Ladies and gentlemen, thank you for standing by and welcome to the KAR Auction Services, Inc. Q3 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to hand the conference over to your speaker for today, Mike Eliason. You may begin.

Thanks, Wanda. Good morning and thank you for joining us today for the KAR Global third quarter 2020 earnings conference call. Today, we will discuss the financial performance of KAR Global for the quarter ended September 30, 2020. 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 yesterday, which is also available in the Investor Relations section of our website. Now, I’d like to turn this call over to KAR Global’s CEO, Jim Hallett. Jim?

Thank you, Michael, and good morning ladies and gentlemen. Welcome to our call. Thought I would start just reflecting a little bit on what we’re dealing with the COVID crisis. The COVID crisis has really created a unique opportunity for us to rapidly accelerate the transformation of our business and our industry. This transformation that we have been – this is a transformation that we’ve been leading over the last couple of years and we decided to embrace this opportunity and we took swift action to move our business into a fully digital direction, and I believe that we’re now seeing the positive results of those decisions that we took. We had a very good third quarter, although revenue was down from the prior year. We were able to take advantage of selling 100% of our volume through our digital marketplaces. And I believe the changes in our business model over the past six months in transforming to a digital operating model, provided a permanent reduction in our cost structure. It is clear to me that we are a very different business today than we were one year ago, and I am encouraged by the future prospects of our business. Before I get into the detail, let me review the topics that I plan to cover this morning. First, I want to review some highlights of our performance in the third quarter, including addressing how permanent the changes in our cost structure are expected to be. I want to give you an update on the growth in the dealer-to-dealer digital marketplace being TradeRev. I will also provide some color around BacklotCars and why we believe this acquisition will accelerate our growth in this channel. I want to give you an idea of the size of the dealer-to-dealer space and quantify…

Thank you, Jim. Let me start by updating you on PWI growth. We have reached agreement to divest Preferred Warranties, Inc. to Kingsway Financial. We were approached by Kingsway Financial earlier this year with the proposal to acquire PWI. Kingsway will add PWI to its existing auto warranty business with the expectation that they could accelerate growth at PWI. As we looked at the PWI platform that is a consumer-focused product and the fact that during the initial COVID disruption, we pulled back on the sales and marketing of this line of business, it became clear to us that Kingsway was a better home for PWI. The PWI offering was not core to either ADESA or AFC, and we had not integrated PWI into any of our core businesses. We are awaiting regulatory approval for the transaction and expect to close the transaction before year-end. The cash purchase price is less than $30 million. The PWI business was not material to our financial results and has been reported within the AFC segment of KAR. Investors have also asked us to provide more information on our investment in CarLotz, which was recently announced as part of their SPAC transaction. CarLotz has been a customer of ADESA and AFC for the past 5 years. CarLotz came to us about 5 years ago, with an opportunity to have a strategic relationship. We have supported their growth with loans from AFC and a strong relationship with ADESA, as they have acquired inventory over the years. CarLotz continues to utilize AFC as their floor plan lender and ADESA as a source of used car inventory to supplement their consignment to retail sourcing model. As part of our relationship, we have accumulated a minority ownership position in CarLotz. With the recent announcement of their SPAC transaction,…

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

Hi. Good morning, guys. How are you?

Hey, John.

I’ve got a bunch of questions, so I’ll try to keep it as brief as I can here. First, Jim, you mentioned BacklotCars, potentially contributing $100 million of EBITDA as you ramp it up. I’m just curious if you can give us some basic operating metrics on where it is right now as far as sales and EBITDA? And then you also mentioned that BacklotCars plus TradeRev could potentially ultimately double your total corporate volume, including ADESA, over time. So, I’m just curious how that happens without sort of some kind of cannibalization, because that would be a very significant jump obviously?

So John, let me start with your second question and then I’ll get to the $100 million. First, I want to clarify that what I believe I said – what I intended to say is with the addition of BacklotCars and putting it with TradeRev, it doubles our volume in the dealer-to-dealer digital space, okay, for clarity. And now, speaking to the $100 million, really, as we look at putting these two businesses together, we believe that over the period of 4 years we can get to $100 million and I can tell you the one metric is going to be volume. It’s not going to be – it’s not going to be synergies. It’s going to be driven by volume. And as we get the volume that will determine how quickly we get to the $100 million.

