Ladies and gentlemen, thank you for standing by, and welcome to the KAR Global Q4 and Full-Year 2019 Earnings Conference Call. At this time, all participants' lines are in a listen-only mode. After the speaker's presentation there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to speaker today, Mike Eliason, Treasurer and Vice President of Investor Relations. Thank you. Please go ahead, sir.

Thanks, Dan. Good morning and thank you for joining us today for the KAR Global Year-End 2019 Earnings Conference Call. Today we will discuss the financial performance of KAR Global for the quarter ended December 31, 2019. After concluding our commentary, we will take questions from participants. Before Jim kicks off our discussion, I would like to remind you that this conference call contains forward-looking statements within the meaning of the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties that may affect KAR's business, prospects, and results of operations, and such risks are fully detailed in our SEC filings. In providing forward-looking statements, the company expressly disclaims any obligation to update these statements. Let me also mention that throughout this conference call, we will be referencing both GAAP and non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to the applicable GAAP financial measure can be found in the press release that we issued last night, which is also available in the Investor Relations section of our Web site. Now, I'd like to turn this call over to KAR Global CEO, Jim Hallett. Jim?

Thank you, Michael, and good morning ladies and gentlemen, and welcome to our call. Let me start by stating what may be the obvious, 2019 has been a challenging year, and I want our investors to know that we are accountable for these results, and we are also have a path forward, and we will be accountable for that path forward. As I will explain in my comments today, I believe that KAR is well-positioned to improve our performance in 2020 and beyond. So with that, let me outline my agenda for today, and then we will get to it. First of all, I want to review our fourth quarter and our full-year financial performance, summarize the key items that impact the KAR Global in 2019, review our guidance for 2020, and provide insights on the trends we believe could influence our performance, and last, I want to walk you through our top priorities for 2020. Our priorities are a combination of initiatives that directly contribute to improving our performance in 2020, and sets us up for continued growth beyond 2020. Let me start with an overview of our financial performance. Actually, I'm pleased with our fourth quarter performance, where we grew net revenues 6% on a consolidated basis, our adjusted EBITDA increased 10% over the prior year, and for the full-year we saw net revenue increase 7%, and adjusted EBITDA increased 1%. Our performance for 2019 was disappointing, but when you look at the pieces that make up KAR, my disappointment is limited to two areas. First, we had an issue at High Tech Locksmiths that negatively impacted our performance by more than $10 million. We did recover just under $4 million of expenses incurred at High Tech Locksmiths in 2019, but the drain on earnings was still significant,…

Thank you, Jim. Let me add some additional comments on our performance in 2019. First, I would like to highlight a change in our income statement presentation. Beginning in the fourth quarter, and for the full-year 2019, we are identifying purchase vehicle sales as a separate component of revenue. This presentation allows the readers of our financial statements to better understand our gross profit performance. Almost 90% of our total revenue is auction fees, services revenue and finance related revenue that have high gross margins. However, the revenue from sale of purchased vehicles reflects the sale price of the vehicle with a comparable cost of services that distorts the reported gross margins in our consolidated financial statements and in the financial results reported for the ADESA segment. Revenue from purchased vehicle sales has become more significant recently, as we have expanded the ADESA insurance program and acquired CarsOnTheWeb. I would also like to highlight a couple of items that impacted our fourth quarter results. First, we incurred $9.6 million in severance in the fourth quarter as we eliminated a number of corporate positions throughout the company. The severance costs are defined as non-recurring expenses and are excluded from the adjusted EBITDA. However, severance costs are not excluded from the computation of operating adjusted net income from continuing operations per share. Fourth quarter severance costs net of income taxes reduced operating adjusted net income from continuing operations per share by $0.05. Our fourth quarter results were also negatively impacted by a higher effective income tax rate in 2019 as compared to 2018 and as compared to our expected effective income tax rate for the year. The effective income tax rate of 38% in the fourth quarter compared to 11% for the fourth quarter of 2018. The increased effective income tax rate…

[Operator Instructions] Our first question comes from John Murphy with Bank of America. Your line is now open.

