Good morning, and thank you for standing by. Welcome to Vroom's Third-Quarter 2021 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. Joining us on the call today are Paul Hennessy, Chief Executive Officer, and Bob Krakowiak, Chief Financial Officer. Please note that this call will be simultaneously webcast on the Investor Relations section of the Company's corporate website at ir.vroom.com. The third quarter earnings release and earnings presentation are also posted to the IR website. Before we begin, please note that the discussion today includes forward-looking statements within the meaning of the Federal Securities Laws, including but not limited to statements about Vroom 's operations and future financial performance. These and other forward-looking statements are subject to a number of risks, uncertainties, and other important factors that may cause actual results to differ materially from those in such statements. We direct you to the Company's most recent SEC filings, including the risk factors section of Vroom's, most recent Form 10-K, for the year ended December 31, 2020. As updated by our quarterly report on Form 10-Q, for the 3 months ended September 30, 2021. For additional discussion of factors that could cause actual results to differ materially from those in the forward-looking statements. Please note further that today's discussion, including the forward-looking statements, speaks only as of the date of this call and Vroom assumes no obligation to update such statements based upon future developments or otherwise. The Company may also discuss certain non - GAAP financial measures during today's call. You can find the presentation of the most directly comparable GAAP measures and a reconciliation of those measures in the third quarter earnings press release. I'll now hand the conference over to your first speaker today, Paul Hennessy, Chief Executive Officer. The floor is yours.

Thank you. And welcome everyone to Vroom 's third quarter earnings call. Today, Bob and I will walk you through a presentation reviewing our third quarter performance and provide an updated outlook on the balance of this year. Before I dive in, I'd like to thank our employees and Board members for their incredible efforts this quarter, as we build an outstanding customer - centric Company. I'd also like to thank our investors for their ongoing support as we scale our business. Let's start on slide 3. I wanted to take a minute to formally introduce our new Chief Financial Officer, Bob Krakowiak. While many of you have heard from Bob on our United Auto Credit Corporation or UACC Acquisition Call, this is his first time joining us for Earnings. He's been with us for 2 months now, and his experience and guidance have already been a tremendous asset for Vroom. Bob joined us from Stoneridge Corporation, a designer and manufacturer of electronic systems for the automotive industry, where he served as CFO for over 5 years. Previously, he's served in Finance and Investor Relations leadership roles at Visteon, Owens Corning, and Kmart Corporation. I'm thrilled to have Bob on the team. His season track record of results-driven leadership will help propel Vroom to the next level. Let's turn to Slide 4. We are proud of our performance during the third quarter. We drove triple-digit year-over-year ecommerce unit growth, as we ramped output across the business to keep pace with record demand while we are slightly light of our guidance on ecommerce units, we feel good about taking a disciplined approach to our acquisitions, pricing, and supply chain. Our ecommerce gross profit per unit or GPP U, came in well ahead of our guidance as we preserve vehicle margins and…

Thanks Paul. It's great to be a member of the pit crew at Vroom, and to join everyone for the third quarter earnings call. I would like to begin on Slide 12 with our financial highlights. We had a strong quarter as we drove healthy year-over-year unit growth, and outperformed our expectations for the quarter on revenue, e-commerce gross profit per unit, total gross profit, and adjusted EBITDA. Total revenues of $897 million increased nearly 180 % year-over-year and 18 % sequentially, coming in above the high end of our guidance. Our overall growth was principally driven by growth in retail units. Higher than expected average selling prices further drove the outperformance relative to our expectations. Third quarter e-commerce units of $19,683 grew 123 % year-over-year and 8 % quarter-over-quarter. We experienced healthy growth for the quarter as consumer demand remains high for used vehicles, and as we delivered strong execution in a healthy demand environment. During the quarter, continued focus on our strategic objectives drove increased listed inventory in amplified marketing. Our e-commerce GPPU hit $2560 up 17 % year-over-year, and meaningfully higher product GPPU, and slightly increased vehicle GPPU. Further into the drivers of e-commerce units and e-commerce performance on the next slide. Full gross profit for the quarter of $58 million increased 128 % year-over-year, and came in ahead of our expectations. This was driven primarily by the expansion of e-commerce GPPU in higher unit volumes. As expected, our per unit profitability contracted versus the second quarter as we experienced transient macro headwinds to sales margins. Despite the headwinds, we surpassed our gross profit guidance for the quarter, thanks to better-than-anticipated performance, across all 3 lines of our business. EBITDA, which was adjusted for acquisition costs related to our announced UACC transaction, came in at an $87…

Please stand by while we compile the Q&A roster. Our first question comes from the line of Zach Fadem of Wells Fargo. Your line is open.

