KAR - Earnings call transcript Q2 2022 | KAR Auction Services, Inc.

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Operator

Good morning, and welcome to the Q2 FY2022 Earnings Conference Call of KAR Auction Services, Inc. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note being recorded. Please now Mr. would like to to over conference the turn I Eliason. Mike you. Thank And over sir. to you,

Mike Eliason

[Technical Difficulty] are and statements, update prospects, our and these uncertainties filings. the that may of SEC any And affect company operations. statements. expressly such obligation providing risks In fully disclaims in results detailed forward-looking KAR's to business,

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

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

Peter Kelly

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

And quarter our second of earnings year. of that with a impact operation During information our capital strategy U.S. today's industry; ADESA remainder which last factors following additional treated the for first, to the quarter that was auction will business, segment, segment, physical a segment. current significant view and and market outlook KAR's of is the we called be and automotive on and history our a ADESA in This detail our reports. our going historic this divestiture results divestiture I'm call Finance that will in completed segment, The auction ADESA important with provide the I of employees, as to QX our Eric transaction the two of will three in areas: business; discontinued excludes history, and night, AFC quarter. the ADESA second, company, transaction did I about allocation customers, and I and discuss as the a call, our U.S. divested the the formally we last continue release our as in stockholders. the traditional and begin, our segments, milestone the Consistent call, an here closed Marketplace completion this our business. also QX a generally performance we morning transformative our third, our was the X. of company U.S. physical physical business for was which a you May in our recent financial auction To formally which on speak

$X.XX The as only and are itself our generated we repay already loan a approximately cash, used revolver. So to $XXX net outstanding amounts of and million approximately taxes transaction that we billion now been the has B our for term of company Over of quarter. operated on half fees.

to want I million As of a the cash second August available cash cash. continues to in with emphasize in position, to end available over be million offer cash that $XXX we announced our quarter. very our strong and release also tender will back generate at last senior the to $XXX using a conducting of remains during notes of up we in night, earnings buy the month KAR

our ability from us cash things. to strong and cash to do Our business position two our allows generate

to into marketplace our allows invest First, flexibility it digital the us businesses.

to these digital our market position in marketplace here believe is organic to extend us expand the and enhance objective lead customer growth and industry business Our volumes that will the normalize. our our investments share, accelerated We product portfolio for experience. us when improve position

authorization our our $XX going We buying Board the undervalued. $XXX believe a repurchased KAR transaction, commercial from remaining Secondly, particular, during of of million second I've we is spent our time KAR continue of approximately sellers. stock continue the shares intend back approximately with in our with We shares quarter bit Since quite and and close million to to have forward. the opportunistically Directors. the in customers, on

for our last recent future. affecting half the issues side lower our that year would although customers normal at the Production supply to this in strategy to did vehicles share I their thoughts been and the perspectives produce more automotive stable a several near-term out. production as, more interested of over they our the digital side reported getting feedback hear and bottomed OEMs year-and-a-half, recovery. The customer's to impacted of large Also, have challenges first they are than on interested and pace their industry the in have appear I supportive past summarize second the half. supply as as that timing expect level Our enthusiasm over -- am new always on the well also new vehicle six relatively follows. recently that has months, of than

and to expect leading gradual, of in Our of also the higher sales increased used environment vehicles channels. number increase customers vehicles prices. result to put tend gradual new on the gradual the market. will new inventory interest into finally, pressure new of vehicle wholesale to rate volume wholesale vehicle recovery going production on increased vehicle vehicles a downward trade-in lot also Increased would the be amount new production a and And in entering dealer's in retail from of increase coupled with

supply supply amongst side rationalize, our returns, starting and there remained that these challenged more consensus that when didn't may market our accelerating I later and it QX, year-and-a-half temporary hopeful we that over prices it's a overtime. exactly customer XXXX, widespread time. conversations, I'm us see environment to year-on-year of that first predict the and that can while returning past factors during will the happen. still versus No our summarize, this improvement dealer equation normal wholesale one tend hopefully experienced that sellers over commercial we've through But fair the say into start signs to and worsen think a year to to if very materially customers QX, and to is So are will

of backdrop, as some our cover that, the quarter with second highlights of me let results. So