Good morning, guys. A first question, which is a little sort of more strategic, when you think of sort of the growth efforts on TradeRev, CarsOnTheWeb, and what's happened with High Tech Locksmiths to draw the second question on, it seems like there has been sort of diversion and some of the stuff is not going according to plan, but it also seems like you are now indicating in the core of the business based on the restructuring or headcount reduction that you are going after and SG&A reductions that there might be something going on in the core business where costs are a bit inflated. Is that something that has changed in the core business, or is this something where there has been a lot of management effort and time focused on these growth initiatives and you maybe too your eyes to drive off the ball there and you need to go back and right-sizing? I am just trying to understand what's going on in the core business. It seems like there is a little bit of underperformance on the cost side there or performance.

Well, John, this is Eric. Let me start and then I think Jim will add some things to this. Relative to the cost structure, let's break it into pieces you have brought. When we talk about TradeRev, it was clearly too high of a cost model with all of the incentives and things that we have cutback, and so, there specifically we have slowed down in order to get the business model right-sized so that we can have long-term profitable growth in the dealer-to-dealer segment. CarsOnTheWeb specifically has outperformed our expectations. In fact, they are doing very well. We have owned it 11 months now or ten-and-half months at the end of the years, but it's done very well, it's exceeding our expectations, and in fact, is expected to grow a little bit more, and I think we are fine there. The core business, ancillary service, I don't think our costs were inflated. What I think has happened is we have the opportunity to use technology to have a more efficient delivery of our direct cost into that business, and shortening the amount of time a car is on the property, how many moves you make, how can you deliver the services more efficiently, and improve our profitability that way, and then lastly, I will let Jim speak to this; can we come up with an auction model that has less reliance on labor? All of this comes down to reducing the labor component of the direct cost structure across all of our platforms, and VirtuaLane is an initiative that Jim is very passionate about for many reasons. So, Jim, may be talk about how we are going to use the technology to reduce the cost structure in the core business?

Yes, John, I think I mentioned in some of my comments, but as you think about our legacy physical auction business, I think we have to -- as I like to say, we have to rethink our processes and kind of re-engineer that business, and there is no question my first priority is making these auction safer. We have been the industry leader in safety, and I want to continue to drive safety and be the person for safety in this industry, but second to that, we really -- and along with safety, we really want to limit the amount of times we touch a car and move a car and how the car moves through the process, and as we talk about virtual auction, we talk about not moving the car. The car can sit on its designated spot, dealers can walk around it, if they want to come to the physical auctions, they can see the car, touch the car, but when they actually bid on the car, they will be sitting in a theater-like atmosphere and they will be bidding on the car without the car moving through the auction and will be seen on the screen, and as you do that, obviously you are reducing your sell day labor, you are reducing your drivers, you are reducing the people in the yard, the people the lanes, actually right down to reducing the people that are needed and required in the office to handle these dealers that will be coming to the auction. So, those reductions in labor and cost savings there, I told you last year that we were going to have 30 of our auctions equipped with VirtuaLane, and we continue to have 30 auctions, and now we're pushing for the rest of the auctions to be equipped with VirtuaLanes to the point, where hopefully, as we approach year-end we will have -- maybe not all 75, but we'll have closer to all of our auctions equipped with VirtuaLane with that theater-like atmosphere, and as we do that, I would -- without getting into the numbers, I would report to you that we had roughly 14, what I would call commercial customers that were supporting VirtuaLane in 2019. We expect that maybe we can grow that. We're very pleased with the number of cars we sold on VirtuaLane last year in a VirtuaLane concept, and this year, our expectation is we will add a minimum double number of cars we're going to sell in VirtuaLane. So, with that, I'll take a pause.

And john, one last comment, our fourth quarter gross profit in the core ADESA business was up 40 bps year-over-year, and that's early in our process. We think we can continue that trend by improving gross margin in the core business going forward again, excluding purchased vehicle sales, which there is no margin in that.

Okay, and then maybe the second question, I mean -- so it seems like the core business is in transition, you're going after these growth initiatives, which all make sense, I mean, yes, the business is shifting and you're shifting with it. So it's the right thing to do, but if you look at what's going on with TradeRev and CarsOnTheWeb, it sounds like CarsOnTheWeb is going fairly well relative to your expectations, TradeRev is underperforming. Is there anything else that may or may not happen with TradeRev, meaning, you know, when do you kind of think that you declare success or decide to cut bait on it? And also maybe very specifically on TradeRev, is the sort of the channel different than what you traditionally see in your auctions, because it seems like dealer-to-dealer, the way you're discussing it is much more what the wholesalers are going after as opposed to what was going on in your auction. So, I mean as we think about TradeRev, whether you fill or kill, I'd like to your answer on that, but also I mean really what is the addressable market, it seems like it's outside the 10 million unit traditional auction industry, and it's more in the sort of the fortified wholesaler industry. I'm just trying to understand what the channel is as well?

