Q3 2021 Carlotz Inc Earnings Call
[music].
Yes.
Good day, and thank you for standing by welcome to Carla third quarter 2021 earnings call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded.
You require any further assistance. Please press star zero. Thank you I would now like to hand, the conference over to your first speaker today, Ms. Susan Lewis Vice President Investor Relations for cartilage Ma'am. Please go ahead.
Thank you good afternoon, everyone with me on the call is Michael Mueller co founder and Chief Executive Officer, and Tom <unk>, Chief Financial Officer before we get started I'd like to remind you of the Companys Safe Harbor language.
You're all familiar with the statements contained in this conference call, which are not historical facts.
Maybe 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 that 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 in our press release now I would like to turn the call over to Michael bore co founder and Chief Executive Officer.
Carlos.
Thank you Susan good afternoon, everyone and thank you for joining us to discuss our third quarter 2021 results I want to start by saying that despite the headwinds we have faced this year from an inventory standpoint, I'm encouraged by what our team has accomplished both during the quarter and year to date during the third quarter, we achieved record revenue of 68 million.
More than double our revenue last year. This 128% growth in revenue was supported by more than doubling our hub footprint of 58% increase in units sold and a 190% increase in F&I revenue versus last year.
We started this year with exciting growth object objectives for our hub footprint brand awareness and technology transformation all to create more value for our stakeholders through our unique consignment business model the significant industry disruption caused by the ongoing chip shortage and the compression in the typical margin between the wholesale and.
Retail pricing in the first half of the year, however caused us to make several tactical changes even with these challenges we've accomplished a great deal first we more than doubled our hub base opening 12 units year to date for a current total of 'twenty versus only eight at the start of the year.
During the third quarter, specifically, we opened large hubs in Denver, St. Louis and Atlanta fourth quarter to date, we've opened hubs in Plano, Texas, and Pomona, California and have a couple more that we have announced but not yet opened this year.
While we have increased the number of hubs by 150% year to date, we have increased our inventory capacity by 226% with these larger hubs.
Second we hired many talented teammates to build out new expertise in areas like product development, while also expanding our finance technology and marketing Proficiencies.
We also hired many talented teammates in the hubs who've been on the frontline supporting lead conversion unit sales and driving significant growth in F&I. We're proud of the fact that in the midst of one of the greatest U S labor shortages, where more than 90% staffed as we continue to grow.
Third we have launched a marketing campaign designed to increase the awareness of our brand and focus on our consignment business model as we enter new markets. Most people don't know the car lots name nor do they know what consigning their car for more money could even mean for them, it's been challenging and fun to introduce our unique business model and value proposition.
To markets around the country and watch it grow.
Fourth we've continued our technology transformation, focusing on increasing consumer engagement and improving the functionality of our website. There's certainly more to do on the technology roadmap, but we are focused on enhancing the user experience and increasing conversions.
And lastly, we've been flexible in how we source inventory and navigate consignment headwinds and appropriately stock our hubs, while we still cant predict when things will be back to normal I'm encouraged by the sequential improvement of unit source non competitively each month during the quarter and into the fourth quarter and anecdotally have seen signs that the chip shortage.
It's getting the attention it deserves from the companies that can work to solve the problem.
Now, let me elaborate on sourcing given its importance to our business model as Youll recall in Q2, one of our top accounts paused consigning inventory to us as we were also seeing a compression in the margin between retail and wholesale prices.
Significantly affected the inflow of vehicles from our traditional sources, which necessitated increased auction sourcing to fill up our hubs with inventory.
As we worked to improve all of our sourcing channels in the face of this adversity, we have made progress in lessening our reliance on auctions to source vehicles, while monthly sourcing can vary based on seasonality and growth needs in June about 70% of our inventory inflow was being sourced adoption while in October that number was less than 50%.
Yeah.
In part the increase in unit sourced noncompetitive Lee this past quarter is a result of new accounts, the rekindling of a prior account and the wholesale retail pricing environment, making consignment more attractive than in the recent past.
