Q2 2022 CarGurus Inc Earnings Call
Greetings and welcome to the car Gurus, Inc. Second quarter 2022 earnings results conference call.
At this time all participants are in a listen only mode.
And then answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
I will now turn the call over to MS. Karen Deep thing widespread Investor relations.
Please go ahead.
Thank you operator, good afternoon I'm delighted to welcome you to Carter's second quarter 2022 earnings call, we will be discussing the results announced in our press release issued today after the market close and posted on our Investor Relations website with me on the call today are Jason Robinson, Chief Executive Officer, Scott <unk>, Chief Financial Officer.
And Sam Zell, President and Chief operating officer during.
During the call we will make statements regarding our business that may be considered forward looking within the applicable securities laws, including statements concerning our outlook for the third quarter 2022 management's expectations for our future financial and operational performance, our business and growth strategies, our expectations for our car off our business in Aqua.
There are some synergies as well as our potential acquisition of additional equity interest in car offer.
Sally proposition of our current product offerings and other product opportunities the impact of the semiconductor chip shortage and other macro level industry issues and other statements regarding our plans prospects and expectations.
These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results.
Information concerning those risks is available in our earnings press release issued after market close today and in our most recent reports on forms 10-K, and 10-Q, which along with our other SEC filings can be found on the SEC's website and in the Investor Relations section of our website, we undertake no obligation to update forward looking.
Except as required by law further during the course of today's call. We will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our press release issued today as well as in our updated investor presentation, which can also be found on the Investor Relations section of our website with that I'll turn it over.
Hi, Jason.
Thank you Curt deep and thank you to all those joining us today.
We achieved exceptional results for the second quarter of 2022.
Strength in our performance was driven by the acquisition of new dealers and Reengagement of returning dealers to our foundational listings business.
Operational improvements for our car offer business in.
And launch of our innovative digital retail product offerings.
Combination of our foundational listings business, coupled with digital wholesale and digital retail allows us to create a transaction enabled platform that holistically serves both our dealer partners and largest consumer audience.
Before I dive into the detailed results that were driven by this performance I'd like to highlight the factors that continue to impact our customers and the broader global economy.
In past quarters, we discussed the challenges the automotive industry faced as a result of the semiconductor chip shortage.
However, with inflation rising interest rates concerns of a recession and changing consumer sentiment dealers are further challenged with a reduction in demand for vehicle purchases.
In addition to these factors retail sales seasonality declines typically occur in the second half of the year.
While we continue to closely monitor the impact of these macro factors, we feel confident that we've built a resilient platform geared towards providing our partners the highest ROI the greatest flexibility and the most comprehensive product suite that is continuously innovating to support their unique business needs, which is paramount in both upward and.
Downward trends.
Despite these challenges facing our industry, we've achieved exceptional results and looking ahead to the second half of 2022 we're marching towards fulfilling our vision of creating the only platform where dealers can source market and sell and consumers can shop financed by itself.
For dealers, we will continue to focus on growing engagement on a car off a platform and pioneering the digitally enabled automotive market with our digital retail offerings.
For consumers, we will continue working to provide choice trust and transparency to our listings business and expand the awareness of cargo routes instant Max cash offer or instant Max for short as consumers look for the best value for their vehicle sale.
We're excited for the near and long term trajectory of our end to end transaction enabled platform and we will continue to adapt quickly and innovate to support both sets of customers.
With that let me walk through our second quarter results.
As we highlighted at our Investor day at the end of May car offers tremendous growth and sustained profitability is an incredible accomplishment for a company that is only two and a half years old.
While still in its infancy car offer has already captured 2% of the wholesale market and continues to gain share of the 400 billion dollar addressable market.
This quarter, our offer continued to yield strong results as total revenue inclusive of our dealer to dealer and instant backs cash offer businesses was $347 3 million in Q2, an increase of 506% year over year.
Our offers profitability increased in the second quarter with total car offer adjusted EBITDA of $19 1 million in Q2 up 51% year over year highly.
Highlighting the strength and success of car offers matrix technology and asset light model.
Gross merchandize sales or GFS for the combined businesses inclusive of dealer to dealer and instant cash offer was approximately $1 9 billion for the second quarter up 101% from the previous year and remaining relatively flat quarter over quarter.