Yes. So, John, let me speak to that, and I want to speak to TradeRev, but first I want to start with -- I want our investors and I want the industry, our employees, I want them to start thinking about total dealer consignment as a segment, and as you think about total dealer consignment, we are going to grow total dealer consignment, and as we think about dealer consignment, we really have two products there. We have physical auctions, where we can sell dealer consignment, and we have trade drive, where we can sell dealer consignment. When you add the two of those together, we're looking to grow that segment, and quite frankly, I'm not concerned where those cars sell, as long as we get the car, and sell the car in one of those channels, and as we reported, we sold approximately 900,000 vehicles at physical auction last year, and we sold 158,000 vehicles on TradeRev last year. You can do the math. We are projecting that we will grow total dealer consignment. We are in dealer consignment and we're in it to win the category, and I can tell you that we slowed down, I told you at last quarter, we were going to slow down to speed up, and certainly volumes fell short, and we took our expenses that we needed to take in TradeRev, and we knew that we were possibly going to give up some volume to our competition, but what we did -- we're able to reset our go-to-market strategy. We have combined these two sales teams from ADESA and TradeRev. They're integrated into total dealer consignments. At ADESA, our go-to-market strategy has changed. We brought 450 sales representatives from across North America into Indianapolis in January. I was very pleased to sit…

That's very helpful, and maybe if I can just ask one quick mundane question. It seems like the conversion rate was roughly flat in the mid-58% year-over-year. Your expectation, I think the general consensus is that used vehicle pricing will come down. So, it seems like your institutional sellers are being a little more stubborn than maybe they should be, and I kind of thought they were going to get a little bit more realistic as we're in the fourth quarter. Is there a backlog of institutional vehicles that needs to be clear here and the conversion rate may tick up early in 2022 to clear this, because I mean it just seems like they're being awful stubborn and they're going to pay the price in maybe the next few quarters if they don't clear this inventory now?

Yes, John, I'll speak to that, and then let Eric add some comments as well. First of all, we told you on our last call that the supply of off-lease vehicles was going to be very strong, coming back in the fourth quarter, because there was a record amount of leases written in the fourth quarter of 2016, and we said, we weren't sure if that volume was going to sell in the fourth quarter, or would some of that volume carryover to the first quarter of 2020. In fact, I would tell you, and I think Eric will speak to it here, that volume kind of got split out of the fourth quarter and some of it has carried over to the first quarter. Eric?

Yes, John, I wanted to add to that. We did very well on the online model, and that is because you only get one shot at it. The cars went to business auction, the conversion rate was lower because the [technical difficulty] what they believe is a higher price after year-end. So it's kind of the best. We had very strong online performance, and I think the physical cars probably were held off going into the first quarter, and that was actually good for our business and help the ARPU. So John, we probably got to move on to others to take their questions.

Thank you.

You're welcome.

Thank you. Our next question comes from Bob Labick with CJS Securities. Your line is now open.

Good morning. Thank you.

Good morning, Bob.

I just want to step back on TradeRev. So I think on the third quarter call you implied you were going to pull back on incentives and then reduce the loss. Obviously, it was a little higher. Have incentives been pulled back, or were they I guess in Q4 is that something that's happening prospectively Q1 and going forward?

Yes. So, basically, Bob, we pulled back on the incentives as we're getting through the fourth quarter, but they've been pulled back as we go into 2020, and then the other thing that we did is, as we were resetting our plan and resetting our approach our go-to-market strategy for 2020, we did take additional losses, and we got our losses behind us as we went into the New Year. Eric?

Yes, Bob. We clearly took action that probably reduced -- but definitely reduced the volume from what we expected, which reduced the revenue and increased the losses, but it was most important, really, as Jim mentioned, to have that activity in the fourth quarter and not carry expenses and programs into the first quarter, that would be a burden on earnings as we look at 2020.

