KAR Auction Services (KAR) 22 Feb 232022 Q4 Earnings call transcript

Good morning and welcome to the KAR Auction Services Inc. 2022 Year End Earnings Conference Call. All participants will be in a listen-only mode [Operator Instructions].

Please note this event is being recorded.

I would now like to turn the conference over to Mike Eliason, Treasurer and Vice President Investor Relations. ahead. go Please

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

provisions I'd forward-looking for that this the contains forward statements Before Reform the of you Safe Private Act Peter conference the remind XXXX. Harbor risks kicks-off Securities that and such KAR's involve in statements Litigation results that like to forward-looking filings. fully our of prospects within are uncertainties may discussion, meaning Investors are SEC business, such cautioned risks our and and detailed of call operations affect

any statements, update forward-looking the to disclaims expressly company obligation providing statements. these In

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

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

here good I'm morning, you, an Thank and Mike, to delighted this to provide on Global. everybody. be KAR morning update with you

market our of current our a summary following During and and today's the activities. call, for capital I'll impacting full our provide XXXX allocation and our detail fourth outlook quarter items; view beyond, XXXX you to the our information of relating and additional year industry, performance, factors

structure. more call segments AFC with like backdrop To we overall We industry digital unusual and our platforms position growth to company. business marketplace made and on about of performance the gross our segments, speak our we consolidating reducing revenue formerly called improved and significant company an a company full simplifying cost our a QX marketplace total increased number profit very still by asset volume our finance we two to beyond. XXXX and which for our I'm and in segment segments progress And begin second a environment, as constrained our formally which we ADESA XXXX in positions Against quarter for in the operations. our the segments. going and business of

fourth touch me full let year of So some specific quarter performance. the the of highlights on and

profit same the gross a QX. year the we QX excluding XX.X% million, of For fourth $XXX represented quarter the increase X% generated million quarter, year. purchase revenue vehicle XX% prior quarter. $XX.X revenue, of $XXX the We increase representative This in million from in in revenue total an generated EBITDA total in a of revenue Purchase X% of gross versus resulted prior vehicles. adjusted of of the of profit

generated vehicles. XXXX year. purchase For Gross range million, profit Purchase billion over $XXX prior XXXX. which approximately over adjusted of revenue, to million. at million, the X.X company compared of excluding EBITDA in represented the $XXX gross a for the XX% year that vehicle of represented total full revenue in increase of total $XXX was KAR generated A X% X% of below increase year. end that And XX.X% an revenue the guidance our lower resulted of profit XXXX was revenue

participation sellers. the lower year. and conversion year. quarter solid sold than X.X marketplace and from to the buyers both But We Specific used values vehicle remained throughout the XXX,XXX in saw segments, for rates our prior we again marketplace vehicles quarter full million declined approximately and the

to revenue of As also the segment XXXX. X% and decreased marketplace of compared year the a compared result, in QX XXXX to full X%

XX% per million performance XX% in transactions experienced successful the XXXX. over increase revenue segment a QX the revenue was QX an we In another $XXX of of finance year, in strong increase finance growth driven AFC by XX% transaction. in a was out segment, as and quarter our closed prior an that

XXXX year a a in growth an full was XXXX, versus was the driven per that in revenue segment the For and and XX% to finance revenue, in generated transactions $XXX by $XXX. XX% increase XX% million increase transaction that

now made a I number to in of will quarter benefit I'd our progress and believe like progress areas highlight the beyond. performance in we where important that XXXX

is these of first The consolidation. platform

As and of here is one experience. our objectives at in primary business to simplify prior the I calls, KAR mentioned customer our

completed over platform BacklotCars out focused the have within across the has markets the rolled national XXXX. States of have course of CARWAVES integration in United now BacklotCars retired now successfully BacklotCars and core the CARWAVES this rollout of auction been new branch. the format and We and auction and The on format

we progress single revenue In mid digital align to Canadian we're strategy, To By trade all the work marketplaces. have growth customer a marketplace. feedback support functions. our vehicles customer and data pilot as and make to expect operations Using from Canada, marketing this consolidating continue input finalizing development XXXX, our roadmap, consolidated one of sales, and connect Canadian support also to as and to sellers, product also the buyers into customers, Canadian we've the a better our platform our change of simplified we experience. one leadership well

Europe platform UK successfully in been positive platform our there business, and processes dealer in that market the the and in And a early onto consolidates This dealer we've has also. European to standalone technology single migrated our very to and ADESA platform. customers feedback Germany, adept technology onto our our

Now we anticipate XXXX. and on simplification additional these consolidation making progress in efforts

of and help with our marketplace that simplification we other experience and Ultimately, sales accelerate marketing believe products extending be levels this efforts strategy. our also will customer and better feature services our development. better the and new customer focus and generate improve to higher costs, We them align will IT across internally will products our maintenance brands, also engagement, work reduce

agenda by the committed end that and Last cost $XX like we in work me cover, This I'm strategic focus remains will culture Cost pleased management. costs key achieved brings of by part consciousness to XXXX. a at that management key are complete. goal. be is a continue and achieved is to year, of secondary in of an will million we ongoing initiatives our this here that all through of that of XXXX our that our area savings reducing we not KAR. this a part our I'd But that The part to cost of year.