As we mentioned on our last call the partner, who paused our relationship during the height of the wholesale pricing disruption has returned and is now consigning again accounting for about 10% of our sourcing volume in October.
In addition, we have added new corporate partners to our sourcing mix, while seeing more corporate sourcing partner pilots in Q3 than in Q2.
Also encouraging from a sourcing perspective is the increase in units sourced from consumers through consignment trade ins in purchases. This is a primary focus for us given the attractive variety of inventory faster sell through and the relatively higher GPU generated from these units.
As our name recognition and our brand grow in our new markets combined with the efforts we are placing on growing consumer sourcing, we anticipate continuing to see unit growth in consumer source vehicles going forward.
While our noncompetitive, we source inventories improved incrementally in Q3 versus Q2, the inventory purchased at auction during the last two quarters pressured retail GPU during Q3 and resulted in an increased inventory reserve for owned inventory at the lower of cost or market. Historically, we have not needed a significant reserve because the majority of our unit.
Have been consigned versus owned with a shift over the last two quarters to more owned units and the associated price depreciation on these units owned we increased our inventory reserve. The factors that caused the increase were as follows first we purchased a significant amount of inventory at auction while wholesale prices were high these auction unit.
It can be less desirable than commercial or consumer source vehicles, and can experience higher depreciation and longer days to sell in addition, we purchased vehicles at higher price points than our historical average. These factors have resulted in the average age of our inventory increasing and the increase in the reserve as you may know the gross profit used to calculate REIT.
<unk> GPU includes the lower of cost or market reserve booked an inventory is still on our balance sheet and divided it by the retail units sold during the third quarter.
Including the increase in the inventory reserve of $935000 recorded in Q3, our retail GPU was $939. Excluding the increase in the inventory reserve our adjusted retail GPU for the units actually sold in Q3 was $1115.
Tom will discuss we expect our retail GPU to improve in Q4 versus Q3, while inventory continues to age into Q4, we're making good progress in selling the aged units this quarter along with the newer inventory, we are sourcing and see that through the retail and wholesale channels, we should be able to reduce our aged inventory to more normalized levels over the next several.
<unk>.
The offset to these pressures on retail GPU is our strong backend of profitability like Q2, we saw significant growth in F&I as we mentioned on our last call. We have seen increased penetration and an increase in contribution dollars from several F&I products as we increased training enhanced our technology and added new.
Products and services.
We're extremely pleased with these results and look to continue this momentum in Q4 by adding several financing partners, who will help us to better serve our guests who find themselves at the lower end of the credit spectrum previously without the right products to serve these guests they have the lowest conversion rates, while accounting for the majority of the credit profile submitted at all.
Hubs and online.
With a more diverse with more diverse financing options, we expect to better meet the needs of more guests, which we expect will improve conversion rates.
Some of these financing partners have just come on board and more will be added during Q4 2021 and early Q1 2022.
Even with the industry disruption we've experienced this year I remain optimistic about the long term opportunity of our consignment business model to drive long term value for all of our stakeholders as we said on our Q2 call. We have not seen a structural change in the industry that would prevent us from returning to that model when the market normalizes.
We are making investments across all aspects of our business that will allow us to be in an even better position when the industry emerges from the chip shortage. As you know we have invested in expanding our hub footprint in both new markets and fill in markets. This year. These new hubs are larger and have more processing capacity and our mature hubs, allowing us to do more work in.
<unk> and address inefficiencies in the process.
And while finding corporate consignment units has been more difficult due to the industry challenges our retail <unk> marketing team has done a great job of maintaining our current corporate sourcing partnerships, establishing new relationships and increasing the number of pilots. These relationships are core to our business model and will be a crucial factor in allowing us to <unk>.
Further increase our consignment mix as the market allows.
I would be remiss, if I didn't discuss our marketing initiatives, we have increased our marketing investment in key geographies and launched our first major brand campaign, which aims to debunk preconceived notions about pre owned vehicles and remind people that it feels good to be a used car person. It's a big platform that allows us to increase brand awareness and.
To help introduce people to our unique offering.
