Good day, and welcome to the KAR Auction Services Third Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Mr. Mike Eliason, Treasurer and Vice President Investor Relations. Please go ahead, sir.

Thanks Matt. Good morning. And thank you for joining us today for the KAR Global third quarter 2022 earnings conference call. Today, we will discuss the financial performance of KAR Global for the quarter ended September 30, 2022. After concluding our commentary, we will take questions from participants. Before Peter kicks-off our discussion, I'd like to remind you that this conference call contains forward forward-looking statements within the meaning of the Safe Harbor provisions 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 measures 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's CEO, Peter Kelly. Peter?

Thank you, Mike, and good morning, everybody. I'm delighted to be here this morning to provide you with an update on KAR Global. During today's call, I'll provide you with additional information and detail relating to the following; our third quarter performance, our view of the current market factors that continue to impact the automotive industry, and a summary of our capital allocation activities. I'm going to speak about our business in two segments, our Marketplace segment, which we formally call the ADESA segment, and the Finance segment, which we formally called the AFC segment. To begin, Q3 was an important quarter in the history of our company. It was our first full quarter since we completed the divestiture of the ADESA US Physical Auction business in May and in fact, the true beginning of what I believe will be a bright future for KAR as a more asset light digital marketplace company. I'm pleased with the results that we produced across the organization, especially given what continues to be a very challenging industry and economic environment. During the quarter, we increased revenue, total gross profit and adjusted EBITDA. We met our cost reduction targets [Technical Difficulty] to $283 and we also increased gross profit per vehicle to $320. This was an increase of 14% over the third quarter of last year. In our Finance segment, we experienced another solid quarter of performance as AFC continues to grow its core finance business. Our Finance segment generated revenue of $99 million in the quarter, an increase of 31% over Q3 of last year. This was driven by 13% growth in the number of transactions and 16% increase in revenue per transaction, which increased to $250 for the quarter. Interest income represented 54% of AFC revenue for the quarter, that is 700…

Thank you, Peter. First, I would like to point out that foreign currency had a negative impact on our third quarter results. Revenue was negatively reduced by $12 million, net income was reduced by approximately $1 million and adjusted EBITDA was reduced by $1.5 million in the third quarter as compared to the prior year. I would also like to give more color on our SG&A and the evidence of improvement in our cost structure that is not obvious in the third quarter financial statements. We have provided a schedule of SG&A by quarter for 2022. This schedule provides additional detail for SG&A by segment, what SG&A was added due to acquisition and the noncash and other costs that are recorded in SG&A that do not impact our reported adjusted EBITDA. When we speak of eliminating over $30 million in annual SG&A, we are focused on adjusted SG&A. All add backs in computing adjusted SG&A are the same as the add backs for computing adjusted EBITDA. We have provided a schedule of adjusted SG&A for our continuing operations in the Q3 earnings slides that were posted yesterday. The headline result is we have reduced the adjusted SG&A run rate in Q3 to $96 million per quarter from $104 million in Q2 and $102 million in Q1. We are excluding noncash compensation in this analysis of SG&A. As you can see in the earnings slide, there was an increase in noncash compensation in Q2. This relates to the recognition of the impact of the gain on the sale of the US Physical Auction business on the expected award of the 2020 and 2021 PRSU grants to employees. There have been no increases in total annual noncash equity grant value. However, the timing of recognizing expense in our financial statements was impacted…

Thank you, Eric. And before we get to Q&A, I want to formally announce that Eric will be retiring at the end of 2022, making this his last earnings call as the Chief Financial Officer of KAR Global. Eric has been an incredible leader and CFO for more than 15 years. He has led the company through many complex acquisitions and divestitures, and advanced the capital investment strategy that has helped KAR navigate change, capture great opportunities and create meaningful shareholder value. Eric has also always been a positive cultural leader here at KAR, a skilled and transparent financial operator and a tireless advocate for the interests of our investors and shareholders. We are conducting a national search for Eric's replacement and hope to fill the role prior to Eric’s retirement. If these timelines do not align, we have a strong internal bench strength at KAR to lead the function on an interim basis until a permanent CFO is named. We will provide additional details and updates in due course. But for now, let me just thank you Eric for your incredible service to this company and to our investors. I wish you all the best for relaxing and enjoyable retirement. You've certainly earned it. And with that, let's turn to the group for questions. Thank you.