Hey, good morning. So if I take your current output of about $1,500 e-comm units per week, it suggests you're running at about 52 % of your reconditioning capacity. And I realize there is some near-term labor constraints that are bogging you down today. But can you talk about what needs to happen to unlock that full capacity and whether it's reasonable for us to expect you to break through that 60 % utilization level in the upcoming quarters?

Yeah. Thanks, Zach. I'll take that one. What's required to unlock the capacity is doing what we've been doing which is, we've been adding additional facilities, we've been adding additional headcount to those facilities, and we've been adding additional headcount to our own facilities. And then when you think about that, that's the near-term outlook. We continue to work with our third-party partners to scale our reconditioning capacity. And we've been absolutely successful in doing that throughout the year, even quarter-to-quarter growing that express capacity from 2800 units to 3200 units. So Zach, it's really doing what we've been doing. Where we see a challenge in our business, we lean in on that challenge and we fix the problem and we see this again as a transitory short-term issue, not a long-term issue.

Zach, one thing I just want to add to that it just -- to Paul 's comment is what we're seeing is there is a significant piece of this that is just -- it's a labor issue with our partners at the third party locations. So -- to the extent that -- we're working hard, as Paul mentioned, with -- in our own facilities and partnered with our third party partners to do everything that we can to get the staffing levels correct. So that's a -- that's one key driver than, Paul had mentioned in his comments as well, just the current high demand situation that we're facing nationally, is -- it's driving very competitive situation in the reconditioning centers at this point in time as well.

Got it. And then I liked the ways that you guys framed the total e-comm units, both buys and sells and I'm curious if you could talk about -- with 80 % of cars now sourced from customers in Q3, can you talk about how you're managing through the constraints on resources and your infrastructure, just given that sharp rise in customer sourcing? And then how you think about the trade-offs between the GPPU benefits of higher customer sourcing versus the added SG&A and capacity constraint. And to what extent do you think this pivot is accretive versus dilutive?

Absolutely, Seth. Thanks for the question. So the way that we look at it, it's basically a dial for us. And right now, with the current situation in the auction market, a lot of people showed up for auctions, lots of bids on vehicles, extremely price competitive. So the trade-off that you do when you do a transaction like this, when you buy from our consumer, generally speaking, you incur higher inbound logistics into the recon centers. You get a better vehicle but you also spend some additional SG&A as well. So really the trade-off in better vehicle versus the additional costs from the SG&A perspective and from the manager’s perspective. And we're constantly looking at that, and making the determination in terms of what's the right trade-off. But right now with the current auction market, the trade-off is definitely to our benefit to move the dial fourth to consumer sourcing. But we'll continue to tweak and adjust that based upon -- based on current market conditions as they developed over time.

Got it. Thanks for the time, guys.

Thank you, Zach. Thanks for the questions.

Thank you. Our next question comes from Raja Gupta of JP Morgan. Please go ahead.

Great. Thanks for taking the question. I just have a follow-up on the reconditioning question. The dedicated centers that you're adding, could you give us a sense of the timing, the capacity, and just the cash needs for those dedicated centers? How did those ramp? And I have a follow-up. Thanks.

Thank you, Raj. I'll take that in line. First and foremost, I signaled in our second quarter earnings that we would start to contemplate this. And look, we're going to be incredibly thoughtful about where we're putting these reconditioning centers. We'll obviously be matching supply opportunity and demand opportunities so that they are super strategic in our location, in the size and scale, in their ability to coordinate with our logistics requirements. So we're going to be thoughtful on that. And when I think about the investment thesis, the language that we've been using is, think 6 of 60 locations. So our hybrid approach, our asset-light approach still rules the day here so that we're aligning the needs of the business and being judicious in our capital deployment. So we think of these as a $100 million, maybe as great as a $150 million in total CapEx not $2 billion and we don't see this to be a 60 own Vroom reconditioning centers. Again, we think, call it half a dozen or so in all of the places that you might expect would be strategic areas that have high demand and high supply rejects.

What I had to add just to Paul comments. We really view this as just responsible capacity planning for the Company where we have -- in our high demand areas, it's going to make a lot of sense for us to make some reasonable investments to support the Company. Because what we'll have we'll be able to have very stable operations in the reconditioning centers. And the stable operations means, it means higher throughput and it means lower costs. So basically addresses more buying to our customers and more lower-cost volume and that's better for our shareholders as well.

