OPENLANE(US:KAR)2020-11-04 20:24Financial Data and Key Metrics Changes - Revenue decreased by 15% year-over-year, with 9% less volume sold compared to the prior year [9] - Gross profit as a percentage of revenue increased to 44.5%, up 300 basis points from last year [9] - Gross profit was 52% of net revenue, compared to 47% the prior year [9][10] - The company has over $1.2 billion in cash and net leverage is down to 1.6 times [22] Business Line Data and Key Metrics Changes - TradeRev volumes grew by 22% in Q3, with September growth exceeding 30% [11] - OPENLANE and TradeRev saw growth in volumes sold, while services revenue declined year-over-year [9] - The company experienced increases in auction fee revenue per unit in all digital marketplaces except OPENLANE [9] Market Data and Key Metrics Changes - The wholesale marketplace faced a shortage of used car supply, impacting transaction volumes [16] - Off-lease vehicle transactions returned to normal levels, but the overall inventory shortage limited transactions [17] - Repossession volumes are expected to increase by 30% to 40% in 2021, as the industry anticipates a recovery in repo activity [18] Company Strategy and Development Direction - The company is focusing on a digital transformation, aiming to enhance its digital marketplace model [6][10] - The acquisition of BacklotCars is expected to significantly increase annual adjusted EBITDA by over $100 million within four years [13][14] - The company plans to simplify its reporting structure and metrics to better reflect its digital transformation [28][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing a commitment to maintaining a lower cost structure even as volumes return to normal [10][24] - The company anticipates a strong retail used car market, despite facing challenges with supply [16] - Management noted that the pandemic has accelerated the shift towards online vehicle purchasing [12] Other Important Information - The company is divesting Preferred Warranties, Inc. for less than $30 million, as it was not core to its business [25][26] - The company plans to repurchase shares under its existing $300 million share repurchase authorization [23] Q&A Session Summary Question: What are the current operating metrics for BacklotCars? - BacklotCars is on a run rate of about 160,000 vehicles, with revenue estimated between $50 million to $70 million, operating at a modest loss [37] Question: How many physical facilities will be needed in the future? - The company believes physical locations remain critical for vehicle inspection and ancillary services, even as it transitions to a digital model [38] Question: What is the outlook for ancillary services? - There is optimism for strong ancillary services revenue, particularly as off-lease vehicles and repossessions increase [42] Question: What is the expected timeline for the integration of BacklotCars? - The integration will proceed as quickly as possible, with no specific timeline provided [71] Question: How will the company handle increased repo volumes? - The company has the capacity to process increased repo volumes and is looking forward to serving this segment [86]