[Operator Instructions] And our first question will come from John Murphy with Bank of America.

Good morning, guys. And Eric, congratulations. I hope you get to rest, because I know you have been working hard for a long time, so congratulations.

Thank you, John.

A first question here, there is a lot going on here in the industry and there is a lot going on in the transition of the company. So there is a lot of moving pieces. So it's I think a bit tough as people are looking at this to try to get a sort of a constant variable or something to kind of work off of understanding exactly how the company and the industry is going to look in 2023 plus. I mean, when do you think we are going to get an outlook for 2023? And what do you think the major sort of focal points are going to be for you as you communicate that, not looking for specific answers, but as you communicate this, people are looking for sort of some guideposts and ways to think about things structurally for this company, the industry going forward and there is a lot of moving parts. So when will we get that and how do you think about that?

And I guess you are correct, there is a lot going on. We have got a pandemic that led to production issues, which the industry it seems to be struggling to recover from in terms of new vehicle production. We have got declining used vehicle values, we've got everything that’s going on with off lease and so on and so forth. Obviously, we are deep in our planning efforts for 2023. I remain optimistic for the prospects for the business. I don't plan to go into specific detail on this call, but I would expect to provide more detail in our next earnings call, which I think is early February. We’ll talk about expectations for 2023 at that point. Again, I think if I look at our Q3 results, in my view, they demonstrate an underlying level of performance in a challenging environment that I think we can build on for the future. That's kind of how I view it. We have got a finance business that's performing well. I expect that to continue to perform well in the future and through all of 2023 and we've got a Marketplace business that has obviously faced significant volume challenges. I expect that overtime those volume challenges will ease, but I expect it to be a gradual change. And then in the midst of that, we have obviously got platform consolidation, we have got cost actions, pricing actions, where I think we are building in sort of -- we are taking actions that will benefit us quarter after quarter after quarter as we look at the future. So I see this kind of, at least endeavoring to build upon that and obviously growing the business sustainably overtimse. But I think when I look to the macro perspective, I think the new vehicle production impacts, the recovery in wholesale volumes, those changes will be, I would say, gradual changes, not a step function.

And then just a follow-up on your comment on pricing, with the backdrop of those kinds of constraints on wholesale volumes and the automakers clearly not being able to ramp up production even as much we might have thought a couple months ago, supply will remain constrained on the new vehicle side and we'll see the one to six year old car fleet shrink probably for the next three or four years. So I'm just curious as you look at that backdrop, how do you think about pricing, first, because it seems like it shouldn't go down if there's that kind of supply constraint and then second, your opportunity set in that kind of environment to gain incremental revenue per unit as well as maybe gain market share?

I think, John, by pricing you mean the pricing for our services, not the value of used vehicles?

Actually both opportunities. I mean first on the vehicle pricing and then second your opportunity to drive revenue through pricing and other actions.

So in terms of used vehicle values, we've seen a fairly substantial decline in used vehicle values in the wholesale market in Q3. Prices declined pretty much every single week of the quarter. If anything, the rate of decline accelerated later in the quarter, continues to decline here in Q4. And we're seeing that pricing decline now show up in -- first I started to show up in used vehicle pricing at the retail level, and now I believe it's beginning to show up in new vehicle pricing at the retail level. So I think the combination of a slight increase in production but also increased interest rates has been putting downward pressure on vehicle values, I think that will continue. I don't expect used vehicle values to fall down to pre-pandemic levels, because of the constraints you talked about. But I do think they'll continue to decline at least till the end of this year and then we'll see what happens after that. As those values decline, that creates an opportunity for more vehicles to start to flow into our channels. Again, particularly off lease where you've got this equity gap, which is the difference between the residual value and the market value of the vehicle. As those numbers come closer together, I think incrementally more vehicles can start to flow. And again, I expect that to be very gradual. So again, I think, used vehicle prices continue to decline gradually at least through the end of this year. In terms of the pricing for our services, obviously, we've taken some actions there. We have a mix of commercial and dealer business. Some of this requires a negotiation with some customers or conversation with some customers. I'd say generally, John, what we look for, first, is there an opportunity for us to potentially do more for the customer in exchange for a greater revenue opportunity, right? So we look at those types of opportunities and I think some of it reflects that and some of it we just look at -- what is the appropriate pricing given current volumes, and that might be different to what it was three years ago when volumes were higher. So we have that discussion. So again, we've been, I think, strategic and disciplined around that, but have been pleased with the progress we've made.