gross in of QX in that to approximately marketplace $XX.X million, amount we in quarter of year. For XXX,XXX adjusted in KAR it This vehicles. an EBITDA a of from represented that year. gross $XXX We generated of first a profit of segments, this was we year. overall, purchased XX.X% last over the decrease a of QX Specific but our increase sold was quarter million, the quarter. versus generated revenue, of total This profit a generated revenue, the year, excluding increase of last resulted the increase of second X% from QX sequential vehicles X% $XXX of million last same XX% was XX%

been sold. unit And rates have per revenue recent were $XXX of the our remained sold. lower conversion over did conversion, decline QX Notwithstanding accustomed prices out we for vehicles those expectations, that This a quarter challenges to versus getting last supply year. strong top buyer able marketplaces they volumes continue and as relative funnel fee by this to higher in to supply buyer reduced to in between alignment our hold conversion vehicle rates increase see our relatively the reflected to weaker of quarters. sold and seller same While sentiments across per sellers auction XX% and resulted relative expectations, and in to decline we demand

quarter as finance XX% We the over continues increase performance, segments, year. Floorplanning also vehicle sold another its our to solid experienced per same increased to In quarter we of expand gross finance profit $XXX, of business. AFC last an

increased to per segment the last transaction same offerings. the significant generated year. of percentage versus in quarter from an finance revenue and fee-based quarter was a revenue million generate of And Our continues $XX of same last $XXX XX% revenue non-interest, AFC increase That its quarter. XX% year. services over to

last same During XX% the second revenue by year. quarter, fee-based increased over quarter

the what with achieving the opportunities results where second a advancing second accelerate I'd of this But our and ahead that were strategy KAR significant performance are year we benefit I by were and pleased to relatively the will to quarter our highlight areas overall, and to half positioning in of that environment for want the we given clear, many indicative conditions. I believe we is via progress we capable our share believe of few from are capture like navigate current that taking beyond. these KAR us. do performance and steps to So growth be not market the lie of the

been the goal. of a opportunity underway. October to of And This end this call, [indiscernible] have first on intent to Specific We've an cost with and XXXX, performance. full I well our The our on to reflect savings diligent management. towards is quarter U.S. digital adjusting model made is spoke by rate our creates more reduce that this importantly, run by ahead our earnings we our in intention overhead. structure $XX the That contribute meaningful business SG&A our realities current progress now market. But towards of year. is million an by the ADESA additional Global operating should goal our lower cost focus achieve XXXX of the our annually to to asset-light last more of of now divesture schedule. And work

has Another focus priority quarter in on pricing. second been the a

to fees our current that the a as digital and versus performance our have well quarter to negotiating new marketplace do with pricing maturely business. should cases, across commercial streams that and our through we fee year-end. volumes In different dealer-to-dealer our revenue plans revise contributed market contemplated the increased digital set currently to business, our and introduced In second exist. structures First, to as shift so we our reflect have many environment years ago continue were to been business customers those

the simplifying institute that short-term during both ultimately collaborative for working the have United return. we're pleased our finalizing and are with bridge we're hosted marketplaces So am States, first sale to to I lastly, mutually combined help that integration on BacklotCars And the the volumes customer the report platform successfully engagement consolidation. month structure BacklotCars our platform now across when CARWAVE. fee CARWAVE In of parties experience and the July. we benefit should customers changes increasing of challenges and we to

way Canada, inventory that In integration. digital launched are now well the a will So beta on have of version of Canada totality combine marketplace. single our sellers, TradeRev, that our we we in buyers, single a and and completing marketplace ADESA to

speak this remainder we company now did in Generally, So our to to given This number months. of and the second we perform we expect market based control, to a the can on our to what is for actions I'd like year. than six outlook of expectation current conditions first in the the half better I control of assumptions. are the the year taking key

QX months with two of reflect than related the revenue transaction, but revenue. of with less Carvana. First, were commercial also impacted by and a associated couple partnership assumptions QX to the they

revenue that the that of the increase of expect to expect we a revenue, pricing those second from go benefit months started those in of have benefits latter see others August, benefit We helping but the live increases QX to some of six vary to part the year. improvements just Also half and handful and changes QX I dates mentioned. The by year. the in we for in July, of will the have customer, September, in June, of this customer

half impact year. are our is in assumption of initiated second and half This items towards were actions, cost actions expect effect our during increase the second will also are go we hard have these second contribute and The performance. them those during revenue improved second management cost that to half confidence efforts. our back advance and and quarter, control we working I this to of the within in performance of of XXXX. the the generally remainder anticipate will actions. These into those the I Many

conversion results our The impacting third is factor rate.