we in that will roadmap XXXX. what will we detailed a place have impact a in believe, deliver similar we of that We believe achieved scales we

is these and One in and of we the primary to technology the continue underway remainder savings additional initiative and the building the and locations of XXXX a out through global efficiency, with consistency structure business into selected this it is This levers help and us operations. India improve Philippines. and services XXXX. achieve already And in the of model our cost well expansion will will leveraging that partners shared

up place. The area this involves work while one nature of are resources still wrapping in in other resources

to we in while overlapping XXXX, full during see do So benefits apparent also not next some we some year year. costs expect until be will see the impact may and

activities for many growth. than more excites me opportunities cost What management that has whoever the KAR are our

dealer digital that First, commercial of share channels a underway the affecting gain owned past years. number I secular inventory, industry, towards believe and in in shift digital there of is both our

to of we will benefit right from on positioned shift, the We and that. that continue side are

growing our share our offerings. We focused are market highly also within on current

We dealers. cash strong both support of uniquely digital investments. have and our to a a differentiation profitability scale with strong with strong with commercial leader flows as position the sellers Also and

new areas party innovation several and for these. unlock our out mapped a our company. examples have give expand you We our will that streams To product few revenue for portfolio, customer relationships of deepen

markets current all We lever year. plan channel. we to BacklotCars as roll further adoption that additional see the to format volume this on within First, the auction drive customer out in to and U.S. a

and It open and sale mainly vehicles, Second, sellers increase of breadth dealer with offering. One integrate of venue will for we selection all vehicles rental one before will increase vehicles of vehicles marketplace will This for all our end and vehicles to and scale this our improve owned our plan year. indeed. powerful marketplace network the off leased very of the for effects. be and our digital buyers buyers also into our the commercial

has years we and see as opportunity the more more have dealers AFC on over AFC and customer inventory of gained for its grow past base inventory share portfolios, lot particularly to their number further Third, its finance. to and

to of cross at finally, AFC, AFC to relation the plan sales And rate in simplified also also efforts, and financings experience checkout. combination a attach a the and our marketing increase in of customer channel we marketplaces, to

progress others, on We on all and these have of working teams on updating I and you initiatives calls. future our many look forward to on

some industry the environment look outlook we're a macro to positive improvement. perspective, the towards to like beginning some now provide signals environment. future around details see of From macro and I'd

increased in is to expectation of First, two our the dealer balancing factors many of vehicle are increase and we used new lots an ingredients vehicle market. commercial are vehicle the demand necessary have customers increased XXXX. to on with production supply seeing supply. starting These inventory now new state Also, indicated in

witnessed conditions that XXXX expect Shifting second price spring half to to May. in market we used January declines the that typically from values, in the of we vehicle abate significant the through prevail

I short transaction of some expect term become second may on greater to evident This marketplace. again vehicle rates. volume wholesale values the this the lead But in on will it run believe in that we long will in half used downward However, cause the conversion pressure pressure year. ultimately

dealer levels space, encouraged of our since also we our in Looking at grow And auctions while the in are dealer and volumes volumes pandemic. lowest down volumes to dealer channels, the dealer dealer and the continue was new increase buyer to to I digital participation. seller data to QX fell industry onset quarterly registrations, according that the dealer physical to

we in Currently these worth to our about that new cost improve a to the new opportunities markets. dealers ahead more commenting some now and QX also in learn dealers likely migration were about format some limited platform. adoption positive QX. as we have continues excited to platform But volume increased I'm the It's and that flexibility effects this believe dealers to choice us provides. have introduce as our been CARWAVE

of in increase customers, we a In should terms them have of discussions the in that later signaled a off with lease XXXX. volumes segments, recent number in office expect commercial meaningful

our being not and business positive undoubtedly would in we've since we're a the for proved conservative that increase signals modeling before now for any had While significant be incorrect.

many between the increase help mature enter amount be of XX% April end. to data, to will how our vehicles of question declined when should channels has of vehicles peaked of value the average contract the the are lease value time. that that is lease will the equity the lease leases key difference marketplace off year. flowing of approximately later over those According year marketing market this of scheduled residual volume in by A wholesale value into it maturing This the last and the since your decline

I point of first we in now see our in of these all weeks this but that customers this portfolios. out evidence year, some happening of in first are starting the not would to

delivery our then for starting a our we're customers new in activity footprint older more return also. business the environment. you this the of I fleets. Rental normalized nationally, is And beginning And and signs. see industry a positive and of this for vehicles in finally, which increased though a is to take categories are signal rental believe increasing also is some many to indicator should their is repossession smaller of positive generate sales of more vehicles, leading Repossession

used continue customer past gained number a of Looking book base in expand of to we enabling so due segments, share anticipate and the and losses. manage environment. declines We also business. higher to at We years, an and disciplined done to way, an limit vehicle increased environment to our but AFC in our combination have interest to over opportunity see of the AFC rate risk same. finance a risk plan continue it price the in has our XXXX

business these here on to through with of feed the to a mitigate AFC and The data impact is to meaningful KAR's a combination technology, AFC actively continue works and contribution will that monitors directly pressures. the street believe dealers that and overall performance. we positive make bottomline of risk

expectations my So on XXXX. I'd like insight to provide some for

last enter beginning at First, believe I KAR were of is we very differently we the as XXXX, the than year. positioned

a We clear have focus. digital

have We debt. our of down the paid majority

cost our reduced meaningfully have We structure.