Nevertheless, the car off our platform continues to gain traction among the dealer community with strong adoption in the second quarter.
The combined cargo routes and car offer sales team enrolled approximately 1550 rooftops in Q2, bringing.
Bringing the total number of enrolled rooftops on the platform to approximately 12400.
However, increasing rooftops as only one vector of growth.
And while we will continue to enroll dealers on the platform, we're applying greater focus to increasing each enrolled dealers usage of the matrix.
We believe this will be achieved by further optimization of our operations and growth of our dealer sales manager team.
Dealer sales managers are an integral component to the setup of the matrix and evolve to be personal advisers guiding dealers towards the most effective matrix roles enhancing their experience and driving increased sales for them.
Which ultimately leads to increase utilization on the platform.
While we are still in the early stages. Our strategy has resulted in an increase in the number of dealers actively transacting on our platform month over month in Q2 and continuing in Q3.
As well as an increase of over 20% unique buyers in the month of June compared to the month of March.
As evidenced with each passing month, we are seeing non fleet or non rental company activity rise.
As rental fleets experienced challenges of the chip shortage and consumer demand seasonality, we have witnessed unique trends quarter over quarter.
In the fourth quarter and into Q1 rental fleets leveraged our platform aggressively to grow their fleet sizes. However.
However, as rental fleets continue to remain nimble to changing demand requirements and prudent during times of macroeconomic uncertainty, we witnessed a change in buying patterns.
As a result, when rental fleets quickly enter and exit our platform, we observed price swings, which can cause an imbalance in the prices dealers are willing to sell a vehicle and what a buyer is willing to pay.
It takes time for the imbalance to normalize and during this period, we tend to see more cautious dealer behaviour.
So while rental fleets will come on and off the platform based on their needs. We are acutely focused on the fundamental drivers of dealers transacting more and that scale, allowing us to build the business for the long term.
Over time, we've seen dealers continue to adopt modern wholly digital ways of operating replacing the historic and time consuming physical C in person approach to auctions.
Our platform is helping to drive this shift which is evidenced by the increased adoption in second quarter dealer to dealer revenue of $97 1 million in Q2 up 69% year over year.
This increase in revenue was attributable to an approximate 48% increase in transactions compared to the prior year further highlighting the power of the car offer matrix as more dealers begin to transact at scale.
Compared to the previous quarter dealer to dealer revenue declined 8%, mostly due to an expected decrease in transportation revenue as well as a slight decline in transactions.
As we previously mentioned last quarters transportation revenue was higher than usual as we had assumed transportation for a large customer experiencing a material backlog of vehicle pickups.
Accordingly, with less low margin transportation revenue relative to transactions and reduced arbitration losses per vehicle non-GAAP gross margin for our dealer to dealer business grew to 33, 7% in Q2.
It's only been three quarters since we launched instant Max cash offer a direct to consumer channel for dealers and we could not be more pleased with its results thus far.
Since the launch instant Max has seen exceptional growth into new regions and product optimization.
We now service over 85% of the U S population with a national rollout and brand campaign planned for later this year.
Instant Max cash offer generated $250 2 million of revenue in the second quarter, an increase of 55% quarter over quarter.
This increase in revenue was driven by an overall increase in transactions that resulted from expansion into new geographies as well as growth in existing geographies.
non-GAAP gross margin for instant backs grew to four 1% in the second quarter.
Improvement in margin was driven by enhancement measures put in place to reduce arbitration losses per vehicle and offer optimization.
With instant Max cash offer we have the ability to test our offer competitiveness and transaction volumes and determined and efficient frontier in terms of growth and margin.
As we scale the business, we will continue to test and analyze the relationship between margin and growth to gain market share in a prudent manner.
Beyond the operational enhancements, we're also acutely focused on delivering an excellent customer experience.
Here is what our happy customer Mike had to say about the recent experience with instant Max cash offer quote.
I would recommend this experience over and over it is so easy and you literally never have to leave home.
They also offer direct deposit, which means no waiting for a check or a bank declare funds I had my funds within 24 hours after pick up they.