And John, let me add something. We have talked incremental volume across the dealer-to-dealer segment, which nets out any cannibalization. BacklotCars is on a run rate that they’ve announced locally, so I’ll give you that, that they were selling on a run rate for the year of about 160,000 vehicles. We could estimate that that puts their revenue in the $50 million to $70 million a year range and they have been operating at a very modest loss. So, we’re really excited about putting these companies together, creating scale, creating some synergies and – moving forward – having a profitable dealer-to-dealer digital marketplace that contributes to KAR’s overall performance.

Okay, that’s helpful. And then the second question is, it appears everything is going to be sold online, maybe not online-only but certainly online. We have 74 facilities, I think, right now in the U.S. How many you’re going to need in the future as you make this transition and how should we think about your potential sales or monetization there?

Yes. So, John, listen, we continue to believe that one of the most critical assets we have is still our physical locations. For a digital company, real estate is still a very critical asset, and I think it differentiates us from many of the platforms in the industry. So, number one, we will still need these facilities to check in cars, to inspect cars, to image cars and to provide ancillary services to vehicles. As well, listen, there will still be some dealers that want to run cars in a physical auction environment, and we’re not necessarily running cars but we’re certainly still prepared to sell those cars at a physical auction site if that’s what the dealer wants. We’ve been saying for years and years and years, it’s not up to us to dictate to the dealer where they should sell their vehicle; and again, it’s providing all channels, making all channels available and letting the dealer eventually decide what channel works best. And as you know, we’re committed to the digital channel. That’s the way we are going and we’ll bring the dealers along at the speed that they’re comfortable with.

And then just one last question…

John, if I could add one thing. We have been adding – with the digital transformation, over the last 6 to 8 months, we have been adding property in Los Angeles, Manville, New Jersey, outside of New York City and Chicago. And that’s in the middle of the transformation to a digital framework. So, I think that’s evidence that the land becomes an integral part of the offering. And I wanted to share that major metropolitan markets, that land is extremely valuable in particular.

That’s very helpful. And then just last one on ancillary services. As we see the business transform over time, is there a greater or less opportunity to ancillary services, and how do you kind of communicate that with BacklotCars and TradeRevs transactions or customers, potentially get them on board while doing more? Just trying to understand, because obviously that’s a great margin business for you and a great incremental business, so just curious how you think about that going forward.

Yes, so I think there still is going to be that opportunity, especially as you think about the off-lease cars and the off-lease cars returning; and then repossessions – again, heavy users of ancillary services. We think there is an opportunity there. And if you do take a look at our revenue per unit, even though it was down a little bit in the quarter, it has been strong, Eric – it has been strong over the last few quarters. Yes, in fact, revenue per unit, physical, which is a metric I plan to phase out, was $904 – $905 in Q3, the strongest we’ve had in history. So, John, I mean, when the cars do get to the property, there is a strong interest and increasing the value of the vehicle, and that will continue. And we’re also expanding the off-premise services like transportation and inspections, and ultimately this is without a lot of contribution from the repo activity that will probably be a bigger contributor in 2021. So, I’m actually very optimistic about strong ancillary and related services revenue going forward.

Great. Thank you very much, guys.

You’re welcome. John.

Thanks, John.

Thank you. Our next question comes from the line of Ryan Brinkman with JPMorgan. Your line is open.

Hi, good morning. This is Rajat Gupta on for Ryan. Thanks for taking the questions.

Hi, Rajat.

Hi. So, at the end of second quarter, you had mentioned that there were still 2,000 employees on furlough and if they are not going to be called back by October, those positions will be eliminated. Does it look like volumes have recovered much from the June exit rate? Did it secure actually degree of any further cost saves that you’re anticipating now versus the $90 million you had indicated on the 2Q call? And I had a follow-up. Thanks.

Yes. So, we did have a couple thousand employees that were still on furlough and those employees have either now been able to return to work or they’ve been permanently laid off, as we go forward. So, that activity was planned and was accounted for. And at this time, we don’t anticipate any major layoffs or furloughs, at this time.

And Rajat, our headcount has been stable at about 9,700 over the last couple of months. So, where we have pulled back employees that were on furlough, it was to fill open positions that were open due to attrition.

Got it, got it. So, like in totality, like – there are still like 5,000 employees that were – you’re running at 5,000 fewer employees versus pre-pandemic, right?

Yes. Pre-COVID, our last number was 15,400 and we are now at 9,700 and change. So, that’s – and we’ve been holding steady there.

