Q2 2020 Vroom Inc Earnings Call
These calls being recorded and will be available for replay on the company's website under the investor tab at Www Dot Dot com.
The discussion today may include forward looking statements about future events.
Moving the expected impacts related to cope with 19 also the company may make forward looking statements about their operational earnings potential liquidity and outlook on the call today.
These and other forward looking statements speak only as of the date of this call and are subject to a number of important factors that could cause actual results could differ materially from those in the fourth statement.
Polluting the risks and uncertainties.
Outlined in today's press release, we direct you to the company's most recent as you see filings, including its quarterly report on form 10 dashed Q.
Additional discussion in factors that could cause actual results to differ materially from those in the forward looking statement.
The company May also discuss certain non-GAAP financial measures. During today's call you may find a presentation of the most directly comparable.
Terrible G.A.P. measures and reconciliation of those measures in today's press release.
Now I'll turn the call over to policy <unk> CEO.
Thank you Sydney and thanks, everyone for joining rooms first earnings call as a public company.
I'd like to thank all of our employees investors and board of directors for all of their hard work and support in building a great customer centric public company.
Looking back on the second quarter I'm very pleased that we substantially exceeded the financial targets in our plan.
Of course, it's always the goal to do better than that our plans, but the second quarter gave us so much more than that.
The Cobot 19 pandemic has of course Synta Black Swan event for our country in general.
And definitely for our company.
Our single retail store T.D.A. experienced massive annual sales declines in revenue and continue as we speak.
The wholesale markets underwent an alarming bout of instability in illiquidity.
And we had to institute emergency furloughs in salary reductions.
Say that it's been a challenging environment for us would be an extraordinary understatement.
And yet it has also been an extraordinarily valuable quarter for us.
Is it allowed us to learn so much about the capabilities of our business model our operations our employees.
Nearly all of them validating.
Hard learnings have reinforced our belief that we're well on our way to building a business that can be a dominant digital car retailer in the coming years.
When I say the word validating I want to spend a couple of minutes to tell you what I need by that.
We found it room based on the firmly held belief that they used car market was poised to finally entered the digital age.
On our road show many investors ask as what we meant by that given the existence of so many car selling site.
All of which had been around since Amazon with selling only books in the mid 19 nineties.
Our response.
Yes, that's true but.
But the purpose of nearly every single one of these sites was and is the funnel customers right back to the same old way to buying cars.
Namely small car dealerships underserved their customers and over earn.
At room, we formed a direct relationship with our customers.
We are buying cars from them at market setting prices.
And our we and we are selling them expertly reconditioned and authenticated cars also at market setting prices.
Of course, that's the job of any great ecommerce company in any vertical.
It was certainly the contract price line for the many years that I was there as an executive.
Well controlling the customer relationship and the transaction in the world of car retailing, it's very risky business.
We go to bed each night owning hundreds of millions of dollars of car inventory and we hope that one day soon that number will be in the billion.
That's when the Kobin pandemic came to the United States. It was a very sobering time for us.
As as we had been in this game.
Long enough to understand.
That aging inventory can be the death of a car retailer.
And yet in the early days of Cold and we saw significant contraction in retail demand, which had ripple effects into the wholesale markets.
Given the severity of the contraction and the extreme lack of visibility.
We made the difficult decision to dramatically reduce our exposure to these alarming trend.
It was at this moment that we learned how valuable our technological and operational infrastructures are too.
And our core we're a data driven demand driven company.
It informs how we buy cars, how we price our cars, how we invest in the reconditioning of our cars and how we market our cars.
We didn't build these tools ticket duct fire sale.
And frankly.
That's the best analogy of what we're doing in late March and into the first half of the second quarter.
We not only stopped buying new inventory.
Methodically dynamically and carefully priced our inventory to move very quickly.
We did so in a way to protect that our company and our balance sheet well also very clearly stimulating demand for our cars.
The us well nearly every other used car retailer was in a state of paralysis in late March and April.
We were breaking company E Commerce sales records on nearly a daily basis.
We commenced this activity with the grim determination to sell down our inventory.