They come to your house and drive the car truck away.
We were sent to all the paperwork via Fedex ahead of time and they follow up with you. The whole experience was incredible in a time when customer service for most is not good.
They went out of their way to make sure it was great.
Easiest way to sell your vehicle out their hands down end quote.
As we leverage our marketing efforts, we're able to reach more consumers like Mike and tap into the 95% of consumers, who do not already view us as a primary place to sell their vehicle and are working to grow instant Max to be the first choice for consumers nationwide.
Turning to our foundational listings business. We're pleased that results were above our expectations for the quarter.
The resilient high margin legacy business supports growing initiatives, which enable us to expand our capabilities for our dealer partners while remaining profitable.
As we continue to focus on offering a platform that best serves our dealer partners, we're seeing greater adoption as total paying dealers grew to 31143 in the second quarter up 416 from the prior year and up 276 from the previous quarter.
In the U S paying dealers were 24000 and 488 up.
538, compared to the prior year and 269 compared to the previous quarter.
Of the total approximate dealer rooftops in the U S. We have about 80% on the platform and of those dealers only approximately 72% are paying dealers, which gives ample runway for our sales team to not only expand our paying dealer base, but also increase the number of additional products per paying dealer.
Second quarter performance was the result of dealer adds existing dealers adopting additional products and improved retention throughout the quarter.
By consumer demand softening, we reported an increase in monthly revenue from both new enrollments and upgrades of digital advertising products packaged as real time performance marketing or RPM for short.
In comparison to the previous year.
As a result U S quarterly average revenue per subscribing dealer or <unk> for short grew approximately 4% year over year to 5000 and 771.
Internationally total paying dealers for the second quarter were 6655 up seven dealers compared to the prior quarter and down 122 dealers compared to the previous year.
Dealer adds quarter over quarter, primarily consisted of higher paying franchise and independent dealers.
As we mentioned in the previous quarter, we launched our digital display product otherwise known as RPM in the U S. In both the UK and Canada, and we're thrilled to see a quarter over quarter increase in dealers adopting multiple products.
Compared to the previous quarter, we saw an increase of 32% and dealers utilizing multi products in the U K and Canada.
As a result of adding and retaining higher paying dealers and the increased product adoption or international listings revenue increase year over year validating that dealers in both markets find value across our offerings.
The increase in revenue resulted in international car sit for the quarter of 1533, a slight increase of 3% compared to prior year.
Our listings performance in both the U S and international markets is indicative of our team's success in establishing increased adoption of our additional offerings, while providing superior service and ROI to our current dealer partners.
Ultimately improving retention and growing monthly recurring revenue.
As macro headwinds will eventually subside, we are poised for even greater success with our dealer partners as we expect that our improvements in retention product innovation and ROI will only further strengthen our foundational listings business.
With 90% of dealers expecting to continue or accelerate digital retailing at their dealership. We will continue to focus on product innovation, which enables dealers to service consumers who are looking to do more online.
Our digital retail products, not only service dealerships that have differing needs and capabilities, but also enabled dealers to compete more effectively from.
From the consumer perspective, our digital retail offerings serve those who are looking to do more online and cater to each consumer's preferences. So they can pursue a self selective journey for their vehicle purchase not to mention consumers utilizing our digital retail offerings have a two times greater satisfaction and a traditional lead.
The launch of digital deal in Q2 was a critical step on a rapid path to fully digital retail transactions to meet the needs of our customers.
Digital deal allows the consumer to do even more online with trade and the estimates prequalification or heart full financing in deposits.
Consumers can build a near penny perfect deal with dealer or vehicle specific finance and insurance products and then placed a deposit on their vehicle of choice all while customizing their online to in person experience.
Digital deal is a dealer aligned way for consumers to transact, providing both dealers and consumers flexibility in the car shopping process.
Consumers are seven times more likely to make an appointment with a dealer if they go through an online checkout process and 60% of consumers who place a deposit purchase their vehicle through the digitally enabled dealer providing dealers with the efficiency and ability to sell more with less investment.
This program is highly customizable dealers can sign up for what works well within their specific market and consumer base.
