

the shift there's significant the with mix trying what just pretty because business understand to meant cutting. I'm along So cost to

take I'll attempt Yes. that. John. first Thank you, of a

right. There have relative services those that an like per gross commercial sold. channel, pieces. to on-premise a physical vehicle anything you moving attach and same attached vehicle, rate dealer ultimately -- rate. higher just to about the have higher Again, a our profit seller You're say the tend in different commercial of was car to cost generally would described. that services the the a on-premise business channel will I vehicle, to doesn't independent think phenomenon of tend that and if a was particularly I a lot of

put that. metric So volume in on seller strong I'd spite downward relative metric. would have in dealer of was the still say pressure commercial obviously, relative that the decline to But

There of -- quarter. we the cost little bit were adjust our that. generally of So I think in a independent did fourth actions fees some was

So, if there reflected add was well I some higher that, of in number want But you know Eric, to don't monetization I'm to XXX. as the not...

There growing profit, not to an fourth our retail Again, we John, commercial the wholesale contributing environment A. element, was it business. still but decline then would is did have reconditioning had other there the in normal the seller. the of is in on XXXX the movement did was most direct the and more reductions, changes What we vehicles we numbers. little very is the through yet with length. in workforce really in costs made running of as maintained that began action, realized that future SG& a recently and dealer-to-dealer the in fact cost we is quarter grow much we SG&A. the weren't volumes, the gross for as to any focused our cost our in supporting offset reconditioning doing though, It's the that And anticipate and be a part the the No, most structure are we

it's Okay. get just in mostly grosses, get I but I higher to mean, dollars you you you mean commercial, higher buy/sell That's I lower is, follow higher up, I helpful. mean, because fees, percent gross guess, side, then but get understanding dealer my margins. margin. And on lower the

hurt little I confusing mix total margin argue it's bit why the certainly mean, that's it's shift percentage So your should you because have helped but a margin. your that dollar

that's seems significantly. deeper pretty was like -- you're just about outperformed on the did underlying -- I'm why better even up to talking it trying And seems to And asking. can bit maybe based it what this later. that's kind on -- get a that you I little just just it's into just that was of out. like that probably operations than dig So, mix. follow I it figure We trying why

On used... the

me let John, one clarify thing. And

and That's decline you normally that in ADESA the revenue, far part revenue what services indicate. in retail less where and supplement, is can in the this the impact -- the services numbers, If the in increases and reconditioning. you volume than the margin at get is segment would in lower drove look was that of commercial

business That but the the XX%, that margin that okay? would have at lower add than a incremental XX% overall, in be would we dollars,

really of in the Okay. I -- that's this mean, the Got dynamics. there's market. creating just seems new then pricing lot a to new jam-up it Peter -- mean, supply, retail you. is on but of pricing used Because that's new alluded the to I desert lot of second And your to, also problems like as I your relative you a a used is on gauge of I what's mean kind just of in gauge mean to what I now? then there's mean, right actual pricing -- at moment? used pricing somewhat

year, good index. level I part its latter to of is Yes. of, an do we all-time the to of XX%. represent. high that is to used pricing think, that that that relative last And Well, percent typical vehicle level frankly, used new unsustainable And -- at a a at vehicle new. vehicle of prices look percentage What in close was

with market honestly, our There's think something think for again, in below pricing generally vehicle to Tom closer mentioned used more the but a weaker we're used is think sometimes towards a analysts just actually decline rapid in decline. I trend pricing vehicles the relative are I produced values it's different values, steady And opinions lean that's perhaps more rates a think vehicle on But as out the my in year guess marketplaces. vehicle us. decline. good XX environment, certainly is and lower declining predicting us, numbers. some more that a I starting different spring new I in situation sort a for probably I remarks, industry. on most business. of And opinions listen, to Kontos see typical there a to there And greater expecting used I thing of as Not this conversion are a decline, And typical noticeably on analysis rate what various I run to little more is line XX%.

happen. to something can in that's we opinions different there, the normalize. prices the have on better view my We of obviously, change. opinion. different I Getting don't there, want of to want quicker get so have these we a think pace the But that perfect people the future, I

last one. And just Okay. then one

maybe what managers fourth You are local review. and that not just lot evolution the a what service because it. the very smaller service part evolution curious as quarter in exactly meant you development. if that you of the we're logistics and really second on help AV is some mentioned or of guys that use I'm could across and that's point coming by are of even probably non-AV really I'm equation curious so that your by part fleet mean just you good service that at sophisticated