Our next question will come from Ryan Brinkman with JP Morgan.

This is Rajat on for Ryan. And Eric, I wanted to convey my best wishes as well. So maybe like to start with OPENLANE. Looks like just following-up on John's comments, looks like the volume -- the outlook for volume there is likely to be tough for a while. Cox Automotive put out some estimates where they expect another step down in off lease volumes before growing again. So curious like if you think that's the case as well, and is there an opportunity to rightsize or restructure that business even further going forward, or has some of that already happened? Any thoughts on that would be helpful, and I have a follow up.

I guess, thanks Rajat, first of all. And as I mentioned in my remarks, commercial volumes declined in the third quarter but the rate of decline was less than prior quarter. So I expect that to bottom out here is my expectation. I'd say on the -- we've talked about cost action, purely we've looked at businesses like OPENLANE and other businesses, so some of the cost actions that we've taken are in those parts of the organization. So that's something we continue to look at. Obviously that's also an area where we've had conversations with customers on with respect to pricing and services. So that's the situation with respect to that. I would say that, I think the key determinant of the future performance of that business, I'd say there are two factors. One is the rate of decline of user vehicle values and do off lease vehicles start returning into their marketing funnel in greater volumes. I'd say we're seeing the very beginning of some evidence of that, but it's very small, it's not yet material, but it certainly has started to trend in that direction as vehicle values have come down. And the second one is the new lease originations and obviously, 2025 there will be fewer releases -- 2022, there will be few releases written in 2022 than there were in prior years. And that reflects, I'd say two things, Rajat. One is fewer new vehicles produced and manufacturers feeling that they don't need to put incentives on vehicles, which often drive the lease attach rate. Again, I expect both of those things to start to change as well. I expect production of new vehicles to start to increase, albeit more slowly than experts have predicted. I also expect that in a more challenging economic environment, manufacturers will at some point have to start increasing their incentive spend on vehicles as well. And that will likely, I think, start to drive an increased lease attach rate over time. So again, I think leasing will remain a very important area for our business. I think it's one where we are significantly differentiated vis-a-vis our competition given our strong footprint with that segment. I would agree that that's not impacting our financial performance today like it was when the volumes were stronger. But I think we're sort of at or very, very close to the bottom, and I think it will improve over time.

And maybe just on the GPU increase in the quarter, you cited mix of the factor as well but you also cited some price actions. Could you give us some more color on that, were there any other factors also that drove the uptick from 2Q to 3Q on that GPU? And how should we think about the GPU trends into the fourth quarter and maybe early next year, based on all the price actions and the mix changes that have happened?

GPU is very -- gross profit per unit sold in the marketplace business is very strong in Q3 $320, that's well above the sort of target we established in our Analyst Day presentation, which was in the sort of 260ish kind of range. I'd say a couple of things. When the volume is transacted is low, the GPU tends to increase because of service revenue on vehicles that were not, we have other services that aren't attached to actually selling vehicles. So that can drive some of the GPU increase. I think the pricing actions as well, obviously, have a positive impact there. So that's for sure. I guess what I would say is the strong GPU performance in Q3 gives me confidence that the numbers we put in place in our Analyst Day are very, very achievable and sustainable overtime, although, I don't necessarily expect that they would stay at the sort of $320 per unit level that we saw in the third quarter. But I think we are sort of -- we have a significant cushion above the range that we discussed in our Analyst Day.

Our next question will come from Gary Prestopino with Barrington Research.

A couple of questions here. Can you give us some level of the decline in conversion rates in the quarter? And how -- if the conversion rates were the same as last year, what would that have done to your lift in vehicles sold?