The team will build on this campaign by focusing on the quality of leads in driving conversion all of our initiatives and investments are in place to provide the best used car customer experience through our differentiated business model. We look forward to executing on our growth plan to achieve this goal I'll now turn the call over to Tom to present, our financial results.
Its Tom Thanks, Mike.
For full details regarding our financial results. Please refer to our press release available in the Investor Relations section of our website.
For the third quarter revenues were $68 million.
And an increase of 128% versus last year retail unit sales were 2490, an increase of 58% versus last year.
Year to date period revenue increased to 115% and unit sales grew 60% as compared to the same nine month period in 2020.
Revenue growth was driven by F&I revenue up 190%, new hundredths of 125% and ASP growth of 34% year over year during Q3.
Gross profit was $2 million for the quarter gross profit was negatively impacted by lower front end profits on owned vehicles, primarily driven by the large volume of auction purchases in Q2, and Q3, which are now aging into and through Q4, given the macro industry challenges already discussed and.
The increase in the inventory reserve of $935000. These.
These headwinds were offset by the significant increase in F&I profits.
Including the increase in the inventory reserve retail GPU was $939.
Excluding the increase in the inventory reserve, reflecting the GPU on just the units sold in the quarter adjusted retail GPU was 1315.
Third quarter SG&A expense, excluding stock compensation and depreciation was $24 8 million.
The increase in SG&A versus last year is primarily due to an increase in compensation expense related to the increase in support staff and home employees to support our growth strategy. The increase in SG&A is also driven by technology and marketing expenses.
Net loss for the third quarter. It was $3 5 million versus a loss of 500000 booths same period last year.
Q3, adjusted EBITDA loss was $22 8 million versus a loss of 571 for the <unk>.
Same period last year.
Now turning to the balance sheet at quarter end, our cash and marketable securities were $201 million, which continues to provide us with flexibility. We continue to utilize our $40 million floor plan to support our vehicle purchases at the end of Q3, we had $24 million outstanding under the <unk>.
So our plan.
Now moving to inventory and the inventory reserve as Mike explained earlier until Q2 of this year. Our inventory was primarily from Simons our inventory reserves were insignificant until Q3, when our inventory composition became mostly owned versus consign, our owned inventory valuation has been impacted.
A couple of factors.
First we purchased a significant amount of inventory from auctions when wholesale prices were rising. These units purchased at auction can be less desirable than noncompetitive resource units. As a result, we are seeing price depreciation in addition to the longer days to sell on these auctions purchased units.
Secondly in late Q2, we have a higher percentage of units at meaningful meaningfully higher price points, which can take longer to sell and from an absolute dollar perspective are impacted more by depreciation. These factors resulted in the age of inventory and the inventory reserve increasing in Q3.
Hi.
Going forward, we do not expect large shifts towards owned inventory and therefore, we do not expect large increases in our inventory reserve, we are managing our inventory more efficiently with the goal of ending the year with a significantly improved aged inventory profile and ready for the seasonally higher first quarter.
While we have provided some qualitative guidance today given the continued uncertainty regarding our supply chain. We are not issuing comprehensive guidance at this time. However, we expect to provide guidance on our Q4 call in March 2022.
In summary, we expect sequential quarterly improvement in retail units sold and retail GPU in Q4.
We will continue to be judicious with our corporate spend and how we allocate capital to maintain flexibility and manage through the continued disruptive market conditions and we expect to have fewer hub openings in 2022, and then in 2021.
In 2022 openings scheduled should enable us to have a greater focus on the productivity and growth of our existing footprint I will now turn the call back over to Mike for closing comments and Q&A.
Thanks, Tom in summary, while the chip shortage has certainly caused unprecedented disruption across the industry. We are focused on maximizing the returns on our significant investments made this year leveraging the assets we already have in place offering the best customer experience in the industry and building awareness of the car last name.
And what consignment means we look forward to returning to a predominantly consignment business model is the chip shortage is resolved we will now take your questions operator.
Thank you as a reminder to ask a question you will need to press star one on your telephone.
A question would you Express your county.
Please standby, while we compile the Q&A roster.