Understood. Thanks for the color there. I just have a question on GPU or e-commerce GPU in particular. For the fourth quarter, you are guiding to a roughly $350 drop at midpoint. Presumably, that's all on the retail side. Is that primarily baking in some seasonality or maybe even higher reconditioning in inbound logistics, or is there some conservatism around the direction of used vehicle pricing for the remainder of the quarter? Just trying to get a better sense of that bridge from 3Q to 4Q, GPU. Particularly given used vehicle pricing still remains pretty elevated in the year into October and November. Thanks.

Yeah, Raja. Thanks for the question. Most of the Delta that we're seeing between the third quarter and the fourth quarter with respect to the GPPU is really being driven by additional costs in -- as a result of reconditioning and logistics. So that's really what you're seeing on 3Q to 4Q.

Got it.

Well, just let me be very clear about it. So reconditioning and then actually shipping vehicles as well. So inbound and outbound, just in inflation and we're seeing in terms of rate inflation and just on a year-over-year basis and what the trend looks like.

Understood. That's clear. Thanks. I'll jump back in queue.

Thank you

Thank you. Our next question comes from Sharon Zackfia of William Blair. Your question, please?

Hi. Good morning. A couple of questions, I guess first it would be helpful to get an update on how the recon cost is trending at your third-party partners versus your owned facility, particularly as you contemplate opening more owned facilities? And then secondarily, I guess -- it's obviously difficult to control what's going on with your third-party partners, but where is the staffing level now versus where you would ideally wanted to be? And how confident are you in those parties getting the staffing up to the levels you need in order to prepare for tax refund season?

Great. I'll take that one. Thanks, Sharon. In terms of the cost structure, we continue to deploy the hybrid approach because we see attractive cost structures both within our own and with our third parties. And so we're managing that well and are comfortable with the reconditioning costs. In terms of trend, the overarching trend for reconditioning in terms of efficiency, will start to decline as we scale. In the near-term, as you've heard from our prepared remarks and from the deck, in the near-term there's pressure, which leads to your second question. How confident are we in our third-parties? We're working with them directly to make sure that we've got the mechanics that we need, the staff that we need to get our output to where we need it to be. And to dimensionalize that we're modestly off of where we wanted to be in Q3. And again, modestly off from where we wanted to be in Q4 thinking that in the couple of 100 units, maybe to 1000 units and when you spread that across 30 reconditioning locations, it's handfuls of units by location. So we don't -- again, we see this as a transitory issue that our teams are working to solve rather than something that's structural in nature and long-term.

Yes. Sharon, just to add on what Paul said. If you put the unit -- if you look at the units in context, we were about 400 units below the low-end of our range for the quarter. And then if you spread that across 30 reconditioning centers over a 90-day period, you're basically talking about one vehicle every 9 days in terms of the overall impact that would drive that kind of shortfall. So it's well, with -- really when you look at it that way and you look at the data, the labor constraint, it has impacted our unit volume. And as Paul mentioned earlier, we're working hard to continue to expand our capacity with other third-party partners, with our existing third-party partners, and then making those strategic response or strategic investments with our own dedicated capacity as well.

That's really helpful. One other question, are your agreements structured such that if the third-parties are having labor pressure, that that's passed on to you, it's like a cost clutch arrangement or how does that work?

Yeah. We don't share the particulars sharing of any of our agreement. We're confident we're working through the problem without it impacting costs in a material way for the long term. So we're -- I think we're in good shape there with our agreements.

Thank you.

Thank you, Sharon

Thank you. . Our next question comes from the line of Seth Basham of Wedbush. Your line is open.

Thanks a lot. And good morning. I have a question around GPU, ecommerce GPU when the third quarter start. Just thinking about that huge increase in mix of vehicle that you sold that were sourced from consumers. Those usually come with much higher GPU's, but that didn't seem to be reflected on year-to-year basis improvement, saving sequential improvement in your ecommerce vehicle GPU. Can you help us understand why?

Sure, Seth. I mean, it's really along the same lines what we talked about in the third, fourth quarter. What's big in our guidance (ph ) the fourth quarter, it's just the incremental costs we're seeing on the logistics side and on the reconditioning side as well is really driving the difference.

Okay. And just a follow-up on that, if we look at your e-commerce GPU guidance for the fourth quarter, $2,200 at the midpoint relative to $2,560 that you reported for the third quarter. That's a $360 decline. You're attributing that primarily to the higher reconditioning logistics costs? That's pretty substantial increase on a 3-month basis.