Got it, got it. That’s helpful. And then just on the gross margin uptick here from 2Q to 3Q, or you can look at it year-over-year. Could you just help unpack the components of that? How much was that versus like cost saves versus just the mix impact? Like, how much did TradeRev influence that? Just curious and the reason I ask is like any visibility on how that should progress here in the fourth quarter, especially in the context of backlogs coming in as well? That will be helpful.

Well, again, we’re very comfortable with the gross profit of all our business units. TradeRev gross profit is continuing to be above the 50% level that Jim – 52% that Jim talked about on a net basis. So, we’re very pleased with that. All of our businesses are performing well. And I would tell you right now, Rajat, the volumes are not as strong as they were a year ago and ancillary services are down, but I would tell you I think the mix will improve with our higher margin auction business over time becoming a bigger percentage. So, I’m not going to promise higher gross profit, but I think we can sustain these gross profits. The one element that makes it confusing on a GAAP basis is purchased vehicles. We’re down to 44.5%. Last quarter, we had months at 47%, even 50% on gross, but that was because of very light purchased vehicles. So, that’s the one thing that could influence the number. But on a net basis, we’ve been very consistent above 50%, gross profit and I think we’ll stay there.

So ex-purchased vehicles, you’re comfortable with the 50% level basically, going forward?

Yes, that’s where we’re performing right now. And if ancillary services start to influence, we’d be very happy with it and we would tell you when to expect that. But right now, that looks like a good target for us is something in the high 40s to low 50s sustainable.

Got it. Great. That’s super helpful. I’ll get back in queue. Thank you.

Thank you. Our next question comes from the line of Craig Kennison with Baird. Your line is open.

Hey, good morning. Thanks for taking my questions. Eric, I was close to getting my PhD in your metrics. But I appreciate your decision to simplify that that’s going to help a lot. My question had to do with the dealer-to-dealer channel you talked about, Jim, going from 5 million units to 15 million units. I just want to understand where those are coming from. Is that incremental 10 million units coming from volume that never would have used a wholesale channel in the physical world?

Yes. So, there is a couple of things, Craig, that I mentioned is, number one is, we’ve expanded our reach to now be able to attract dealers who typically never used a wholesale auction, so that’s part of it. And then it’s really the wholesalers that have been buying a lot of these cars from the franchises, and we’ve been obviously able to attract that marketplace as well. So, we’re just – all those cars that weren’t coming to auction now becomes part of that addressable market. And our number up to 15 million is not exaggerated. We think the number could be even larger than that, but we’re positioning it somewhere in the neighborhood of 15 million.

And Craig, another element, the consumer-to-consumer transaction is increasingly going consumer-to-dealer as you’re seeing all this car buying activity of the retailers, where previously the consumer might have tried to sell directly to a consumer, many of them are going into the dealer. And that’s providing an increased opportunity for us, as well with the likes of CarMax, Carvana, Vroom, Shift and other dealer groups that are starting to buy cars.

Got it. Thank you. And then going back to the comment on the $100 million of potential EBITDA from BacklotCars, could you just give us a feel for the underlying assumptions there, whether it’s your volume or your revenue per transaction there? And I’m particularly curious whether that includes like ancillary services, transportation or finance benefits, or if that’s just a transaction EBITDA number?

Yes. So, Craig, the number one metric that we are looking at here is volume. Volume is going to drive it and its how quickly we can win the market share that we think we can win. I’ll expand on that a little bit too, is when you think about what’s important on these platforms, I think the platform that has the most participants is the winner. And when you take the BacklotCars buyer base, add to that the TradeRev buyer base and add to that the ADESA buyer base, I believe that is the buyer base that’s unmatched anywhere in the industry. And really this is not about being number two. This is about being number one and taking that leadership position. And we are clearly, clearly focused on winning that number one position and we think that we will have the platform, we think we will have the buyer base and we think we will have the team that can go and clearly win that position. Eric, did you want to add that?

Yes. And relative to what is included, it would be auction fees and transportation, and to the extent there was any inspections. In our analysis, there is a small amount of, call it, finance income in the BacklotCars business, but we have left that to our AFC models. So, we are not really including the finance element in that $100 million. And that’s incremental to what we would have expected over that same period under the current platforms, including TradeRev.

Got it. Thank you.

You are welcome.

Thank you. Our next question comes from the line of Stephanie Benjamin with Truist. Your line is open.

Hi, good morning.

Hi, Stephanie. Good morning.

Good morning, Stephanie.

I was hoping you could maybe talk a little bit about what you have seen thus far in October trends, if supply has come back a little bit or even demand from dealers? Some pricing, as always, come down a little bit sequentially, but any color you could give on recent trends would be helpful.

