Q2 2021 Carlotz Inc Earnings Call

August 9, 2021

[music].

Good day, and thank you for standing by.

Welcome to the car and that's so cute.

And in this call.

At this time all participants lines are you know and listen only mode. After the speaker's presentation, there will be a question and answer session.

A question during this session you and press Star 1 on your telephone.

Please be advised that today's conference is being recorded.

Uruguay and any further assistance please press star zero.

I would now like to hand, the conference over to your Speaker today, Ms. Susan Lewis VP of Investor Relations. Thank you. Please go ahead.

Thank you good evening, everyone with me on the call is Michael bore co founder and Chief Executive Officer of car lots and Tom's Stokes Chief Financial Officer before we get started I would like to remind you of the company's safe Harbor language, which I'm sure you're all familiar with the statements Kantar.

And in this conference call, which are not historical facts may be deemed to constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 actual future results may differ materially from those suggested in such statements due to a number of risks and uncertainties.

All of which are described in the company's filings with the SEC, which includes today's press release.

If any non-GAAP financial measure is used on this call a presentation of the most directly comparable GAAP financial measure to this non-GAAP financial measure will be provided as supplemental financial information and our press release now I would like to turn the call over to Michael bore co founder and Chief Executive Officer.

<unk> of car lots.

Thank you Susan good afternoon, everyone and thank you for joining us to discuss our second quarter 2021 results.

As you'll hear we are very pleased with our second quarter results, having met our unit guidance significantly outperformed our GPU guidance achieved record gross profit launched our new web experience and to date, we have opened 8 new hubs, while announcing an additional 6 hubs. It has been a challenging year from a macro industry perspective.

But certainly an exciting and busy year from a company growth perspective over the last 6 months since we became a public company. We have doubled our number of hub locations hired experienced talent across the company and began executing on major technology and marketing initiatives that we believe will support significant growth and <unk>.

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All this being said we continue to experience disruption and the wholesale markets that is impacting our ability to effectively source. The most desirable cars from both commercial accounts and options. After Tom discusses second quarter results I'll give more color about the current macro environment, what actions were taken to further accelerate our unit sales.

And finally, our continued confidence and our long term consignment business model Tom.

Thank you Mike.

For full details regarding our financial results. Please refer to our press release available and the Investor Relations section of our website.

And as Mike mentioned, we are pleased with our results for the second quarter, achieving strong unit revenue and gross profit growth.

Revenues were $58 million and increase of 92% versus last year.

Retail unit sales were 2009, increasing 46% versus last year.

Additionally for the year to date period revenue increased to 107% and unit sales grew 61% as compared to the same 6 month period and 2020.

Our revenue growth for the quarter was driven by increases and our retail unit sales of 29% increase and our average selling price changes and inventory mix year over year, and overall price increases and the used car market and.

Importantly, and nearly 100% increase and finance and insurance revenue driven by a combination of increased penetration and pricing and products and services on units sold.

Gross profit increased to 108% sequentially over last quarter, and 53% year over year to $4.2 million retail GPU increased to 84% sequentially over last quarter, and 17% year over year to $2175.

And retail GPU benefited from a significant increase and F&I penetration and an increase in front of me and profits and home vehicles.

Total Q2, SG&A expenses, excluding stock compensation and depreciation.

For $19.4 million compared to $3.1 million and the same period last year and $18.9 million and Q1.

<unk> Q2, SG&A costs relative to last year were driven by our and management and support staff to execute our growth strategy and addition to incremental technology and marketing investments, which began in Q1.2020 1.

And total our net loss for the second quarter was $7.2 million compared to a loss of 200000 during last year's Q2, and a loss of 15 million and the first quarter of this year.

Adjusted EBITDA was a loss of $15.2 million compared to a loss of 300000 last year, and Q2 and a loss of $16.9 million and the first quarter. This year.

Now turning to our balance sheet, we ended the second quarter with cash and marketable securities of $259 million, which.

Which provides us meaningful flexibility going forward. Additionally, during the second quarter, our Floorplan credit facility with ally and was increased to $40 million.

Now regarding our outlook.

And for us to predict volumes and profitability and our business, we need to have a clear view into our supply of vehicles.

And our clients have historically been able to predict the remarketing volume and part based on new vehicle delivery schedules.

We currently lack and the appropriate visibility needed to predict the timing of when our supply chain will returned to normal and therefore, we believe it is appropriate to withdraw guidance at this time Michael.

Mike will further discuss the macro environment that led to this difficult decision, but given the uncertainties and the marketplace. We have determined that this is the appropriate course of action.

To further illustrate this dynamic and the beginning of Q2, our inventory primarily was consigned, but over the course of Q2 due to these industry conditions and the pause and our relationship with our largest corporate confinement partner our mix shifts to about 80% owned inventory for.

A substantial portion and purchased at auction.

Due to the nature of owned inventory versus consigned inventory.

Bind with seasonal pricing depreciation we expect this new mix will apply pressure to gross profit for the balance of the year.

In addition, while our new hubs performed well at the beginning of the year when we were selling predominantly consigned inventory.

The group of new hubs as a whole are not ramping units as quickly as we originally expected also resulting in gross profit pressure.

As a result qualitatively, while we continue to see unit growth and Q3 over Q2, we have seen gross profit compression and Q3 today, which we expect to continue through the end of the year due to the issues that Mike will elaborate on shortly.

Looking ahead for the second half of the year, despite our near term lack of visibility.

We plan to continue to make the strategic and tactical investments necessary to further establish the base from which we expect to scale and.

Nationwide vehicle consignment and sales marketplace and the long term.

I'll now turn the call over to Mike to discuss how we are operating in line and this current environment. Thank.

Thank you Tom.

While we're very pleased with the Q2 results that we delivered in light of the macro sourcing disruptions that we've seen this year. It is important that we further articulate these headwinds first I'll discuss the supply chain issues, we are facing and why they are uniquely disruptive to our business model second I'll address the specific actions we are.

Taking to mitigate the disruption and third I'll talk about the investments we are making to ensure the long term growth and success of the business.

With respect to our supply chain starting in late Q1 and into Q2, the broadly discussed chip shortage, which decreased the availability of new cars and the increase in wholesale prices resulted in fewer used cars being available through our commercial clients in light of rapidly increasing wholesale prices in relation to retail prices the <unk>.

<unk> service offering became less appealing to a retail remarketing clients.