Eric, to do want that? Well, take you

Yes. capacity, mean, players given John, actually you're you when of the car right. But shortage are the in service about talking I industry also the today. a have marketplace bigger used

versus been that but we has So plus we're that services ADESA I a it transaction as again, or retailers this car you have wholesale lot And would who always although, consignor. a capacity us providing the the the to demand for of be call our of retailer it seems buyer for agree been used larger with you, opposed the have the to right to ones that the the to I would available, smaller consumed seller provide was by tell and now.

you. Thank

JPMorgan. Our next Brickman Ryan question comes from with

Your line open. is

still a sales, metrics or For you in in sales the some then into or factors channel track? how those And conversion what but range comfortable about or thinking of of another, from you as, given on the top to off-lease outcomes and possible, 'XX of see? one the for maybe check or example, that wanted to to maybe new could see year, unit lower, volume like know, are stabilization higher prices visibility and if regard be level driver, the the What with flow, sales puts you're the some car what Or may current rate factors what guiding I the will cetera. et metrics don't cash really need big factors to or the repo of conversion reasonable be volume I EBITDA monitoring used how line, a could uncertainty, to would of -- might the realize to assume the need automotive volumes to of supply the and picture free car new example, pricing? there providing better takes chain, cause order that perspective? to industry including, if you're other such guidance? not it is feel in reinstating And be worth of car be would on independent healing

different providing on there's seeing there that. principal that, volume of volume, was showing increase Ryan. production sort I one causes principal think And statements and vehicles new franchise can think different to we're guidance. is the their I we guess in to OEMs. more two Thanks, are from appreciate about it's seller the me this vehicle factor expecting dealers specifically But will we'd I see delivered generally, that on loss. and guidance. more get think up I channel. questions year I production dealers. inputs And cautious be at more, and most will commercial what that And is, be vehicles to are how predicting One quickly timing I new

So to I second end segment, values tied volume lessee right our lease value used has we what related of $XX,XXX the in then factor. our over is equity look factor have, vehicle this every of the at now, at one average segment, particularly now used does the at again, vehicle end is the Because that do their really constraints to that equity believe lease. and lessees a of it the if that's is, which to off-lease biggest And commercial pricing? right

dynamic, have, that from vehicles companies, get they're leases panel or going on production, sort supply vehicle of a get new purchasing got just us, allocated market by returning So adjusts, particularly than price they because they've miles related rental our higher expecting up more are they is They to at then to my the they to gained whom be recognize which by the manufacturers, based as to discussions. rather things in typically defaults, vehicle what's used And the a that's not induce remarket if cars. will commercial $XX,XXX largest segment. there's also to to it and to value. tied simple more them has liver open And return return doesn't it it's then residual. that fact repossession those tied dealer And so do that automotive like the leases. but to that they're to happen on segment, at would and if around simply older to They're like enter keeping it's

new the understanding got be remains Ryan, about. as to I conclusion trends it's way we've production right of soon would way be So guidance I used as of wide be They're meaningful. those came we extent were the those into our visibility got think What a able too we've speed all going. vehicles and those are is in and that I And just that. better the range factors. are hope or the vehicle provide got to to directionally once we values. talked that dynamics It's to of of good two think, that And business. a going the if debated we've visibility which for that's we guidance be now, reinstate is to that But to better favorable

be? to And might the maybe also there? barriers helpful. very in That's the on me. see potential the dealer-to-dealer dynamics for what are commercial release be commercial for whether maintaining if Okay. share saw or the that competitive comment market there penetrate even would talking consignors. about with you And just entry you press lastly It digital I to then could you or peers great gaining maybe market the

commercial we with second obviously, market could in strong at But commercial doing the question, Day of some off-premise To a side me say off-premise got I so to share. comment gains our we share seller overall. the a the I small our shares did that. seller Yes. have for stable OPENLANE. hard on that. I on that was would very customers, in categories, I that, look generally, with felt market of XXXX your And commercial Again, current number Analyst good the maintaining if of modest part were both one about framework, and we've we're think on-premise thesis share in believe

I a differentiated volume And shares obviously, have strong physical stable to to relatively think limited competitors have sort again, have very offering assets share. those our over that that's be that's on-premise that of market duplicate. tended pretty market And time. of those hard and a number channels, in there's

you. Thank

Our with Barrington next question comes Prestopino from Gary Research.