volumes impacted had than a that conversion our mentioned, coupled weaker normal were QX and than I situation, expected. what supply As were weaker with tight by rates we

million conversion million. $XXX our the adjusted adjusted we updating guidance to still quarter that the Accordingly, to in experienced of EBITDA second we range pressures for are maybe to would full-year do low a not $XXX achieving expect as we have While path EBITDA $XXX we million, $XXX million. XXXX previous improve, as if

my summarize messages to today. So key for

now Our ADESA closed. auction transaction U.S, is physical

volumes. to of vehicle profit In meaningful a second will recovery result paid compared half debt, and to our new a recovery a new expect vehicle that And the segments, affecting ago. this despite broader We down in time volumes, appear used our vehicle in our to have production in strategy. out. committed over XXXX. negatively supply vehicle one production year that to our we Marketplace We marketplace impacted in gross the we portion wholesale believe corresponding see increased digital our bottomed starting and in we're now of gradual have marketplace fully The QX revenue challenges issues

$XX.X our of per revenue $X compared conversion unit despite than segments quarter million we're by revenue our of meaningfully volumes QX, sold We with revenue represented increased in ahead. a as per And and per Marketplace and performance QX. gross our EBITDA AFC we Adjusted sequential profit energized unit. also experienced finance rates in being solid segment. the and the another unit million our weaker We look increase to to slightly and opportunities despite excited many lower future, growing

we Update As for outlined growth. in our a believe opportunity we in Investor we June, significant have

the Eric. We to a expanding in innovate that now quarter. detailed invest. a of and large and for customer addressable provide more diverse have space financial which platform, differentiated will and a review base results With the Eric market

Eric Loughmiller

time our provide the discontinued managing of financial I operations, forward. released on our where Thank viewpoint you, need a night continuing do most separating improve of my capital, our commentary. to cost spend operations KAR's not lot about I talking a additional from around results and last opportunities believe exist want structure were Peter. that actions to going recently

information of our start the assist we business. this pointing out Let quarter by providing to me analysis are with

XXXX. we quarters individual to we results It for information costly not provided XXXX, have the year. for will of extremely quarterly so that and for complex the First, annual operations continuing providing be restate is

year the make continuing remainder of for our each our materials. quarterly in the operations. provided for This XXXX have our of for We results the allow quarter you of results will to comparisons earnings

We our present for metrics were for previously changes operations the of have key KAR finance for datasheet. continuing Global. marketplace the segment no updated the to business metrics There datasheet to reported the

as will our provided the line changes and in are reporting finance disclosure also segment of analysis interest in allow this increasing. that for additional believe revenue rates the We interest We revenue have revenue. separate business items fee

the quarters. We have provided segment finance all our in additional for this information previous schedule data for

Now, I on U.S. business May close in specifics the would cash at billion We capital the of $X.XXX of our following like on transactions auction to the sale closing. cover X. more physical received

$XX expected two consent million receiving will remaining have received property that of proceeds for leases. after be We

the to we provide of transaction, for $XX part cash business approximately business physical operating. As U.S. transferred to continue of the working adequate capital auction the million to

capital the been and quarter as the of close our we have purchase this agreement, KAR million by reconciled As required working end. to following has back date of remitted $XX.X cash

be We have XXXX income $XX and fees income million related the paid returns. approximately approximately in state expenses million federal of taxes directly to with our cash to transaction and and $XXX paid tax expect

already and the of June these to of prior be in taxes XX, half the remitted the year. to have approximately expect remitted half remainder XXXX, We second

are the the due We of to the use of XXXX. required net repay a proceeds to senior transaction portion notes

of senior redeem date than the $XXX redemption by of press price detailed million notes senior redeem the We in are offer will of release have to announced notes the be date August. the The to Yesterday, a the tender month XXX.XX. days XXX in to from we tender terms a to of transaction offer the up of notes. included earlier close redeem company of the required offer a the the This yesterday. senior issued at completed