a are commercial simplifying our to the We We're of first beginning business. and our recovery. platforms signs consolidating see volume

a growth of have cash to And broad initiatives. We flows profits business generates. to we're that able pipeline these innovation the and support this and investments

are of existed the same in are all present still some time, XXXX at market While these degrees. challenges positives, today that varying the to

used we expected below in the will values wholesale lower expected are us, XXXX New year. for to term below vehicle and vehicle may term will longer put term lastly, with in finance long more that as a those I've interest higher where increases Volumes a before and marketplace our environment normal coupled realized. values and declining while create drive And help business rates production already remains risk short remain those modest price pressure declines are volume benefits vehicle conversion normal on in may mentioned. this with rate environments are used positive high believe be

our people, $XXX performance these adjusted technology for our full that support of and the enable EBITDA I management the in and believe to we our platforms The delivering and invest will us year million also Based and of analysis, are factors can committed on to million. to results. deliver in for internal customers of KAR the strategy team $XXX necessary growth. range to all XXXX This level this

Our on supply and to guidance scenarios further and to wholesale year's upside into an in and/or an last increased to arrange acceleration volumes below expectations our is dealer levels last risk AFC. marketplace based year, include similar the at volumes, volume commercial downside recovery, than scenarios expected beyond dealer contraction faster will

As volume we delayed anticipated. more commercial we beyond recovery been we that XXXX, has than the look recognize

adjusted is For lease volumes million our XXXX to example, originations present in conclude likely in estimate me This previous will XXXX. leads a to unachievable. XXXX off lower lease of in that $XXX during EBITDA headwind

over our EBITDA a adjusted by grow can XX% next between rate growth we consolidated that believe of annual to compound do the I several XX% However, years.

managements expansion this of the our we services organic can through products cost achieve and offerings. growth volume of our that believe I combination a share, strategic and in and continued

to believe capabilities a of those. I available and As position new capture our strategy and there to well lot earlier, I stated KAR opportunities are that us

a like now brief I'd to on our capital recap provide allocation activities.

acquisitions an divestiture platform's prior that major no XXXX, in material This and simplified our technologies was teams During primary we XXXX, focus us acquired in a Also made we and integrating greatly allowed the years. business. our attractive in to specifics proceeds reduce our shares more the while this pay utilizing the debt, will off in and price. business repurchase these KAR around next to the and cost structure Scott call. portion invest of activities completed provide

allowances positive At the range cash could cash business debt repurchasing our stated the strategic continue by our Any to another over XXXX after provide which acquisitions approximately course $XX exploring we taxes to and dividends arise. I've off flow $XX capital company's details. debt, by Scott they shares of for Looking this will payments, million stated follow our KAR deliver more allocation to expect we the strong generated and CapEx, include guidance flows. year. would priorities that cash will paying net preferred interest expected business reduce our should million excess

and still key my against summarize challenging to for a solid well business. So economic we of experienced our another backdrop quarter QX, in in environment messages finance industry performance we a today, performed and

our plan on roadmap targets, simplify cost executing a multiyear to realize and and in we XXXX significant clear We savings consolidating our savings XXXX business. achieved additional platforms to are beyond. our a and We have

highly on growth. term focused We're long

We have a and a both. strength in base and offering commercial customer and differentiated dealer includes that scale with expanding diverse

several I on have which our have we will exciting of XXXX. and future invest the to large progress and market We a growth innovate addressable agenda in for And you on initiatives calls. update

energized and believe position into future translate years for and progress come. to made improved this many to that performance in in our KAR for the I'm overall, to XXXX success. So transform XXXX, I we've by company will

concludes my that prepared So remarks.

we're new for our national in a mentioned last chief search officer. a call financial As currently conducting I

our Financial Joining interim me Officer will financial Scott? Scott today further is Scott results. Chief on our Anderson. provide detail

you, Thank Peter.

our has have Peter many made review. As of a areas I change. of already commented disclosure to additional only metrics, on We one financial couple

business. a vehicle down the to we amounts have believe the marketplace digital is needed We sold model and will off-premise on-premise business of providing measure longer for because our we longer no segment no success a to be break moved

transportation consolidated Peter but year services per sales XX% marketplace to to revenues technology of XXX,XXX increased declined Marketplace million. approximately attachment unit excluding to units X% of note to amount. result purchase fees the all to the XX% excluding fourth segment in these are highlighted. transactions. were marketplace Looking values. repossession, with sales the Service vehicle our revenues at increases of that $XXX.X increase million vehicle at quarter, approximately provided. $XXX.X purchase vehicle Marketplace Auction prior generated in XX% and $XXX quarter the lower services it's vehicle not the flat only due to Not consolidated revenues declined X% conditions as services sold important a and attached increased to due did market

RDN varied generally For transaction. to services highlight in Increased attach that empower diversified example, market challenging can conditions. provided in generated repossession service platforms and revenue through environment, be grew our do a not streams revenues industry our the generated marketplace

to fees gross sales generally largely margin revenues XXXX, due in quarter vehicle XX% from of margins Service margin are auction to therefore our purchase lower XX% services in lower to provided. compared the the consolidated excluding declined and increases fourth

due finance growth. addition, revenues, of to XX% volume million excluding revenues Finance for purchase and vehicle strong segment XX% segment segments, sales. fee $XXX.X in or revenues interest consolidated accounted increased the In quarter income

to provision credit receivables the under losses for expected the be Long for increased credit annually. quarter. losses manage for provision X% of to the X.X% average AFC's is term,

the from actual could range. particular However, this quarter losses in deviate any

additional plan floor from increased low due slowdown prices, growth wholesale Although declining for economic an we anticipate in supply and fee returns. losses as car business credit industry has amounts, the to volume we historical room believe used