Yes. So, Stephanie, we did see a little bit of softening in the third quarter in terms of price and conversion, and we pretty much expect what we have seen in the third quarter is what will continue through the fourth quarter. Really, as I say to the team here, we got to focus on the things we can control. We can’t necessarily control the volume, but what we can control is we can control our costs and we can control our margins and we can control and stay focused on being a digital company and that’s where my head is up.

Got it. Really helpful. And then just to jump back on the BacklotCars transaction, your commentary that you expect it to tick to profitability once integration is complete. I know you just now started that process. But do you have general timeline on when you think the integration will be complete as you – over the next year or 18 months?

Stephanie, the answer is, as fast as we can. I would tell you that we expect that we will have full approval here and we will close in the next week or so, as I mentioned in my commentary. Obviously, we haven’t been able to communicate with the BacklotCars team as we went through the regulatory process. Now, we will be able – when we finally get this approval, we will be able to bring the two teams together. We have thought a lot about the integration, we certainly want the BacklotCars team to weigh in, and we are going to move as quickly as we can and it would be irresponsible for me to put a timeframe on that, but we know this business is moving quick and we want to move quick with it.

Got it, fair. And then just lastly on that. Could we assume that just given what you have done to integrate the TradeRev and ADESA inventories, so that they are accessible on one site, could be analogous to what you would likely do with BacklotCars?

Yes, thanks for mentioning that. We do have single sign-on now with all of our platforms and all of our inventory to our buyers, and I would look to be able to now integrate all those vehicles being posted on Backlot, into that same network, where they can come in and see those cars as well.

Got it. Thank you so much.

You are welcome.

Thank you. Our next question comes from the line of Daniel Imbro with Stephens. Your line is open.

Yes. Hey, good morning, guys. Thanks for taking our questions.

Good morning, Daniel.

Jim, I wanted to start on the expense cuts. On the supplemental, you noted you eliminated part of jobs. Looking on the website, it does look like some of your debt allocations have what you’re calling limited in-person buying. Can you maybe just help us understand what are the process changes you have made and when we see that some of these yards are quote-unquote – "Reopening physically", are they still online-only selling processes? Or how do we reconcile the decreased headcount with what looks like increased physical activity? Thanks.

Yes. So, Daniel, I will start now and I will ask Eric to weigh-in as well. But first of all, one of the things that our dealers did request – we’re not running vehicles, that’s a 100%, okay? We are not running vehicles, but dealers did want the opportunity to be able to come and preview cars. Be able to come and walk the inventory, start the vehicle, open it up and have a look at it. And then we gave them the option of being able to come and be socially distanced in the auction lane and they could sit in the auction lane or stand in the auction lane on the axis, where we are socially distanced, and they could bid and – look on the screen and bid on the vehicle or they could return to their office or their place of business and they could bid from there. So, we have basically provided them the opportunity to preview these cars and bid on these cars with the auction, but there are no cars that are running across the block. So, we have eliminated all the drivers and all the yard personnel, and the personnel associated with running cars through the lanes.

Yes. And Daniel, think of this. Pre-COVID, we had initiated a project called Flow My Car. And what we are looking at is how we can more efficiently move cars throughout the process of the various reconditioning, whether that be mechanical, bodywork, detailing the vehicle, whatever. So that was unrelated to COVID. With COVID though, we stop the sale day activity, which made it much easier to make those changes and have a more efficient flow. What that does, it reduces cycle times. Selling online allows us to get the cars sold faster, because we are not waiting for a physical event. We can get that car posted. So, we see a lot of opportunity here for efficiency. It’s around labor. And what we have eliminated to-date is predominantly sale day labor and we are working on other aspects of efficiency to continue this process.

It’s really helpful color. And a quick follow-up on that one Eric, I think you noted last quarter that 2,000 employees on furlough were mostly part-time. So, there is a less average salary than the initial 3,000 laid off. Can you help us quantify at all what the incremental savings are from these 2,000 jobs that have been eliminated since last quarter?

So, I want to clarify, they included many part-time. I don’t know that they were mostly part-time, but they were primarily hourly employees with a lot of high concentration of sale day labor that we have eliminated. We averaged, if you saw the numbers we announced last quarter, an average salary was about $30,000 per employee. That is not annual. That is their actual compensation. And on the remaining 2,000 that we are talking about, the average would be very similar to that, so it would be in the same range, because again it’s of similar, shall we say, composition of the group of employees.