balance cash completion significant available operations we accounting to discontinued significant the is offer, that the goodwill for the gain that LBO to business the book KAR before is, were able have from discontinued gain gain to other to and and reason redemption approximately cash will difference taxes. million reduce million. sale Included of of from the assets book our the we sale relate The assets business later from from $XXX formed. what XXXX, We by net Global fund purchase this when in reduces Upon generally transaction physical income because month. gain. the the U.S. of the The that allocate $XXX the auction available book reduce was in tender this for transaction the sufficient the proceeds is approximately

dividend $X kind quarter our Today, the The to headcount total this compared following explanation items prior increase quarter the for I of physical stock. we in after close following severance the the pay dividend by in non-recurring investment. eight quarters stock-based convertible million million needs in housekeeping preferred SG&A million SG&A accounting the for as been occurred as One year. second the preferred dividend item the an the this compensation, in auction of U.S. in kind is to the $XX.X the address as requirement in financial in sale paid Another statements the are acquisition CARWAVE, second the terms for of and required XXXX, is increase some in has exited last non-cash that was business. that the The $X.X like would item first to of stock. on that

this the be All cash. The of dividends in third quarter XXXX, company. any dividend of at discretion combination paid two paid the the stock cash, of in or will future be preferred may

let the transition continuing activities physical on for KAR Global. the U.S. comment auction Now, the me of from operations business some ongoing of separating

We significant provide KAR. of KAR both a that that operations discontinued the of and services have Global number name contracts of in to the continuing are

to the we the working to certain of to Until is to be contracts. able the contracts, independently. to Global consuming to significant are arrangements provide of KAR allow and the to contract the urgently contracts, we party most agreements entity required time benefits these separate operations. with and remains are the each the We discontinued and This these to are separate parties go-forward is the proving prioritizing

many the cost reduce As look to these incurred opportunities we by these parties the contracts, we to with KAR vendors. to of for separate continue

space. are is addressing office corporate Another area we our

footprint corporate in determined transaction, can including office Following reduce our headquarters. locations, have several we our we corporate that the

for each sublet where locations existing corporate currently no the an longer space. we looking We opportunity appropriate of are need for our

We would this opportunities our have business moving impacting retail our efficient circumstances with offices of increasing in more used be cost significant rates, cost sense the our as interest businesses. many urgency consumer in a it areas uncertainty early reduction as can. to to for provide and of deteriorating Toronto With vehicles without in important in forward. current around Indiana a going near-term, structure to we we we are time, and our run for inflation, At In Carmel, cost for address looking our that are the structure core summary, demand of today. confidence, is interest

We all substantially have to interest taken cash the payments the redemption per eliminate opportunity by senior approximately complete $XX future once year the our notes. of reducing of we debt, million

We KAR longtime very to has our who digital are reduce type to lower from model. as organic digital have mentioned, marketplaces. marketplace continue customers interest invest for generated the this Global capital uncertain good cash believe, with as business. our we news our acknowledged the are of sufficient of are future auction Things And interest we sale characteristics as an asset-light of U.S. know forward have of with in the obligations have we lot the for using improved for is growth sure, and fact The business And reduced business reposition that the businesses, and a following repay of additional uncertainty. this in I debt. cost cash evolved. the opportunity remains to payments we a structure have be strong And significantly Peter Global unique our we last, and could immune are move of KAR streamlining SG&A physical fixed we will we business KAR to not

to this excited are for for industry. transformation pace described my time an of KAR and That car of the used we about have Global accelerate the remarks. customers exciting wholesale is the Our concludes opportunity them,

Jacob so we turn I'll will questions. your And and it take now back to

Peter Kelly

Jacob, you can open questions. line the for

Operator

Thank you.

begin now the We [Operator Instructions]. will question-and-answer session.

go Bank ahead. America. Murphy comes The from first question John with Please of

John Murphy

the here. info guys, and Good two and thanks all restatements questions. for I morning, had

and what's the somewhat out on you in certainly a the supply levels. two going to may First, disequilibrium normal a alluded huge Peter, we being to at another moment on of there's at look then that or market now, issue right side sort year the not as agree would worked get you for

you to the really being your As amidst the almost business pure you're time key looking pure should mean, difficult toughly at this to transitioning a mean, thinking or understanding I you're into? gauge that mayhem ex-Canada. progress a what manage progress -- digital so on you're there's kind of are of a in metrics to pieces lot digital business. about and KPIs how in it's moving successful how it's direction your of I you here, just very there's sort are or the which drive transitioning business

in near thinking to you're how curious to the how just and the how So about KPIs term? -- manage volatility