Even if it meant taking significant gross margin hit.
But the power of our data in our pricing tools allowed us to sell down nearly 70% of our inventory while still maintaining positive gross margins.
At our peak in March we are carrying over $200 million an inventory.
At our low point in Q2, our inventory hit a low watermark of approximately $70 million.
Which brings me back to the word validating.
What did we validate.
We believe we have validated the premise that a car retailer.
One with only a single physical retail location, which by the way is currently experiencing huge double digit comp store decreases.
Can safely carry the inventory necessary to achieve market leadership.
And that's a very big deal for us.
Because in the digital world inventory equal unique content.
Each and every car that we carry itself is like a snowflake.
Not a single one the same as any other different color different make different mileage different age different state of condition.
And for all the more content that we have the better our ability to lineup that specific customer who is looking for that specific content.
And they're in is how digital flywheel is born.
Content begets conversion.
Conversion begets success and high NPS.
Hi, N.P.S. He gets inventory turns on gross profit and inventory turns in gross profit be gets more and more content.
Throw in repeating customers from prior delightful transactions in massive multiyear digital and media brand building to help lower the marginal cost of finding our customers over time.
And you can see how and why we're so excited.
About what's ahead in the coming years.
So yes.
Hope it has been a huge challenge for us.
But is also given us the added confidence to go bigger faster because of the unplanned, but very valuable de risking exercise that we just executed.
And that brings us to today.
We definitely have a bit of a high class problem right now.
We were so successful selling down or inventory in April.
We were somewhat caught off guard as demand snapped back.
So once we spent everyday since may trying to build back our inventory all all our customers prevented us from doing so to the degree that we want.
And with the speed that we won because demand has been so robust.
From a sales perspective.
We had been a classic example of the V shaped recovery.
As I mentioned, we delivered a record month of unit sales in April as we thought to de risk our business.
With the inventory at extreme lows in May our unit sales that month, we're roughly half of April levels.
We have rebounded rapidly off of the May lows with strong monthly sequential increases in unit sales in June and July.
As Dave will discuss momentarily.
We've made great strides in building back or inventory.
What we're still not where we want to be in terms of cars in inventory that are fully reconditioned and ready to be sold and delivered.
Lower availability inventory levels impact conversion.
So we continue to leverage our asset light reconditioning model and are working with our third party reconditioning partners to ramp capacity levels quickly.
The good news here is at the high demand and limited supply just had a very powerful and positive impact on our gross profit per unit.
Losses, they will soon detail.
Total company gross profit is running well ahead of our expectations and our what underpins the guidance that we're getting for the third quarter.
We have also noticed a fairly profound shift in the buying preferences of our customers.
Specifically.
We've seen a downward shift in the price points that our customers are looking for Fortunately for us our tools were able to discern the shift in real time.
And given that our inventory was it is at such low level.
We had been restocking or inventory at the same lower price points to line up with what our customers are demanding.
That's we've been able to maintain our GPP you targets, while decreasing the overall dollars committed to our inventory.
Due to the lower cost paid for each car that we hold.
Looking forward to the remainder of the third quarter.
We will continue to invest an experiment in our end to end ecommerce platform as well as in our driveway delivery experience.
We expect you continue to accelerate sales and gross profit per unit in the quarter on a monthly sequential basis as we scale inventory.
And take advantage of what we believe our structural shifts in consumer behavior and demand for the brand model.
And finally, we're very excited about the brand campaign, the recently kicked off.
As I mentioned earlier, we believe in our market studies tell us that the American consumer is not fully aware of.
Oh, what they're actually will experience will be as they head into the digital world to buy a car.
Many do not understand that many lead gen sites out there will ultimately lead them to the same old underwhelming and unsatisfying experience at a used car dealership law.
The goal of our campaign is the better educate the customer to this reality and offer them. The delightful digital experience offered bike room.
We hope and expect that this message will break through to consumers all while continuing down the path that we hope and expect will make a room, a trusted household name and deep place to buy or sell a car.
And with that I'll hand, it over to Dave for further remarks on our financial and our guidance.