is open. line Your

new the some dealer-to-dealer I'd on CDK and one this my Peter, particularly comment to, then system possible, another to maybe company, of into like a of to do where dealer to trades. with dealer entrants you putting out CarBravo if space, is coverage GM

very So field. advantages How crowded coming some are your as of you you there keep share? a just versus out? what these gaining it, do It's competitive newer see are that platforms becoming

Gary. the thank Well, you, appreciate Yes. I question.

it take parts. me Let in two

just as talk and about I'll explain see there. a I'll I don't then bit competition little but which about I talk CarBravo, myself actually competition, First,

competition. on say I'd guess I So

I reasonable First I industry have it, forth, as and see that technology I and relationships, fundamentally, day, quickly, customer in of where got characteristics think deliver advantages all, that. opportunity and I'd us of of move and business frankly, And very, digital want end to delivering focused guess at ability to platforms our in I had the of so a And compete on enables outcomes. always well. vehicles. And to always marketplaces I expertise, buy be where do be cost. to choice our options value of say, And as those very over terms competitive. strong our vehicles has will we've believe also, continues I vehicles been we're think the evident sell that scale, that can for think to flow time strategy there. their cash forward. I And increasingly full us improve on enabled access our lot customers we that our believe at also as they and attracts our to go customers the to send view to I competitive competitors to as their and

say, people brand really entrants. glance. on individual more I at to think opinion generally, lot I new don't tends initial of often one that, So if I some I want any we that exists. to can or I recognize and my comment industry on we our are that we competition do business customers. we And be taking focus our well, can guess, believe execute will doing is of how a this any I to complex and kind, customer, with what care of than continue we're deal

potential find don't a to any of it achieve ours. for that as I customer dismissive So they're really some objectives I think also customer there. an struggle programs see entities If I their actually KAR. but the go think CarBravo the of to be to I'm those important CarBravo, opportunities program -- I and of If like I will want competitor, of there,

for vehicles We or insurance process. is sort direct-to-consumer. us and at of be sort are an But of example, to selling do the in into and very retail-ready -- off-lease that's to some to that, our opportunity deeply those positive for facilities. off-lease company our a There that their It's vehicles, condition, in vehicles strong got a in program, fully business. gotten of integrated have relationship possibility have

and vehicle, a revenue So there's opportunity the there's So customer both The there that ultimately there's dealers, still facilitated and us. then for experience profit us. integrate digital platforms the fee okay? for into CarBravo other create dealer. and are And for has opportunities to transaction a dealer other wins and buy through that's the our to for cars still to retail the

as So as I see I opportunity threat. a there's whole see change, I don't business. And that a as of an again, see for -- as it there. but see it host our I opportunities it a

you. Thank

Our next from question Stephanie Moore with comes Truist.

Your is line open.

the longer-term picture, cost lot I between the work dealer. years bigger to oriented a been the step couple obviously, done from behind but back wanted ask digital transformation, last of to a over cutting, dealer take obviously of A has, a lot and of question. maybe actions investments

has can umbrella? the works of maybe So its kind together is talk car you ahead, about platform platforms because KAR how as How in seamlessly. should years think integration the each So seamlessness it's that the recovery of through we to or all you about recovery instance, look of assume some the a kind envision in if this together just very volumes let's inventory integrated large under of the occur.

thought I'd not really like. a of offering back you're looks So and just big picture jumping the umbrella how to forth. get cars of really the love

of both business, our on you're want an good of I And standpoint, benefits focusing trying fewer of frankly, to benefits Stephanie, us And the greater on as simplify on our point brands. Listen, principally of our question. That's And focused when from do one I've long my our consolidation. hitting a investments to in business and thank we of things type important whole is to that's think brands, mind. I'm customer. a I got and in and customer also sort platforms cost said one the think investor that of is number get you. that for is standpoint, platforms obviously an it, part the a run. fewer host It's in fewer before,

it's and So things are of think our also effects, there I But business. like liquidity got there benefits network benefits on and scale, the customer simplicity cost through side that.

are in we So that the U.S. accomplished Obviously, working marketplace We and into CARWAVE TradeRev on quickly/ that. XXXX, integrated we in

BacklotCars.