Since our formal launch of digital deal in May we've enrolled 435 dealers across 47 states, representing a two times faster product adoption rate when compared to the average of other cargoes listings and digital retail product launches.
Dealers are utilizing digital deal drove a greater than 75% increase in digital deal leads quarter over quarter.
Of those leads nearly half our high value leads meaning the lead included Prequalification Hartzell deposit <unk>, an appointment with the dealer.
With over 400000 digitally enabled listings on our platform today over 60% of all cargo who searches now include digital deal results and dealers have seen a two times increase in digital deal leads as a percentage of their total C. G E mail lead volume.
More notably shopper sentiment demonstrates increased satisfaction for consumers utilizing digital deal with an 81 net promoter score year to date.
As such dealers are embracing a newer way of attracting consumers through online offerings and consumers are becoming more accepting of transacting online with dealers through our digital retail products.
Further digital deal allows cargoes to power more steps of a dealer consumer transaction setting the groundwork for multiple monetization paths forward in a capital light way.
Partnering with dealers as opposed to competing with them provides no inventory risk or servicing requirements.
Knowing our monetization potential for digital retail and allowing us to both build upon and expand accessibility nationally.
Overall, it's been an outstanding year, so far for our business and we're pleased with our results.
Despite ongoing macro challenges, we demonstrated the excellence of our business model through our ability to create a listings platform that continues to attract paying dealers continued innovation with the launch of digital deal.
Increasing unique dealer activity in the car off our platform and our ability to enhance and optimize our business operations, resulting in improved margins.
Moreover, the strength of our profitable foundational listings business enables us the flexibility to build out our new transformative growth factors, while continuing to maintain strong unit economics.
While it's easy to focus on the business quarter over quarter, we're creating a platform for our customers that will serve them over the long term as evidenced by our increased focus on dealer relations continuous optimization and investment in consumer awareness.
We are concentrating on growing our newer businesses economically in their own right, while focusing on maintaining overall profitability.
Like many others in the tech industry, we're closely monitoring our growth and profitability.
Moreover, we continue to have remarkable control over our spend and like our ability to adjust marketing spend during the pandemic, we will be quick to adapt.
Our thoughtful and judicious approach gives us confidence in our plan, but we remain prudent as we monitor the potential changes in the macro economy and are prepared to adjust our strategy and outlook if necessary.
It is through the combination of our foundational listings digital wholesale and digital retail offerings. We have created an automotive ecosystem that serves both our dealer partners and the largest consumer audience through nearly every aspect of the automotive buying and selling journey.
Our platform, where the sum of the parts are greater than the standalone for not only us but also our customers.
Now before we review our financial results I'd like to share some news.
Scott Fried our Chief Financial Officer has made the difficult decision to pursue another opportunity.
Scott's been with cargoes for six and a half years and has been instrumental in leading us through our IPO as well as being a thought leader in our financial and strategic growth as we've scaled and acquired new businesses.
It's been an honor and privilege to work with Scott All these years and I greatly appreciate the impacts Scott has had on our business and community and the tremendous work he and his teams have done to set cargo is up for an exciting road ahead.
While the decision to move on was a difficult one for him to make I know he'll do so is a continued support of <unk> proud of the successes, we've celebrated and confident in a bright future.
Please join me in thanking Scott for his leadership and contributions we wish him all the best in his next chapter.
With that I'll turn it over to Scott to discuss our financial results.
Thank you, Jason it's been amazing working with you Sam Langley and so many incredible cargo was colleagues over the last six and a half years and the future is bright for cargos.
So grateful for everything I've experienced during my car ignores tenure and I'm excited to see the continued evolution and growth of the company.
And now I will provide a detailed overview of our second quarter performance, followed by our guidance for the third quarter of 2022.
Total second quarter revenue was $511 2 million up 135% year over year and within our most recent updated guidance range provided during our Investor day in May.
Marketplace revenue was 163 9 million for the second quarter up 2% from $160 5 million in the prior year and up slightly from the prior quarter.
The increase in marketplace revenue compared to the prior year was primarily due to the increase in U S paying dealers utilizing our subscription listings products.
As a reminder, marketplace revenue also includes revenue from our digital retail products, such as area boost and consumer financing as well as OEM advertising.