Yeah.
[laughter], Thank Paul good afternoon, everyone.
Let me unpack the second quarter, a little bit.
E Commerce units sold in the second quarter increased 74% year over year, albeit with constrained inventory levels.
What's the vehicles decrease from over 5000 in March to less than 1500 in April.
Happy to say that through our employees hard work are listed inventory is currently over 8000 units and they are driving strong year over year and monthly sequential growth here in the third quarter.
In May we implemented technology to allow us to with coming soon inventory. This has enabled us to increase the amount of listed inventory and therefore increased demand through our website.
Of the listed inventory today, approximately 50% is coming soon and another 11% itself pending.
Of course, our immediate goal is to drive that 60% coming soon number down substantially between now and the end of the year.
But as Paul mentioned that continues to be a good challenge for us given the rising demand for our vehicles.
The results of this demand and supply imbalance has certainly benefited our gross profit for units and our inventory turns.
Since restarting acquisition in April we've also been focused on expanding our reconditioning capabilities.
Today, we have 17 reconditioning facilities around the country, including our proprietary room reconditioning facility in Houston.
Up from 14 at the end of Q1.
These 17, Chris facilities provide us with capability to recondition, approximately 1800 vehicles per week.
We're currently operating at less than 100% capacity and that's really driven mainly by newly opened facilities that are still ramping.
We're confident that we can currently have the capacity to meet our Q3 targets and we believe our utilization will continue to increase and we work with our reconditioning partners to continue expanding our reconditioning network.
In Q2 E Commerce revenue grew 45% versus the 74% growth in units.
As Paul mentioned this is driven by a year over year decline in our average selling price, which contracted from $30749. In Q2 was last year to $25393 than this year.
This decline in average selling price in Q2 was driven by two factors. The first was obviously the pandemic and our strategic decision to price units to sell in the first half a quarter.
Second and far more contributing factor with consumer driven.
As we've mentioned many times, we are data driven and therefore, we acquire inventory based on demand that we see in our data analytics.
That data is moving us toward lower price vehicles.
We expect it to continue into Q3, and our forecasting an average selling price in Q3 of about $22800.
That leads us to gross profit per unit.
Ecommerce gross profit per unit was $1075 in Q2, well ahead of our plan, but a decrease of $817 year over year.
All of the decrease came from vehicle gross profit.
Which is principally a reflection of the pricing adjustments, we proactively took in the beginning of the Pandemics and move units.
Our products gross profit per unit increase year over year from $618 per unit to $761 per unit. Despite the reduction in average selling price for vehicles, which reduces the fees we earn on arranging financing.
This increase was driven primarily by higher attachment rates across all products offered.
During the quarter, we saw gross profit for E. Commerce here that go from 1700 $99 in Q1 to 1200 $36 in April $191.
And then a rebound to $1714 in June as we were able to begin to offer fresh higher margin inventory that was purchased and reconditioned in may.
We believe that the improves gross profit per unit will sustain through Q3.
Our wholesale business declined about 40% year over year as we restricted purchasing to only trade ins during the height of the pandemic.
However, gross profit for wholesale unit exceeded our expectations due to the resilience of the wholesale market and our efforts to retail vehicles profitability during April and May.
Carter's wholesale pricing is very strong, but we expect that that may temper itself into Q3.
As Paul mentioned T.D.A. are sold physical location was negatively affected by shelter in place orders early in the quarter and Houston continues to be a relative hotspot in the country.
As a result, T.D.A. experience is 60% decrease in units sold in the quarter and 63% decrease in gross profit per unit.
We believe the T.D.A. will rebound with an eventual recovery in the area, but we can't predict at this time when that will be.
He ever mean remains an important piece of our puzzle as it forms the nexus of our owned reconditioning and inventory capabilities and it's also another outlets are fulfilling demand, which in turn allows us the whole even more inventory than we would otherwise.
However, keep in mind that rooms future is E commerce, and we continue to see increasing strength in our ecommerce business as discussed.
US overtime, we expect T.D.A. to become a decreasing contributor to our future results, even as T.D.A. recovers in the coming year from its covered related declines.