I spoke on the last earnings call about our conversion rates, which were lower. But I would say in essence of that situation for the most part continued through all of Q3. We did see I think a little bump in conversion rate in August. But for the most part, it has been below last year. I would say conversion rates vary by channel, but I'd say something like 10% below. So if a channel had 60% last year, it's 50% this year, as a sort of a rough order of magnitude of it. I also would say that is very consistent with what I've seen, certainly, when I've looked at sort of physical auction data, conversion rates have been low low there as well pretty much for all of the quarter, lower than normal. Gary, you may know, we also see typically higher conversion rates on commercial versus dealer, so some of it may be mix related. But I would say roughly 10 points. And if you think of a channel where conversion rate was 60% and that has declined to 50% and that is -- is that something like 18% headwind to sales volume, something like that. So it's pretty significant. Now I would also say, candidly, with the benefit of hindsight, last year's conversion rates were characterized by a very tight market for used vehicle supply and significant used vehicle appreciation. So I would say, last year's conversion rates were somewhat above normal and this year's conversion rates are below normal and a normal conversion rate is somewhere in between and I'd say, close to halfway between the two would be my best guess.

Then just a couple of more. You talked about what you are doing with BacklotCars and CARWAVE. You've said two formats, one of which I wrote down as a marketplace and then you go to an auction. Could you just maybe elaborate on that? Are you getting a buyers the opportunity pre-auction to buy these cars through a listing service and if so, how is that price determined?

So I guess to sort of provide a little bit more detail on that. The CARWAVE business, their sale format was an auction format. It ran two days a week and vehicles were sort of preloaded into the auction where dealers could view them and research them, place advanced bids, but they actually couldn't buy them, okay? And then the bidding opens for a two or three hour window on a Monday and a Thursday, and then the cars are sold at the end of that window. That's essentially how the format works. It works very, very well. Dealers really liked it. It got great results for their customers. And we felt it was important to replicate that capability in our platform. So that's what we've done and that complements the existing BacklotCars bid ask marketplace. So now when a dealer loads a car, they choose which format do they want to load it into. They want to load it into the marketplace where it's available immediately if we bought at any time or they want to put it in the next scheduled auction, that's the choice they make. And obviously, if the car is unsold at the end of the auction, they can push it over into the marketplace. But that's essentially how it works. And again, as I said, our focus right now is consolidating that migration in the markets where CARWAVE already existed, that's principally California but also Arizona and Texas. And then we look to roll that format across the remaining 48 states in 2023. So we're excited about that. We think this will be a positive for the business and we'll enable us to address an even bigger segment of the market.

And then just one last question here. I just want to make sure, in terms of what you had guided before for EBITDA 245 to 265, and given how you discussed, do you think the impacts of what's going on will impact Q4? Is that range still good and more tended towards the low end of that range?

I guess, Gary, first of all, I’d just say our policy is not to provide quarterly guidance, but I will provide some remarks here just on how I see the situation. So if I think about the year overall, 2022 overall, purely the environment environment's been a challenge for the entire year. And again, I believe our Q3 results show we're responding well to those challenges. I would also say, in most years there is some seasonality and Q4 is often a little weaker from a volume perspective than Q3, that's not unusual. It doesn't always happen but it is more common that that's the case. As Eric also reported, we have foreign currency headwinds in Q3. We expect those to continue in Q4. They may even be a little bit more material to us in Q4 than they were in Q3, to be honest. Now I'd also say helping offset those, our fourth quarter will benefit from the cost, the full quarter impact of the cost savings taken in Q3, as well as the pricing actions taken in Q3. And we'll also have further cost and pricing actions that become effective in Q4. And finally, as Eric mentioned, our digital strategy has enabled us to take advantage of some ex-real estate in Montreal and divest some excess land up there with a gain of $30 million. So I guess with this gain included, I'm very comfortable with our previously issued guidance. I will say we are focused on finishing the year strong and I look forward to reporting the final numbers in the new year and obviously, we'll do that with and without the gain.

Our next question will come from Bob Labick with CJS Securities.

Good morning. Thanks, and congratulations to Eric from us as well. I wanted to talk about what you're seeing at the dealer level. The provision for credit losses at AFCs has remained low, it's been low throughout the pandemic and everything. And you mentioned you may not expect it to get back to the typical kind of 1.5% to 2% long term expectation. Maybe give us a sense of what you expect, I guess, over the next year or two for those provisions and where you see that trending and what the drivers are there?

