Q4 2021 Autoweb Inc Earnings Call
Okay.
Good afternoon, everyone and thank you for participating in today's conference call to discuss auto webs financial results for the fourth quarter and full year ended December 31, 2021, joining us today are auto webs.
Resident and CEO .
Jared Rowe the company's CFO called in Hayward, and the company's outside Investor Relations advisor Cody Cree with Gateway group.
Following their remarks, we'll open the call for your questions I would now like to turn the call over to Mr. <unk> for some introductory comments.
Thank you Josh before I introduce Jared I remind you that during today's call, including the question and answer session statements that are not historical facts, including any projections statements regarding future events or future financial performance or statements of intent or belief are forward looking statements and are covered by the safe Harbor disclaimers contained in today's press release.
The company's public filings with the SEC.
Actual outcomes and results may differ materially from what is expressed in or implied by these forward looking statements specifically.
Specifically, please refer to the company's Form 10-K for the year ended December 31, 2021, which was filed prior to this call as well as other filings made by auto web with the SEC from time to time.
Fillings identify factors that could cause results to differ materially from those forward looking statements.
Please also note that during this call management will be disclosing adjusted EBITDA. This is a non-GAAP financial measure as defined by S. E. C regulation G. A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure and these steam and disclosing the reasons why company management believes that adjusted EBITDA provides useful information to invest.
<unk>.
The company's financial condition and results of operations are included in today's press release is posted on the company's website.
And with that I will now turn the call over to Jerry Jerry over to you.
Thank you Kenny and good afternoon, everybody before we jump into the quarter and our strategic goals for 2022 I wanted to briefly spend some time.
Recapping, just how far we've come as an organization. So I think as you. All know we started this turnaround journey in 2018, and we've made some really really meaningful strides towards transforming the company over the past four years.
Now during this time, we've done a lot in terms of consolidating our operations and reducing unnecessary overhead and redundancy.
We have retired a tremendous amount of technical data to greatly improve our operational resiliency and efficiency, we've replenished our key talent, including appointing industry experts to some of our most critical roles.
We've modernized our audience acquisition approach to continue providing our customers with high quality leads and we've overhauled our operational structure to become a far more nimble and better positioned for future growth across multiple revenue streams.
So essentially what we've done is we've created an organization that is much more efficient with better operating leverage all while responding to a very very challenging macro economic environment.
As a result of these efforts when comparing our full year 2021 results with our full year 2018 results, which again was the first year of the turnaround we were able to cut our cost of sales by 49% and operating expenses by 43%.
By bringing the same comparison period, our revenue declined by 43% as we reposition the company for future growth, we focused on delivering a better quality product rather than just chasing a revenue volume.
We dealt with the challenges facing the automotive industry.
And we've been able to like I said really focus on on replenishing our talent as an organization. So just to put a bit of a finer point on all of this over the past four years.
We removed more than a dollar of expense operating and cost of sales for every dollar of revenue that came out of this business, which is one of the reasons why we feel really good about our future prospects.
Now again, we've done all of this in the face of unprecedented market conditions that I do think it's important to recognize all we've been able to accomplish despite an unfavorable macroeconomic environment and where our work is only just beginning as we start to scale our vehicle acquisition business, which is really the fulfillment of our transaction enabled matchmaker strategy I do want to take the time.
I think our tireless employees and dedicated stakeholders, who have continued to support this company through this journey.
Now, let's jump into the fourth quarter.
Overall, our fourth quarter results were marked by the continuation of macroeconomic challenges and headwinds felt throughout the year, our inventory challenges pricing constraints and favorable consumer spending environment resulted in a decrease in many of our key metrics when compared year over year.
You can further context to the consumer environment, we're operating in new vehicle inventory challenges for dealers worsened in the fourth quarter.
This has significantly affected new vehicle sales across the country and extended the average time it usually takes for a consumer to purchase a vehicle.
In fact, our internal research shows that everyone's audience at scale buying at the same rate as previously reported but it's actually taking them twice as long to do so.
So again, what's interesting is the overall quality of our audience is there.
<unk> are just facing a very challenging buying environment I was taking about twice as long to buy a vehicle.
In fact, I'm sorry, one other note and I'll just make this one other note one other note about the the mass.
Zero environment, but I think that is very interesting is that the average monthly new vehicle Saar for.