Turning to operating expenses, our compensation and benefits were up approximately 18% year over year. Although a portion of this was the $1.3 million of onetime noncash stock based comp charges related to completing the IPO that we mentioned in the release.
We expect to continue to invest in our people in Q3 and in particular around technology logistics and support functions that need to scale with the business.
Marketing expense was down about 9% due to the pullback during cold it we've since increased marketing efforts. So we're back to pre cobras levels and expect to continue to invest in building our brand going forward.
[noise] outbound logistics increased 106% year over year as E Commerce volume increase the cobot Pandemics is also caused some decrease carrier availability and increased rates in the logistics industry. In addition, traditional car dealers and scrambled to try and adapt to the emerging new ways to consumers prefer.
Her to buy cars.
We hope and expect that this trend is temporary but we do expect it will continue through at least two three and this dynamic is factored into our guidance.
As you would expect this is a variable expense and we'll continue to increase with volume.
Given that we're hard at work on our hybrid approach to logistics identifying ways in which we can improve and expand our proprietary logistics network to achieve operating leverage on this line item.
Total operating cost per retail unit was 1000, I'm sorry, $6124 in Q2, we would expect that to be consistent to up a bit in Q.
Finally, we've provided comprehensive Q3 guidance in today's earnings announcement.
Even with some of the Throughputs constraints, we believe we can grow ecommerce units over 50% year over year in Q3, and despite lower average selling prices. We believe we will have a sending E commerce gross profit per unit.
In the low to mid single digits.
With that said, we'd like to now open the call for questions today.
Ladies and gentlemen, if you have a question at this time you want me to press Star one on your telephone.
To withdraw your question please press the pound.
Our first question comes from Daniel Powell with Goldman Sachs. Your line is open.
Great. Thank you, we're taking the questions one of them in a follow up on on the first one just wanted to see how youre capacity around production withstanding versus your own facility in Houston, where I understand you called out you're still a little bit more in that impacted by pandemic Oh no versus your efforts to scale up your third.
I'd reconditioning.
[noise] Caltech I'll take that Oh, Thanks, Dan you for the question are our Houston factory is up and running at at full capacity. So despite the you know some of the challenges with customers walking into the the retail facility.
The the factory is is running in running well and then we you know I would say again at capacity and and we're looking to continue to leverage our our third party reconditioning partners to to scale or capacity quickly and and again, our great partnerships are working.
And we're doing that and you see that reflected in our guidance.
Great and then on on the marketing side, you know realize.
Things are uncertain right now, but some how are you thinking about your marketing plans for the back half the year given some of the production or inventory constraints you might be facing on on the website that you're referring people do that's yeah. Yeah, you know where we're good managers of all of our all of our plan and Weve.
Got to throttle on marketing and so as we expand capacity by more units and and list more vehicles, we're well positioned to turn up the marketing spend as appropriate to to match supply and demand. So we're very surgical in the way, we think about marketing and and so.
<unk> will continue to be that way.
Thanks, Phil.
Thank you. Thank you and our next question.
Matt.
With Bank of America. Your line is open.
Yes, hi, guys. Thank you for the question.
Mostly I want to talk a little bit about the ARPU decrease you saw at least it's understandable and what you're saying on Q2, but the Q3 guidance calls for 23500.
In your E commerce, and that's well blow.
The over 29000, you were in Q1 and the Derby. It's thousand you were running prior.
Can you talk a little bit about how you have come down in price as you as you've expanded and a little bit on the strategy. There also can you talk about what impact does the $600 shipping fees have at lower price points and when does that start to be impact on demand.
Great Great I'll start and then Dave you 10.
You can chime in.
I guess.
The way I think about the average selling price and I and I opened up in my opening remarks with this is that.
Where where data driven and where demand driven and and not surprisingly in a world with where the the world. It's kind of shifted in in terms of or the amount of unemployment and and maybe even uncertainty the the demand for higher price cars has come down and so.
Room was agile and its execution and then I've been you know since since they the crisis in matching our stuff supply.