There's no question, in the past couple of years, AFC has been a very strong performer. And I'd say we have seen lower than historical levels of risk, both in terms of frequency and severity in that business. I'd say given the changing macro environment, I'd say specifically higher interest rates and also declining used vehicle values, I think it's prudent to expect some increase in the risk environment there. But I will say that our expectations are that that will be relatively moderate and something that's manageable in the context of the numbers and projections that we've shared previously. And as you mentioned historically AFC -- the historical risk was somewhere in the range of 1.5% to 2% of the outstanding loan balance. We've been well below that this year. I think with a more digital model and with I'd say greater access to data and I think stronger controls, I think it's possible that the new normal will be below that historical range. I guess time will tell, we'll have to see how it plays out exactly. We are modeling a modest increase in risk in our preliminary 2023 projections but we think it'll be very manageable, and we think it'll also be offset by just the underlying growth in the business.

And then just trying to get a sense, I know there's a lot of moving parts in the macro. But excluding, if you can for a second, kind of used car value index, so to speak, impact on GMV. How are the mix of units trending, where's the sweet spot for [Backlot], CARWAVE and how are those units relative to kind of pre-COVID on a normalized used car value index?

I just want to clarify your question. Are you talking about the vehicle values themselves or are you talking about the mix in our volume between dealer and commercial?

The vehicle values at dealer. If you're still -- say a car pre-COVID was, you know, I think the numbers that we had before $5,000 to $7,000 GMV pre-COVID [Backlot]. And then you've added both the value of vehicle with the used car prices going up and then increased mix as you've moved the mix of the dealer vehicles in that marketplace. So trying to get a sense of the mix of the vehicles within the dealer marketplace and how that's trending adjusting for the massive change in used car values.

So I guess what I'd say generally we have seen in all our marketplaces an appreciation in the value of the vehicle themselves really kicked off early last year. It sort of peaked out in probably March of this year and has been flat lined and ultimately started to decline from about May to the present. And I'd say today, rule of thumb, probably vehicle values are still 30ish percent, maybe a little more above their pre-COVID level. So that has sort of generally increased GMV in all our marketplaces. From a mix perspective, different marketplaces have had a different mix of vehicles. So BacklotCars probably point to the way it sort of started and also its specific format that had a real focus on, I'd say, sub $15,000 vehicles, okay, with probably a median GMV today of around, I don’t know, $9,000 or $10,000. Whereas Trade Rev and CARWAVE would probably have a broader mix of vehicles and a median GMV that's higher, I don't know, $15,000, $16,000, $17,000. So with the merging of Trade Rev -- BacklotCars and CARWAVE, we're now combining those, that will bring up the median GMV there as well. So that maybe would give you a sense of the sweet spot of these marketplaces. When I look at our dealer to dealer business, one of the interesting facts is the vast majority of vehicles that are sold between dealers are in that sort of sub $15,000 category. That is where most of the volume is. So I think we are very well positioned in that marketplace and really deliver exceptional value to the -- and exceptional outcomes to those customers in that segment. But I will say, we are in time also focused in increasing the GMV and bringing more high value vehicles into that channel as well.

Our next question will come from Daniel Imbro with Stephens.

This is Joe on for Daniel. Thanks for taking our question. So I was wondering about the strength in the services revenue line, saw a $12 million sequential increase this quarter. I was wondering if you could provide any color there and if this was driven by the Carvana services agreement?

Joe, thank you. I'll let Eric take that question.

Joe, yes, the services revenue has driven a couple of things. First, I would point to repo volumes. While we aren't selling the repos in the US through our digital marketplace at the same level we used to, we have RDN and PAR as key contributors to the growth in the revenue, and that's really helped us as they begun -- the capital finance companies and banks have begun processing more delinquencies, and there are more defaults on auto loans. Second, we did see some increases in transportation. And I would argue that a little of it was probably related to the Carvana commercial agreement, most of it was related to attach rates and how we have been able to penetrate more on the dealer-to-dealer space and have some strong growth in the transportation revenue during the quarter compared to a year ago. Those were the two big drivers.

And then as a follow-up, as volumes recover next year, I was wondering if you have to bring back any of that headcount you have temporarily reduced, whether it's in support staff or at AFC, or should the offshoring of some of that back office functions take out the need for this?

I think one of the great advantages of a more digital model is the scalability you get from a digital platform. So I don't foresee that in the context of the assumption certainly we're making about the industry. I think these businesses will scale incredibly well. We have got evidence of that from the past. And unfortunately, we have been hurt on the downside of that as volumes have declined over the last couple of years. I think as those volumes come back, they'll flow through a business model that is more scalable and more efficient than it ever has been before. So I don't foresee that happening. And I would view the GSS initiative, as Eric said, incremental savings versus our current sort of run rate.