Well, we did see tremendous success with the launch of digital deal. This quarter macroeconomic conditions may reduce the amount of consumer loan originations and the impacts OEM advertising on our platform, creating potential offsets to our listings revenue that has been growing and which we expect to grow in the second half of the year.
Wholesale revenue was $75 9 million for the second quarter of 2022.
Up 42% from $53 5 million in the prior year.
A meaningful portion of the year over year growth in wholesale revenue is attributed to an increase of dealers transacting on the car for platform as they become more comfortable using the car for matrix compared to the previous quarter wholesale revenue declined 17%.
The decrease in wholesale revenue is mostly due to the decline in transportation revenue that Jason discussed earlier.
Lastly, product revenue generated $271 4 million for the second quarter up 7087% from $3 8 million in the prior year and up 54% from the previous quarter.
The increase in revenue from the prior quarter is primarily due to transaction volume growth associated with instant Max cash offer which generated $250 2 million in revenue roughly 3 million ahead of our most recent updated guidance range.
I will discuss our expenses and profitability on a non-GAAP basis, which backs out our stock based compensation expense.
Amortization of acquired intangible assets acquisition related expenses, and net loss or net income attributable to redeemable noncontrolling interest.
Second quarter non-GAAP gross margin was 38% compared to 77% in the year ago quarter and 44% in the prior quarter.
<unk> non-GAAP gross margin quarter over quarter is primarily due to instant Max cash ARPA transactions, which are accounted for on a gross revenue basis. Despite the contraction in non-GAAP gross margin on a consolidated basis. We are extremely pleased with the improvements in margin and our digital wholesale businesses.
non-GAAP gross margin for our dealer to dealer business was 33, 7% up 340 basis points from 33% in the previous quarter and similarly, non-GAAP gross margin for our instant Max cash off our business was four 1% up 120 basis points from two 9%.
In the previous quarter.
Total second quarter non-GAAP operating expenses were $135 6 million up 38% year over year.
non-GAAP sales and marketing expense increased 46% year over year to $91.5 million and 9% compared to the previous quarter.
non-GAAP sales and marketing expense represented 18% of revenue down from 29% of revenue in the year ago period.
Kris and marketing spend in comparison to the previous year is primarily a result of our increase in performance marketing spend year over year.
We also increased our brand marketing spend in the first half of 2022, as we develop and release new content to increase awareness for our collective offerings.
We remain thoughtful with both our performance marketing and brand spend as we continue to grow the business and increase brand awareness.
As such we do not anticipate material incremental marketing spend increases for the second half of the year.
We continue to monitor marketing investments carefully and adjust real time as we have done in the past evaluating the effectiveness of each additional dollar spent.
Our second quarter, non-GAAP product technology, and development expense grew 18% versus the year ago period to $25 2 million.
Similar to previous quarters. The increase is primarily due to an increase in employee related costs. As a result of 17% increase in head count and continued investment in our technology to grow digital wholesale and digital retail.
We generated non-GAAP operating income of $57 7 million, representing a non-GAAP margin of 11% and we generated $61 2 million consolidated adjusted EBITDA for the quarter.
Both figures were roughly 2 million ahead of the high end of our most recent guidance range.
non-GAAP diluted earnings per share attributable to cargoes, Inc.
It was 32 cents for the second quarter two cents above the high end of our most recent guidance range.
On a GAAP basis, we generated second quarter gross margin of 37% compared to 77% in the year ago period the.
The contraction in gross margin is primarily due to the growth of instant Max cash offer.
We incurred total operating expenses of $164 3 million up roughly 27% and year over year.
The increase in operating expenses was primarily driven by additional head count and associated expenses from the Colorado acquisition.
Second quarter GAAP operating income decreased 39% year over year to $23 5 million second.
Second quarter GAAP net income attributable to car doors, Inc. Totaled $18 1 million and second quarter GAAP net loss attributable to common shareholders was negative $10 3 million.
We ended the second quarter with $368 2 million in cash and investments a slight decrease of $6 8 million from the end of the first quarter.
We used $5 5 million in cash from operations in the second quarter and $9 9 million of non-GAAP free cash flow, which includes capital expenditures and capitalized website development costs of $4 4 million.