Our largest corporate consignment partner's decision in may to pause consignment further exacerbated these challenges Additionally, and similarly to our peers sourcing attractive inventory at reasonable prices for wholesale auctions and other competitive sources became unusual and challenging we.

We performed well and Q2 with this competitively sourced inventory as pricing was down and unprecedented rise, but as we begin to see prices peak and begin to recede and we've seen a more challenging profitability environment and the third quarter to date compared to second quarter, which we expect to continue until the market normalizes.

Our consignment inventory due to the fee structures, we utilize with our accounts provides us more predictable profitability than owning inventory. It's frankly the reason why we believe so strongly and our business model and are excited for the market to return to normal and our clients to increase their consignments.

Carrying less desirable option source inventory and higher acquisition cost is impacting the performance of our new hubs, while our first 2 hub openings performed well and their first 90 days, we are experiencing lower than anticipated sell throughs and part due to the sourcing mix younger age and higher selling price of inventory with <unk>.

We have had to stop all of our hubs with 8 new openings year to date and several more coming up we are reliant on our new high performance to achieve our growth long term. So what have we done about this disruption to get inventory to appropriate levels. We did 2 things first we began sourcing much more heavily from competitive channels.

Even though we were able to increase our available inventory and the June the overall balance of our inventory is now much more heavily weighted towards competitively sourced and owned inventory than we anticipated and prefer <unk>.

We are attempting to grow our consumer sourcing, which we believe will have a positive impact on mix and profitability growing consumer sourcing is a continuing and longer term initiatives, which will take time to materialize, but we are seeing promising early results.

Outside of what we're doing to address the short term impact of the industry. What are we doing to ensure the long term growth and success of the business.

1 we've grown and continue to grow our geographic footprint and our team too we're investing heavily and building our brand through our new marketing campaign and 3 we are significantly upgrading our technology for we are taking actions to continue to improve our unit profitability and 5 we are growing our relationships with some of the top.

Corporate and signers and the industry so that when the market returns to normal we expect to have more access than we have ever had to consigned inventory.

Let me discuss each of these initiatives first we have and continue to set the groundwork for a much larger national presence and we previously had which we plan to take advantage of as the market returns to normal. We are so far opened 8 new hubs this year and some of the most attractive markets across the country doubling the number of locations and which we operate and <unk>.

More than doubling our inventory and processing capacity.

We have also announced 6 additional new hubs, so far on our way to our goal for the year of adding 14 to 16 hubs.

We believe that continuing to build out our national infrastructure will put us in a strong position to take advantage of our unique business model when industry conditions normalize.

Second we have very recently launched our first ever major brand campaign designed to increase our brand awareness and introduce many many people to the concept of vehicle consignment.

And the campaign highlights that our guests are not buying used or consigning because they are cheap they're doing so because they are smart crowd independent and pragmatic and.

In addition to building brand awareness and driving unit sales, we believe it will support new hub launches and provide sustained support and key legacy markets. We believe this campaign will have greater and more effective reach than our previous marketing initiatives look for the campaign across social digital radio and TV.

Third we're driving technology initiatives that will facilitate sales by making the vehicle buying process, whether in hub or online as easy as possible. During the second quarter. We brought our website infrastructure in house, which we believe will give us improved operational control and stability the enhanced ability to identify and adapt to this.

Specific needs of our guests and the ability to experiment with and test New features. We also believe that the launch of our new website and the development of the mobile App will further enable our guests to buy outside of our direct markets.

Fourth we continue to focus on profitability as we mentioned we've increased F&I revenue by nearly 100% year over year. This quarter and we continue to seek new ways to be cost effective and timely with our processing center operations.

And fifth we continue to build strong relations and relationships with our corporate consignment partners and expect them to ramp up their retail remarketing efforts as market conditions sufficiently normalized in fact, our corporate consignment partner, who paused our relationship and May has recently expressed an interest and restarting our relationship we have started seeing some.

Volumes of inventory from this account, but it's still too early to tell how significant the relationship will be to our overall sourcing.

With respect to some of our other top accounts, we are seeing early signs of more consignment volumes coming back, but again, we don't anticipate seeing meaningful inflows of consignments from these accounts until they increase their deliveries of new vehicles from the manufacturers.

In closing our experiences over the last several months have only made me more enthusiastic about our consignment business model asset light and with lower inventory risk and greater profit predictability, we fully believe that the retail wholesale pricing relationship will return to normal and our clients will eventually receive their anticipated volumes and new cars from the <unk>.

And in the meantime, we believe that our investments and 2021 put us and a favorable position with the right infrastructure and human resources in place to take advantage of the consignment market when it reaccelerate.

To reiterate we continue to have confidence and our long term consignment strategy and value proposition, we have not seen any long term structural changes and the market that would prevent us from eventually returning to our desired consignment model mix.

We believe that our relationships with our corporate sourcing partners are strong. We are also growing our consumer consignment operations investing and our brand awareness and significantly growing our hub network. While also enhancing our technology. We are optimistic about the long term success of our business model as we navigate through what we believe is a short term disruption.

I want to reinforce that I couldnt be prouder of how the team has navigated through this challenging quarter and delivered strong unit revenue gross profit and retail GPU growth. We will continue to focus on strengthening our foundations for the future, while making tactical changes and investments to operate efficiently and this current environment.

We will now take your questions.

As a reminder to ask a question you want and need for Brad Star 1 on your telephone and we do all your question. Please.

Please standby, while we compile the Q&A roster.

Okay.

First question comes from the line of Sharon Zackfia.

<unk> of William Blair.

Hi, Good afternoon, I guess, there was a lot and there.

And to talk about but I guess.

How just given that there is an industry wide dynamic.

And we're facing right now how are you able to it sounds so certain.

And that these stresses you're seeing are.

Kind of almost all externally related as opposed to maybe some internal stress related to the pace of growth.

And I'm referring to.

How 'bout Bonanza and the sell through.

Thanks, Sharon for the question, Yes, I mean the key.

Industry related.

<unk> that we've seen over the course of the year.

Related to Covid or the.

The lack of new cars being delivered to our clients.

And this is a big 1 I mean, it is dramatically reduced the number of consignments that are coming from these accounts because they don't have and new cars to replace their old cars with.

And the rapidly increasing wholesale prices that were beginning to CV and of these or 2 events that.

And my history and this industry, we have never seen anything close to it and they are having a meaningful impact on our ability to source the types of vehicles, we like to sell and and.

The predictability of the profitability that we like to see with what we do sell so.