Peter Kelly

Thank Yes. John, you, good question.

first cetera, participation, Customer given participation, of of is we I health in little are of expect a in for important rates think growing the we sold, as mean around and rate that's, and You're now that issues here, marketplaces. some of to have, our kind talked continues perhaps et on converting very of, rate the a all highest metrics bottomed customer a differ I Are the of -- time the obviously, gross feel right be revenues the recovery certainly do doesn't conversion of time metric profit a buy a et change. focus QX, great, an But I sold, I'm of it a by do lot deeper, But end tunnel, When right to side but the marketplace. look to high-level lot percentage I vehicles. a is conversion side. important cetera. at revenue have, our on supply And our business. about health are of OPENLANE mentioned, customer the little is important light of starting the I opportunity of the of sale both encouraged metrics at KPIs. base, the I you're all we as Obviously, transition scarcity marketplace metric. these any we a volume think about we business, is total the the feel conversion levels a with generated, see an right; our which about. out, think

So that. progress we focus we obviously, our measure and against certainly measure then, And on the initiatives.

and technology stacks this we're about of consolidating addressing spoke fewer cost -- sort on I to on stabs call, As another to We're on call platforms. our focused structure. focused migrating

in progress lot So fully the will something work I metrics on on metrics, those in become here scale recover creating the all a efficiency structure of is powerful for apparent work system, effect. greater be volume focused I a And and while like this think that again, not us -- consolidation well. yet to think has the quarters, as coming very, these, I know cost think we're it's most perhaps business, as more think creating the very ultimately you apparent very around our we've because done businesses in starts around I will

physical I the hybrid in than a digital or is a scale more even a effect model. model in magnified think

we the seeing encouraged increase. really work I'm very we're making very So we're to for and I'm the that the see as and very, us to doing progress be volumes positive start going metrics is

have Now, trying to recognize but to lay obviously, ultimately a success. that foundation out. future to we're prove we're that, We going to

John Murphy

this mean any pricing pricing. And going and is or what pushback you're it the customers. you're for higher to this? are then all I auction real a it that talked just you just June about fees sounds unique? --I you I'm is mean, it, helpful. trying And to now sounds not you through your way adjusting how to about so simply having mean? August on or understand right question just that's curious pretty like from September what the It That's just second receptivity or like

Peter Kelly

In of things. results. marketplace, how somewhat of I were so mentioned the dealer-to-dealer we improved. down a late metrics QX actually financial some relatively were QX, think actually the impacts flat, our QX we're slightly that in the versus on in seeing pricing Well, volumes couple increased some I

that benefit of that up will of and year. that we So the over I think rest there see the have showing the

had call But less as where And imagine, of here of the I like these and for -- down want our it fees more related in to service we've John, around in it's commercial what fees As providing more national provide referenced depth our it's buy services types we're was And actually them other that certain in cases on to the months this we can costs in last sellers. addressed that, has our side to to not need we XX say, situation in over some possible on and a and more it to auction take our commercial I'd to to but the can. areas frankly, degree, volumes, business. XX% you basis, cases sell continue been you if cost logistics services. a inspection, some is, have been call we've down the where and of fees, related services

So support And of price essentially, understanding fixed been are our I get if put that. way kind speak increase of we've the low levels don't of a to the we've for structure economics we've a volume what then price returns price the back. structure, pre-existing instead to all the place reality around customers towards volumes And as these sort those higher of all a generally very over in converted current at pricing which volumes. customers do is at time, tiered volumes have current unit of to services about tried think and the really very very, And what volumes. how just has volumes

the They you us the business completely they of affects imagine very partner. value ours. as services they've that their been volume So I type a understand we supportive. in if a take they value can scenario, provide picture that and from business that that,

take increase of going as changes up probably to mentioned, that the sort actually And actually back more by volumes encouraged these changes at even are perhaps these so I'm encouraged say that So -- meaningful of may volumes be is And normal. you trend towards time. these would as to volumes. current I'm about that's impact I more meaningful What John, that. are start

time. So a we benefit considerable of may that period over get

John Murphy

Yes. No, a tremendous well leverage. and up there'll it side lot revenue be setting of you're operating like volumes amount side, as cost from of a recover, a seems a

all seems stuff. the it doing you're So like right

appreciate it. we So Thank much, you so guys.