For the second half of the calendar year and it's the only declined six times.
Since 2000, and so what I mean by this is when you do the when you look at the average SAR for the first six months and compare it with the average SAR for the second six months of any given year from 2000 to 2021 would you see is that it's only declined six times in that time period now that makes a lot of sense right because the automotive industry is very seasonal and most of the.
Oh, the big selling days and big selling weekends are actually in the back half of the year. The second half of the year a month seven and beyond.
This decline in that timeframe came in 2021 with the second half of the year average monthly Saar being down 21, 8% compared to the first half of the year.
That means that the average for the first six months of the year. The Saar was $16 8 million. It means in the second half of the year. It was $13. One that's where you get the 21, 8% decline, which is substantial and I'll tell you why in a second.
The second Lara.
Largest decline in those 21 years.
Was actually in the back half of 2008 and that declined 22%. So as you can see that was a very different environment, a very challenging environment, but challenging for different reason.
You can see that we've actually just worked our way through what appears to be the the worst second half in terms of total vehicle sales from a Saar perspective on the new car side that we've seen since 2000 that we believe this is directly attributable to the inventory and pricing environment that new car buyers are currently facing.
So what does this mean for Ottawa.
During the fourth quarter, we continue to intentionally operate at lower levels of media spend.
Despite these challenges we were still able to methodically ramp up our used vehicle acquisition channel and we would agree with older and with the additional revenues generated we were able to offset some of the slowdown that we experienced in our core leads business.
Now with cars or used vehicle acquisition business, we were focused heavily on scaling optimizing and integrating that that channel throughout the quarter quarter, we were able to materially improve the unit economics of our San Antonio location.
As expected we did initiate our first expansion effort by moving into Austin, Texas, which we currently sell.
Remotely through our existing operations in San Antonio.
Now this is part of our business is still in its infancy.
Each of the past quarter preparing for the broader geographic coverage that we aim to have but again, we're very excited and bullish on.
On the impact that this is going to have on our business overall.
In conjunction with our expansionary Affleck with within cars is we also spent much of the quarter focused on curating, a larger audience of consumers.
Looking to dispose of their vehicles and I'm pleased to report that within the arc and Antonio markets or revenue per marketing dollar spent has increased over 400 in 80% and the resulting gross margin per marketing dollar spent increased over 775% when comparing the first seven months of last year the last.
Five months of last year now the reason, we do that comparison because as you all know we acquired the cars whose asset.
At the end of July which means that only had an effect on the business for the policy for the final five months.
So again as you can see that this has a material impact on the revenue per marketing dollar and on the gross margin per marketing dollar spent.
Bye Bye Ottawa, but we believe these metrics show that the consumers are positively engaging with our marketing initiatives.
Which has the potential to provide meaningful contribution to our profitability as we begin to scale. This part of our business overall, the fourth quarter capped off a very challenging year, but we're still pleased with the progress we were able to make the macroeconomic environment. It blows our transformation, but I do believe that we've taken a series of impactful steps in preparing this company for the future I remain exceptionally com.
Our core operations across the organization and I look forward to scaling our used vehicle acquisition, while we cautiously monitor the macro environment.
Before I dive into the 2022 strategic initiatives I'd like to turn the call over to Joe Our new CFO Carlton Hammer to walk through our fourth quarter and full year 2021 financials in more detail now.
Minder, Carlton and I have worked together in the past as he's worked with several of our senior executives here. He joined US as the Chief Financial Officer in January of 2022.
Carlton is a certified public accountant, bringing over offering to our executive team almost three decades of experience, including a significant portion of his career dedicated to the automotive industry wallet Cox automotive, we're very excited to have carlton's impressive financial acumen and a strong backlog.
As a member of the senior executive team as we continue to move into 2022, and we continue to drive the mobile phone information of Ottawa overall, so with that and helping them. They turned it over to you.
Thank you Jeremy and good afternoon to everyone. It's a pleasure to be on the call today and to be joining auto web at such a pivotal time.
With that said, let's jump right into our fourth quarter results.
Total revenue in the fourth quarter was $17 $8 million up from $17 2 million in Q3 and up from $17 3 million in the year ago quarter.
The increase was primarily a result of incremental revenue generated through our vehicle acquisition business offset by reductions within our automotive digital marketing segment.