And just as an example, our inventory today is at a meaningfully higher price and not just related to the increase in wholesale prices and retail prices, but also due due to mix and mix shifts and the types of inventory that we're getting from the auction versus the types of inventory that we were regularly getting for.

Our accounts.

Accounts.

As an example, probably 30.40 plus percent of our inventory used to be in that under $15000 range and it's now about 10%.

And that is inventory, obviously that turns the fastest and so.

And we're pretty confident that these macro industry trends that are fairly uniquely impacting us.

A huge part of the stresses we are seeing.

I guess.

Uh huh.

That.

And you mentioned consumer sourcing and Ive heard the radio ads at least and Chicago.

Other publicly traded companies that they're kind of having and consumer balk at the price points.

That are out there so what why do you think Carla.

Is that maybe more than some of the others debt that we're aware of.

Did you say half consumers bulk that we said higher price.

Because I think you were mentioning and higher prices as being 1 of the issues with our new hub ramps and.

And it doesn't appear with any of the other companies that have reported thus far that they are seen and.

Consumer resistance to the prices if that makes sense.

Yes, and maybe I may.

And my point wasn't clear enough.

We.

The volume of vehicles that we're selling that are and the $30.40 $50 range versus what our average has been since we started the company is much higher and as you can imagine the number of people that can afford a 40 or $50000 car and has far fewer than the number of people who can afford and are looking for.

And to $15000 car.

Our average over the last several years has been in the teens to partner and really low teens to high teens and over the course of this year, it's pushed up meaningfully from there as a result of the types of inventory. We're getting now we are selling a lot more higher priced inventory than we've ever sold in the past and we believe we are building.

Good brand for that type of vehicle, but the sell through rates that have always kind of gone into our model and how we predicted the business have been based on sell through rates of our average inventory, which has been in the teens not for <unk>. So it's less that consumers are balking at price points.

This is a new type of inventory that we're selling and it comes at it.

Different sell through than the averages that we've seen over the course of the company's history.

Okay. That's fair and then on the consumer sourcing do you have any kind of recent metrics on the uptake there.

Yes so.

We have increased marketing as you mentioned.

Both for consumer sourcing through consignment and through consumer and consumer sourcing through buying.

We have seen a meaningful uptick off of a small base. So consumer sourcing dropped when the wholesale prices were ramping up dramatically and.

And consumers found that they could get.

Very hefty prices from dealers and the consignment offerings, just like it was with with the with our corporate consignment accounts became temporarily less enticing due to the kind of shift and wholesale prices as as compared to retail as we're seeing that revert to.

Normal trends.

We're seeing significant improvements and consumer sourcing and so so it's really kind of structurally we're seeing the improvements based on the wholesale retail pricing GAAP, but also we're turning on our marketing muscle and specifically to that.

That group and so we're seeing very good early results and and those efforts.

And then last question have you considered kind of pausing and are delaying some other hub openings just given the external environment is challenging.

We haven't yet I mean.

The structural it's very obviously very difficult to predict when.

And the Oems will begin to deliver when the pricing environment will return to normal.

But it's not hard to predict that it will happen and and so we predict that it will go back to normal. We just don't have a good idea of when but what we do know is that having hubs.

Covering more of the country being able to reach more guests more sellers more buyers.

Is what will drive the growth for this business going forward and so we still believe strongly and our our ability to grow this business with really at the top of the pyramid with really hit the bottom of the pyramid with new hubs being developed.

Thank you.

Thank you Sharon.

Next question comes from the line of Gary <unk> Barrington Research.

Good afternoon.

Okay.

Couple of questions here.

Yes.

The average selling days how much of day increased for you given that youre selling cars at higher price points, and then taking a probably a relatively high depreciation hit if the average selling days are increasing.

Yes.

Believe them.

We don't really disclose that but I would say.

As we went through the quarter early Q2, we actually had sold down on inventories at the end of the first quarter.

And so we were actually trying to source more inventory and.

And so our sell throughs were actually accelerated during the first part of Q2 and then towards the end of Q2, as we got more fully inventoried and so.

Through slowed some and it was probably more pronounced and some other new hubs.

At that time, just because it was difficult to get the full mix of inventory that we were looking for.

And those new hubs and we're relying solely on auction buys at that point for the new homes.

Right Alright, well is.

I mean.

The fact of the matter is is that the prices are starting to come down a little bit right.

And at retail and if your average days to sale.

Our increasing and you've had to go out and pay up for inventory youre definitely going to have.

A margin squeeze there but.

How much is <unk>.

You're talking about pricing.

Has that come down though over the last couple of weeks or so from where it was maybe 2 months ago at retail.

Yes.

It's difficult to give you a number on that because it does depend on price point and type of vehicle and location and all of that what we do know is debt we will likely face.

GPU pressure heading into the last half of the year I think part of that is seasonal I mean, typically this time of year, you do see some pressures and and as Brian to Q4.

Fortunately, we have done a phenomenal job on the back and with F&I growth.

Nearly 100% quarter over quarter and that really does.

It doesn't it doesn't solve all problems, but it really is helpful. As we start seeing more front and pressure we have the backend and that's growing to support overall GPU.

So as the Oems eventually start ramping up production how much of a lag do you think there's going to be from at the time that production starts ramping up say sequentially. We go up for 12 months, how much of a lag before it starts really benefiting your business and gets you back to where you could be with the consignment model versus per.

<unk> the bulk of your cars as you are doing now.

That's a great question Gary.

Think in quarters past or in calls past, we've taken and attempted guessing.

We have not been right on that in reality.

They are going to ramp up manufacturing they are going to distribute there are several channels through which they have to distribute.

The dealers the rental businesses, our clients et cetera and.

What order, they do that and and the volumes that they do that and it's still a mystery I will tell you that months ago. When we were pulling our clients on what they thought they would begin to get deliveries they were pointing towards early summer late spring and.

And then clearly hasnt happened, so and there are 1 step closer to the supply chain and we are.

So the best we can do is.

And we'll talk to our clients and get their best guess as to when deliveries will resume but even there kind of throwing their hands up in terms of guessing.

And then just last question you use $70 million of cash the first 6 months of the year, we're going to see your cash burn and similar to that for the next for <unk>.

6 months.

Yes, I think youre pulling the number from.

Cash flow statement from operations. There is an offset to that was the floor plan and financing.

You see a build of inventory of $36 million, I think and the 6 months and it.