$XX provide SG&A was Non-cash QX. expected $X compared on to to quarter cost which amounts the a than $XX longer an million compensation best. are me third due in additional approximate non-cash to Fourth million SG&A. initiatives portion our of was some color as performance lower of execution let awards quarter million, no the and saving Next, compensation reduction decreased

excluded The Montreal and long Peter of the to of reduce As affect item separate provide on performance to SG&A from have $XX in One in progress. mentioned, the a term million. adjusted fourth that is did we and income in game EBITDA. sale line we continue segregated resulted approximately quarter was statement, gain a initiatives spend, which land is as pre-tax will game item this excess updates

hand, net On is continuing and other share included the operating gain per the amounts. share from in per our income adjusted operations earnings

addition, realized when of quarter-to-date with In XXXX $XX XXXX results comparing EBITDA million gains sale year, of and prior included on the adjusted investments. year-to-date strategic million $X

a in a we some auto of companies and As enterprises. those our went portion invest public stage related early certain reminder, of we monetize occasionally In XXXX investment.

anticipate Going continue investments near in of amount any we monetizing a forward not but small amounts hold to do the term. these

Next, revolving We execute year which million of to I capital structure. credit, cash line provides ample $XXX ended available liquidity available will strategy. $XXX highlight our million in the with of our strong in

significant activities, the capital me for the In allocation of XXXX. items let terms summarize full year

Our XX% XX.X our accounted capital stock common XXXX which shares for million. million. for expenditures outstanding of approximately repurchase of also KAR to million aggregated In $XX $XXX we stock,

the BX. cash billion transaction proceeds repay the provided, our net $X.X terms Under proceeds term generated of company $XXX our auction were business. sale from million credit used to the the net U.S. importantly, cash agreement, physical of loan Most from gross of

maturity indenture within our EBITDA obligations, Therefore, as windows XXXX, tender notes debt debt adjusted revolver markets repurchased looking have we be at XXX notes like be to which senior XX, million more December senior the in remaining opportunity structure. down the leverage approximately going two one to million that asset our must August forward, debt transaction. current date, of a in that debt of XXXX. Within our we a outstanding of for the is net reinvested or for offer in senior be used are XXX extend to target in classified framework, place an and Because lowered year specify to the more expect note permanent proceeds we'll the put business. of we approximately times appropriate excess terms one The and pay

Let on me close with guidance. some comments

$XXX $XXX to we mentioned, XXXX adjusted million. EBITDA Peter and As between be million expect

our we We continue invest XXXX. as strategy and were result, expect digital $XX will also capital approximately to million a in expenditures in

one $XX two corporate to net on In EBITDA million. approximately million addition, times cash expect interest we debt to with leverage debt adjusted of to of $XX

$XX We also taxes expect of million cash million. approximately to $XX

similar preferred approximately quarter, stocks million by $XX million This are operating other capital be $X.XX capital million of working million $X.XX adjusted net on assuming assumptions year. to allocation believe these reduction could activity $XX this will in $X.XX. $XX per or earned Cash share diluted the The result earnings of of We range to $XX for a and debt generate to changes. to into dividends midpoint expected XXXX. is no per

per I nonrecurring Montreal However, from XXXX housekeeping guidance. in the share benefit included included such recurring $X.XX item. our XXXX a No real are have items gain. estate one

be filing the week. our will within We next XX-K

and I Q&A. remarks turn it begin concludes over Kate to to my That will

now and question Gupta, will [Operator session. Instructions] first Please Morgan. ahead. answer question from The go the is We JP Rajat begin

sequentially the drivers profit that a a more per is to takings down questions. about took Orion. that? quarter, thanks follow than fourth step into should trajectory for unit XXXX the Thanks. on on revenue able elaborate you How be per declined. gross up. the think the on Maybe first question we unit Rajat of and have the Great, This Would

Rajat. Yes.

mentioned gross value a I think profit I was declining used vehicle it environment.

into came there So, environment revenue, through vehicle profit that feed flowed unit. on per so by as in gross negative down that some price probably was

so rate gross profit you values recur. sold, it would I would conversion would every bit lower, So conversion to principal lower number but we for that factor. I'd it are that when the a factor, think then of accounting the rates comes generally profit, I gross pressure. We think some also you're be inspecting and in if per because on per more gross vehicle that don't vehicle I when But example think under other, rates, be which quarter, a conversion a were think lower was pressure vehicles greater one, profit fourth impacted they unit you find is puts items have when about had little technical this say another

greater metric XX% if net other target the we for of maybe I at metric profit, And was consolidated The the of gross than revenues more anything, gross use the delivered look manage that business. profit the is XX% a above on health to though, important I that pleased we internally the quarter.