To meet that demand. So we've just weve effectively moved with the market and we'll continue to read those tea leaves as appropriate and and optimize I'm. So that our customers find what they're looking for you know on on on the room experience. So we'll do that and so that the strategy then to answer your question.
It is to match demand I found it we seldom lose our way when we match our supply with the consumer demand and so we'll continue to do that we've been also able to do that as we launch and more reconditioning facilities as Dave has mentioned a we've been able to you don't get inventory.
<unk> in more and more distributed locations.
It takes inbound and outbound miles out of our network and that allows us to achieve a gross profit per unit level consistent with our plan and so even though we've moved downward in average selling price.
We've been able to deliver the gross profit per unit a again in conjunction with our plan as far as the the 599 charge.
We have not yet seen that as a conversion negative, but I think that we've talked about over time as we get further and further with inventory in remote locations. A we think that a deal based shipping see makes sense, so short short or shorter haul.
Distances will pay less than longer haul distances would pay more consistent with many of the players in the industry and so well.
We'll evaluate that as as our inventories scale, but right now we've not seen the 599 as a as a conversion negative.
Great. Thank you and just a follow up.
You did last year, you were doing about 1700 E Commerce, GPU, which is basically in line with the same user guidance for this coming quarter.
But you were doing with 8000 dollar higher cost car and then you said there there are some efficiencies you gained that allowed you to make those mass, but how would GPU scale.
With price of car normal so if all else being equal this quarter you were selling cars at 31000 like you were last year, what would you be you.
Yeah, it's hard to create the the world that we don't live in the right on.
No what what's unique about you know life after coated with you know with a fundamental change in the wholesale markets, but what what I can tell you is that we brought a lot of data science to there and we brought a lot of analytical work and rigor to to not only.
The match the cars that are in demand, but decide what the appropriate prices that we should pay for them and what's the appropriate price that we should merchandise and obviously, we'll continue to do that that's that that is what we do and so if life, where you know I guess in this alternate universe says you have served up.
We would be bringing to bear those tools and I believe that we would have attractive gross profit per unit levels as well.
Great. Thank you.
Thank you. Thank you. Our next question comes from sacks with.
With Wells Fargo. Your line is open.
Hey, guys.
The constraints around the acquiring inventory in the quarter, how would you framed the gap between your sales growth and actual demand and and that's your inventory constraints ease.
In the upcoming month at what point do you expect unit growth to fully catch up with the current level of demand.
Yeah. That's that's a great question the way they were thinking about it and you can see us on our website. We were almost returned to the inventory level or is that we were in pre co bid, but as I again as I said in my opening remarks, but those cars that are available and ready to go.
Go is where were lagging because we're turning inventory. So quickly our customers are just not letting US you know get ahead at a pace that you know we're way out in front, but we've got we've got capacity as Dave articulated all lined up not only in Q3 to match our guidance, but now and then.
You know I call a catch up period that allows us to do continue on our our scaled ramp you know.
You know in conjunction with our long range plan. So we we believe that were almost out of this capacity constraint issue you know in in this quarter.
Okay and then.
To go through the numbers a little bit at the high end up your E. Com unit guidance 8800 that implies about 60% growth and I'm curious first of all if that's your current run rate and then second could you talk about why that would decelerate from the 74% growth that you saw in Q2.
Yeah, I'll I'll I'll answer that and then have Dave you can jump in but I think that the the there's there's you know to two things at work here. One I mentioned, we had a record setting April then offset by a by you know Oh made it was in half of April's number.
And then kind of eight sending in June and July. So that's one issue. The second is comps as we started to to scale last last year and so we tried to give you you know a good guidance on what we're seeing in our business right now.
And and that's why we ended up at you know at the range that we did David anything to add there.
No I think that's right fall and you know the comp it's really an issue.
It's a different comp year over year so.
No I think that's right on.
Got it appreciate the time Guy.
Thank you.
Thank you our next question comes.
Safia with William Blair. Your line is open.
Hi, good afternoon, Thanks for taking my question.