And also a big old of $29 million and the floor plan. So that after some good part of that 70 that being said, we are seeing about a $20 million cash burn from operations and the first 2 quarters for the year and then we've had some capex of about $10 million as well. So that's what we've seen for the first half and.

And it probably would be something comparable to that.

Over the last half of this year.

Okay. Thank you.

Thanks, Gary.

The next question comes from the line of Karen short of Barclays.

Hi, Thanks very much.

A couple of questions first can you.

Give us a sense of what Asps is now versus historical and where you think it may settle out by the time, we're at kind of the end of the calendar year.

Yeah, Yeah. So ASP has gone up I don't know I don't know the exact number for the quarter.

But it has gone up meaningfully and we were at this point within the last couple of years, we were in the low teens.

I think.

By the end of.

By the end of 2020 and into 2021 were and the high teens and we've gone over 20 meaningfully over 'twenty.

And obviously part of that is just the rise in prices of cars. So if we were selling the exact same car. My guess is we would've gone from the low teens for the high teens, but we're not selling the exact same car we're selling.

A higher price car as we go forward, where we expect it to.

Settle as we do think wholesale prices will come down a bit although that will probably take a while or it might and might not come down as quickly as it went up.

Or or in total as much as it went up.

And we will probably continue to sell the higher priced cars that we've been selling I think we started to build a good following for buyers of cars and that at that price point.

But we will certainly as the consignment volume comes back we certainly do expect to see a lot more vehicles in the lower price point for sub 20.

That will likely bring our asps down, which frankly were we're looking forward to.

And those lower ASP cars, we've seen.

All through it at a much brisker pace than than the higher ASP cars, and particularly on consignment. When we're more of a flat fee program. We really wanted to turn cars quickly and the Asps is not as important to us in terms of overall gross profit.

No I understand that it's just a question of where the overall landscape as that is relevant and for you but.

Okay. So my second question is just on that is could you just elaborate a little bit on how the conversations are actually progressing and what the conversations are with your corporate partner, who I guess, Michael you indicated was looking everything and the relationship.

Yes, so they and Youll recall and May they've decided deposit relationship because they were seeing tremendous increases in wholesale pricing that would give them very quick opportunity to sell at very attractive prices.

Which we understood.

We did anticipate that win.

That wholesale retail spread began to revert to kind of normal debt, we would get a call from them.

And within the last couple of weeks, they reached out proactively and said and we'd like to start setting new cars again, we started taking small handfuls of cars over the last couple of weeks, it's still very early.

And the restarting of the relationship, but we're seeing good vehicles coming in where.

We're excited to be working with them.

Okay and then just my last question is.

The new have that back to a prior question I guess given that you are less able to confine and you've indicated in the past that new hubs are obviously much more reliant on that versus.

Used vehicles from consumers why wouldn't you take a pause and the new hub opening and told the landscape kind of reaches a better equilibrium.

Yeah. There are several reasons, 1 and there is a little bit of a runway.

Getting these hubs opened finding the locations negotiating leases getting them set up and so.

The hubs for this year are for the most part planned and ready to go and even trickling into 2022.

And that's kind of operationally why but structurally is unless we or anyone believes that OEM production will net will not return to the levels that it was that before the supply chain disruption or that wholesale prices and retail prices will not revert to a GAAP.

That is consistent with historical norms.

Our growth is still predicated on reaching more of the country with our offering.

And that happens through these these new hubs that we're opening we still remain very confident in that.

And what we've driven and this business over the last 10 years, it's unfortunate that we're experiencing this industry issue right now but.

But we're excited to kind of get back to what we've seen for the.

The 8.9 years before Covid.

Where our consignment offering was very attractive to these companies that we're getting new cars in and having old cars that they needed to get rid of.

Okay. That's helpful. Thank you.

Karen.

And again to ask a question. Please press Star then the number 1 on your telephone keypad.

Next question comes from the line of and Manuel Rosner of Deutsche Bank.

Sure.

Yeah, Hi, good evening everybody.

Hi, Emmanuel how are you.

Good good.

So.

First question and so you mentioned sort of like these 2 and.

Industry trends.

March March headwind.

Lack of new cars being delivered to clients and then also the increased.

Increased wholesale pricing what would you say the.

Larger factor in terms of impact and your business and when you speak to your typical and finally do you find that day.

Just not selling cars at all because they can't get New Orleans, or do you find that non selling cars, but they're doing it through different channels and the reason I'm thinking about it is obviously no 1 can predict current sort of like unfolds going forward, but coming at it from the automotive side.

And definitely a review around the world and automakers production crew and sort of like normalized but.

The wholesale pricing, we still seem to be able to see pretty high level. So just curious, which 1 is most impactful if you're capable to tell yes.

Yes.

Hard to tell and.

Exactly but.

I would say that the lack of inventory is a key driver is the key driver.

With 1 of our top accounts with whom we met recently they have added resources to work with.

To work on our relationship we are getting the opportunity several times a day to look at a few units. They do have to sell but the lists of units that they do have to sell is tiny fraction of what it would be if they were seeing meaningful deliveries of new cars.

So that they can then send out to their clients so our relationships with our.

Top clients are very strong we still we have a strong and growing team of account management and.

People that work with our top corporate accounts and everybody is just frankly frustrated that these new cars hasn't shown up yet and it really and eagerly anticipating the arrival of them. So they can flip their fleet.

And and bringing in cash.

And reduce the age of their fleet.

That's a key 1 on the pricing and we said this in previous calls.

The pricing going up.

The problem and not the price being high so now that we're seeing the pricing level off and begin to recede, we do anticipate that the GAAP between wholesale and retail will return so that will be that should be and it will be we believe the smaller portion of the issue and eventually it won't be an issue.

And when the wholesale and retail price GAAP returns and it's visible to our clients who are trying to consign cars.

Okay and is there.

Is there a timeline you're thinking for that specific piece, so not the OEM piece, but.

The GAAP between wholesale and retail and reflect reaching a level where it makes sense for your traditional partners too.

Steer more units towards consignment.

Yeah, I mean, just that we are seeing the beginnings of it it is very difficult.

We haven't we haven't predicted the end of the structural changes very well in the past and we'll just we'll just let you know that we're seeing that we're beginning to see.

Some positive tailwind.

A tailwind there.

Okay, and so and then Conversely, then third to come.

While some of these issues are still ongoing and your.

Sort of like shifting and a little bit the sourcing to competitively source vehicles.

I guess how.

And how well structured and positioned or you choose to reflect be able to execute these well.

<unk>.