Got it. And then just -- it's probably too early, given the change in incentives has been very recent, but can you tell what's happening in like on the same market, same-store basis when you pullback incentives, has there been much of a difference in conversion rates or how is it impacting the model so far?

Well, we're measuring one thing, although we measure it in two pieces. We are very pleased with our dealer consignment volumes, beginning in 2020. We are meeting our objective of growing dealer consignment in total, and we are also pleased with the mix between online and physical within that so that, we report the first quarter, when we get the full quarter end, but we're very pleased with the start of the year, and I think our combined sales team is doing an excellent job of attracting more dealer consignment vehicles into our many offerings and letting them sell wherever they get the most money. Right, Jim?

Absolutely. We've had invested this early Bob, and we don't want to get excited about the first part of the year here, but I just say, I'm not disappointed with the reaction of our sales team. I think our sales team has really come together culturally, where we are very much aligned, where we weren't aligned before, and I think we really understand that we have an opportunity to win this space, and I think that teams are motivated by that, and now we've not only done the sales training, we've aligned compensation programs, we've aligned markets. I think we have a very good go-to-market plan, and that's just not optimistic, Jim speaking. I'm very confident with the training I've seen and with the feedback I've had directly from dealers that we are on the right path here.

Okay, great. And then, just last one real quick, and I'll jump back in queue and thank you. Can you just highlight the changes in the differences in the new highway to sell we love the name, by the way, but in a new go-to-market strategy highway to sell, what are the primary differences versus what you were doing before?

Well, think of this as we're making the dealer aware of all of our capabilities across all of our platforms for dealer transact dealer transactions, and they select where to step in, do they want to manage the process? Or do they want to turn it over to us and say, you take it through your process like a waterfall, you take it through, put it on TradeRev, see what the bids are. It's not high enough, you take into physical auction, you get liquidity there, and then, you can even take it back onto the digital channel, if you want. The concept there is, the end result is we want to get the maximum value for your vehicle, and we want to do that in the more sensible way, and then, we'll add to that a guarantee that if a buyer buys a vehicle, and they are within 500 miles of the grounding location, wherever it's sitting, we will guarantee delivery within 3 days, which is the most important thing to the buyer, it's going to get the vehicle to retail. Jim?

Yes, I think Eric has said, at NADA, we rolled out our highway to sell, and there're really three offerings there, and those three offerings come at different price points, and there's the manual service and there's what we call the automatic service, and then, there's the cruise control service and obviously manual, you're doing most of the work yourself and cruise control. We're taking care of all that for you, and I think that is really coming back to what I've always preached. We're given dealer's choices, and I can tell you being a former dealer, I didn't want somebody coming in and telling me, how I was going to do business. I wanted them to tell me what the options were and what products were available, and then, at the end of the day, I'm going to choose how I want to do business, and it's not one-size-fits-all, I've come down to say, I would maybe want different cars going to different channels, based on the car and the price point and the condition of that car. So this is really about providing dealers with choice, but having that one point of contact that can represent all those choices, and all those services to our customers.

And no the cost to the seller to get whatever service they're asking for, there's a fixed cost for them for the selection they make.

Terrific. All right, thank you very much.

You're welcome.

Thank you. Our next question comes from Ryan Brinkman with JP Morgan. Your line is now open.

Hi, thanks. A couple questions on TradeRev. Maybe first could you just speak to the competitive environment for the TradeRev business, is it just ACV that you're bumping up against there? Or do you see other established or maybe upstart competitors in this space also?

Yes, so Ryan, there are the competitors in this space. I got to tell you that, obviously, we recognize there's another competition beyond ACV and that's, and there will continue to be other competitors in this space, but at the end of the day, I think this organization has really gotten focused on what we need to do at TradeRev. We need to be aware of our competition, but at the end of the day, I'm talking about increasing dealer consignment and total dealer consignment, and our TradeRev offering is just a product that helps us increase total dealer consignment.

Okay, thanks. And then how should we think about the path to profitability at TradeRev? Do you still expect to begin to at least break even on that business at some point during 2021 given that would now seem like a pretty material improvement versus the implied guidance of $50 million or so of loss in 2020? And to get the profitability, should we be looking for faster growth in order to better amortize fixed technology and other overhead costs, or is the path forward more about the disciplines growth with less transportation, subsidies, marketing costs, et cetera?