You know as he has shifted the inventory to say lower price point can you talk about any potential changes you've seen in terms of your customer base, whether from a credit dynamic where they allowed the spectrum or a geographic within the quarter.
Sure Dave you want to take on.
Yeah sure Shannon I guess.
I would say you know we've we've seen a very moderate shift in this and the customer base, but.
Certainly not significant in terms of geography I think.
Really no changes that we typically sell more cars where.
There is more.
Sure.
Or car dealers, that's why they're there and I don't think we've seen any significant shifts and geography, either we do have a seven technology. The scores are leads as they come into our platform and so that that helps us manage the credit spectrum.
And managed to the quality of the deals coming in that we address first so I.
I think that's helped US you know.
Managers that affected the business.
Okay. Thank you and I might have missed that sits with you our or can you provide an update on where you are on the white glove touchless delivery.
Yeah, Paul you want to pick up.
Yeah, I'm I'm happy to we are we are continuing to experiment on a on both you know our own version of that and leveraging a third party supplier, but it it's still early days and our valuation. So I guess, what I'd say is they stay tuned on that but we continue to roll out.
Oh, I always say greater levels of of last mile and as I mentioned again in my opening remarks, we're going to continue to invest in the drive way experience and so I think I think more to come their share.
Thank you.
Thank you.
Thank you and our next question comes when a line of.
Yes.
Your line is open.
Great. Thanks, Congrats guys on the IPO again, it's nice to talk to you.
I guess my first questions a follow up on the Laureus peas, obviously, the Gpus still look very good.
But I'm wondering if there any implications in terms of what level of reconditioning those lower price cars requirements are older models for example.
And if those costs are higher or does that require any change to your to your partnership agreements and then related to the bottlenecks that you have at the B or C level.
I know it sounds like that those are using now but did those new agreements to gain the extra capacity have any impact on per units reconditioning or or shipping cost that we should be aware of thank you.
Yeah.
Oh go ahead, sorry, no go ahead.
Yeah, calling no I think you know we talked quite a bit in the in the in the preparation for the IPO about reconditioning standards and you know we have different standards for different cars are different vehicles, sorry. So.
50000 dollar BMW is going to have a distant reconditioning standard than it's been a $20000 camry. So that's really how we manage that and that's one of the keys to be able to allow us to.
To maintain that gross profit per unit at the at the lower average selling price. We also have on our website defects disclosure so.
You know with with sows with all of our vehicles, we have the ability to show a customer you know a minor defect in a bumper for example, rather than taking the bunker off sending it to the paint shop, you know reinstalling. The bumpers. So I think the combination of those two things gives us a lot of control.
Over managing reconditioning costs.
On the on the VR see a question, yes, new agreements you know I think we've mentioned before we work with Manheim and ADESA in terms of reconditioning.
There's there's nothing you know in in the each new location that we opened as part of the master agreements. So there's nothing unique about opening additional ones and I would say you you had mentioned bottleneck I think.
We're not currently experiencing experiencing any significant.
Capacity constraints in any of those you know like I said in my remarks that the ones that we turned on recently they take a little while to ramp so that affects the overall utilization, but you know that's one of the benefits really of being distributed widely distributed around the country as well we don't have the G.
Chris You know, we've we don't have.
Material.
Concentration in any one area and that will just get better and better as we continue to expand the network. So hopefully that answers. The question Yeah. That's helpful.
Just as does the situation does that impact the timing, where you might decide to build out another owned facility.
Yeah, I think that view there is still the same we are we have we has.
Plenty of experience with our own facility and in fact, you know we try and.
Give as much of the learnings that we have from that to our partners to help her own process and in their shops.
And you know we're work.
Certainly open to building another facility. It's the neither rises you know if we find a particular geographic location that we we need the extra or that we need our own facility. That's fine if we find that.
You know there's for for whatever reason, we need to build another one.
We're okay with that but but certainly nothing in the short term plan I think we've we've got tons runway.
Okay, let's say fixable.
Thank you.
Thank you. Our next question comes from the line of Ron Josey with JMP Securities. Your line is open.