Great. And last one from me if I could squeeze it in. I think, Jim, you mentioned you are expecting repossessions volumes be up 30% to 40% next year for the industry. As we think about capacity, what are the physical restraints on you guys handling that? And I think in the past, you have noted your overweight repo versus the industry. So, should we expect you guys to see a stronger growth in that, since you guys are more exposed there than some of your peers? Or how should we think about that flowing through your P&L? Thanks.

Yes. So, Daniel, first, I believe what I said is that repo volumes will be 30% to 40% less in 2020. So, that is one point of clarification. In terms of capacity – bring them on. We have the capacity and we have the ability to process as many repos’ that will come our way. We do expect that volumes will increase significantly in 2021. And yes, we are over-weighted on volumes and it’s a segment that we’re very much looking forward to serving.

And Daniel, we are uncertain as to when it will start. We are concerned it may not be in the first quarter, but it’s definitely looking like a tailwind later in the year, especially the second half of the year.

Thanks, guys. Best of luck.

Thank you.

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

Good morning, Bob.

Good morning. Thanks. Quick one on the digital dealer platform, can you give us a sense of your go-to-market strategy? You are going to stick with three brands, I imagine. Just how will this ultimately play out? Who is leading it? We have three sales teams, multiple brands, what’s the kind of consolidated strategy there?

Bob, you are about a week, 10 days ahead of me, I think. We are working on that integration plan. And at this point in time, it would be unfair for me to comment on what those plans are, because we really need to get the BacklotCars guys involved in this conversation. Listen, we know one thing. We have got two great platforms and we know that they are doing very well today and they are serving our customers very well, but how we go forward with those platforms and how we go forward with the sales teams and things of that nature, that all needs to be determined here over the course of the next few weeks, as we mentioned. But one thing I will mention to you is I am very, very pleased with what we have been able to do with TradeRev. I will speak to that. Over the last – I guess over the last year, we have really made some major moves with TradeRev that has really accelerated the growth of TradeRev and continues to grow TradeRev. Number one is, we made some changes to the technology to make it friendlier and easier for our customers to use. Number two, we did put the sales team together. You heard about the Better Together sales strategy. We put that together and that seems to have worked very well for TradeRev being able to represent both those products with one sales team. And then the third thing is, we went to a different fee structure, and that fee structure has certainly attracted more business and has certainly shown up in our growth rate. So TradeRev, we are very pleased with the strides we have made and we want to make sure that we don’t lose track of what we have been able to accomplish with TradeRev as we make these decisions with BacklotCars.

Jim, I think the one thing we can comment we have found it successful to have a single sales team on the dealer-to-dealer space with KAR’s sales team. We do not plan to change that decision. There will be one sales team representing all products of KAR.

Okay, great. And look forward to more and understand why the answers are not full there, but that was great and very helpful. And then also Eric looking very much forward to ancillary service revenue being broken out in the future, but given what we have right now, just looking at ARPU less purchase cars in the quarter rebounded nicely from Q2, but still down 8%, 9% around $500 to $510, versus a year ago $550 to $560. I know there is lots of moving parts, but can you give us a sense of how you are thinking about ARPU now? Is it down because of mix and moving to all digital? Is it the lack of kind of repo cars flowing through right now or how should we think about that ARPU less purchase cars trends?

Yes, Bob, real quick, the biggest pressure is coming from the OPENLANE platform. That is where we saw absolute ARPU down, because the grounding dealer are taking a large number of those transaction and that is a very large number of transactions for us and looking here at what I have got as known as online-only was – online-only volume in North America was 437,000 vehicles, which you will get out of our details. So, that’s a big impact. Second, the decline in ancillary and related services, when I apply that to all the denominator being all units sold, that would be the second biggest negative. While I’m up on a physical basis for those transactions, I am spreading that over a much bigger denominator now with all the transactions and the total volume sold. So, those are the two things. I do not think there is a secular shift in either. I think those are market conditions today. The fact that we have such a high wholesale pricing environment, we experienced this back in 2010 to 2012, where they want to sell the cars back, they can’t because they are getting a wholesale gross profit. They are making a profit on the wholesale transaction in many cases, so they don’t want to wait to get a few more dollars by doing ancillary services. And then that grounding dealer buying before the car is marketed on our platform while we get a transaction fee, it’s a very low transaction fee. Not secular. I think those are temporary situations. As the market stabilizes, you will see those two elements rebound in my opinion.