Got it. Got it. color. Thanks for that

going SG&A much just and that. action, of should and Thanks. now just the on mentioned maybe the the nature? savings, think confidence average based you're XX% actually gross fixed overall be volume the EBITDA profit XX% And like volume that annual SG&A You treated we us of versus to that CAGR just on you how also that, help that expecting through cost is forward, how recovery recovery, flows in slowing should taken, to variable cost about and can how on that as

there. that into Rajat, there packed is lot a question

So focused growth on first, the yes, EBITDA And deliver. multiple at a believe that this what to consolidated adjusted we look we're is I if I believe growth, over business can delivering go forward organically. and years adjusted XX% consecutive XX% sort of

pressure. conversion we've strong but think, see We well. volume I our the entire I as know, to rates look you growth for in see I in opportunities has business. strong across volumes, that presence also, commercial as long term with think opportunities the been commercial a under over at company category that category, as growth If volumes those got have the

dealer. So strong We towards digital, that intend opportunities category. your and category. site, there, frankly, I category gain physical in grow on off-premise secular that to that in shift off dealer way great digital that We're belief fundamental there My to channels. think in is is in from share a intended

I think segment. to grow in that we're going So

I etc, last a logistics, couple businesses, been years. under have pressure, lot our of services, the think inspections, of

towards get Some of a them as of businesses for there's AFC back performer, years. been which know, I ultimately, because above of profitability been that, the And those you of levels We've chance over low very number well a to volumes. and for addressing historical frankly, losing last as time. think strong has money, even

I for think are opportunities there there. growth

I think be of to think that be and AFC modestly it's we growth total more marketplace strong a will the much continue also a over our going smaller of in will faster. expect because percentage grow the AFC will to time, modest business. part grow business be to earnings But performer. we

all of the So for Switching company. things give SG&A those growth in the me to confidence this question. opportunity

we've executing So progress we I'm XXXX I next continue larger much made into year. of pleased in the guess a the we made. part the program part was The with to is progress that been that since divestiture roadmap across early business of the

works the year So to initiatives in we that have continue numerous to this on vein. expect I progress. make more

have we benefits stuff work in the and But won't because until that. through costs apparent I year, of the some fully an next of XXXX. overlapping mentioned, context As we'll be

ultimately of I that our we view net And percentage revenue declining think SG&A revenue, total over as or potential a for time.

of of business, I transaction. the operate percentage is each variable, digital my, characteristics more more I a that There tend kind in a they tied one incremental In terms fixed what variable SG&A of to think think as what view is one do of less fixed of cost to my of versus is business.

in you That's top, add So performance volume sort on that's more they when well. P&L. of so why down the outsized get further why scale you

are fixed bit all nature with to less I will costs So variable. a that's fair time, little that also our variable I over start know that more long structure SG&A assessment a But look in run, cost. guess in the

will true that we for we business also and have. cost the So the create right that's structure

color. that all for Thanks

of The next question is Please go from John Murphy Bank America. ahead. of

that look Peter and what vehicles for are a in transformation, 'XX be better of the of might Many may recover, the to that tough you flow should the in at people that industry it lot as as environment. of of vines debatable to mean, the simply be you be in Is I not that. of think a CAGR about and gauge a mean, frustrated flattish think happen that sort mean, there's see investors It the is be EBITDA, at? think I and you might the in year this you're or kind I might the progress, be 'XX to But able are XX% looking the lot making? you what tough debated to on Good to that people morning, remarketing. because recovery. Because be XX%, years this may it backdrop, about us point you're going may I going hotly over show of other progress? understand industry think KPIs with sort than in two sort I the really progress and Are there the to think guys. folks next can what looking KPIs of

essentially down you, years. below John. industry the an couple on to wholesale all are from volume for And last year. still percent, about XX in say Thank pre-pandemic below growth levels. maybe I as of volumes things, Yes, in relative inherent of normal. volumes industry Yes. The our that of on guidance remaining normal industry the much of plus would would volumes are XX%, flat remains say as modeling next talking context based the a our number is is assumptions I our I'm

or dealer I that guidance, we I as acceleration, faster would said. to see versus our think, if an represent upside or dealer recovery, digital a

our being remodeling. think we're I So conservative in

sustained to see But we're terms volumes, recovery of it to going a the call my for multiple industry years. but want positive in at over time over or Our be bottom belief however we're that'd and personal realistic, you is us. a gradual

is per KPIs than closer, driver. sold correlate a marketplace in key volume of terms the the business our results quarter In more

So conversion rate. obviously, KPI volume in consumer offered our sold business. is is times the volume two Volume sold, critical

of So volume we obviously And then look conversion function participating at a both sellers offered metrics. those is participation, participating buyers. and rate of

So and marketplaces. buyer we our participation seller look digital at in

or benchmarks. at attainment also customers indexed conversion we so what some results of price rates, beyond our are marketplaces achieving sort And then look against

these at business. functions So of our we of health look as all others and many the metrics

of have I earlier mentioned trying simplification sort simpler business. and a to

thoughts of the one sort behind me Let go of that. into

challenges our company have the is has this of one I marketplaces had been think fragmented. that

multiple last volumes challenges business. X.X volumes across but two million, venues. think I last, And have the to digital creates We year that different to fragmented total

One of platforms. supporting challenge cost the multiple

and even it's maybe you're your The fragmenting multiple other demand your a across is marketplaces. impactful, effect where network more scale challenge

driver real for Consolidate that. marketplace participating has our buyers all all to that consolidate one marketplace. all of participating benefits of volumes, creates a And sellers, So simplification of participants. our into