Do you have the team to do that you have for balance sheet like are you actually able to share with like a rough run.

Good business.

If that goes on for multiple quarters, how should we think about that.

Yes.

1 other great things about the transaction, we executed earlier in the year as it provided us a tremendous amount of capital, especially as compared to how much capital we've ever had and the history of this business and.

And so.

For $259 million at the end of the quarter and cash on the balance sheet.

And.

We've done.

Tremendous amount of hiring a very talented experienced teammates who are getting the job done opening these new hubs.

And we're staffing them up quickly.

And.

The processing centers are getting ramped up.

Building relationships with new accounts strengthening relationships with our existing accounts kind of doing.

And doing what we need to do to be prepared for when the volumes of inventory come back and the.

The basically the overall market normalizes.

Yes.

Just curious about the before that happens.

Intermediary period between now and.

And until conditions normalize like should we look at those quarters of business and sort of.

Sort of like suboptimal quarters, because of the way things are sourced so do you actually have always true.

Maybe this.

As you can business in the meantime.

Yes, well that's a good question.

We are not accustomed to having to source as much of our inventory from auction as we are right now.

And so we built a very experienced team that is sourcing meaningful quantities of inventory at auction and as evidenced in Q2, they've done a great job of.

Selling a lot of vehicles that good Gpus.

As we head into the third and fourth quarter. We did like we mentioned, we do think GPU will be challenged.

And it is a different type of inventory that we sold in the past, but like anything thats been new to us it's taken a little bit of time to get experience and it and then we've become good at it so.

We are not throwing our hands up and saying.

And we give up until consignment volumes come back, we're working really hard to be.

Professionals and successful at selling all kinds of inventory at new hubs and hubs.

At any price point.

But some of that takes a little bit of time to gain experience.

Understood. Thank you.

Thank you.

I am showing no further questions at this time I would now like to turn the conference back for Mr. Michael Moore. Please go ahead.

Okay.

Thank you thanks to everyone, who dialed in today as I said earlier, while we are experiencing some disruption during this unusual market, we remain confident and our long term consignment strategy and believe we are creating the foundation to scale. This business when the market returns to normal where dry.

Giving growth and a very volatile and complicated market and we're looking forward to the back half of the year as we continue to open hubs ramp newly opened hubs and invest and strategic marketing and technology to drive results. We look forward to speaking with you again soon and thanks and have a nice evening.

Ladies and gentlemen, this concludes today's conference call.

And for participating you may now disconnect.

Okay.

And.

[music].

Good day, and thank you for standing by.

Welcome to the core labs Q.

And in this call.

At this time all participant lines are you know listen only mode.

Speaker's presentation, there will be a question and answer session.

That's a question during this session and even the press star 1 on your telephone.

Please be advised that today's conference is being recorded.

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I would now like to hand, the conference over to your speakers today, which Susan Levine VP of Investor Relations. Thank you. Please go ahead.

Thank you good evening, everyone with me on the call is Michael bore co founder and Chief Executive Officer of Carla and consult Chief Financial Officer before we get started I would like to remind you of the company's safe Harbor language, which I'm sure you're all familiar with the statements can be.

All of which are described in the company's filings with the SEC, which includes today's press release.

If any non-GAAP financial measure is used on this call a presentation of the most directly comparable GAAP financial measure for this non-GAAP financial measure will be provided as supplemental financial information and our press release now I would like to turn the call over to Michael bore co founder and Chief Executive Officer.

Her of cartilage.

Thank you Susan good afternoon, everyone and thank you for joining us to discuss our second quarter 2021 result as.

As Youll hear we are very pleased with our second quarter results, having met our unit guidance significantly outperformed our GPU guidance achieved record gross profit launched our new web experience and to date, we have opened 8 new hubs, while announcing an additional 6 hubs. It has been a challenging year from a macro industry perspective.

Bill.

All this being said we continue to experience disruption and the wholesale markets that is impacting our ability to effectively source and most desirable cars from both commercial accounts and options. After Tom discusses our second quarter results I'll give more color about the current macro environment, what actions were taken to further accelerate our unit sales.

And finally, our continued confidence and our long term consignment business model Tom.

Thank you Mike.

For full details regarding our financial results.

Please refer to our press release available and the Investor Relations section of our website.

And as Mike mentioned, we are pleased with our results for the second quarter, achieving strong unit revenue and gross profit growth.

Revenues were $50.8 million and increase of 92% versus last year.

Retail unit sales were 2009, increasing 46% versus last year.

Additionally for the year to date period revenue increased to 110% and unit sales grew 61% as compared to the same 6 month period and 2020.

Our revenue growth for the quarter was driven by increases and our retail unit sales and 29% increase and our average selling price devote changes and inventory mix year over year, and overall price increases and the used car market and importantly, and nearly 100% increase and finance and insurance revenue.

Is it driven by a combination of increased penetration and pricing and products and services on unit. So.

Gross profit increased 108% sequentially over last quarter, and 53% year over year to $4.2 million retail GPU increased 84% sequentially over last quarter, and 17% year over year to $2175.

Retail GPU and benefited from a significant increase and F&I penetration and an increase in front and profits and on vehicles.

Total Q2, SG&A expenses, excluding stock compensation and depreciation were.

And were $19.4 million compared to $3.1 million and the same period last year and $18.9 million and Q1.

Q2, SG&A costs relative to last year were driven by our and management and support staff to execute our growth strategy and addition to incremental technology and marketing investments, which began in Q1.2020 1.

And total our net loss for the second quarter was $7.2 million compared to a loss of 200000 during last year's Q2, and a loss of 15 million and the first quarter. This year.

Adjusted EBITDA was a loss of $15.2 million compared to a loss of 300000 last year, and Q2 and a loss of $16.9 million and the first quarter of this year.

Now turning to our balance sheet, we ended the second quarter with cash and marketable securities of $259 million, which.

Advisers meaningful flexibility going forward. Additionally, during the second quarter, our Floorplan credit facility with ally and was increased to $40 million.

Now regarding our outlook.

For us to predict volumes and profitability and our business, we need to have a clear view into our supply of vehicles.

And our clients have historically been able to predict the remarketing volumes and part based on new vehicle delivery schedules.

We currently lack the appropriate visibility needed to predict the timing of when our supply chain and will return to normal and therefore, we believe it is appropriate to withdraw guidance at this time.

Mike will further discuss the macro environment that led to this difficult decision, but given the uncertainties and the marketplace. We have determined that this is the appropriate course of action.