Cash used in operations in the second quarter was primarily driven by an increase of $52 million of accounts receivable compared to the previous quarter, which offset cash generated from profitability in our operations.
As Jason touched upon at the beginning of our prepared remarks, there are several macroeconomic challenges impacting the automotive industry.
The typical wholesale seasonal softness which is a leading indicator for retail sales seasonality occurring in the second half of the year.
As a result, we are forecasting headwinds toward do what's the dealer business. Similarly, despite the tremendous growth to date for instant Max cash offer we remain prudent balancing growth and profitability.
With these factors in mind, we expect our third quarter total revenue guidance to be in the range of $460 million to $490 million.
Third quarter revenue guidance for instant Max cash offer to be in the range of $225 million to $245 million.
Third quarter non-GAAP consolidated adjusted EBITDA in the range of 44.5 to $52 5 million.
Third quarter non-GAAP earnings per share in the range of 25 to 28 cents.
This past quarter saw increased profitability from both positive performance and cost savings as planned second quarter expenses shifted into the second half of the year.
As a result, we now anticipate that the third quarter will likely be the trough for our profitability guidance figures and while we will prudently reinvest in our business for future growth and expansion, we expect to see continued improved margins.
Finally in the coming months, we will be determining our next steps in our acquisition with car offer.
As a reminder, we have the ability to purchase up to an additional 25% at seven times <unk> trailing 12 months gross profit as of June 32022.
We are in the process of making this decision in partnership with our board of directors and car offer and look forward to sharing the decision at the appropriate time.
While macroeconomic challenges faced by our dealer partners and consumers continue to be at the forefront of our minds. We are proud of the excellent financial results for the quarter. We continued to intelligently invest in our technology products and customer service, which enables us to be the only full transaction enabled platform and a strong.
<unk> more robust partner to our customers in challenging economic times, but even more so in better times.
As always our path forward would not be possible without the extraordinary efforts of our employees globally I would like to thank them for their continued dedication and commitment as we innovate and transform the automotive industry I am grateful and honored to have worked alongside our talented employees for six and a half years as we grew and transformed our.
Business and while it's not easy to leave cargos I know this team will continue to drive our vision forward to create an end to end transaction enabled platform for dealers and consumers with that we'll open up the call for Q&A.
Thank you.
Ladies and gentlemen at this time, we will be conducting a question and answer session.
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Ladies and gentlemen, we request you to restrict to one question and one follow up.
One moment, please while we poll for questions.
Our first question comes from the line of Chris P. S from Needham.
Go ahead.
Hey, good afternoon, how are you guys doing a quick question on the wholesale revenue you talked about.
Q2 revenue was down versus Q1 because of the increased transportation revenues in Q1, but can you kind of talk about how Q2 versus Q4 2021.
Down you know persons that mark as well and then.
Does the REIT the rental car part of it does that play a part in the instant Max cash I forget as well because they were buyers can cause that's backed by car Aqua as well. So they were buyers there as well and there's you know they were kind of higher or better. So there will be lesser than less of that big going on right. Now so that kind of informs of internet cash I forget as well thanks.
Sure Hey, Chris This is Jason Trevor has been high.
I will I'll start and then I'll, probably have Sam add a little bit.
Yeah, we in both Scotts comments and mine we listed a few of the reasons for some of the sequential trends in D D.
And one as you pointed out was the transportation revenue.
Other factors were around.
Our fleet activity, which which we mentioned as well as some seasonality and some other things related to revenue mix.
Yeah fourth quarter in particular, which you referenced did have you know across the industry very high levels of fleet activity and.
And so that that's specific to that comp one of the factors at play there and that's also why the comments we made about.
The volume of.
Active dealers.
Being on the growth trajectory that they are as so germane and relevant.
And to your second question and then I'll for Sam to add anything.
Yes.
<unk>.
Anytime you have active bidders, that's going to create a more.
Liquid CD environment, so when a dealer you know.
Put it completes a bid matrix to buy a car they're not specifying if they want to buy a CD D card D. D car, but they are obviously, putting in a price and so if the.