Peter Kelly

John. you, Thank

Operator

Thank CJS you. from ahead. Securities. go Bob The Please the next Labick question line of is with

Bob Labick

to wanted rate. I with start conversion

on us a last broadly you rate assuming continue relates prices. seen that the gave guys. softening And while some kind that prices than just conversion car and could interesting You if of of more the it's to statistics used And I'm to lower soften.

are right? doing kind what long their driven price it more regular So decision And to selling is price take this dealers lower encourage line conversion b) that my question of does a) to to data how with get on normalize back And to limit reality? the you rates? to get or is and limit how that in is to

Peter Kelly

thank question. Bob, you. Good

on we can what are then I if first, So comment doing about and the just it. metrics themselves

So highest I'd straight think shift. the percentage a conversion a first, One for higher say commercial about sellers you it, marketplaces the as I right mentioned, on now. of to ago rates of like to ago. is mix vehicles are rate, from sold so platform if was factors. again, relative of this QX in The OPENLANE the two a decline are factor There example, our year relative year. year conversion just our And

So OPENLANE, just a will terms shift, less mix tend to reduce dealer-to-dealer relative in conversion straight rates. more

with we appetite set increasing opposite factor. are seen was say of had were is sort an the prices has was sentiment. I'd of of I'd are the weakening. some ago, ago then in been And factor the unusually and Where or recall, of market appetite to of which a year for running the just that’s I of are And where of it kind QX reason Demand -- strong that months because -- very more right? higher holding market was year not relative buyer QX of you three it's of last strong impact, demand a a sort but here up. most say is and if buyer the that impact, weakening factor. mix over every the buyers prices has if a high say It's and I'd were more their there's on had a And and for that we've month, we've was sellers so. So seller I impact again, consumer environment was sort of contrast and facts kind recognizing

So that's facts. a of set

then declining I our that if precisely, that rate But we're rates an think in terms correct right? being steadily one our guidance, can remain will of that show of of are conversion us if revising cautious period think reasons up numbers. that's predict for persist our could extended our anticipating you in under pressure. of are prices, None these I conversion

strong factor. it? that, So the bids key-key perfect we price in what they a are that about aligned around a the marketplaces a Obviously, have seller, guide what to also definitive over opinion. control to of and put have offers or market can a to that launched vehicle our are typically have trying these seller through do we on true but the is in ability vehicle have, the requiring it's And before value that offering we in of Bob, doing the the We've our get launched. influence data, certain don't technologies large sellers buyers they on seller, we some it's fact some candidly, on the these that

floor convert Canada, performs. how want sellers So those and they with price, less what a if at cars lower And in -- see can is at TradeRev rate. vehicles in find the no example, we for market launch typically

to they've our put that reruns the VIN more to get limiting fifth same they the market pricing. if what of the frankly fourth the to trying believe current running and through We're run vehicle we're also great a So of sentiment we number then times the marketplace a two because of got they can is or time have benefit three run sellers the or of isn't floor value.

step a by of say so July we the So principle rate market. we're the of factors, at, Bob, see prices lower was said, looking the just there the used of respond things metrics in sort actually vehicles encouraged to of, more are did Black sort conversion. sellers and that in June, is, conversion vehicle these a haven't higher is to number finally of release I are worsening I impacted last I'd market on any by from relative prices down, a get sellers and those margin, seen was of, driver the and but say, to, that's report to it starting by sort significant, encouraging. yesterday Book their And week

have So And everybody's to in the interest I because quickly. it's sell. these to quickly. to And think ultimately move marketplace the phenomena be to ultimately through buyers cars temporary and very pretty sellers tend have learn

Bob Labick

color was queue. Very back And I'll COVID Okay, appreciated. to one by that. began great. helpful digital other That's in shift then on before super need the get during just COVID. Obviously and accelerated much

how's physical settling how now, it or all options volumes? to of see be Given believe there are is Has towards a of just how on since can't by is, been and partial are out where these everything we my where to now? volume right the journey long the virtue guess out I we opening this digital? really -- up physical switch is lack we what there public right question And share back going

Peter Kelly

Yes. perfect have have Good data, data. Again, I I do don't but some question.