The industry challenges Gerry previously mentioned continued to impact our automotive digital marketing segment.
For the fourth quarter totaled $14 $1 million.
Down from $15 6 million in Q3, and $17 3 million in the year ago quarter.
Within the automotive digital marketing segment, our leads revenue in the fourth quarter totaled $10 7 million, which is down compared to 12, one zero million in Q3.
$13 6 million in the year ago quarter.
These declines can be attributed to the unfavorable inventory challenges in pricing constraints brought on by global supply chain issues as well as the loss of the key customer in the second quarter of 2021.
Total retail dealer count for the fourth quarter came in at 581 dealers down slightly from 16 117 in Q3.
Down from 17 185 in the year ago quarter.
Also within the automotive digital marketing segment, our digital advertising revenue primarily click revenue.
$3 $4 million in the fourth quarter slightly down from $3 5 million in Q3, and $3 6 million in the year ago quarter.
Moving on to our used vehicle acquisition business, our fourth quarter revenue totaled $3 $7 million compared to $1 6 million in Q3.
As a reminder, we acquired specified assets of course, you saw on July 31 2021.
In operations commenced on August one 2021.
The fourth fourth quarter represents the first full quarter of financial results related to our used vehicle acquisition of Russo.
Turning to the gross profit line, our consolidated fourth quarter gross profit was $3 $5 million.
Which was down from $4 4 million in Q3, and $5 9 million in the year ago quarter.
Fourth quarter gross margin came in at 19, 8%, which was down from 25, 8% in Q3 and 34% in the year ago quarter.
As expected the decline in gross margin as a result of our lower margin vehicle acquisition business generating a larger portion of revenue.
Combined with higher per unit costs in the automotive digital marketing business.
Consolidated operating expenses for the fourth quarter decreased to $5 $9 million compared to $7 3 million in Q3, and $6 6 million in the year ago quarter.
The decrease from Q3 to Q4 was largely related to adjusting the expense for annual incentive compensation plan to better align with our results as well as the continued focus on expense management throughout the organization.
Consolidated net loss in the fourth quarter was $2 $6 million or a loss of <unk> 20 per share.
Compared to a net loss of $3 $1 million or 23 cents per share in Q3, and a net loss of <unk>.
900000.
<unk> per share in the year ago period.
Adjusted EBITDA in the fourth quarter was a loss of $1 3 million compared to a loss of $1 7 million in Q4, Q3, and a gain of <unk>.
<unk> 5 million in the year ago quarter.
This decrease was primarily driven by the aforementioned inventory challenges pricing and strength and unfavorable consumer spending environment that occurred throughout the quarter.
At December 31, 2021, cash and cash equivalents and restricted cash stood at $11 6 million compared to $15 1 million at December 31, 2020.
The decrease was primarily due to the use of cash in our operating and investing activities.
At December 31, 2021, we had an outstanding balance of $10 million on our revolving credit facility with CIT Northbridge credit compared to $10 2 million at December 31, 2020.
Now quickly running through the full year results in the 2021 total revenue was $71 6 million compared to $76 6 million in 2020 gross profit was 20.
Gross profit in 2021 was $23 million compared to $23 7 million in 2020.
Total operating expenses in 2021 were $26 $8 million compared to $29 2 million in the prior year.
Net loss in 2021 improved to $5 7 million or a loss of <unk> 43 per share compared to a net loss of $6 8 million or 52 cents per share last year.
It should be noted that this improvement was primarily driven by the positive impact from the PPP loan forgiveness, we received in 2021.
Adjusted EBITDA for 2021 was a loss of $1 8 million compared to a gain of <unk>.
<unk> 2 million in 2020.
As we get further into 2022, we will continue to closely monitor any changes in our industry conditions and intend to maintain our focus on optimizing our organizational efficiency as we make progress with our transformation strategy.
At this point I will turn the call back over to Jared.
For additional context on our strategic outlook.
Sure.
Thanks, Carsten so as we move into 2022, we're very focused on executing what we can and executing on what we can control.
2021 laid the foundation for auto webs transformation from a digital media company to a transaction enabled matchmaker marketplace, providing valuable synergies to both dealer partners and our high quality consumer audience.
Our focus in 2022 is really quite simple, we intend to cure rates of high quality low cost audience of consumers looking to acquire and dispose of vehicles.