For the substantial portion purchased at auction.

Due to the nature of owned inventory versus consigned inventory combined with seasonal pricing depreciation. We expect this new mix will apply pressure to gross profit for the balance of the year.

In addition, while our new hubs performed well at the beginning of the year, when we were selling and predominantly consigned inventory.

The group of new hubs as a whole are not ramping units as quickly as we originally expected also resulting in gross profit pressure.

Looking ahead to the second half of the year, despite our near term lack of visibility.

We plan to continue to make the strategic and tactical investments necessary to further establish the base from which we expect to scale and.

And nationwide vehicle consignment and sales marketplace and long term.

I'll now turn the call over to Mike to discuss how we are operating in line and this current environment. Thank.

Thank you Tom.

Taking to mitigate the disruption and third I'll talk about the investments we are making to ensure the long term growth and success of the business.

With respect to our supply chain starting in late Q1 and into Q2, the broadly discuss chip shortage, which decreased the availability of new cars and the increase and wholesale prices resulted in fewer used cars being available through our commercial clients in light of rapidly increasing wholesale prices in relation to retail prices the <unk>.

<unk> service offering became less appealing to a retail remarketing clients are.

Our largest corporate consignment partner's decision in may to pause consignments further exacerbated these challenges Additionally, and similarly to our peers sourcing attractive inventory at reasonable prices for wholesale auctions and other competitive sources became unusual and challenging.

We performed well and Q2 with this competitively sourced inventory as pricing was down and unprecedented rise and as we begin to see prices peak and begin to recede and we've seen a more challenging profitability environment and the third quarter to date compared to second quarter, which we expect to continue until the market normalizes.

Our consignment inventory due to the fee structures, we utilized with our accounts provides us more predictable profitability than owning inventory. It's frankly the reason why we believe so strongly and our business model and are excited for the market to return to normal and our clients to increase their consignments.

Which we have had to stop all of our hubs with 8 new openings year to date and several more coming up we are reliant on our new high performance to achieve our growth long term. So what have we done about this disruption to get inventory to appropriate levels. We did 2 things first we began sourcing much more heavily from competitive channels.

Outside of what we're doing to address the short term impact of the industry. What are we doing to ensure the long term growth and success of the business.

1 we've grown and continue to grow our geographic footprint and our team too we're investing heavily and building our brand through our new marketing campaign..3 we are significantly upgrading our technology for we are taking actions to continue to improve our unit profitability and 5 we are growing our relationships with some of the top.

Corporate consignor and the industry, so that when the market returns to normal we expect to have more access than we have ever had to consigned inventory.

More than doubling our inventory and processing capacity, we have also announced 6 additional new hub so far on our way to our goal for the year of adding 14 to 16 hubs.

We believe that continuing to build out our national infrastructure will put us in a strong position to take advantage of our unique business model when industry conditions normalize.

Second we have very recently launched our first ever major brand campaign designed to increase our brand awareness and introduce many many people to the concept of vehicle consignment.

The campaign highlights that our guests are not buying used are consigning because they are cheap they're doing so because they are smart crowd independent and pragmatic.

In addition to building brand awareness and driving unit sales, we believe it will support new hub launches and provide sustained support and key legacy markets. We believe this campaign will have greater and more effective reach than our previous marketing initiatives and look for the campaign across social digital radio and TV.

Small volumes of inventory from this account, but it's still too early to tell how significant the relationship will be to our overall sourcing.

In the meantime, we believe that our investments and 2021 put us and a favorable position with the right infrastructure and human resources in place to take advantage of the consignment market when it reaccelerate.

We will now take your questions.

As a reminder to ask a question you will need for grass star 1 on your telephone and with you all year.

Question for Keith Please standby, while we compile the Q&A roster.

Okay.

First question comes from the line of Sharon.

<unk> of William Blair.

Hi, Good afternoon, I guess, there was a lot and there.

To talk about but I guess.

And how just given that there is an industry wide dynamic.

And right now how are you able to sound so certain that.

These stresses you're seeing are.

And of almost all externally related as opposed to maybe some internal stress related to the pace of growth.

And I'm referring to.

And then how 'bout bonanza and the sell through.

Thanks, Sharon for the question, Yes, I mean the key.

Industry related.

<unk> that we've seen over the course of the year really related to Covid.

Our.

The lack of new cars being delivered to our clients.

This is a big 1 I mean, it is dramatically reduced the number of consignments that are coming from these accounts because they don't have and new cars to replace their old cars with <unk>.

And the rapidly increasing wholesale prices that we are beginning to CV and of these are 2 events it.

And in my history, and this industry, we have never seen anything close to it and they are having a meaningful impact on our ability to source the types of vehicles, we like to sell and and.

The predictability of the profitability that we like to see with what we do sell.

So.

And just for as an example, our inventory today is at a meaningfully higher price not just related to the increase and wholesale prices and retail prices, but also due to the mix and mix shifts and the types of inventory that we're getting from the auction versus the types of inventory that we were regularly getting from.

<unk>.

Accounts.

As an example, probably 30.40 plus percent of our inventory used to be and that under $15000 range and it's now about 10%.

And that is inventory, obviously that turns the fastest and so.

We're pretty confident that these macro industry trends that are fairly uniquely impacting us.

A huge part of the stresses we are seeing.

I guess.

For that.

You mentioned consumer sourcing and Ive heard the radio ads at least and Chicago.

Can you talk about how that's ramping I know that would be and longer term trajectory, but any kind of metrics there might be helpful. And then I guess secondarily I mean, we're really not hearing from other publicly traded companies that they're kind of having and consumer balk at the price points.

That are out there so what why do you think Carla.

Is that maybe more than some of the others that debt we're aware of.

Did you say half consumers bulk that we said.

Okay.

Because I think you were mentioning and higher prices as being 1 of the issues with new hub ramps and.

It doesn't appear with any of the other companies that have reported thus far that they are seeing.

And you know consumer resistance to the prices if that makes sense.

And maybe.

And my point wasn't clear enough.

And we.

The volume of vehicles that we're selling that are and the $30.40 $50 range versus what our average has been since we started the company is much higher and as you can imagine the number of people that can afford a 40 or 50000 hour car and has far fewer than the number of people who can afford and are looking for.

10 to $15000 car.

Our average over the last several years has been in the teens to hot and really low teens to high teens and over the course of this year, it's pushed up meaningfully from there as a result of the types of inventory. We're getting now we are selling a lot more higher priced inventory than we've ever sold in the past and we believe we are building.