The fleets per your question or if any set of dealers were to come in and put in very high bid matrix offers then that's going to allow us to make higher more compelling offers to consumers and instant Max which will lead to more transaction. So there is a flow through in that although it's sort of a rising water let.
<unk> is not a group, saying I only want to buy a C. Today.
And would you add anything on either of those.
I think you hit it Jason I think Chris the only thing I'd add to it is how do we diversify in the future and I think that's a really important strategic effort for our business going forward.
The last four months.
More and more buyers have transacted on the platform each month and I think we quoted the 20% increase from June versus March so even into July we're seeing that increase that helps you.
When the rental fleets go in and go out become diversified and allow you to continue to grow both the D to D and C to the business the challenges in the macro environment when buyers and sellers are a little more skittish theyre doing less transactions per per dealer than they did previously and so our effort is continue to.
Diversify get more and more of that buy side activity on the platform. So that the rental fleet doesn't become a concentrated position for you in there ins and outs of the market. When you know that they fulfilled their fleets for the big seasonal transactions in the travel industry in the summer they slowed down their purchases.
Diversified and have more of those buyers and we're happy to see that number growing every month for the last four months.
Thank you.
Yeah.
Thank you.
Our next question comes from the line of Brad Erickson from RBC capital markets. Please go ahead.
Yeah. Thank you. So first up just on the wholesale weakness maybe if we could set aside the transportation comp you mentioned just curious if you feel like you're maybe getting squeezed out during this period versus some of your larger competitive channels. The dealers already worked with and maybe like what factors are in your <unk>.
Troll to retain and potentially recapture some of that volume from these dealers you know if we set the industry headwinds aside.
Thanks, Brad.
Speak to the first part the first part you mentioned and then Sam can talk in much more depth about how we are retaining and growing customers, which you just shared some of the data on.
No I don't I don't think we're getting squeezed at all I mean I think.
If you look at the factors in the market.
As retail demand comes down that.
That puts pressure on wholesale activity and over the course of the last.
A couple of months, you've seen SAR estimates continue to tick down on weaker consumer demand from higher prices.
The fleets were very active buyers in the winter and into the spring and have pulled back a bit because of their own seasonality in their own fleet aspirations.
And the other thing to that and that's an important part of that is when any any exogenous factor raises prices in a market like a wholesale market, whether it's you know.
Platform agnostic it takes a little while for that balance to then readjust.
Because you had other sellers, who are used to certain high prices.
And they don't adjust as quickly as a big group that may move quickly and so it takes a while for them to lower their prices to meet the bid ask spread and get transactions flowing and then the last one would be would be seasonality as we as we are in the summer here.
So no I mean, we we continued we measure NPS I'm sure Sam will get into all that so I won't go into it but.
We continue to have.
Every signal is saying that.
From a customer level perspective.
Engagement and satisfaction and.
With our platform is very high.
Sam.
Jason I would just add and Brad. Thanks for the question I think you see that in enrollments, but now the number I just mentioned beforehand, more and more by activity for more and more buyers. So.
What what you've Gotta do when you've got an opportunity to serve more of your customers is give more of your youre by base, a chance to participate and transact and that's what we've seen over the last four months. The sell side has always been diverse obviously because of bringing in the CBD.
Inventory youre, bringing in inventory that's gold to the dealers they've never seen that consumer inventory. So you get more and more buyers to have a seat at the transaction you have to have more by activity and so that's what we're.
I think we're bringing in a differentiated offering.
Offering to those dealers not just on the instant trade platform, but bringing in that <unk> volume and thousands of transactions that they've never seen before and I think that's what's leading to that diversification, it's not just making buyers onetime buyers, but ongoing buyers and.
And more of them being able to transact on the platform. So we're thrilled with those numbers, we've got to keep that growing so the concentration doesn't hit us as it does in some of those cases, where the rental fleets.
Got it that's that's great. Thanks, and then maybe just a follow up I guess when you think about the volume headwinds that are going on right now in the <unk> business.
Those are sort of disproportionately going on at dealers, where you added more recently or or are you seeing it in the more mature part of your book of business, where you're just seeing it sort of more broadly across the dealer customer base.
I think I would tie that more to the macro environment Brad.