If get you're where likely your are, can location better buyers a outcome. into to all you car a the put

behind So our that's simplification a of lot work. really

It with in migration see challenging a quarter. backlog we bigger marketplace. benefits mentioned I it's marketplace that buyers those moment. the vehicles having considerably I a was the But last can done, in more completed CARWAVE the benefit the now in migration that and of that

grow and Bringing So to us we're performance our commercial health, things that customer vehicles adoption, marketplace the types for scale of our looking improve listen, and the vehicles outcomes and into one that will these business, at. etc. help are we the dealer our owned increased customers, the will deliver

a of company tremendous opportunity. this So has amount

I very very talked believe growth the we're focused we on that that is attainable. opportunity And about executing that. for yes, I think

re-creep what tech stay And for right you stay here now? two those would up we is there? what us when than housekeeping then it's under more be But in a the sort where And than like greater kind Right. just guidance quick think or And losses normal the do you're of AFC business you're XXXX? grow more And you like the reasonable, side? lower just offering, remind of X% significantly and AFC should what level, you Carvana in losses on to it agreements to mentioned the expectation your risk from can feeds if also, you're X%. is getting sounds taking what getting service you

above Thanks, it's Carvana as John. same but attached. the arrangement percentage We on small year. Yes, services, as don't some well activities last I comment we provide on to losses the or or some too median much going there's of for want focused our continue arrangement, a separation It's On AFC, fees and historical had total be mean the we're well. that would generally that's revenues. obviously, the X% very that number. But

than So X%. is historical. higher

the year, for any we X% think may, but it the I year, in it budget, said Our Scott X%. expect given quarter reflect it But doesn't a see less. in be this we to

in terms level, terms for like we've and comes we business I'd been we of our put, like always cautious run yes, just, this be where in of there's of our continue. I the conservatively. AFC a And I I Keeping stewardship is to business. important to business, Simply our the cautious think grow. that us conservative think approach that's bigger when below growth. But to it want to to just opportunity losses to in

Great, thank you very much.

question Prestopino go The of Gary Please ahead. from Research. Barrington is next

the where conversion the how they Peter. a to level last the the get just were your time? idea questions change having conversion what low year-over-year I'm ratios they on on on mean, are morning, couple versus you at guidance. you Could year Good if stayed an And in ratios? Hey, portfolio? much this were had of here. end at trying volume down have these maybe of comment of hit just may they your I impact

car run doesn't be more the conversion in four Yes. I'd that seller it. than you more the the auction could it's argue even you. in think very the sell goes The of the to Because say Gary, week, a they important. physical. if and important is out weeks digital often one physical come way The low, business, are may sold. it going a it thank the gate week, for ultimately works, until conversion you in run rates ultimately or they're gate, car when rates next that but

channel. the don't physical digital to it's marketplace then car, move sell you going a the to if In on maybe

across of cars kind we're Conversion move taking chunk down rates were out before of the of that a So the process. slice through they entire industry.

fact, I of QX were lowest of In auctions were in QX think conversion looking convert, the XXXX. was I physical they since at rates

the So pandemic. the of depths

level weak XX range down to wide were it a front have generally X say So conversion from I rates bit industry. area, that's quarter I'm rates being our very I'd conversion numbers And in the to and XX-ish a based a to to math some of marketplaces how me XX-ish on I'm something a here, say, that can the level, from XX but XX impacts you sales. of yourself in specific was X in that, thinking points a don't across of markets, our like you do about, can and points,

That's at got drops XX%. a XX%, and drop converting you've in that market sales. XX% effectively an If to

up been if the year, one yes, would prior hit lower the we as the rates So it's into page have had rates conversion probably been we a we I demand of interesting, has book historical almost The conversion rates, turned have levels. and been I same though, as think that conversion is weak back end strong it's were will in picked rates again thing the would conversion at XXXX, like but as the range. soon and turned are really say,

Some is of the that spring market.

a have market most this spring industry effect years. We in

continue With in seen. buyers So board. rates. the I market spring strong certainly a think the moment strong and spring remains we're that we're to conversion seeing increase across will be rates the market, How seeing conversion in strong this year. But demand current from long

that somewhere too When is to historic say it's Or that levels, XX%? close high? you is back to

is that venues, like little a we that. And But say just that of XX%. I'd in below or marketplaces these have I'm it's that. something to a because say I'd in range XX our some in probably different couple XX

with far going platforms franchise could digital companies overall this now lastly, and dealer Okay. market you you on. product? to And on How the then that's penetrated into both with are the your comment with dealer just consolidation dealer

the the same be volume our look auctions the where the vehicles, I physical dealer Well, dealers and are say these at total to say still early But the dealer they're time, channels. We're we the consigned of of still many industry into total is using types market past adopter dealer broad in platforms approximately the channels. three I'd phase. digital times would volume segment. of combined at would when

that that of to Gary, all being platform increase. But strong a sold terms over penetration of a if question still digital have But I dealers the the minority gained no the number the last So over continue. vehicles of years in just of the you to but said, last digital look gained there's mind, marketplace. using the my in in has number continuing channels share share, expect and

moved this car base. after much on within It's pretty process. think marketplace inspect flow, to if seems immediately within offerings, a buyer immediately. me your that It efficient the very our It be of have at our flow. dealership. this with we that hours, Likely And digital tidal will you you that, will national sold certainly funds XX

location. base to buyer and some to for You immediately national who for to as scheduled just showing up that right to opposed ready be bid a online buyers happened waiting sale at the offered that are now