That's correct. It is a substantial increase. And if you look at the trends, that's what we're seeing especially and more so in the reconditioning side than the logistics side, but those are the primary drivers.

Okay. And then lastly, if you look at the guidance for the full year around gross profit increase from over 200 %, it imply that gross profit dollars for the fourth-quarter going to being at the high end of that guided range, unless I'm doing the math wrong?

No, you're doing the math correct. That's the way to look at it, correct.

Thank you.

Thank you.

Thank you. Our next question comes from Edward Yruma of KeyBanc Capital Markets. Your line is open.

Hey, good morning, guys. Thanks for taking the question. First, good progress on the consumer source vehicles. That 81 % though, is that ahead of where you would plan longer term? Are there some downsides to having a high consumer stores percentage? Second, given -- you guys talked through these reconditioning issues, are you slowing the buys or are you expecting that inventory levels of vehicles in progress should increase in the interim? And as a final one, you guys have really transformed the business this year. How should we think about the longer term algorithm around profitability, given all the services you brought in-house? Thanks.

Okay. Great. I'll start with that, and Bob can add comments at the end. In terms of our consumer , and Bob articulated earlier, we're going to be good stewards of the business. So we're going to dial that in as appropriate based on what we're seeing on demand. We're reusing all of our data scientists and algorithms to be good buyers. And whether that number remains at 80 % or 81 % or drops down to 70 % or 75 %, or actually creeps up, that's something that we'll be evaluating over time. And we're going to be opportunistic on the market. So if it turns out that there are cars that we want that are good deals and they happen to be at auction we'll do that. And if we continue on our consumer care, we'll do that as well as it makes sense for our business. In terms of the, are we ahead of schedule? We've been at, it's been in our DNA buying cars from consumers. We think that's super strategic for us, not only because of the unit economics associated with those cars, but also because that becomes a great target audience for us to sell cars to. And so we think it's strategic. We've got the marketing right, we've got the algorithms, and we've got the people and process now working right that allows us to get to 81 % of our mix. So we're really proud of that. And again, we'll be thoughtful on what the perfect mix is by quarter based on the market environment. Regarding the slowing buys, again, we're buying inventory based on our forecast and what we see not only in the fourth quarter but what has been. Historically, Q1 typically is a strong quarter for us. So again, we're buying supply to match what we forecast the demand to be and so we've -- that's reflected on the number of cars that you see on our website. And as we scale that business, we ultimately know that more cars drive a better conversion. So, again, we'll be thoughtful quarter-to-quarter on what that right number is. So that we don't get into an oversupply situation, or a missed opportunity situation in terms of under supplying the business. In terms of long-term profitability, again, I'll let Bob comment on that, but I think we'll be in a much better position as we complete the year and complete our potential, our acquisition and our transaction with UACC to give you a better view on, not only 2022 in the aggregate, but also what this business looks like going forward multiple years out.

Yes. The only thing I would add to what Paul said is on the side and I referenced it in my comments and on slide today that we are starting to see leverage on total weak comp and totally converse transactions. And we continue to look at it on a per transaction basis and expect to continue to see that leverage as we continue to ramp up volume next year. But I'll have more -- with respect to longer-term outlook, I will have more to say after the UACC transaction closes.

Thanks so much.

Thank you.

Thank you. Our next question comes from Alex Potter of Piper Sandler. Your line is open.

Hey, guys. One more question on the implied GPU guide in Q4. It's clear that the labor, the reconditioning costs, and logistics costs are headwind. What are you expecting for F&I attach rates of the ancillary products, things like that? Do you expect that to be flattish versus Q3 or ticking down also?

Yes. Well, so thanks for the question, Alex. We don't guide specifically on what attachment rates are going to be for our product revenue, but I do want to say just a little bit more on the logistics aspect of the cost increase in the third quarter, the fourth-quarter. If part of the additional expense as well, the reason this is transitory is we're doing some things, shipping vehicles some additional distances between some of the reconditioning centers just because of capacity constraints. So we are incurring some additional mileage on an average transaction and that's driving up costs whilst rate inflation. But on top of the rate inflation, as we go into the holiday season, you generally see rates get a move up a little bit around Thanksgiving and the Christmas holiday. But in addition to that, we are doing some things in terms of shipping the vehicles some additional businesses to make sure that we have enough vehicles as possible to satisfy the great demand that we have from our customers.