Your first question comes from the line of Gary <unk> from Barrington Research. Please proceed with your question.
Good afternoon, Mike Tom how are you.
Doing well thanks have a good.
Hi.
Mike just a couple of questions here.
You know in terms of.
Are you also still experiencing.
Some issues with getting the cars ready for sale and through.
Onto the sites onto the onto the website.
Like you had experienced earlier this year because.
The used car market is just so hot right now I'm, just trying to understand why you're getting depreciation and the prices when everything seems to be flying off the shelves.
Yeah.
Yes, so getting getting the cars ready for sale has.
When we started the year and we're launching as many new hubs as we did.
<unk> was challenging for us as we were trying to hire up teammates to run our new processing centers.
And getting the technology and the equipment in place very quickly I would say over the course of the year as we've hired awesome people filter technology got new equipment, and our new startup hubs have.
The matured our time to get a car ready for sale has come down meaningfully at our new hubs and our legacy hubs have been performing well on the time it takes to get cars ready for sale to answer the second part of your question.
Also we have also been bringing cars in and a much steadier.
<unk> so that the hubs are not kind of overwhelmed with large buckets of inventory like they were in Q2 and earlier in the year.
The cars that we source in Q2 and in Q3 as a result of the temporary pause of one of our top accounts. In addition to seeing a lot less consignment volume due to the wholesale retail pricing in version.
We were then forced to buy cars at auction at a time when cars going through auction, where frankly, not the most desirable vehicles and so we brought on a lot of vehicles that while.
A desirable vehicle, we're selling very quickly for a great price.
Not all vehicles are built the same not all vehicles have the same trim level and there were some vehicles through Q3 and really bleeding into Q4 a bit.
Just taking longer to sell.
So we're seeing we're seeing that as we bleed through that that <unk>.
Early inventory that came in and then combining it with.
The inventory that we're getting nowadays shifting a little bit more to consignment noncompetitive, we sourced inventory.
We're seeing.
All of that improve.
Okay.
And then in terms of some of these accounts.
Legacy account coming back to you as well as Youre getting some new accounts on the commercial side.
One would assume that they're not getting the.
Desired results from the auction side of the business is that.
More or less the case, they're they're not getting the price realization that they thought they could.
Well.
In a normal environment or even close to normal retail will be higher than wholesale so what we've seen in the first nine years of being in business and then <unk>.
Since the early part of this year is there is a gap between wholesale and retail and that's really where that's really the value that we add so when in Q2. When many were seeing that in some cases wholesale prices were above retail it was very difficult to make the decision to send.
Car that needs to be remarketed to retail.
We have not seen inverted wholesale higher than retail.
Have seen over the last several months that the gap between wholesale and retail has been even in the last several months has been more.
Volatile than we would like to see but we're definitely able to show our accounts.
Left over what they could make at wholesale and <unk>.
We're looking forward to a time when that becomes a little more stable.
With our accounts.
It drives a lot of value to them when they can send us vehicles and make $1000 plus over wholesale.
Okay. Thank you.
Youre welcome.
Thank you. Your next question comes from the line of Emmanuel Rosner from Deutsche Bank. Please proceed with your question.
Thank you very much.
My first question.
Is around the environment Youre seeing for this consignment model I think some of you.
Earlier remarks suggested that you're seeing at least sequentially. Some improvement there and just wanted to know if you could give us a little bit more color. There obviously wholesale prices continue to reach new records.
And so I guess, what are you seeing that sort of improving conditions for the consignment model.
Yes.
At the end of the day it really comes from a couple of different sources. One we have legacy accounts accounts that have been working with us for many years and there was a period earlier in the year, where they really have to think hard about sending a vehicle to retail because the wholesale prices.
We're increasing at such a dramatic right now eventually the retail price adjusts and Theres, a gap between wholesale and retail and that's where we add value and so in Q2, we saw our commercial account inflows.
As low as 10% of our of the vehicles that we were sourcing.
And that was kind of mid year and ever since then we've seen significant improvements over that.
As we mentioned in our remarks.