So I very strong. offerings think the digital

going think it's share. I to gain

share I think with we're gain going that. to

versus are there question. then of to what's I dealer dealer off. what you're And guys I'll that last market? physical just realization what you the one price digital seeing digital differential on are digital typical the auctions jump on quick out kind mean, out on to in there

we to get we're digital obviously, that's to in further that, execute mission believe versus improve the well. market. And perform every for the have benchmarked sell We we've our They to offerings sellers. continuing critical car and offer Well price. channel best extremely because the strategies

yes, or would perform very I So very, that think alternative. digital than I better metric good the on say, channels well, as

apparent that our making sales customers of and our process. marketing So a is to part key

Right.

Okay. you. Thank

Thank you, Gary.

ahead. from CJS The Bob is go Please next question of Labick Securities.

Hi, Lucas, for good Bob. morning. It's Pete

You type consolidation single auction? guys the ask for better settled Or dealer do of market? on of you And something bid versus terms that's auctions the of of the in that price And of touch what you segregated that? think covered by types are lot just platform about strategy. how to on vehicle? a in Have is talked timed wanted terms cars dealer to you about

interesting very things in these we question. of there a these And are is the both that absolutely offerings market. you, apparent have that thank some now Pete, become are

are So cars if There today, our look the there I two at marketplace. XX/X back offerings. essentially, is

BacklotCars it's what so that's performs come is tends It been interact, to well. and seems price they where bid has that sub historically. a I And really, And in the particularly really, to $XX,XXX And and strong I price and work would really sells conversion say XX,XXX, on the have vehicle kind certainly strong lower vehicles. very of marketplace vehicles, vehicles to really well. seller tear a value model a rates, strong of That sub and attendance. say would buyer

Its higher weakness, and vehicles, but with $XX,XXX strong. as has value just frankly quite quite well, been not greater performed

over that They we've that purely a visible auction the days increase two days over It's got Cars imagine available time, and Now to Thursdays. live, auction are inspected. then We that. running different digital bidding different week. different have are I in will different made frequency currently our window for in and the auction. on we'll we're of place that markets, Mondays format auction pre takes days currently sellers. a a process

in we're tiny So market the or a that. bit in very to strong flexibility a currently, what days with we've got how it's go is below two we're we a But price very there seeing week. very, conversion, lot but we're of seeing marketplace, attainment. seeing What strong

value So also really better and seeing on really, it price the if perform vehicles. we're well even attainments higher in marketplace, the anything

Okay.

combined as sale the as going been to into integrate with into here very hasn't They've those they compelling, footprint other we're commercial addresses vehicles vehicles of we've differentiation offering and think so. and those of which open we sites, But all a marketplace. have label first more last at etc. the of believe private many think an types have selling there vehicles. And got cars, here that big been all, different channels, is year deep volume I one I sellers. car I them that's So that will, or over deep, Currently, more we flow

digital owned etc. very will dealer to buyers a one to of vehicles, venue checkouts, see they're commercially use tremendous tools, going number vehicles number of also our where go and owned digital a easy tremendous to So with

to unique going a that's create the in think differentiation for I marketplace. us

I very, to our think to very compelling going of it's all be customers.

So and I'm about really that's strategy. excited that very

ones and to of you've hurting about higher Thanks. hang outlook. there. of you and volumes you lane what talked in auction? What terms a terms You But you? are helpful. for the that priced in more auctioning mix open Meaning on lower change dealers And or one and lot how me at just seeing? the seen are the are seeing helping the Very market priced is what cars

on I are is lane owned open new lane far what lease. say cars were vehicles selling I commercially open guess and the by off the an are majority

a volume the year little currently I is is high to dealer. similar better By last lower in year, Last seeing mean, we're the actually was we're to seeing that mix. what grounding in levels them So but slightly a we're percentage XXs. selling seeing of

percentage. marketing So funnel, consequently, is deeper generate little more we're seeing vehicle. that lower are where a a percentage grounding is buying vehicles And bidder flowing dropping, into their per the greater we revenue

Okay.

position to last from it's nothing for XX months. But it away been distorted to its So normal. in the we're close started that seeing unusually it's move that

Okay.

that. seeing we're So

sellers other I more my The number have indicated later significantly as year. a is, volume should mentioned of expect thing commercial we this our in remarks,

on. There haven't been been our I being in around it. this see because in that journey that very to reflected am this I cautious We want before in really false have we've dawns models.

I be should from time, over And to happen. going when we believe I'm happens, sure. that do cautious. benefit So But absolutely for it that will

Very helpful. Thank you.

You are welcome.

Jefferies. is question Please of next from Jordan ahead. Bret go The

you bit And trying about the Just Could talk continue there? we to expect the versus at progressing is Thanks line finance Jordan. model you being driver Hey, bottom 'XX? the guys, questions. cadence the more if see the to out this throughout should taking for in year? main Patrick auction [indiscernible] for how little of finance marketplace contributions on Brett our a

appreciate in guidance, we this continue but that If lower year, Patrick. question. a strong AFC contributor, contribution Thanks, for than be think our expect we slightly to its to about XXXX.