Okay. Good. That's helpful. And then maybe one last one on marketing. Looks like -- if I'm doing my math correctly, it looks like your marketing expense per e-commerce unit has maybe 1600 or a little bit above that in Q3. It looks like guidance implies similar level of spending, maybe a little higher again in Q4. Just wondering if you can comment, maybe qualitatively, what are you working on? You've referenced a couple of national campaigns, things like that. But then also, looking forward to this run rate level of spending, is this something that you're sort of choosing in the near-term and then will come back down? Any qualitative and quantitative comments would be helpful. Thanks.

Great. I'll take that one. Look, we're building a super brand. And so we will be good marketers both in building our brand and telling our story in the various media channels. that worked well as well as being very, very strong digital marketers to drive transactions in our business. And so we mentioned that we're working on a national campaign. That led to some of the increase in the spend in the third quarter. And I'll tell you this: we're very pleased with the way that the marketing is not only building brand awareness, the trend in our brand awareness is exactly where we want it to be. But also as you can see in the total transactions of our business, we are both buying a lot of cars and selling a lot of cars. So we're feeling very, very positive about the job that the marketing is doing for us, and so we'll continue to use that as a lever in our business to scale our business in the future. And so I'm very pleased with the outcome of our marketing initiatives.

Great. Thanks, guys.

Thank you.

Thank you.

Thank you. Our next question comes from John of Jefferies. Your line is open.

Thanks for taking my questions. Just a quick one on CapEx, the $100 to $150 million that you mentioned. Can we think about that as a 2022 investment or multiple years? Maybe you could just give us a little bit more sense of the timing there. And then related to that based on the results from the last mile build out which seems to be going well, is the expectation that you'll continue to build the percentage of units delivered by Vroom trucks over time? And I have a quick follow-up up. Thanks.

John, thanks so much for the question. With respect to the CapEx, and so the first thing we talked about in the Q that you look at our capacity in a normal situation where we were fully staffed with our third-party locations, we've got capacity for about 3,200 units a week. So you take that and you basically annualize it. And that's why we're really focused right now and responsible capacity additions. So we're -- the primary focus right now is helping our partner’s step-up the current locations that we have and making sure that our dedicated Vroom facility is fully staffed and productive as possible. So that's always the lowest capital alternative, and that's the first thing that we look at. In terms of the investments that Paul referenced, you would see -- this will be over -- this will be over a few years, so there's no -- we're not saying that we're going to spend it all. We're not going to spend it all next year. This is over the next 3 to 4 years. With the addition of probably 1 maybe -- maybe 2 facilities were propping up, but 1 to 2 next year, but not fully operational. And not -- probably not firing on all cylinders but we're looking at this over a few year period. And then I'll have Paul take the second part of your question.

Yes. On the last mile, we couldn't be happier with the progress that we've made. We're running ahead of schedule, we're delivering customers a great experience, and we feel great about our run rate of hitting our 50 % target at year-end, and we're going to keep going because the customers love it. At scale, you get efficiencies in your logistics, we can schedule not only the day of the delivery, but the time of the delivery, and it's just a fundamentally better experience. And as a result, our business gets much more predictable, and with predictability comes efficiency. So we're going to keep going on last mile, and we're really pleased with how it's going so far.

Great. And just had one more on the wholesale. The midpoint of guidance for the wholesale segment supplying roughly a 30 % sequential decrease in the number of units sold. Could you just talk about the puts and takes here? Is this a reflection of meet the sell down a bit of an inventory buildup from the ramp in consumer purchases during Q3? And then maybe some elasticity headwinds to conversion from increased retail prices, particularly given Vroom's inventory mix already skews to vehicles that are close to new vehicle prices. Thanks.

Yeah. I'll take that one. And the answer is no. That's not how we think about wholesale. We didn't have an inventory buildup that -- then we ended up into the wholesale market. When we put a price on every car that comes to us, and we're seeing massive demand for our product again because we've got this marketing mix in the machine cranking in terms of buying cars from consumers, we are an outstanding place to go. We get a disproportionate amount of wholesale cars that come into us. And when we buy those cars, we sell them into the wholesale market. And so -- and then we're obviously looking to buy for retail because that's what fuels our growth business, but we're not doing anything adverse to the retail business to move it into the wholesale market. And what you see in terms of the return, the gross profit per unit associated with the wholesale market, that's because of the broader market. And that effectively moves with this unprecedented, all-time high market that we're operating in. And that's what's reflected there.

Thanks so much.

Sure.

Thank you. Our next question comes from Mic Backers of Raymond James. Your line is open.