And 50% of our vehicles now are sourced.
Through competitive channels. So we're getting much more now than we had than we were getting earlier in the year from.
We're getting less it from the auction and more from our commercial accounts and also seeing nice improvements in consumer sourced vehicles.
And thats, because we are starting to be able to provide significant value to these accounts who have vehicles that.
That they otherwise would've send to auction if the gap between wholesale and retail was too narrow.
Okay understood and I guess, just thinking a little bit deeper on the sourcing part and maybe.
Anecdotally, we've noticed a decent ramp up Tesla vehicles on the carload website during September and October and they seem to be concentrated in like two hogs near one another.
California and so.
In light of this geographic concentration is very quick ramp in units.
Are you able to comment on weather.
These are consigned or in the owned by the company and if Theyre coming from a fleet manager or are they coming from Tesla any color you're able to provide on how are you.
Dealing with the sourcing.
Sure well.
We like many are very excited about this transition to evs over time, and we're seeing it.
Our guests people will buy cars from us.
We have great demand for electric vehicles, we think it's going to be at play a big part in the future of transportation.
As we've managed through this year, we picked up some great new accounts.
A couple of which one specifically began sending us it's a financing company began sending us.
The two or three or four year old test was a bunch of different models just to test out what the results could be the company was on the West coast. It was.
These vehicles are on the West coast.
We at the time in California, only had our Bakersfield hub open and so we use our Bakersfield hub as a testing ground for this account they saw very very.
Good results from the first many that we sold for them both in terms of lift in days to sell and so they started sending us more and more vehicles and now as we and we then we opened up Pomona location, a few weeks ago started sending some there and because of that because the results have been great. We've started to actually send them around the country, which is one of the <unk>.
Benefits that we talked about when we talked about geographic expansion being.
A key part of our growth strategy is that it makes it really attractive for sellers of vehicles, our clients to be able to spread their inventory around the country and so even though there is a meaningful cost to ship a vehicle from California to Chicago, Texas, Florida, they're seeing tremendous lift on the sale of these vehicles.
And we're sending truckloads around the country. So that we can spread this inventory around and generate more eyeballs on the vehicles. So it's been a great new account for US we are very excited about it.
And we see a bright future for our relationship with this new account.
And I guess.
So my understanding.
These are consigned vehicles is that right.
They are consigned vehicles thats right.
Okay, and so what would be a successful outcome of these partnerships.
With the inventory from this.
This account growth significantly.
Yes.
Yeah, No I mean, they have they have a lot of vehicles.
Manage all types of vehicles, so it's not just teslas.
But <unk> been financing company, they just have a specialty in.
Two to three year old tesla's, but they've been bringing us other vehicles as well.
<unk> been testing.
Some.
Some of their repossessed vehicles as well so.
We're really kind of excited about this account branching out now most of their vehicles are on the west coast.
So unless we see the types of the kind of lift the magnitude of the lift that we're seeing on the teslas across other vehicle types that will probably stay on the west closer close to close to it.
Two locations in California, we have a location in Seattle.
And we've announced some other in Denver, and we've announced some other locations that are kind of west of the Rockies. So probably most of the inventory will stay in that region, but to the extent, we can show significant lift will be spreading those vehicles around the country.
Great. Thank you very much.
Youre welcome.
Thank you. The next question comes from the line of Sharon Zackfia from William Blair. Please proceed with your question.
Hi, good afternoon.
So I'm sorry, I missed the first part of the call.
For for quite a bit trying to get in so hopefully I'm not asking.
Maybe you've already answered but.
In terms of the pullback on hub openings and 22 are you already fully committed with leases I mean, there are there any financial ramifications from dialing that down a bit and can you give us any metrics on how many leases you have signed at this point.
Yes so.
The process of opening hubs.
As you would know as many months process that it can be many years frankly in some cases.
But in many cases, we have leases that we have scheduled to open as you know throughout the rest of this year and into next year. So we're not pulling back from any.
Any commitments that we've made to date, but we're excited about the hubs that we have planned for the rest of this year and into next year.