Okay. Yes, that’s great. Super helpful. And then last one, just to sneak in, more big picture. Given the massive shift in the marketplace over a long period of time, but really fast over the last six months, is B2C, business-to-consumer an option for KAR in the future, and what are the pros and cons to that approach?

Yes. So, Bob, I think that our focus is clearly on this dealer-to-dealer wholesale digital space and we need to stay laser focused on what we have at hand. And I think getting BacklotCars and getting TradeRev, getting it right, and getting our go-to-market strategy right and all the things that we plan in the integration plan is our focus. And I would tell you that B2C is not something that’s on our radar at this point in time.

Okay, super. Thank you very much.

You are welcome. We have only got a few more minutes. So, we have tried to get as many as we can, but be quick.

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

Hey, good morning, guys.

Good morning, Bret.

Good morning, Bret.

Looking at Backlot and TradeRev, could you give us a feeling for dealer overlap? Are there guys using both platforms now or are they largely separate?

I would think you would describe the dealer base as using any and all platforms across the entire marketplace wherever they can get a car, Bret. There is some overlap, like always. It probably is more coincident with geography. If the geographies overlap or the geographies don’t overlap, we will be adding to the buyer base. The overlap would be less than – in my opinion, less than 50%, but that’s more on anecdotal review, not a scientific review. But that’s because of the markets we’re serving, not because we don’t – if you go to ADESA, it’s probably close to a 100% overlap. The dealers, all transact wherever they can.

Okay. And then I guess the question, as you look at $100 million of EBITDA and knowing what you know of unit margins, how many units does that back into, I mean, so we can sort of benchmark the progress?

We are not going to get into that level of forward-looking statements. It would be a level of contribution consistent with what we are seeing in the combined Backlot and TradeRev performance today. We are not looking for that to grow, but we are looking to get the scale. I would probably look at the business models that we have with TradeRev, that is what we have spoken about, where you are probably looking at a fee structure that provides the leverage to get a gross profit dollar per transaction that’s 50% to 60% of the revenue and then with that smaller SG&A, very high EBITDA dollars. Again, without quantifying in the specific number, I am guiding you to how we view at scale.

Okay, great. Thank you.

Welcome.

Thank you. Our next question comes from the line of Gary Prestopino with Barrington Research. Your line is open.

Hey, good morning, everyone.

Hi, Gary.

I will be real quick. I just want to clarify you are now a 100% digital, you are not going back to any kind of physical auction activities. Is that correct, Jim?

So, Gary, we are a 100% digital and we have no plans to return to running cars.

Okay, great. And then, Eric, did you give the free cash flow number for the quarter?

It was very positive cash flow from operations. Year-to-date is the positive $400 million, I have that in the financials, I’d have to go back to look, but it was a very strong performance, because I think we were neutral to negative. So, it was quite a bit of cash generated in the quarter. Gary, I don’t have that right in front of me, but it was a very strong contribution to the quarter.

Okay. And then just a quick question, I don’t know if you are going to answer this or not, but as this TradeRev and BacklotCars starts – gets combined, integrated and starts to mature it looks like you are generating about $160 of adjusted EBITDA per vehicle, would you expect that contribution from the combined entities to be somewhere lower than that, higher than that, somewhere in the middle?

Gary, let’s not get too specific, but that seems like a reasonable target for that type of business. We’re not looking – we think we have the leverage in the marketplace that we could achieve numbers in that ballpark. I will just leave it at that.

The ballpark of about $160 of EBITDA for car…

Yes, let’s just put it somewhere in the middle between $100 and $200 is a reasonable target.

Okay. Thanks a lot, guys.

You’re welcome, Gary.

Thank you. I am showing no further questions in the queue. I will now turn the call back over to Mr. Jim Hallett for closing remarks.

Great. Well, thank you for being on this morning. Again, we continue to appreciate your interest and support in our Company. I can tell you that we feel very good about how we are positioned here. I think the team is really, – you can look at COVID and you can look at all that happened and you can look at the challenges, but the other side of that coin is it’s also been very energizing. I think it’s energized the team as to how we can really manage this business and how we can take an industry like this and transform it to digital. I think the team is energized. I think we’re excited about going forward, not only with digital, but excited with the cost structure that we put in place and focused on maintaining the margins that Eric and I have spoken about today. So, we are looking forward to 2021. We think there is ample opportunity, looking forward to the markets returning and the volumes coming, and we will have more to share with you at our year-end call coming up in February. So, thank you for being on. We appreciate it.