We intend to grow leads and clicks when inventory levels begin to recover that's very important when inventory levels begin to recover.
We intend to aggressively manage expenses as we've done over the past four years, and we intend to grant, but geographically expand our vehicle acquisition services.
As part of our continuing investments in our core capabilities I'd like to highlight a couple of leadership appointments, we have made to start the year.
First we brought on and that's got to work with senior Vice President Digital marketing operations. Scott is responsible for our search engine marketing digital marketing and digital advertising solutions. He brings over a decade.
A highly relevant experience to our team and we're really excited to gain his expertise to build upon the company's legacy of efficient and high quality audience generation.
We also promoted Breton Aegean senior Vice President product and technology that he's been with US since 2019 and has been responsible for the strategic direction designed development enhancement.
The company's product portfolio.
Leaning on him to evolve our product and technology in support of our transactional matchmaker multi play strategy.
These appointments as well as a couple of other that I'm Gonna mentioned in a moment.
Really show that but we'll continue investing and what really matters and what really matters is our people and our core capabilities.
And you also know we revamped our finance team by bringing on Carlton Hammer as executive Vice President and Chief Financial Officer, We also brought and Josh Josh are steady.
As our vice President controller, and principal accounting officer since I heard he's talking earlier I'm, just going to spend a couple of minutes, telling you about Josh.
Josh brings us 20, plus years of experience driving efficiencies and productivity, but along well with all laws model from an operational finance perspective, ultimately the Carlton Josh is a CPA and have extensive experience in public company reporting.
And previously held senior and executive level accounting roles in two publicly traded company.
Again, I'm really excited about the fact that we continue to make the investments in people and our core capabilities.
Looking at our strategic objectives for the year for the two revenue channels media and vehicle acquisition again media is made up of leads and clicks were.
We're going to continue to provide what we believe is a best in class service for our dealer customers within our core digital marketing services as we navigate this extremely challenging macroeconomic environment, while we plan to continue leveraging all our consumer audience from this channel. We don't anticipate this side of our business to provide meaningful growth opportunities until more favorable market down.
<unk> returned essentially.
We don't expect leads and clicks to get back on a growth path until inventory levels return, we're still operating in that 30 to $5 34 to 35 day supply, which is well well below industry standards.
Meantime, we are we do remain committed to optimizing our platform enhancing our solution for today's evolving automotive market. So as we continue to transform into a transactional marketplace and supports all forms of consumer and dealer interaction.
As we announced in January of this year, we did enter into a new business arrangement with autonomy to provide vehicle shoppers and import and opportunity to subscribe to a Tesla model. Three this is really just another proof point.
Our commitment to staying relevant with shifting consumer preferences, while exploring additional transaction monetization opportunities because again there are our core belief is that ultimately this transactional enabled matchmaker market places.
The approach of the future for third party automotive marketplaces.
Now shifting the focus to our vehicle acquisition service, which is what we have the most control over this year.
This year, we plan to be intensely focused on optimizing scaling and expanding this channel to fully capture the potential of this business, while the sequential improvements in revenue and gross margin for marketing dollar generated in San Antonio that I highlighted earlier were impressive.
No they're not optimized.
Yes.
Our understanding of how others in this market operate we know that there is a significant opportunity in both lead to close rate improvement in gross margin per unit sold improvement when it comes to the vehicle acquisition service.
Which should enhance the positive impact that we believe vehicle acquisition will have on our overall financial performance.
I really mean by that is there's a lot of meat on the bone because while it's having a real positive impact.
In terms of the revenue that we generate per marketing dollar spent in the gross margin that we generate per marketing dollar spend. We also know that we haven't hit peak operational efficiency or effectiveness. When it comes to the used vehicle acquisition side of our business.
Now in an effort to provide some additional context.
Did want to go a bit deeper on the impact of vehicle acquisition has had on our finances in San Antonio This is Jeff in the market obtain Antonio alone.
Carlo incorporating vehicle acquisition into our business model in San Antonio we generated on average $2, 65% of revenue and $1 65 of gross margin per marketing dollar spent in San Antonio.
Okay, because basically what we're doing is we were selling leads and clicks or some other thing well mainly leads and clicks alone in that market.
Now in the months since incorporating vehicle acquisition in San Antonio Our average revenue per marketing dollar spent has increased to $15 48.