This year was a dramatic growth year for us opening 12, so far with a few more on the way.
Next year, we will also be.
A big growth year for us just not as big as it was in terms of new hub openings as we saw this year, we will have more information on that.
The new hub rollout plan.
Early next year, when we when we talk about the full year.
Okay. That's helpful. And then did you did.
Could you comment at all on the kind of customer response to the kind of more pervasive.
Multi media.
<unk> been having and I know I've seen a lot of billboards in the Chicago area. So I'm just curious on.
If you can if you have any.
Metrics on how that's been driving traffic to the website or traffic into the stores and how youre analyzing that rely on that.
Yes, we've seen.
In terms of like unaided awareness and.
Site visits we've seen an increase unique visitors are up 31% for example.
But probably still too early to tell.
Got an anecdotally very positive feedback from guests who are starting to understand what it is that we do.
And so it's exciting and we think it's we think it's a campaign that really kind of makes sense to people.
And to understand what it is that we do gain a lot of pride in being a used car person, which obviously historically has had negative connotations. So we're pretty excited about rolling it out.
It's being rolled out in certain markets, obviously, you've seen it in Chicago and.
So far we're excited about the early results.
Okay. Thank you.
Thank you and once again, if you have a question just press star and then the number one on your telephone keypad.
Next question comes from the line of Karen short from Barclays. Please proceed with your question.
Hi, Thanks.
Just I wanted to see if you could give a little update on timing with respect to getting the car actually ready for sale like today versus what it would've been earlier in the year.
And then wondering if you could just give a little bit of color in terms of finance and insurance.
Obviously that.
Significantly so a little color on that.
Sure.
Well.
Over the last year, I'll say, we had big inflows of vehicles.
That were not evenly.
They weren't coming in at a regular cadence. So we had kind of surges of inventory that definitely slowed us down.
That was when we had eight hubs at the end of last year and very early part of this year then over the course of this year. We did several things to ensure that we can take in the volume of inventory that we need to to hit.
To grow like we want to grow and that was really a few things one it was hiring very talented people in our processing centers.
Can process vehicles quickly and know what to do to it was some technology backend and three was the equipment that we've.
Put into these hubs that enable more and more of our work to be done in house versus outsourced.
That's all kind of internal and then with our inventory team and working with our consignor, we're working very hard to spread the inventory evenly over the hubs and ensure that we don't have huge inflows of inventory that bogged down any one.
Assessing center now with new processing centers, it's always going be a little slower than with ones that have been around for a while.
Just kind of.
Just like anything new needs, a little bit of time to that.
Get the processes working well and so as a lot of these hubs that we opened this year mature we're starting to see.
The time required to getting vehicles ready for sale coming down.
At our mature hubs, we'd like to get a vehicle up on the website.
Ready for sale definitely within seven days, we obviously have anomalies, we have vehicles that can be ready in a day or two and others that take a little bit longer given certain reconditioning needs at our new hubs when we start out we're probably well.
Quite a bit more than that but very quickly we are shooting for that one week turnaround time on average.
With different needs.
Germany, how long it takes for any specific car, but we're seeing that as a result of our investments in people technology equipment, and then ensuring that the inventory is spread out evenly that we're able to process. These vehicles quickly. So that we can get get them sold quickly.
Okay.
Oh, and I'm, sorry on the F&I yet.
Yes.
Earlier this year, when we launched our new website.
The online experience made it so that.
Learning about your financing and figuring out.
The backend became more intuitive and easier and that in addition to training and working very closely with our.
F&I vendors has.
Definitely increased our as you can tell increased our F&I both penetration.
And the profitability that we make on the back it's a huge benefit to us and supports our GPU in a great way.
And we see that continuing to improve.
Okay, and then just one other for me I know you've been pretty consistently saying fewer hubs in 2022, but is there any way to kind of help us frame that.
I mean, we have eight.
Modeled type of thing.
Any any color on that would be helpful.
Yes, the full the full plan for 2022.
We'll talk about it more when we talk about the year we have.
We have hubs that we've already announced.
That they're not going to be opening this year and we have a few more this year, but we have several that we've announced that.