our Backlot should TradeRev, initiative it's into marketplace year, and necessarily integrating one complete and one quicker talk Ultimately, can looking want all the do in Canada. BacklotCars about -- to all get vehicles the one in we in current I can how CARWAVE say. and I format planning to have wasn't beyond it, a an participate. Canada. might we our how but marketplace. we actually -- going that, we're But integrate And into underway we're Sorry, after I to all successful, to U.S. being And and sellers to and buyers for do one that subject we venue that we the get our

it's going But it that's for we're will business. time, obviously, actively and take also but there, benefit be our working. for something to a I there's them think Stephanie, some complexity a and

for follow-up. just a a the work we it a the infection should report from or best done from inspection of standpoint be to forward? port? an behind about how work? What platforms. the full integration it going -- reconditioning think I'm is What's Or So to And has have sorry, there across a Is lot a call practice just Absolutely. one?

of were characterize would inspection work, The it developed they've simple different quite because a mentioned similar, an I guided both to is, particular that inspector They vehicle. lot also and format solution. by I in been at fact of had And were different that a Stephanie, smartphone if BacklotCars that app-based inspected Yes. they wouldn't look a I as CARWAVE. context format but groups. use, companies

have both of what So pick and that best case the features to that. some we is deliver new done try add in

all channel So U.S. unified platform our one it's inspections in inspection the in that for

now relatively believe, CARWAVE expanding of is within spoke So broadly, days. BacklotCars that be more takes more that to the integration I to and, simple context But work. and the ADESA the XX done, I will and in next obviously,

you. Thank

comes with next Bob Labick Our CJS Securities. from question

Your line is open.

lines of right $XXX of much are into some fixed of or you discussed context primary million costs? now where And savings the of I you very or the kind little to a -- of if so. of variable. with cost bit. ask could attractive outlined You $XXX wanted initiatives that fixed how of? of service are the What million versus is And kind cost SG&A is coming the the that and out dig

Bob. question, Good Yes.

said, the term, no the You're term. SG&A is in given of right. the of shops component sort approximately short entirely still cost have Based is volumes view performance the commercial little would that fixed are on in to I XX% but and profit is office think, a the of the elements is low and cost stuff guess leases deliver, like costs bit strong I'd managed be seller And cost back a tend our to to sold fourth structure we costs business, bump car facilities at of on cost we lot the I started a the obviously, short deeper fixed that. would one but say, of facility, fixed, low least to on-premise of operate sort run, the long the I the of math, I medium that tied operation variable, elements to up say, of I per in that gross and quarter, that. a against some in volumes and significant good of that be, started the more sort which and that and of those tend the management be on you to to And with our a fixed. tend of our have side in need business, fixed business in

explain trying spans the of in of between all the me at looking of of to just terms In levels at. looking things of looking workers layers sort trying company. to we're Company. let in about, frontline this sort myself make at management that up and things fewer of layers and the company we're cost we're I'm the talking some I'm some and have at of appropriate this the spans initiatives have

platforms, So that if addressing creates things certain time do less reduce Those on centralize the paper. savings to certain trying over take trying costs by execute, of sort to processes, but automate and changing processes, that, way to term. more change are obviously, sort technology Stephanie's your digitization modeling. of business, can longer you can that and I'd of question, doing our inherent And an cost then to focus as part address that's to say our as savings we platforms, our opportunities well, consolidate investments we differently, start fewer the

are those the things types initiatives after. that So comprise going of the we're

workforce, But the workforce at tied on volumes can't reduce more XX% Bob, about a for of SG&A incentive I down. truly is it's a call actually the SG& A if quick XX% you the salespeople I'm SG& of And is I variable. math here. XX% About little current A. front, commissions mean doesn't SG&A pay what structural is saying go It performance to of and did

you. Thank

next with Jefferies. question from Our Jordan comes Bret

line open. is Your

you've anything fees the shipping could Some environment, ago in might or be fee to a talk stuff players don't I can whether about in ask short either overlapping promotional. already calls bit supply with competitive a around But getting is that. to the space? you the I this morning, want ability years more you take that dealer-to-dealer costs discussed. so about not with talk where the current about scenario changing were few But up or know

think maybe We've the those types would be, is of ago. say I that years we're dynamic prices. competitive seems you fairly competitors I raise which business some doing, the We're seen two-plus featured rational. referenced, and of incentives some not were to I'd say, not seeing What

as of adjustments to creates well. room on-premise for more to think did fee an quarter. that than benefits us related increase on channels, in as expect I had level us small We on at that. that but I from of we the initiatives we that a as Principally, level off-premise opportunity is look over our and executed fourth part to -- the we'll of see that some million $XX part fee of referenced of initiatives the execute those

behaving in focused obviously, So everybody see profitable opportunity, see a and I profitable delivering to -- on but on also competitors I growth. I wants and and guess, way being some the focused we're grow, rational