Yes, so Ryan, to start with, yes, we still believe that we can reach breakeven in 2021, and we believe that with our new go to market strategy and our discipline around incentives, we believe that's going to enable us to get there. We still believe that our breakeven is going to be somewhere between 300,000 and 400,000 cars, and we're looking to accelerate that pace.

And let me add Ryan, our integrated approach by looking at dealer consignment on a consolidated basis, we will actually reduce the cost model for this business. So it's not just the $20 million in TradeRev, it's also taking advantage of the ADESA resources and not having incremental cost to add additional transactions as we put the combined sales teams and then ultimately combine even some operating processes together over time. So it's a little both. So don't just focus on the separate TradeRev component. We've isolated that for you. There's also efficiency we're gaining out of the rest of the enterprise that'll help improve the profitability. I think the moves we've made in 2019 at the end of the year, improve the likelihood, and accelerate our opportunities to have a lower cost delivery model especially when you take those incentives away.

Great, very helpful, thank you.

You're welcome.

Thank you. Our next question comes from Daniel Imbro with Stephens, Inc. Your line is now open.

Hey, good morning, guys. Thanks for taking my questions. First one on ADESA's kind of underlying gross margin. Eric, you talked about ancillary services weighing on gross profit. If I think back a few years ago, you guys used to see near-term headwinds, but we normally call out a gross margin benefit in subsequent quarters as you sold through those vehicles. Can you talk about what's changed to where ancillary services now continue to be a headwind on gross margin, and we're not kind of seeing that catch-up of the gross margins you sell to as higher dollar vehicles, and then I do have a follow-up.

Yes, Dan, thanks for the question. What's interesting is our success is influencing the change. If you go back three, four years, ancillary services, predominantly on site services, improving the condition of the vehicle where now we're doing a lot of offsite, we're doing a lot more transportation of vehicles that aren't at the auction. So, when I talk about that, I think the same phenomena occurs relative to the auction business, but we have a much broader offering that goes beyond that auction business around our ancillary and what we call related services, like inspections, transportation, repossession activity, when those grow, again gross profit dollars are going up, and I'm very pleased with our progress on improving gross profit dollars for cars sold, and that's what I'm focused on, so we've gotten there, but the change is growing that business focusing on it growing, contributes dollars but puts a little pressure on the percentages.

Okay, that's helpful and then a clarifier on the guidance. Jim, you guys have made a number of cost cuts and you described the business improvements you're making at the core auction, but the midpoint of the EBITDA guide assumes $20 million of growth year-over-year, and I think you said your guidance assumes $20 million in improvement of TradeRev's operating losses, so it seems like you're implying underlying EBITDA ex-TradeRev is flat year-over-year? Where I mean, how can you kind of reconcile those points or kind of how should we think about those as we look at the guide?

Yes, so let me say that after 2019 where we saw a very disappointing result. I never want to be in a position again, where I over promise and under deliver, and quite frankly, we're focused on our priorities. We are very confident that we can deliver on what we've told you, and at the end of the year, I'm going to let the results speak for themselves rather than over promising.

Okay, got it. Thanks.

You're welcome.

Thank you. Our next question comes from Derek Glynn with Consumer Edge. Your line is now open.

Yes, good morning. Thanks for taking the questions. Just had one just to follow-up on TradeRev, what kind of response did you see from others as you increase fees and reduced incentives? Did you see anything to suggest competitors followed sue or make any other changes to their offering?

I can say that, I only hear anecdotal information, I don't know anything that's factual, excuse me. I don't know anything that's factual, in terms of how the competition is behaving, we hear things, but I don't put a lot of weight in these anecdotal comments, and again, not to -- not do by commenting on it. I really am focused on our model and winning, I am going to win, and this is not a short-term game. This is a long-term game, it's a space that we have to be in, and not to use the clichés, but I've used in the past. We absolutely have the right to win here. We have the collection of assets that give us that unfair advantage and I'm focused on this team and I'm focused on driving results, and I noticed competition out there, but I got to be aware of it, but I don't want to believe everything I hear, and Derek, let me add, we surveyed our customers, we surveyed the people using our platform and asked what was important to them. It's obtaining inventory at the right price, and getting it to the retail location as quickly as possible. Incentives and the support we were providing was way down the list as to what they were looking for to transact for us.