And I a I think through have there some physical companies that us, analysis But what Maybe digital sort a are little year-to-date bit, that to second -- the to generally see moderated pace towards shift, journey share to of from have There's a rate have consigned data think at sources the albeit the imperfect. basis our the that of the but moderated away I pace that we're continues, still on data may in you a that think industry, journey. shift I of believe shift on of, the but evidence so in that declined have see we'll has volumes report, the and looks that's the other I that of totality -- also physical of like. quarter. are still auctions data available little.

Operator

question Please ahead. Jordan go Jefferies. is next with from Bret the of line The you. Thank

Bret Jordan

sort initiatives, are you and competitive are think QX. issue? Is volumes that pricing you QX or same the sort their On commented slightly of, as trend offset a Are of market landscape? from you had following competitive in volumes in the issue peers that well? I what the down volumes just lower basically the just a lower given seeing

Peter Kelly

I issue, my industry-wide think seeing assessment. all the is competitive but my market based volume pressure just the don't been no have under just on think volumes, Bret, that I there's issue will physical the question volumes is be assessment, a again, were I have data, down.

our channels the we versus pricing, benchmark think We On mentioned the we're dealer-to-dealer pricing I do there. competition. digital well-positioned

then business, volume structure we're on I slightly visibility, comparable, some about prices pricing slightly, unique but aren't about maybe spoke And I think have perfect than side so competitive. Maybe good the don't in what very the our others, I us. terms of commercial challenges I there. of to less on I know feel the

others So discussions I but are surprised a knowledge. be wouldn't I from with can't comment having if similar of position customers,

Bret Jordan

the do half, guide, And look with see relative that in that you and great. versus Okay, the the to issues and auction contribution? million, the conversion you operations then, of contribution $XXX your million at AFC. success obviously, big When in year $XXX to other the what second the credit this you faced

Peter Kelly

business AFC. contributor I we last Well, over strong from been we performance here to But expect this the a over obviously, to has of the continued very future. the Investor is expect And AFC encouraged the performance the we and also in look the guess, the But we profit overall time. of performance significant majority period AFC. of Day, expect the to by on similar time drive the growth guess I to messages the Marketplace segment as that, we

going on some continued we a of -- low very stay AFC. strong time. expect The we to to rates But environment see risk over be a We've last business had we -- the environment's -- Interest AFC continue little is the a has are contributor up need and focused strong strong benefits continue We experience We will a bit. that. period performance. to risk be may just changing that to actually believe.

Operator

next Thank line go Daniel is with Stephens. Please Imbro the you. from ahead. of The question

Daniel Imbro

that appreciate are were the the captured you if you part this, on I million, quarter? discussed start many on XQ, on basis here? those one, run or then that at side. numbers, kind apologies continue the And the that guys going Day, rate $XX but of rate second is that is were How to savings in wanted this the those Analyst cost $XX.X targeting is number non-cash Eric, but million SG&A talked how I Hopped of year. I on And run one-time color the late, non-cash were is of sum? so you CARWAVE many about think of When we that still the in the of at cost look to

Eric Loughmiller

-- same cumulative even year. to impact see, grant XXXX to the point the has has but -- EPS accruing activity things, we Relative to we our reflected we what's year where made -- now very for a number costs, million as take below we've transaction, of let the have in the had part a first Daniel, result plan, as And for the actions it's of transformed, of PR had that to that's we're in associated accruing time, adjusted a reduce other me gain as there's breaking our transition at threshold is of the business for catch-up, cost. our get the things of where a of costs our issues. difficult to of The a business the operating compensation EPS. and a as have the the part major our is apart. with incentive ninth me tied temporarily question. Had sale which are on stock-based been It the to that the XXXX $XX.X gain a long-term grant

see second this, and year, mentioned don't I yet up So the shown I of forward, the it think Daniel. half as analyze, you'll in how the Peter, cost this, and at it's we think million? of let look I'll Peter the look And I that? in I why structure. see about Peter Peter How plan -- do evidence talking we do been to have $XX

Peter Kelly

Yes.