Okay.

in expecting grow than to higher its be than of last or be volumes. But AFC some may We expect lower values ARPU risks. lower last we're year. year. vehicle slightly level may line But

so growth strong, all the business. remaining last while marketplace the lower side the than is year contribution on AFC of So slightly

a last we small maybe think level but slightly a to growth I a then I business we've and on it's we've modeled what very with decline On level of commercial think and driven growth stronger of small again, by modeled And modeled with volumes but say. hope strong DXD do we've similar slight year, lower come SG&A better, to let's with I can line coupled the reasonably you've experience a in overall. margins that mix.

What how beyond I things it. the [indiscernible] AFC 'XX? little Thank see you. side a That's drivers a counts? bit have do of loan those and been little in guess primary Got progressing And on more I there. growth you the helpful. bit then guess more of And

is and the Good the in Yes. many AFC many, two over industry occupied question, years. its number that has positions Patrick. been

the two has consistent share. or last So do strong number we in it's been a years believe AFC three industry. over that the four But gained

So the over between number number last somewhat and AFC one gap reduced the of the years. has

and matters, for and dealer independent We on to to certain generating but dealer. been benefit been to AFC's AFC. try I'd dealer I itself, AFC say its on which price Okay. and the turn profit also of opportunities it's And into increasing I the would the by of say of culture that. AFC product AFC service, has service differentiates activities base. core take of strong principal portfolio although done revenue price, obviously that that say its using well, expansion It's on a driver customer, service those is number compete it has dealers not strong

That's it. very Got guys. helpful. Thanks,

we've Thank one time you. Kate last I for think question.

Imbro Please Daniel ahead. Stephens from of be will Inc. go question last Okay,

Hey, for in. you for Daniel. guys, me squeezing is this on Appreciate all Reed]

how lease as need to year, of With units more coming handle those foresee you reconditioning market the the units the return do ability in and off your normalizes work?

Yes, [Reed]. Dainel, sorry

think digital about things so a is one it of good scales. I the Okay, business

us. So the really is challenge scaling a business as volume not I returns think for

have we platform. more but a from to second build a technology process don't funds, platform We standpoint technology more titles, to have

think really, really I'm scale about well. not So the worried will I business that.

from in there are and probably reconditioning. our the probably it your my portfolio, vehicles is I view typical that that have vehicles with some and is it inspection way when on I some of percentage, comes. benefit We'll our There if they're the a to business are increase But guess some yes Reed deal question parts hire like audit business, [indiscernible] of volumes view To mature. small we XX% there. sold. it's reconditioning a that may before that very as in inspectors

that's conversion just started, put a that, was scientific on off number, on rate Now, the like to pandemic but our not very XX%. the marketplaces before about facts lease some

reconditioned. XX% of are them those none So

reconditioned. the Okay. low number pandemic Those XX% those over in none conversion into rates is and the are levels. vehicles last increased getting up XX% And of the again,

volume thesis So think returned, they back lease back rates our they'll XX% ever start think But sellers that where go physical is that to vehicles sending to my drop conversion the back want level. pre-pandemic. don't as channels. of I I from will I were off think don't volumes into

to costs. to want the they find think ways reduce I conversion upstream remarketing increase and

that really that only So themselves the every can condition need the vehicles gets my it the reconditioning In the inspected, dealers is off more grades. vehicle lease of some damaged provide grade. view, are

the pre-pandemic. may stronger different time, I off my expecting in strong we personal a that's see saw lease guess forward people view. over conversion Now, have than I'm ones, but Other going we'll rates channel, but

you Thank helpful. color. very Okay, the for

You are welcome.

questions the for. think So, again, I that's all have we time

some So of thanks, to for today. those I messages the earlier key everybody just out time by for questions. from morning my close remarks reinforcing want this your

all, we the future. First accomplished, across ourselves year KAR how of team our and entire success for pleased about the I'm by of challenging was positioned XXXX a industry. in

digital a are marketplace leader. We

commercial offerings with and and both unique differentiated have We dealers. a strength is that sellers

our experience. and simplified our have We improved business, consolidated customer platforms

cost efficiently have We operate we've our ourselves reduced future. the to meaningfully up more in And structure. set

help And if repurchased progress common The stock. approximately in in $X.X deliver debt even XXXX XXXX XX% made remain paid in of we billion our industry outstanding should volumes and over performance us down weak. improved

$XXX EBITDA achieving that XXXX million to goal. deliver in fully is of Our the adjusted I team management are committed $XXX guidance and and to million

the and I will As to gain be benefit. to will shift continue believe our we to That secular the share. to the will that digital continue future, platforms digital look

However, waiting this for around happen. not we're to

own We grow offerings course are in our enable customers. to our base, play many our we us and will that product we charting service for our and market expand have share, initiatives increase our believe and customer

I our to and you on future forward updating calls. look progress

can annual opportunity has So growth if I consolidated past line of a KAR to next grow to years. line believe XX% a adjusted you compelling over top look compound and improve XXXX deliver performance. several a believe growth bottom the by rate we I EBITDA XX%

by energized ahead the and excited opportunities I'm for this lie that company.

market differentiated a and offering and diverse innovate have expanding addressable in customer invest. to We a large which and base a

end than I that call. to With days you less look all Thank performance. first in quarter we'll our today's very on update forward reconnecting to XX much. you

has now Thank conference today's presentation. concluded. attending for The you

now may You disconnect.