I So -- think business. good for dynamic that's our dynamic and that's a -- for healthy a

you. Thank

from comes question with Stephens. next Daniel Our Imbro

Your line is open.

to don't clarify, just I to belabor want but a point, Peter.

tailwind used because driven going at look year, that GPU underwrite if of or by out at So about think there's a said moderating GPU, ADESA? would understand over can increase be able prices much an at in the versus roll they offsetting just metric? removal that unit volume, cost to specific to prices we prices How about you on year-over-year to if parse you've that revenue we talked was per headwind next Are being favorable the much ADESA. to to vehicle XX% into be I trying XX% if you how

value, to in Daniel, well with say I support less his are sold move to I'll point have in that's than the answer Eric a like I for a but the higher if higher of $XX and $X,XXX car tier number that would does can that. view. up fees, a directionally it give because weigh maybe was something if next question. maybe would used values is number but then we been or Well, as don't into create have vehicles vehicle of you, precise the good

is And frankly, element value the our don't off-premise not right not only of the value. that sell as fees fees proportional it's the sort was fees to do reflect that, there don't but an mentioned, And So of XX%, up go those up vehicle buy XX%. tend commercial are fees fees, If our that. cell the and channel the reflect Eric either. to

there I profit business, way and relatively small. In say margin than your less for would is So say, sure. increase, certainly, then the less the have any pressure. It's that. other would the your volume. that the a volume, of when just in gross under I you is thing it's other absolute And terms component runs half gross of is profit

and has. within its business every of as of because our fixed direct cost has costs structure business well some element for So sure

I when declining increased supply. think a sort weigh actually value used I of So vehicle versus equation

increased value I think more be the will to than used metric be declining negative. will supply positive the that

let my be would but that. will that view, comment Now Eric I on

On thing car linear this sold. gross the transaction, services profit dollars really Yes. And Daniel, that to is be not one won't is the good. related the or per off-premise the

our dollars my by in denominator up probably transportation unless business, I greater when what volume we off-premise services increases, total, my, my like can like business. So goes grow profit call, some inspection our than repossession gross of like activity, the

would absolute mind, of transactions are X/X commercial $X.XX If X/X were dividing And to those, term, increase call what that would more commercial. number. by total. on profit gets in my in because even but off-premise, are profit put better be volume in, a gross range we denominator growing we pressure ancillary about that the be actually transactions. believe would the off-premise Keep grows would on will we I the that sorry, Day, on targeting Analyst the probably side something the number our it, that no long in of large commented with So $X.XX services. -- that I'm of that's gross But a

over the it, business, ask dealer to wanted guys spent, Peter, viewer billion Okay. to on one couple And fuel the have $X I growth. then of call years last you

a balance you've business pretty of I Xx Or do next kind M&A few here? at there next digital CapEx is opportunities term but this a capital could sheet, M&A the a the think levered. Are as around years then on And high capital-intensive it's that's the total spent right you fuel debt you or other it's this With heavy, How of opportunities? around to look be net other leverage the given growth dealer-to-dealer the business? term know should cost. longer growth not side. maybe I longer lot

I'm significant That we acquisitions. is Obviously, Daniel. Thanks, some done with correct. pleased have Yes. those acquisitions.

mentioned, that and would I channel X.X and in off-premise million I we're think profitability us, to growing dealer TradeRev, get I evidence -- in sold seeing as profitability, at vehicles strong say.

So I are business. feel acquisitions currently other good There no about that contemplated.

more back comments have. I'm we that organic as good assets have pleased market, the the a that of I to well. with position aware the our get is and growing that believe our we'll growth. possible. and on of increasing that continuing integrating to My focused those net and ultimately platforms Company, think current leverage I'm business we deliver three. we're deliver your And our is on on earnings And focus target will and believe leverage, absolutely I that obviously, I reducing in on closer that, number.

Thank you.