Eric Loughmiller

with we we you year. were As that go and think we'll Peter, him. why this share don't we where into end year, the where

Peter Kelly

the think agenda it I transaction entered felt was generally up but agree but yet. here, cost we of with -- around a would well to could was shape, through we I and it Eric's as cost taking felt we comment couldn't didn't I'll within then get want to we shown it's we we Yes. be -- -- were a transaction to this we the had sort actions I comments. actions frankly, And take. don't negotiation had a our sort fully also because could dictate of before operations. the going business shape transaction closed that We need address take that cost And of to that selling. own to

most of closed. this work the in after sort started deal of reality, So

continued So then onwards actions will since and and and continue. have these mid-May

of what we've to $XXX guess or take, seen and half. more quarters. that a them around that, I So number, precise expecting to the rate, million visible don't with obviously say SG&A be end a expect I year something I'd that give certainly us will in second a the run an want something is to what but give on down number I prior I think around be in I'm

very -- on we work. expectation and are focused that that's that's my So

Daniel Imbro

there, And had you allowed that but was to now wanted think profitable, are business then, right going. how outlook I said I pressured business of wanted Day, there? changed ask of there. color. the the EBITDA the is CARWAVE, began when this or just in CARWAVE, anything that you update environment the were on And had positive have Peter, remain your now, to bought portion Analyst things changing for you one price sounded but that side of is of increases any in integration I making at kind dealer-to-dealer the All the right. progress, know like Thank you integration guys volume curious

Peter Kelly

Daniel. Thanks, Thanks. Yes.

to of all be continued well, profitable. CARWAVE first -- has of all, The first

So that -- is positive. is that

continues but be in felt profitable. in well, plan we volumes progressing and BXB, has business the under And channel, the to We as been -- right, pressure is correlate, well. that the You're integration functionality thought building should it we wanted was the within that the experience part feedback BacklotCars power of CARWAVE replicate platform the the another market, technology from and of system. customers; given and to out important new within the generally

an advance still a sale I it, lot month a, over, That in on in now of test We held and been that. pressure there's we so is -- focus of now auction beta, to we customer and to the over buyers first and get have exists. migrated but sellers call July. brought system So forth. cars the It's our some an we that feedback

and positive, milestone So latter in we're was stages again, key that now this say, the complete way. certainly a was that along migration the of that it expect And I'd we to year.

good leveraging one that. getting marketplace, good into network I venue, digital feel about so the all feel I So so to getting our forth. buyers about on effect, one and sellers and

good So digital feel we're well marketplace. and track long-term the about again, about dealer-to-dealer on prospects that. And, feel for good the

Eric Loughmiller

in aggregate. Daniel, add if TradeRev, and would -- the our be also in Peter, some profitable three digital DXD BacklotCars could businesses those CARWAVE, clarity. And marketplaces digital combination are aggregate, of I

Daniel Imbro

That's all I Right. had.

Peter Kelly

CARWAVE. want aggregate. to is to everybody, -- total in clear the profitable be mentioned I you DXD totality just also of Well,

Daniel Imbro

Appreciate color all and forward. the going luck best of

Peter Kelly

Thank you, Dan.

the concludes that believe questions. I So

Jacob; thank -- do have thanks queue? So questions the any more in we you

Operator

turn like would closing No. remarks. This I session. for to back conference our to any Peter sir. the over No, concludes Kelly question-and-answer

Peter Kelly

we of our despite we we I Thank once in the fully I strategy to beyond. believe place our are goals have and we sound revenue Continue positive flows. increased debt. We've supply, strategy. portion profits, gross We've seller despite meaningful marketplace to and down cash a weaker generate committed reach marketplace a and XXXX to in paid conversion. And believe transaction market you, you that second current and and thank are Jacob. your Well, leaders control. well I'm again To completed again, our executing the of your the interest summarize, encouraged quarter questions results by KAR for Global. against for and our in digital challenges light that

growth. for also As encouraged I I'm XXXX, beyond by prospects our look very longer-term

factors. Investor update number will important driven As believe June our we I our outlined growth be in in of by a Day

part drive commercial across in our ongoing the shift First, entire and digital This towards volume both industry. the marketplaces dealer increased secular will business. of our

across broader volumes commercial our a industry. recovery in Second,

market Canada factors our Together, ADESA and efficiency goals And great forward continued strong our to cost for challenges us like on next in in continuous the digital growth and where will I sharing finally, you performance these everybody our a towards offerings the while differentiated being by asset-light Third, progress help positioning Thank day. future. AFC any accelerated an have us on navigate call. look believe a and strong company. businesses have I position. we these focus short-term

Operator

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

You disconnect. now may

KAR Auction Services (KAR) 3 Aug 222022 Q2 Earnings call transcript