Yes, a good point, Eric, and I want to follow-up on that. Listen, and I speak as a former dealer and I can tell you, I talked to dealers every single week of my life. Dealers are focused on results and where you can provide results and service levels, the fees become a very, very small percentage of the transaction and quite frankly that's where we're focused. We're focused on delivering the service now to Eric's point in that survey, Eric, if I can add a couple of points, in that survey that we did along with what Eric said, there were also a couple other things that were mentioned to us that we took action on. They mentioned a couple of things in terms of how our processed work that they'd like to see change. I don't need to get into what those two changes were, but there were a couple of changes that we've now made in terms of the technology delivery and the use of the technology and the use of the platform that we've taken action on and we've listened to our dealers. So the feedback that we got from the dealers was real, and we reacted to it. Yes, so to sum it all up, we're not looking at our competition. We're looking at our customer to give us guidance on what's important and how our business model is put together.

Okay, got it. That's helpful. And then just two more items for clarification, first, are any share repurchases contemplated in your guidance? And then secondly, for High Tech Locksmiths, I think you mentioned a $10 million draft results, but recovery of only $4 million, is there a possibility for further recovery from that issue in 2020?

So let me start with capital allocation and the buybacks that you mentioned, first I want to state that our capital allocation priorities have not changed. We did not do any buyback in the fourth quarter, and quite frankly, our leverage was at three times in the fourth quarter and we did not want to exceed the three times is our target leverage and we did not want to exceed that leverage in buying back shares, and going forward, we continue to evaluate all of the alternatives to deploy capital. We have our dividend, we continue to look at a pipeline of acquisitions and prioritize those, and then, we do have a share authorization, share buyback authorization in place that we can act on based on how we prioritize things going forward. So, again, we didn't buy any shares back in the fourth quarter and the first quarter, but at any point in time, we can pull the trigger on those, Eric?

Yes, and relative to High Tech Locksmith, let me point out two things First, the litigation is ongoing, any potential recovery, I think would come through litigation. That's a long process. I don't know when we would see any outcome from that, but second, if there is recovery in litigation, it would not be included in adjusted EBITDA. That would be considered a non-operating game and so in adjusted EBITDA, it will not be a positive for adjusted EBITDA, it would be included though in net income from continuing operations, so it's a little different than that, because it would be earnings to the organization but it would not be additive to adjusted EBITDA nor, and accordingly. So don't count on that as being part of our guidance.

Got it. Okay, thank you.

Thank you. Our next question comes from Bret Jordan with Jefferies. Your line is now open.

Hey, good morning, guys.

Good morning.

Good morning, Bret.

The comment on the -- the target on is 20% SG&A rate by the end of '20. Just from a modeling standpoint, is that a target for the full fourth quarter or to achieve that within the fourth quarter?

Yes. So, let me talk a little bit about that target Bret is, I recognize that we have to reduce our SG&A in this company, and at some point in time, you've got to put a stake in the ground, and you've got to put a target out there, and 20% is a target or as I would say, a goal that we've got to achieve. If we don't have any target, then we don't know where we're going, and we have to have something that we focus on, and I'll tell you at the very outset here, this is a very aggressive target, and it's going to be, I would call it a monumental task to get to 20%, and I'm not sure if we can get there in 2020, but I want to continue to work towards that in each quarter, as you see our results, I want to see our SG&A coming down, and there's a lot of things that we talk about, there's a lot of initiatives that we have in place, but I can tell you, there's no stone that won't be turned to look for opportunity, and I'll give you some examples, but just let me give you a few of those things that maybe we don't think about in the course of day-to-day business. First of all, there is no finish line on headcount, and we've got to continue to look at innovating through the use of technology and eliminating headcount wherever we can, getting more people to do less work and do more through innovation, travel entertainment in this company has to have to get reduced. You know, you talk about mobile devices that we have within this company, and then, we look at the plans that we have on those mobile devices and the licenses and the software maintenance. These are huge charges to the organization, which we're taking a look at. We've talked to you about what we've done on TradeRev and how we reduce those losses. We continue to look at every aspect of every one of our businesses, and there's a focus on taking that SG&A and by putting that target of 20% out there, whether I get there in 2020. I know I will be better at the end of 2020, and the metric, Bret that we're using is SG&A as a percent of total revenue, improving each quarter year-over-year. That's a metric that we're measuring and being building our team accountable for. So it's not dollars. It's okay.