Guggenheim. Next comes Faghri with from question Ali

line is Your open.

guess, in into XXXX. a and wholesale then on second your have for outlook just starting half the recovery volume I I question,

to isn't And car continue so that the the to money, pandemic. being of X% overall While on to rates XXXX, coming speak, of then volumes in competitors in I predicting lease to that, dynamic penetration to values your lease think reduction years. even least expect a wholesale a end vehicles likely of physical levels in industry pre-pandemic above sales in auction back result few again, during predict, car since XXXX the at to and environment new over of XXXX as pricing a vehicles used up lower year it's top due primarily actually tough off I remain then recognize levels most bearish in the declining next off-lease primary the through XXXX and next forecast

off-lease continue that to for future. it dealers for that advantageous the suggest will be to cars and So foreseeable would their consumers keep

through at XXXX? be could and in gives wondering the scenario I'm into year. volumes So, commercial acceleration confidence there off-lease, next seems a volume a high what a where remain particular, Because it you cyclically in depressed end of level, like

the Yes. Ali, I'll appreciate question.

me Let answer. to attempt

me the just all, volume We're of some increases talked to I category, spend as about. to within reasons off-lease see repo. expecting well. time first volume We're So comment increases see expecting commercial But for on let's on rental. let the

earlier vehicles essentially think situation, I don't inherent go question the really reaching of asked. is question. back total substantial equation give It's saw for the now, big level economic the leased the the vehicles ending, to total -- channel. equity almost had number we to value that $X,XXX written of question right equity a I of what to equity, to or you substantial Because the was is because volume right the when number. that but that numbers is $X,XXX, or $X,XXX know context we that in have the leases number the last think $XX,XXX this in zero that I reaching year no channel. a of when physical maturity. off-lease of physical okay? normal were is was And just sort lessee of or physical number kind the the that not leases are you reaching sort on those It's there reach the that dealer of more to start a of lease situation really channel, still not now needs

from that normal the their level. of revert vehicle well. a about new significant don't there be I'm expectations So get And back predicting for values I their I would telling part the back expectation That's risk of And pre-pandemic model my they we they zero. whole to to the current the that management increase very way expect, to need the in or portfolio volumes. feedback I'm are to getting current But be current as soon. customers guess don't to to with What That back vehicle used relative I just anytime very residual much will not the and assessment terms the just again, the that a to customers, from And think believe predicting that levels levels they're or are volume it though. me conversations we of needs be and off-lease in plan to versus levels. of say way. what XXXX their part not them they their close a asking all reflect increase to production and is management their needs marketing

So tell. will time I guess

how expect see accelerating the and XXXX. in expectation have my an but increase these second this in in I volumes We to of see will what to this year plays out, said, half is consistent with I

we Norma, are time. And out of

like to go we'd closing So to remarks. Peter's

over Back over right. Mr. an to Peter. you All

and with recognize I'm deliver you, did. call, but and morning Thank challenge rallied our your and the for you, that overall. our brought in we and closed we on today's thank way clearly, meet at questions. a time pleased reporting gentlemen, this XXXX that your the team for and And I Norma, that here some ladies out year KAR it was challenges, results to that year

our leave make want So I Thank that help XXXX. call We without employees you to for don't to of sincere efforts all saying in across much a the a to today's that great thank so it. you Company appreciate reality.

my I what on today out to by in most remarks close I'd like So team and the are focused reinforcing XXXX.

can in While we And seller current supply challenges think of QX to in that we we results our do through commercial are year, we some demonstrate expect the the on are controlling what I that focused getting volumes to able control. second relief half and the this business. see in this

our this reengineer our service. cost use lowering as to continue opportunity We an to business, of

is to will a vehicles marketplace return, successful Our This, that digital and been on drive CARWAVE I million continuing lower customers. grow profitable the volumes sold are we and BacklotCars. increasing we a XXXX. we the are in support we've as than very be of focused had well and our at importantly, increase believe that. integration sellers this, we've X.X focused of lower volumes our To our ensuring volumes to a significant in will delivery turn, can most drive than our goal those participation the the more as do with past, in in we overall profitability. focused remain and be by buyers Canada off-premise U.S. and And in finally volumes as and help by on on past cost In we our goal model towards able dealer-to-dealer, increased

us our our award wholesale can business, As I company our prior their so make I with bright easy calls, be have more of successful. will a customers we that to if on customers that said our do purpose believe well, more will and And future. is

an to end to we you all on much. we'll quarter. that, update the current look months three forward very I with So today's call. in the give connected Thank you

gentlemen, and participation in you for thank conference. Ladies your today's

may You have Everyone now wonderful a disconnect. day.