And our average gross margin per marketing dollar spent has increased to $14 48.
So again just to run through those numbers. So we're clear three cars Zeus in San Antonio We're generating $2 65 per marketing dollar spent that moved to <unk> 48.
And we generated $1 65 in gross margin per marketing dollar spend that increased to $14 40 48.
So as you can see the addition of used vehicle acquisition has materially impacted our marketing dollar effectiveness, which we believe validates our approach and as I mentioned earlier, our vehicle acquisition performance is far from optimal so as we think about.
2022, it's really how do you do more of that how do you introduce more of the used vehicle acquisition into our environment. So that we can get more of the benefit that you see here.
With with each marketing dollar that we spend.
Now we have made progress in our expansion effort, we entered the Austin market in the fourth quarter.
Given that we're servicing we're still servicing that market virtually we are ramping our volumes, but not yet operating what we believe could be our full potential capacity there.
As a result, we have identified a physical location, because again, where virtual in that market for our Austin store front end and we're in the final phases of finalizing a lease for that space, which we do intend that fully operational in Q2. So again, we're excited we've been operating in in Austin in a virtual manner for quite a while.
Since Q4, but we're actually going to take that next step and and move forward with a physical storefront.
In Q2, so you should see the Austin volume come online in a more meaningful way as we fully realize the operating model that that has been successful in San Antonio in Austin.
Now more recently, we expanded into our third Texas community, which is Houston.
Followed the same blueprint as we did in Austin, which means that we entered.
The market virtually we've been servicing it from San Antonio.
Looking to identify a physical storefront in in Houston as well.
Houston is a big step for US Houston is a very very large automotive market one of the top five in the country and so as we think about that further expansion into Houston, meaning the physical footprint in and really leaning into Houston, we want to make certain that we have all of the operational capacity necessary to do it well.
So what you're seeing US do is you're going to see us continue to work on on San Antonio We're going to continue to lean into Austin, and we're preparing to move into Houston and a very.
Much more meaningful way that doesn't mean, we can't gain value from Houston, because we will continue to operate virtually in Houston.
But again, we want to make certain that we get Houston right because it's a it's a critical market for us.
So in the long term, we're very excited about the new opportunities used vehicle acquisition business brings to our company I believe that we're uniquely positioned to capitalize on this growing market given the complementary nature of our existing operations essentially what we're doing is we're using the media side of the business to subsidize the vehicle acquisition side of our business.
And they are incredibly complementary because north of 60% of all consumers, who come through the channel and want to buy a car they their vehicles visits to disposal.
I'd like to remind everyone that we are not leaving our core business behind because as I said they are very very complementary on the contrary.
We're going to continue to find new ways to bolster and evolve our digital marketing efforts are targeted to turn this company from one that is significantly affected by changes in the macro conditions and the one that's resilient and steadfast the future market constraints that will inevitably occur the only way to do this is to diversify our channels and we've already begun to see the results of our efforts in cars.
We remain committed to executing upon our growth initiatives and we believe that this strategy will ultimately drive long term value for our shareholders, which is why we're going to stay focused on what we can control. This year with some folks we can't control inflation, we can't control the fed and the environment of increasing interest rates, we can't control.
Vehicle inventory, but we can control how we develop our audience we can control.
How we actually then extract vehicles through via the used vehicle acquisition channel and grow that side of the business. The total addressable market on the digital media side and automotive is about 17 billion estimated by a marketer for the year 2022, the total addressable market in the used vehicle acquisition business is closer.
$230 billion with a much larger market so using our audience in this way in this layered monetization approach, we think positions us exceptionally well for the future.
So that's the end of our prepared remarks, so with that I'm going to turn it back over to Josh our operator to start the Q&A session.
Thank you Sir.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.
Our first question comes from Max Mccandless with Lake Street Capital You May proceed with your question.
Hey, guys.
First of my several questions that I guess should we expect a similar sale price going forward in the next couple of quarters I think it was 19000 here in Q1, and then what should we expect on units sold going forward and what have you seen.
Throughout Q1, and that has anything material changed I guess from Q4.
Thanks for the question.
Let me make certain I don't Miss any so the first thing is in terms of our average transaction prices.
I do think it's going to be in that range. It may come down a little bit.
Not basing.