Yes, got that. And then one question, I might have missed this.

And there is a correction, Jim. We want fewer people doing more work. I want to be clear in the transcript.

Yes, I figured that. Yes. How did I guess…

You said more people doing less work? And I thought that was an error.

Yes. My apologies, thank you for the correction.

Yes, one question on TradeRev. I think you threw out a target for the smaller loss. Did you put a volume target out there for TradeRev in 20?

We have a volume target on dealer consignment, and we don't have specific numbers of applied to TradeRev. With that said, I do expect that the TradeRev volume will increase, but I'm not putting the volume number out there. It's total dealer consignment.

All right, thank you.

You are welcome.

Thank you. Our final question comes from Stephanie Benjamin with SunTrust. Your line is now open.

Hi, thank you. Thanks for squeezing me in. I'll keep it just kind of brief, if you could bucket, I know there is a lot on the call how you're going to grow dealer consignment in 2020, if you could maybe just consolidate that into, call it, maybe the two initiatives you think are going to be the key drivers of that growth just to kind of summarize, there is obviously a lot going on, so may be if you could just kind of put a bow around it, that would be helpful, just as we kind of sum everything up? Thank you.

Well, thanks for a shot of that, Stephanie. We've got two products in dealer consignment. We've got physical auctions and we've got TradeRev, and we've got a go-to-market strategy for both of those products with one point of contact, and bottom line is one dealer at a time with 450 sales reps out there. That's how we're going to grow that business. So, in summary, Stephanie, we have simplified our offering, but have the broadest offering in the industry for dealer-to-dealer consignment, but it's easy to understand, the pricing is easy to understand, simplified the offering, in total instead of segmenting the market into very confusing alternatives that you had to pick from. Right, Jim?

Yes.

Got it. So, within that, is it market share gains expected, I guess what is your view on the growth of the overall market as kind of also to fit that into the growth outlook?

Yes. So, as we look at the entire company, I think we look at both the commercial segments, and we'd look at the dealer consignment segments, and we believe there's market share gains in both of those segments. We believe that we can grow our commercial business through our online platforms, and through our use of data and analytics, and get more of those cars online, and especially sell more of those cars in the open sale for these commercial sellers, where the economics get much, much better as you know, and then getting more of those cars to physical auctions. So, we believe we can gain share there. We also believe that with our Better Together Program, and that one point of contact that we talked about and our go-to-market strategy, we believe that we can increase our overall dealer consignment, and whether that comes to a physical auction or whether that comes through TradeRev, sorry to repeat it, to reinforce it, whatever the dealer wants, we're going to provide that service, and we're going to grow that share of the dealer business as well as a commercial business.

And Stephanie, these offerings, especially -- we offer, as one of our offerings a mobile opportunity or digital opportunity. We do believe we can expand the TAM of the deals consignment marketplace for the wholesale industry. That 5 million units that have historically transacted outside the auction industry remains an important part of our target.

Yes, and if I could add one thing to that, that might be noteworthy, Stephanie is, if you think about the dealer consignment market at physical auction today, our share of that market is 20%, and to me, that's a lot of go-get, there's a lot of opportunity to go get more than 20% of that market being one of the largest two players in the industry.

Thank you. All really helpful, and I'll leave it at that.

Okay. Thank you, Stephanie.

Thank you, Stephanie.

Thank you, ladies and gentlemen, this concludes our question-and-answer session. I would now like to turn the call back over to KAR's CEO, Jim Hallett, for any closing remarks.

Thank you, Daniel, and I just want to say thank you to our investors for being on the call today. I appreciate your continued support and your continued interest in our company. I think that I've been very, very transparent that 2019 certainly has its difficulties and its challenges. I think we accept accountability for that. I think we have a very good path forward. We've defined what's really important to this company. We've defined the areas that we're going to focus on, and we're going to stay focused on those. We're not going to be chasing everything that comes at us. We're going to be focused on these five priorities. We're going to allocate money that support these five areas, and we are confident that we are going to deliver on the guidance that we have given you, and we're going to take it forward, and it's just not sheer optimism, but I think it's on good sound business planning, and I believe that we have got ourselves on the right track, and we look forward to reporting on our first quarter coming up here shortly. So, thank you for you being on the call, and we'll look forward to talking to you on our quarterly conference call. Have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.