Good brand for that type of vehicle, but the sell through rates that have always kind of gone into our model and how we predicted the business have been based on sell through rates, both our average inventory, which has been in the teens non for 'twenty.

It's less debt consumers are balking at price points.

This is a new type of inventory that we're selling and it comes at it.

Different sell through than the averages that we've seen over the course of the company's history.

Okay. That's fair and then on the consumer sourcing do you have any kind of recent metrics on the uptake there.

Yes so.

We have increased marketing as you mentioned.

And for consumer sourcing through consignment and through consumer and consumer sourcing through buying.

We have seen a meaningful uptick off of a small base so consumer sourcing dropped when the wholesale prices were ramping up dramatically.

And consumers found that they could get.

Very hefty prices from dealers and.

And the consignment operating just like it was with.

With our corporate consignment accounts became temporarily less enticing due to the kind of shift and wholesale prices as as compared to retail.

And as we're seeing that revert to normal trends.

Yes.

And that group and so we're seeing very good early results and those efforts.

And then last question have you considered kind of pausing and are delaying some other hub openings just given the external environment is challenging.

We haven't yet.

The structural it's very obviously very difficult to predict when.

Oems will begin to deliver when the pricing environment will return to normal.

But it's not hard to predict that it will happen and and so we predict that it will go back to normal. We just don't have a good idea of when but what we do know is that having hubs.

Covering more of the country being able to reach more guests more sellers more buyers.

That is what will drive the growth for this business going forward and so we still believe strongly and our our ability to grow this business with really at the top of the pyramid with really hit the bottom of the pyramid with new hubs being developed.

Thank you.

Thank you Sharon.

Next question comes from the line of Gary West Avino of Barrington Research.

Good afternoon.

Okay.

Couple of questions here.

Yes.

Believe them.

And we don't really disclose that but I would say.

As we went through the quarter early Q2, we actually had sold down on inventories at the end of the first quarter.

And so we were actually trying to source more inventory and.

And so our sell throughs were actually accelerated during the first part of Q2 and then towards the end of Q2, as we got more fully inventory and sell.

Through slowed some and it was probably more pronounced and some of the new hubs.

At that time, just because it was difficult to get for full mix of inventory that we were looking for.

And those new hubs and we're relying solely on auction and buys at that point for the new homes.

Right Alright, well is.

I mean.

The fact of the matter is that the prices are starting to come down a little bit right at.

At retail and if your average days to sale.

Our increasing and you've had to go out and pay up for inventory youre definitely going to have.

A margin squeeze there but.

How much is <unk>.

You're talking about pricing how much is that come down though over the last couple of weeks or so from where it was maybe 2 months ago at retail.

Yes.

It's difficult to give you a number on that because it does depend on price point and type of vehicle and location and all of that what we do know is debt we will likely face.

<unk> pressure heading into the last half of the year I think part of that is seasonal I mean, typically this time of year, you do see some pressures and into Q4.

Fortunately, we have done a phenomenal job on the back and with F&I growth.

And nearly 100% quarter over quarter and that really does.

Doesn't it doesn't solve all problems, but it really is helpful. As we start seeing more front and pressure we have the backend and that's growing to support overall GPU.

As the Oems eventually start ramping up production how much of a lag do you think theres going to be from at the time that production starts ramping up say sequentially. We go up for 12 months, how much of a lag before it starts really benefiting your business and gets you back to where you could be with the consignment model versus per.

<unk> the bulk of your cars as you are doing now.

Yes, that's a great question Gary.

And in quarters past or in calls past, we've taken and attempted guessing.

We have not been right on that in reality.

They are going to ramp up.

Manufacturing they are going to distribute there are several channels through which they have to distribute.

The dealers the rental businesses, our clients et cetera, and how.

What order they do that and the volumes that they do that and it's still a mystery I will tell you that months ago. When we were pulling our clients on what they thought they would begin to get deliveries they were pointing towards early summer late spring.

And that is clearly has happened so and they were 1 step closer to the supply chain and we are.

So the best we can do is.

We'll talk to our clients and get their best guess as to when deliveries will resume but even there kind of throwing their hands up in terms of guessing.

And then just last question.

Used $70 million of cash the first 6 months of the year, we're going to see a cash burn similar to that for the next.

For 6 months.

Yes, I think youre pulling the number from.

And cash flow statement from operations. There is an offset to that was the floor plan and financing.

You see a build of inventory of $36 million, I think and the 6 months and it.

So a big order for $29 million and the floor plan. So that offsets some good part of that 70% that being said, we are seeing about a $20 million cash burn from operations and the first 2 quarters for the year and then we've had some capex of about $10 million as well. So that's what we've seen for the first half.

And probably would be something comparable to that over the last half of this year.

Okay. Thank you.

Thanks, Gary.

Next question comes from the line of carrier and Choi of Lucky.

Hi, Thanks very much.

A couple of questions first can you.

Give us a sense of what Asps is now versus historical and where you think it may settle out by the time, we're at kind of the end of the calendar year.

Yeah, Yeah. So ASP has gone up I don't know and I don't know the exact number for the quarter.

But it has gone up meaningfully and we were that day.

Point within the last couple of years, we were in the low teens.

I think by.

By the end of.

By the end of 2020 and into 2021 way or and the high teens and we've gone over 20 meaningfully over 'twenty.

And obviously part of that is just the rising prices of cars. So if we were selling the exact same car and my guess is we would have gone from the low teens for the high teens, but we're not selling the exact same car we're selling.

A higher price car as we go forward, where we expect it to.

Settle as we do think wholesale prices will come down a bit although that will probably take a while or it might and might not come down as quickly as it went up.

Or or in total as much as it went up.

And we will probably continue to sell the higher priced cars that we've been selling I think we started to build a good following for buyers of cars and that at that price point.

But we will certainly as the consignment volume comes back we certainly do expect to see a lot more vehicles in the lower price point for sub 20.

And that will likely bring our asps down, which frankly were we're looking forward to.

Those lower ASP cars, we've seen.

And through at a much brisker pace than the higher ASP cars, and particularly on consignment. When we're more of a flat fee program. We really wanted to turn cars quickly and the asps and not as important to us in terms of overall gross profit.

No I understand that it's just a question of where the overall landscape as that is relevant for you but.

Yes, so youll.

Youll recall in May.

Decided deposit relationship because they were seeing tremendous increases in wholesale pricing.

It would give them very quick opportunity to sell at very attractive prices.