Our thinking on the go forward approach is continuing escalation in the used car side I think you're going to see used car pricing start to moderate this year industry experts believe kind of went from 3% to 9% I think it can be on the higher end of that this year and then come down they believe even another 15% next year as new vehicle inventory comes online, but again that all of us.
Dependent upon new inventory nuclear coal inventory coming online.
So we're not basing our expectations of the performance of that business on an ever increasing used car price. So I'd I'd think of it is that are you know call. It 19000 range, we get a little bit better than that that's great.
But again our success is not based on that so that's your first question in terms of the second question on the unit volumes.
That's not something we're Sharon we don't provide guidance in the unit volumes would be really guiding the earnings.
We think we can continue to grow this side of the business. The intention is to continue to grow this side of the business.
Again on the leads and clicks side, we're focused on really managing that business and maintaining it until inventory comes back.
But that doesn't mean that we can't cure rate and use that audience in this new way and get the benefits of our layered monetization approach because as you know this isn't an either or we can monetize via the lead we can monetize via the clicks or the same impression and we can monetize via.
The used vehicle acquisition side offer the same impression this whole layered monetization approach is really really important to how we think about the market. Overall. So again, we do expect growth in this side of the business, but we aren't providing any specifics around that.
Just because we arent providing guidance and I'm sorry, the third question I believe what's the third one.
Max Yeah, no I guess it wasn't it wasn't really a guidance question more or less how it's trended in the positive direction, but it sounds like it has and then just kind of go into the gross profit dollars for our fiscal year 2022, I think it was 6% for Q4 is that something we should expect going into 'twenty.
Wanted to just that same range or should we expect some margin accretion in fiscal year 2022, I guess.
Karl I want you to take that one.
There's a lot of factors that go into the origin, obviously for for this particular quarter.
One is in a range.
So the company can do and what other competitors have done.
As you can imagine we would aspire to do a little more in the future.
But it's in that range.
Yeah. So when you think about the vehicle acquisition side, specifically you know that that I think we talked about 7% to 10% in that range last time, we talked.
We expect to operate in that range going forward on the vehicle acquisition types specifically.
Alright, Thank you and then.
I guess, just shifting cars Zeus overall expansion outside of Texas. What are your what are your guys' plans going forward have you guys thought about that yet and then is there any hiccups along the way that we should know about especially in San Antonio I guess with the roll out there.
So in terms of geographic expansion, we've laid out kind of a path forward.
Again, I apologize, where we're going to be a little cagey on that where we're going to stay focused on what we've got in front of US right now, which is Austin and Houston again, Houston was one of the top five automotive markets in the pump is very very large market.
And so we've got a lot of good growth just sitting in front of us optimizing San Antonio because we haven't hit full stride there on growing into Austin, and then growing into a into Houston Lubbock. Those three markets just continuing there would have a material impact.
This overall.
In terms of hiccups listen this is this isn't a retail business and so it's a little different from what we've done historically.
And you've got a lot of the same constraints that you've seen other businesses a more retail focused in that you know hiring for these roles and scaling up those sorts of things a little different than we've done so well.
We think that there's a good opportunity there like I mentioned earlier, our lead the bio ratio, which is really the conversion rate every inbound requests that we get to two vehicles sale. We believe that we are not at the kind of industry average bar yet.
Until there is improvement there and that's really an operational process improvements.
And then also on the gross per unit.
That is where like I mentioned earlier, we think that there's opportunity for us to grow that as well and then on top of that like I said and making certain that we.
Hire and retain the folks we need to hire and retain as we move geographically.
That recruiting process is just a it's one thing Bob is a little bit new to us, but we're pleased with the initial results because they've allowed us to move into Austin as we launch and then and we're pretty pleased with.
With the initial results, we're seeing in Houston, and our ability to get out.
Hold there as well.
And move into a physical location again, when we have enough organizational capacity to do it do it right because when you move into a market like Houston, you want to make certain that you are executing very very well there because thats like I set up a much larger market than either San Antonio or Austin.
Alright, Thanks, guys. That's it for me.
Thanks for the question.
Thank you. Our next question comes from Gary <unk> with Barrington Research you May proceed with your question.
Thank you.
Do you have the.
The actual lead fees clicks fees display and other and used.
Numbers for revenue for Q4.
Yes, I do.
And I'm sorry, if you mentioned it in the call I didn't pick it up but.
No.