Hey guys, thanks for taking my question. Just a couple of quick ones on UACC. Can you just talk about the timeline? Give us some more detail around timeline for integration and when you would expect to start to see some benefits in terms of market share gains and increased conversion in the sub-prime market. And then secondly, just on used cars inventory. As that potentially starts to normalize, perhaps next year obviously, you've seen a significant ASP growth this year. How do you think about that dynamic? If pricing starts to normalize, is that a headwind in 2022? Thanks a lot.

Sure, Mic. Thanks for the question. So on UACC, we talked about it a little bit. So from the timing of the transaction closing late this year, early next year, and then in terms of -- and we've talked about it, it is our goal and we will set up a captive finance structure to support our Company. We'll do some things initially that will allow us to go after some low-hanging fruit and the teams are working together. But we're not going to comment on what the long-term outlook is going to look like until after the transaction closes. For the -- Okay, you start.

As far as the used car inventory returning to some normalcy, we welcome that. I think when we think about the inflated average selling price that we're seeing now, that's really market driven and that market, as you know, on the wholesale side, is up in excess of 45 % since the beginning of the year. And on the retail side, up approaching 40 % since the beginning of the year. So it's been frothy. We've been good executors in some crazy markets. We've been -- we've done an outstanding job navigating the tough waters of COVID. We've done an outstanding job navigating the tough markets of COVID resurgence and variance, and then it was microchipped with the new cars. And we'll again continue to navigate those that supply and pricing environment by leveraging our data science and our e-commerce platform and the smart folks we've got on our business. And so what we expect in the longer term is that ASPs will start to come down again. And we know that's a bigger, broader market is ultimately in the $20,000 to $25,000 range. And we expect that at scale that's exactly where Vroom will be operating. So we'll be taking advantage of the highest chunks of the demand of that market. And you also asked the UACC question. As we're better able to serve the sub-prime market that will also move us down in average selling prices as well, because you can imagine subprime customers are buying cars that are close to the $20,000 range. So we expect to move with the market and move with the acquisition.

Thanks a lot.

Thank you.

Thank you, Mic.

Thank you. Our next question comes from Naved Khan of Truist Securities. Your line is open.

Thanks a lot. Maybe turning to the GPU and e-commerce. Can you just maybe talk about the different puts and takes there? It seems like you have been able to realize some efficiencies that allow staying price fluctuations. You could -- one could argue that this is a very favorable environment for pricing and therefore should retail into GPU, but maybe just caught on the different factors. How should we think about the sustainable GPU, excluding all this noise from ASP calculation? How should we think about that in a more normalized way?

I'll start and Bob will chime in. And again, you did a bit of a -- there's a bit of a broken record here. When logistics -- when there's capacity constraints in the supply chain, it adds delays in the time and cost. So whether that's in our logistics, or in our reconditioning, or as Bob said, even in our logistics, costs are up even if we're moving inventory to make sure that we're balancing our work in progress and capacity so we can drive throughput. Those are all drivers of expense. We're also operating in a very, very high price market. And just because we're paying a high price, as you can imagine, that means you have to sell those cars for high prices too. So there are not absolute clear gains when you're paying a premium for inventory. And I just would make one more point about the challenge. Our used car prices, average selling prices at or above new car pricing. And so you can imagine that just puts a chilling effect on how much you can ultimately charge. So that's created some pressure in our sales margin. So look, I think the data science or our ability to buy cars from consumers, our ability to manage our business, these are all structural, fundamental improvements we've made to the business. And these incremental costs that we're seeing in logistics and recon are transitory. And that's really the way to think about it.

Great. Maybe another question on consumer sourcing. Can you maybe just touch on how much are you relying on third-party for the pickups, scope of efficiencies in doing this?

Yeah. We've got a hybrid approach, as you know. We use third-parties and we pick up cars ourselves. And you can imagine, with a growing fleet of last mile that drops off cars, that's a logical time to pick up cars that drives efficiency in our network as well. So it's a mix. We don't articulate exactly what that mix is. But what I can tell you is, if we're leaning in on last mile and building that out, that mix will shift to our own fleet to gain those efficiencies at scale.

Thank you. At this time, I'd like to turn the call over to Paul Hennessy, for closing remarks. Sir?

Great. Thanks everyone for joining the call and a special plans to all the Vroom employees and Vroom partners that helped us deliver a great Q3 and are going to deliver a great Q4. Thanks, everyone.

This concludes today's conference call. Thank you for participating, you may now disconnect.