Great. Thanks for taking the question I wanted to maybe ask a little more about inventory and then ecommerce GPU and just on inventory you know as you move towards more on demand cars, a poll and Dave I just wanted to ask about the sourcing of those vehicles and the alternative sourcing specifically in the past you've talked about consumer acquisition I think accounting for 35, 40% of units one.
You can give an update there and then any other sources of acquisition maybe from partners or for other areas and then on GPU for E. Commerce. David You know you noted higher overall attachment rates across the products offered and then you know sequentially significant improvement in sequential improvement in June just talk about maybe what's driving that in June is that the financing I know you said.
Oh products, but anything that sort of stands out thank you.
All right you want to take that one day than.
Yeah sure I.
I think I'll do the last one first on the E Commerce gross profit per unit, yeah, we've seen higher attachment rates across the board on all the products.
I see there isn't.
Anything in particular that stands out in June I think you know the June the sick significantly better results in June are the result of.
All of the inventory that we purchased in May reconditioned in May.
And then our selling in June and obviously, there's a lot overlap there I'm just using that as an example, but no. There's nothing that stands out I think you know we continue to have a lot of they send our preferred lender relationships.
You know with chase and Santander and an ally.
You know those preferred lender relationships really help us drive attachment I think we're really focused on the E commerce experience and like you know different initiatives and testing.
Around driving its attachment so you know.
Real focused on all of that constantly is what's helping us get there in terms of sourcing a I think you know early days on alternative sourcing so not a whole lot to talk about we still are acquiring a majority of our vehicles from auctions and consumers.
Yeah. Your view have stats right around 35 to.
To 40%.
With the slowdown.
During the cold period, I think that.
It took a little while longer to create up our consumer acquisitions again, so that we had about 28%.
In.
In the quarter, and then and that's about 34% year to date.
But the recent results were right back to you know between 35 and 40%. So I expect that percentage will creep up again over time.
Great. Thank you, Ron Ron wrong, but I would just add to that.
Is that.
And you maybe we've seen we've just we just turned on some TV advertising that you know for the first time in in brooms history or offering you know just telling customers that we've got an offering to actually have by customers cars. So again it it literally just launched this week so stay tuned on that but.
You know, we had a high percentage of mix from consumers and you know is like with the world's best kept secret. So we're not we're not keeping that a secret anymore and we think turning on the marketing will will continue the strategy of securing cars. A you know the right cars that drive the right unit economics for our business the match demand.
That's super helpful. Thank you.
Yep.
Thank you and our next question because that's the Shah with Wedbush. Your line is open.
Thanks, a lot and good afternoon, and congrats on the IPO and strengthening results here.
My first questions around the GPU guidance for the E. Commerce unit looking for 16 to 70 <unk> hundred dollars for the third quarter compared to $1800 in that first quarter pre coded and about 1600 and the third quarter <unk> 2019, and 17 under so I think you mentioned in June it seems like you're making.
Tenant improvements here and talk that around attachment rates on the products as well as a strength in terms of buying cars from customers that should be more profitable and by auction why shouldn't we be looking for higher Gpus in the third quarter.
It's not that save I can I can start there I think you know what are the biggest piece of it is the average selling price so with a lower average selling price. We typically would earn a smaller the that we collect on helping to arrange the financing.
Thank you know the rest of the products we sell.
So some of them maybe affected by the S.T., but not as much as the finance.
So I think we're like I said before we're really focused on.
Leveraging.
Increasing the attachment and so that's what you know gives us confidence that.
We can continue to march towards the longer term goals.
Even with the average selling price, which as you know was always into longer term plans.
But you know we found ourselves there a lot more quickly.
And the current environment is helping with that.
Paul you have anything else there.
No I think that said, Dave I was just going to make that that point of the D.S.P. does driver drives lower lending amounts and therefore, you know puts pressure on the product side of the attached which is why we're not guiding significantly above that while we while we ramp.
Got it Okay fair enough my follow up questions around year reconditioning capacity, if I heard your right. I think you mentioned that you could recondition 1800 cars per week, which would equate to about 23000 cars per quarter no you're guiding three Q a unit sales across the common dth around 10000, so it seems like.