For Q4.
Typically the lead fees were $10 7 million.
Digital advertising 500000.
Click revenues $2 9 million.
Yeah.
Okay and used vehicle was three seven.
Right I got that okay, great okay.
That's really helpful.
So let's talk about.
With the cars that you're you're you're selling right now is.
Predominance of your traffic coming through.
The actual website as people are doing searches for used or new vehicles Jarrod.
It's a mix of both Gary we.
We are leveraging the items that we already have from an LTM perspective, right and we're funneling said, we're basically intercepting some of that traffic and sending that through we.
Also our leveraging our search engine.
Arbitrage capability that were largely built to focus on the new car side, and we're using that to run vehicle acquisition specific campaigns as well.
And we're pretty pleased with the results there too so when we think about this gary its use the audience we have.
And also use the capabilities, we have to extend that audience. Even further and are really specific and focused way around vehicle acquisition is how we've been able to reduce.
The the cost per lead within cars these significantly pre acquisition.
Versus post acquisition, we're running far more efficiently on a per lead basis and again. The lead is how this whole thing starts instead of generating a lead somebody else for generating them for ourselves and then we're pushing it into this channel. So we do a little of both here.
Is there is there a way that your dealer base.
Can.
How are you trying to serve your dealer base go.
Through their ability to acquire vehicles through you or is that just not happened and you just sell it through the wholesale channel.
We just sell through the wholesale channel. So we go out and find consumers who are interested in this sort of service really arent interested in a traditional process.
We acquired those that inventory and then we push it right back through the wholesale lane, which benefits the dealers in that they can go acquire that inventory in the old fashioned way they always have.
Okay.
So.
And then lastly in terms of the dealer count I mean, once again it was down but some of that is going to be because some dealers may have temporarily turned you off because.
Tight inventory situation they don't need your.
Your services, but is is.
Do you have a sense of how many of these dealers year over year.
I have basically stopped even considering being a customer of auto web or just kind of temporarily turned you off.
Okay.
Yeah. That's a good question Gary I don't have a good sense of exactly that and the reason is because to your point you can turn it on and off regularly now what I can tell you is is that we see a lot of churn a lot of churn logical names come back.
And I'll turn it on for say I'll make model combination or they turned us on for used car new car.
The fundamental issue for us Gary isn't.
Getting the dealer to consider leaves the fundamental issue for us is competing for those dollars without without with a product that's a bit commoditized and in and in a market that is extremely extremely difficult right now to.
To your point when you're operating at a 30 day supply in your pre sold the bulk of your inventory you don't need to be advertising harvest that profitability. So we believe very strongly in the core value of our products. When we get in front of a dealer and can make that pitch them, particularly with the sophisticated dealers. The one two who really look at this on a on a cost per impression basis.
We're pretty effective in those in those instances.
We're just facing a really really tough market right now so.
Uh-huh.
So could you just remind me are you.
Your pricing to the dealers that on a.
Or lead.
Thesis in a sense or do they have to take a subscription to your services.
No per lead.
Okay.
We will be killed here. So we are a we are very much a our performance our performance based media spend.
And that's where we've seen some success Gary you can see that that clicks line.
We've done a nice job of keeping the dealers engaged.
And we're seeing them transition you may not need new car lead, but hey, how about them click traffic for our used car or a new car consumer that maybe you want to funnel over in your into your used car dealer website. We've seen some good positive signs there again the core quality of our audience is we've actually improved it over the last several.
Yes, it's there.
Fundamental issue that we've had and we've talked about this area is that we don't get full value.
In the market largely because we're selling leads and clicks. The interesting thing is that we can continue to sell leads and clicks high quality stuff. Good stuff that we know the dealers will want when inventory comes back in particular, when the inventory comes back in a big way, which we believe ultimately well and at the same time, we can leverage that same lower funnel high intent audience.
And monetize in a way, where we get more value and that's in the vehicle acquisition side again, that's why we're really excited about how complementary these things off.
Yeah, I mean, how how.
How much capacity do you have on the vehicle acquisition side too.
Expand that I mean is the goal to add three or four metropolitan areas, a year or could you do more than that.
So good question I got two answers for you on the audience side, we've got enough to go to the top 25 markets Tomorrow right.
[noise] perspective, we're there and we feel really good about that.