Which we understood.

We did anticipate that win.

And that wholesale retail spread began to revert to kind of normal debt, we would get a call from them.

And within the last couple of weeks they reached out proactively and said we'd like to start setting new cars again, we started taking small handfuls of cars over the last couple of weeks is still very early.

And the restarting of the relationship, but we're seeing good vehicles coming in and where we're.

And we're excited to be working with them.

Okay and then just my last question is.

The new have that back to a prior question I guess given that you are less able to consign and you've indicated in the past that new hubs are obviously much more reliant on that versus.

Used vehicles for consumers why wouldn't you take a pause and the new hub opening and tell the landscape kind of reaches a better equilibrium.

Yes, there are several reasons, 1 and there is a little bit of a runway.

Getting these hubs opened finding the locations negotiating leases getting them set up and so really the hubs.

Hubs for this year are for the most part planned and ready to go and even trickling into 2022.

That's that's kind of operationally why but structurally is unless we or anyone believes that OEM production will not will not return to the levels that it was that before the supply chain disruption or that wholesale prices and retail prices will not revert to <unk>.

GAAP that is consistent with historical norms.

Our growth is still predicated on reaching more of the country with our offering and that happens through these new hubs that we're opening we still remain very confident in.

What we've driven and this business over the last 10 years, it's unfortunate that we're experiencing this industry issue right now.

But we're excited to kind of get back to what we've seen for the.

8.9 years before Covid.

And where our consignment offering was very attractive to these companies that we're getting new cars in and having old cars that they needed to get rid of.

Okay. That's helpful. Thank you.

Thanks, Karen.

Again to ask a question. Please press Star then the number 1 on your telephone keypad.

Next question comes from the lines and Manuel Rosner of Deutsche Bank.

Yes.

Yeah, Hi, good evening everybody.

Okay.

Hi, Emmanuel how are you.

Good good so.

The first question as you were mentioning sort of like these 2 and.

Industry trends.

Arch headwind.

Lack of new cars being delivered to clients and then also the increased.

Increased wholesale pricing what would you say the.

Larger factor in terms of impact and your business and when you speak to your typical consignment partner do you find that day.

Just not selling cars at all because they can't get New Orleans or do you find that they are selling cars, but they're doing it through different channels and the reason I'm thinking about it is obviously no 1 can predict coming for black unfolds going forward, but coming at it from the automotive side.

I definitely have review around the world and the automakers production through and sort of like normalized but.

And the wholesale pricing still seem to be able to see pretty high level. So just curious, which 1 is most impactful if you could tell yes.

Yes.

Hard to tell and.

Exactly but.

I would say that the lack of inventory is a key driver is the key driver.

And with 1 of our top accounts with whom we met recently they have added resources to work with.

And to work on our relationship we are getting the opportunity several times a day to look at the few units. They do have to sell but the lists of units that they do have to sell is tiny fraction of what it would be if they were seeing meaningful deliveries of new cars.

So that they can then send out to their clients so our relationships with our.

Top clients are very strong we still we have a strong and growing team of account management and.

People that work with our top corporate accounts and everybody is just frankly frustrated that these new cars have been shown up yet and it really.

And we anticipating the arrival of them so they can flip their fleet.

And and bringing in cash.

And reduced the age of their fleet.

So that's a key 1 on the pricing and we said this in previous calls.

For the pricing going up.

The problem and not the price being high and so now that we're seeing the pricing level off and begin to recede, we do anticipate that the GAAP between wholesale and retail will return so that will be that should be and it will be we believe the smaller portion of the issue and eventually it won't be an issue.

And when the wholesale and retail price GAAP returns and it's visible to our clients who are trying to consign cars.

Yes.

Okay and is there.

Is there a timeline you were thinking for that specific piece.

The OEM piece, but.

The GAAP between wholesale and retail.

Reaching a level, where it makes sense for your traditional partners too.

You are more units towards consignment.

Yeah, I mean, just that we are seeing the beginnings of it it's very difficult.

We haven't we haven't predicted the end of the structural changes very well and the past and we'll just.

I'll just let you know that we're seeing that we're beginning to see.

Some positive tail.

Tailwind there.

Okay, and so then Conversely, then theoretic.

While some of these issues are still ongoing and your share.

And that shifting and a little bit the sourcing to competitively source vehicles.

I guess how.

Sure.

How well structured and positioned are you to sort of be able to execute these well.

Do you have the team to do that you have to balance sheet like are you actually able to share with like a rock.

Good business.

And if that goes on for multiple quarters, how should we think about that.

Yes.

For $259 million at the end of the quarter and cash on the balance sheet.

And.

And we've done.

Tremendous amount of hiring a very talented experienced teammates who are getting the job done who are opening these new hubs.

For staffing them up quickly.

The processing centers are getting ramped up.

We're building relationships with new accounts strengthening relationships with our existing accounts kind of doing.

Doing what we need to do to be prepared for when the volumes of inventory come back and the.

Basically the overall market normalizes.

Yes, I'm actually curious about the before that happens so like the intermediary period between now and.

And until conditions normalize like should we look at those quarters of business and sort of.

Sort of like suboptimal quarters, because of the way things are sourced so do you actually have always true.

Making this.

As you can business in the meantime.

Yeah, well that's a good question I mean, we are not accustomed to having to source as much of our inventory from auction as we are right now.

And so we built a very experienced team that is sourcing meaningful quantities of inventory at auction and as evidenced in Q2, they have done a great job of.

Selling a lot of vehicles at good Gpus.

As we head into the third and fourth quarter, we did like we.

I mentioned, we do think GPU will be challenged.

And it is a different type of inventory that we sold in the past, but like anything thats been new to us it's taken a little bit of time and get experience and it and then we've become good at it so.

We are not throwing our hands up and saying.

And we gave up until consignment volumes come back, we're working really hard to be.

Professionals and successful at selling all kinds of inventory at new hubs and hubs.

At any price point.

But some of that takes a little bit of time to gain experience.

Understood. Thank you.

Thank you.

I am showing no further questions at this time I would now like to turn the conference back for Mr. Michael Moore. Please go ahead.

Okay.

Giving growth and a very volatile and complicated market and we're looking forward to the back half of the year as we continue to open hubs ramped newly opened hubs and invest and strategic marketing and technology to drive results. We look forward to speaking with you again soon and thanks and have a nice evening.

Ladies and gentlemen, this concludes today's conference call.

Thank you for participating you may now disconnect.

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