There's a lot of underutilized capacity there is that correct and do you think you'll be able to take advantage of that capacity over the coming quarters.
Yes, I think that's the plan we you know we've we've got.
Catching up to do obviously as others experienced during the pandemic, we had a quick ramp down and then a quick ramp up.
And so.
You know someone had mentioned.
Position availability earlier, we don't have any impediments to.
Buying vehicles were there you know easy to acquire and and obviously, we've been acquiring them with good margin lately. So I think it's it's really a matter.
Playing catch up with the with the capacity, but you're right. We feel like we're doing a good spot now.
Some of the again the 1800 was the total capacity is 17 locations that we have a and obviously that was up from 14 at the end of the first quarter and so we've got a couple that are still ramping.
And and quite honestly, a couple that we're doing the first quarter that are still ramping but yeah. We feel like we've got plenty of capacity certainly to meet the Q3 plan.
And where we're going to work down that 50% coming soon as quickly as you can.
Thank you and our next question comes from the line of.
So with JP Morgan your line is open.
Okay, great. Thanks work, thanks for taking my questions your.
I just wanted to follow up you know on the E Commerce GPU question.
With regard to 16 or Ustwenty 900 across the you know we go in product.
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For us.
[noise] favorites, yeah, we haven't given that breakout.
That's.
We.
Well, we Matt is that as you can imagine 'cause. There's you know it's there's so many variables that go into the vehicle piece and then obviously, we've got a lot of variables affecting their product priest as well. So we kind of actively manage that so we're actually not providing guidance on the on the breakout.
Got it no worries, just but I wouldn't do surprised by the guide and Oh, you know I guarantee you know it's improved through the second quarter and no June was strong.
But you know from your perspective.
Got a little bit but.
My my understanding was that you know in the second half of last year you know.
You'd be especially on the legal side, we're still really impacted by you know just in its fishing season, we needed to ramp up of the units. So.
I would've thought that there was there was an easier comp.
A comparison on that front, but what's still looks like a GPU is tracking down a little bigger.
Despite a pretty strong you know used pricing in one of them. All so just just if you could just a.
Bridge that gap a little bit.
Yeah, Yeah, No I think everything you said is right I think the big difference is the is the average selling price of the vehicles. So you know what was $30000 in the second half's last year will be like we said closer to 20 to $23000. This year and so I think actually.
You know the Great news is we're making great progress.
On our March towards a much bigger market at a at a lower average selling price and we're doing that very profitably with with the Gpus that were predicting now on a much slower selling price.
So I was just a personal got it gives them soon so just to clarify so is the lower used to be also impacting the legal gross profit for human or.
I would've thought that was more of an impact on just the product side. It looks like it's also having.
A decent in fact, even on the Lincoln side.
Our assumption.
Yeah for sure I think it impacts both the vehicle and the product.
Got it so that's the thing thanks for the clarification, there and just my follow up was on.
There are no just just potential for given I know you're seeing this traction on your platform.
How should we think about the potential for no toward parties entry lifting.
Going forward, you know or do you have any commercial agreements in place or that you can talk about.
You know what would the economics of those might look like you know how big the reporting for that look like any color on that front I would be helpful.
Thanks.
Yeah, I'll just take that one Oh I've, just how would you say that it. It. It's very early days are and you know it's it's it's not a material part of our business at this time, but well what I will tell you is that there is growing interest.
From a variety of participants to to to share their inventory on the room platform and leverage our you know kind of the end to end E commerce platform as well as they are our logistics network. So I think it's a it's a stay tuned rather than something that you guys should probably model and this quarter.
But there's there's building interest in that.
And more to report.
Soon.
Got it.
Thanks, so much.
Sure.
Thank you and I'm not showing any further questions at this time I'd now like to turn the call back your speakers for any further remarks.
Great just a thing thanks, everyone for for attending our call and special Thanks to all the room employees that are that got us here and we'll continue to drive our business forward. So thanks, everyone.
Ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a great day.
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