From a capacity perspective, making certain that we've got the people to process. These leads to manage it to do the inspections. The paperwork. That's the side that we're gonna have to make investments in it and we're gonna be methodical and thoughtful in how we do that Gary. So you know when you think about what's going to constrain us a bit what's gonna constrain us a bit is our ability to hire the folks.
Get them up and running.
And to and to manage that that process. There that's the more difficult times, but again the audiences. The audience. There. It's one of the reasons why we talk about not just organic growth, but we've talked publicly about inorganic opportunities as well.
Because ultimately what we want is we want more of this we need more of this and that's the focus for 'twenty 'twenty. Two is how you can do more but again the limiting factor for us is going to be the physical footprint that we expand even though with a light physical footprint of thousands square feet people on this labor market is difficult to find a few people and you've got to train them up and get them going and that's just a.
Little bit of a slower process than we've had historically on the digital media side.
Okay do you as you talk to your dealer base. So they all basically saying the same thing in your back half of the year, it's going to be much better than the first half of the year and there are or is it just a mixed bag.
It's a mixed bag some are optimistic it's week to week, Gary some are optimistic that the second half inventories coming back somewhat pessimistic and it's not coming back till next year promos.
From a planning perspective, where we're not counting on it I mean from a planning perspective, we're counting on controlling what we can control, which is use this audience that we have right and manage it to a reasonable level, which we've done manage expenses aggressively which we've done and then lean into the vehicle acquisition side, because it's a much larger.
Total of addressable market.
And the economics are better and it's so complementary to our existing audience that we can use it in that way. So you know an interesting thing to Gary is as the market comes back right as inventory comes back lead volume will come back as lead volume comes back click volume will come back as leading click volumes come back our audience expanses were already expand that gives us more raw material.
For the.
For the vehicle acquisition side of the business too because it's got this flywheel effect. So again, we're hunkered down and focused this year on managing the core business just keeping that.
Poland continuing to manage that as aggressively as we can.
And really building out the the the the used vehicle acquisition side.
Okay. Thank you really like I said geographic expansion I'm sorry, getting.
No that's fine. Thank you appreciate it.
Thank you. Our next question comes from Ed Woo <unk> Capital You May proceed with your question.
Have you seen any change in competition with vehicle acquisition business. Thank you.
Yeah, Yeah yeah.
Like a lot of folks are in it.
You've got a lot of folks turning the turning the water, killing the soil whichever word you want to use.
And so yes, yes, we've seen it we've also seen an ebb and flow a little bit in terms of the consumer expectations as that as valuations have fluctuated a little bit.
But from our perspective, that's all good and that's that's all very positive and the reason I say that is because.
More of that.
The transaction gets pulled apart the more that that becomes normal through the marketing efforts of Carmax Carvana room Autonation Sonic let the all the big players, they're talking about how we'll buy your car as opposed to a trade and the more that we they get consumers comfortable with that process of pulling that.
That's how that transaction apart the better it is for us because theres less education required in terms of in terms of.
Having the consumer understand the benefits of selling directly versus some of the other channels that they have available to them. So yes, we see this as a growth area for the industry overall.
And like I mentioned, the total addressable market is so large and our audience is well positioned which is why we believe we've got a right to win in that space kind of vertically integrating third party audience deficiency with first party monetization, which is really what we're talking about here.
<unk> is really interesting and unique in this industry quite frankly, there's only one other player in the space, who does it this way third party audience with first party monetization. Besides us, but we believe ultimately that's where the market is truly habits.
Great well, thank you for answering my questions and good luck. Thank you.
Right.
Thank you at this time. This concludes our question and answer session I would now like to turn the call back over to Mr. Rowe for closing remarks.
Well. Thank you everybody. We appreciate the time today. We appreciate your continued support and again I just want to I really want to thank the team at auto web.
In the last couple of years have been had been an interesting couple of years for most companies ours included.
So we've got a team has dedicated working hard doing a lot of great work.
And I'd like to thank the stakeholders as well this has been a long journey for years in terms of the business transformation they'll have some work ahead of us, but we're very excited about the future. So I just want to say. Thank you. Appreciate the time I appreciate the support and we look forward to talking with everybody again at the at the end of Q1, So would that just take care and we'll talk again soon.
Yeah.
Thank you ladies and gentlemen, this does.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you.
Do you for your participation.
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