[Operator Instructions] Our next question will come from Ali Faghri with Guggenheim.

And first, Eric, congrats on the retirement. That was a lot of miles between Chicago and Carmel, so well deserved. So I actually have a few questions on AFC. So loan volumes were up 11% in an environment where your marketplace volumes were down 12%. I think historically, ASC loan volumes have at least directionally correlated pretty well with your auction volumes. Why have they decoupled more recently and what's driving that outperformance versus what we are seeing in the broader wholesale auction industry?

It's true that in the past it correlated more with auction volume. But I'd also say that even when we looked at it historically, the amount of transactions within AFC that were generated through the KAR platforms was always a relatively small amount, I think it was about 30% of their total transactions came from KAR or even less. I would say essentially it's market share. AFC has been focused on expanding it’s dealer footprint, the number of dealers using the system. They've been doing that in a very disciplined way and they've been effective at doing that. So we kind of win the business at the dealership level. And then we commit to fund those dealers -- that dealer's purchases irrespective of what channel the dealer buys them on. So I'd say principally that's the focus. Now I will also say we have been focused as well on increasing attach rates within our existing digital marketplaces. We've put focused initiatives on that with TradeRev and with BacklotCars, and those are bearing positive results. But that's not what's driving the significant change that you alluded to. So I think it's really just a focus on the customer and ultimately increased market share within the segment.

And then maybe just a follow-up on AFC. Maybe you can remind us how interest rates benefit the business? It was obviously a sizeable tailwind this quarter. Maybe a refresh on how you price your loans would be helpful.

Eric, do you want to speak to that?

Well, the first slide we speak to -- the pricing typically is going to be, we use a prime rate quote plus a spread. Typically it's 300 to 400 basis points above prime and prime has been moving up. And Ali, the reason the performance is improved with that because there is a corresponding increase in cost of funds is we're only funding through the securitization about 70% of the total loans when you look at our balance sheet. So about 30% of that is in equity and that's where we get the increased performance in the AFC business is no corresponding cost. Equally important to that though is that we have a very efficient structure for the financing. It's a cost of funds. It actually is a lower cost of funds than it is charges to our customers. In other words, the prime rate has grown more than our cost of funds. So we've gotten a little bit of spread enhancement on that. So those are the two things. And as we look at today's expectation that interest rates will be increased by the Fed going forward for the rest of the year, that probably becomes a bit of a tailwind in the short term. But as Peter mentioned, it puts stress on the dealer. So you've got to balance that out with what it does to the risk side of the portfolio. Peter, anything to add?

No, I think you've got there, Eric. I think, there are some pros, there are some cons. I think generally we're confident in the AFC business model and that it'll be a strong contributor in 2023 and beyond.

Great, thanks for taking my questions.

I think we're pretty much at time. So Matt, unless there's other questions, I'll just move to closing remarks.

No, this concludes our question and answer session. I'll go ahead and turn the conference back over to management for any closing remarks.

Thank you, Matt. Thank you everybody for your time this morning and also for those questions. I just want to close my remarks by reinforcing some of the key messages from today. Again, I'm pleased with the Q3 performance. We delivered improved performance versus a year ago and also compared to Q1 and Q2 of this year in a challenging environment. In our marketplace segment, we increased revenue and gross profit compared to one year ago. We also increased our revenue per unit and our gross profit per unit sold. In our finance segment, we delivered another solid quarter of performance with meaningful growth in both volume and revenue per unit. In addition to those financial results, we made significant progress in terms of platform consolidation, pricing and addressing our cost structure. Obviously, volumes continue to be a challenge in this industry. However, as we look at the future, we expect new vehicle production to increase gradually. We expect used vehicle pricing to decline and we expect a gradual increase in wholesale used vehicle volume over time. And I believe that our digital focus will enable us to grow faster in that type of environment. I'm excited and energized by the many opportunities ahead. I believe we've got a significant opportunity for long term growth in this company. We have a differentiated offering, a diverse and expanding customer base and a large addressable market to in which to innovate and invest. So with that, we'll end today's call. I look forward to reconnecting with you all in the new year. Thank you all very, very much. And again, Eric, best wishes for a very, very happy and successful retirement.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.