OPENLANE(US:KAR)2021-11-03 20:53Financial Data and Key Metrics Changes - KAR Global generated $535 million in revenue for Q3 2021, a decline of 10% from Q3 2020 [8] - Total gross profit was $222 million, representing 50.1% of revenue, excluding purchased vehicles [8] - Adjusted EBITDA was $96.6 million, with cash generated from operations amounting to $57 million [9] - Gross profit per vehicle sold in the ADESA segment was $274, which is 10% higher than Q3 2020 [10][36] - SG&A expenses for the quarter were $134 million, with ADESA segment SG&A at $126 million, down $14 million from Q1 2021 [11] Business Line Data and Key Metrics Changes - ADESA facilitated the sale of 586,000 vehicles, down 33% year-over-year, with commercial volume down 51% [9] - Dealer consigned volume increased by 20%, totaling 274,000 vehicles sold in Q3 2021 [17] - Digital dealer-to-dealer platforms sold 118,000 vehicles, a 105% increase compared to Q3 2020 [18] - AFC had 351,000 loan transactions, an 8% increase year-over-year, with revenue per loan transaction up 20% [12][38] Market Data and Key Metrics Changes - Commercial seller volumes were down 51% compared to Q3 2020, primarily due to disruptions in new vehicle production [14] - Repossession volumes are stable at about 70% of normal levels, indicating potential for recovery [15] - The average selling price for vehicles in various segments increased, with commercial off-premise at $21,500 compared to $19,400 in Q3 2020 [34] Company Strategy and Development Direction - The company is focused on reducing its cost structure to adapt to a more digital marketplace, with an SG&A opportunity of at least $30 million identified [26][23] - The acquisition of CARWAVE is expected to enhance the digital dealer-to-dealer business and strengthen market presence [19][20] - The company anticipates a gradual recovery in commercial seller volumes, with expectations for improvement in 2023 and beyond [16] Management's Comments on Operating Environment and Future Outlook - Management believes the company is at the bottom of the volume challenges, with expectations for gradual improvement [30] - The current supply constraints are expected to persist through the first half of next year, with a small improvement anticipated in the second half [16] - Management remains cautious about providing guidance until visibility into vehicle supply improves [29] Other Important Information - The company welcomed Sanjeev Mehra to the Board of Directors, bringing valuable industry knowledge [32] - The total leverage ratio is currently at 3.2x adjusted EBITDA, with a target of 3x or less [44] Q&A Session Summary Question: Thoughts on CARWAVE acquisition and network effect - Management believes the network effect is significant and that the acquisition is additive rather than duplicative, enhancing market presence [46][48] Question: Maintaining or gaining market share - Management is confident in maintaining or potentially increasing market share as commercial volumes recover, supported by strong customer relationships [52][54] Question: Update on repossession activity - Repossession volumes are currently at 70% of normal, with potential for recovery independent of new vehicle production [56] Question: Coverage of franchise dealers in the U.S. - Management confirmed strong nationwide coverage of franchise dealers in the U.S. and Canada through digital platforms [60][61] Question: Impact of off-lease vehicles and leasing expectations - Management expects a shift in dealer behavior regarding off-lease vehicles and anticipates leasing penetration to remain strong despite lower overall vehicle sales [64][70]