Will be next year, so the Q1 plan.
Like internally is baked, but we'll talk about the full year rollout when we talk to you again in early part of the year.
Okay. Thank you.
Okay.
Thank you. The next question comes from the line of Gary <unk> with Barrington Research. Please go ahead.
Hey, I just wanted to follow up questions here I mean, Mike.
How has the commercial not the commercial consignment the consumer consignment.
<unk> model, how is that being accepted.
With the retail sellers I mean are you starting to get some traction there.
Yeah, Gary as you know Thats kind of our DNA. That's how we started we were essentially 100% consumer consignment back in 2011 and as we as we found the commercial consignment business and the volumes are huge volumes that can bring in we just we.
The consumer consignment piece of our business to just grow on its own.
I would say at the beginning of this year or earlier this year, we really decided to lean back into the consumer sourced.
And we spent a lot of time and energy, making the consumer consignment products that we offer a lot easier we've hired very talented resources.
To help manage that process, we brought on people and our product team to help us build out that part of our business and we're seeing and it's a decent part of our marketing initiatives and what's great about the consumer consignment offering is that when you sell a vehicle for somebody youre essentially creating too.
Fans the seller makes a lot more money than their next best alternative in the buyer gets a great vehicle that they otherwise would have had to go to.
To a traditional dealership and pay much more for so.
What's great about the consumer business model is it.
It helps you bring you build your fan base and a new market very very quickly and so we're seeing that we leaned into it with a specific campaign in certain markets earlier this year and saw a tremendous increase in <unk>.
Leads and lead conversion and we're really doing a lot to help amplify the stories.
Of the people for whom we are selling vehicles.
It also it helps internally I mean, it's really exciting for our team when you see like massive wins for some of these sellers, who are selling their vehicle and making thousands and thousands more than they otherwise would have made on a trade in.
So it's definitely awesome part of our business one we're very proud of it it's in our DNA and it's one that we're going to lean into continue to lean very heavily into as we go forward.
But is it safe to say at this point you said in October we're less than 50% of your cars were sourced that auction is the majority of that.
Really more commercial consignment versus consumer consignment.
At this point.
Hi.
Yes, I mean, it's split not necessarily evenly, but it's split between commercial and consumer.
We don't we won't be we won't break out the specific sources, but.
It's not the vast majority of commercial.
Is it close majority.
Okay, and then I just wanted to ask is writing a lot of the stuff down you said that the.
<unk>.
Commercial account that kind of left came back.
And it's starting to supply you with vehicles.
Tab.
Have you made any inroads in trying to diversify.
<unk> of consumer.
Commercial accounts I know, it's pretty early but onetime that accountants I think given the 60% of your cars.
So any color you could give on that in terms of the <unk>.
Rest of activity to your consignment model among commercial.
<unk> would be great.
Yes so.
The account the pause you mentioned was a significant part of our business that came back but in the meantime, we've been growing across our existing accounts and bringing on new accounts.
Account and also we've grown as a business and so we're obviously selling more vehicles than we have in the past and so.
They are now the accounting policy came back is now about 10% of our of our business of our sourcing.
They have terrific cars, they sell well, it's a great partnership.
Works well for us works well for them and so it's.
It's a piece of business that we want to continue to grow.
Whether it's going to grow as a percentage probably depends more on what our growth rate is more than what their growth rate is.
But it's a great account.
Suppliers with vehicles that multiple many locations.
So we're excited to continue working with them closely.
Okay. Thank you.
Okay.
Thank you and this concludes our question and answer session I would now like to turn the conference back to Mr. Michael Bonner, Sir. Please go ahead.
Thank you and before we end the call I just wanted to reiterate our optimism regarding our long term consignment model, we're making the necessary adjustments to operate effectively and efficiently until the environment returns to normal. Thank you for joining us today and we look forward to speaking to you again soon.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Yes.
Yes.
[music].
Okay.
Yeah.
Yes.
[music].
Okay.
[music].
Yes.
Okay.
[music].
Yes.
[music].
[music].
[music].
[music].