Wholesale and retail pricing at all time highs it makes a buyer or seller skittish as Jason said it takes a while to recalibrate that consumer demand is softening interest rates are at the highest they've been recession looming recession concerns looming and so I think youre just seeing it in general we're getting more buyer.
As to transact, but each of them doing a little less transaction activity, which means it's a it's a macro environment issue and they're just being cautious about that transaction volume.
Yep got it helpful. Thank you.
Thank you.
Question comes from the line of Marvin Fong from BT I G. Please go ahead.
Good afternoon or good evening, thanks for taking my questions at.
That's fine.
Drill down a little bit more into what you're saying about the rental car agencies and their impact on on car all for so.
As far as Youre looking into three Q I know, there's no seasonality in that where I'm trying to get our arms around but how would you just characterize their activity in the second quarter and what Youre expecting the third quarter or is this kind of the are they now at a normalized level or are they perhaps pulled back more.
More than you think they would in a normal environment, perhaps you could just help us.
We just got our arms around what's what's implied in the guidance and then I have a follow up.
Thanks, Marvin it's Sam Zales. Thank you.
I think youre seeing.
If you're if you're watching the the rental fleets and how they're thinking about things some have fulfilled a small bit of demand from the Oems from from new new distributions. They hope for that but that's going to be a depressed state I think over the next period of time, they fulfilled a lot of that demand through us and in the earlier stage of the year, which prepares them.
For the travel season, and yes, seasonally that will slow down and I think that happens in the market traditionally over the next set of months and so we're we're cautious on that front and I think they're balancing their their approach to <unk>.
New versus used to see if anything breakthrough on the new side.
Certainly with pricing as high as it is there's some caution there on that front end.
So we're being thoughtful that if we keep growing the buyer base and the non rental arena. We are in good shape and we can continue to grow.
The transaction volume long term.
So we don't want to be caught in a concentration scenario, we've fulfilled very nicely over the past year.
But we will continue to look to more and more of these buyers getting on the platform to fulfill that volume that we want long term. So I hope that that answers. Your question. That's new used it is seasonal and it is.
In an environment with wholesale pricing as high as it has all of those factors impact the wholesale arena and we think we're in better shape, when we have more and more of those buyers coming on the platform and transacting.
Right Gotcha and then.
My follow up is probably a related question the enrolled been enrolled dealers the.
The count I guess, so did the net additions grew a little a little slower than prior quarters. So should we attribute that also the sort of seasonality in that this is something we should get used to where you know in the second quarter. They were already sort of gearing up for for a weaker seasonally slower second half of the year or is that is that how we should have.
And the pace the cadence of a dealer additions on our yearend you're out basis or.
Or should there should we think about being a little more linear.
And in normal times.
Yeah. Thanks, Thanks, Marvin for the question it really allows us to distinguish enrolled versus active dealers and youre seeing a strategic shift in us just to the point of that first the diversification of the buyer activity.
It from enrolling more and more dealers on the platform I'm not saying it will be it will stop it will slow down because we have moved towards dealer engagement and that is how do you get more and more of those dealers once enrolled on the platform to start the buying process. We've said that it's a it's a completely new and innovative capability with our matrix.
It's a it's a purchase process that works like a stock and stock market, if it's buying products.
<unk> seen and that takes an effort in those first $25 30 days to get those accounts to activate their matrix start the buying or selling process and have that great success, Jason talked about in the high NPS that we have with those customers to get them engaged and activate and the programs you see the shift from just acquiring cut.
<unk> to now the focus on engagement, what we call our dealer sales managers to focus on getting each of those dealers who were enrolled on the program active and purchasing and transacting to see the incredible benefits of sourcing and selling vehicles through this platform. So you'll see us shift that effort to the diversification of activity.
And transaction.
Both buying and selling.
Inside that base, rather than saying how can we get you know 30000 dealers onto that platform. There are many small dealers who wouldn't find value because they're not they don't have the sophisticated technology to do that so youre seeing it move from enrollment to engagement and transaction volume and I think youll see that as we go forward.
And I think I'll just add one side I think that's a very common.
Exercise in this industry and you know a lot of them.
Other companies in the wholesale arena have large field forces that are out trying to engage dealers and.
It's just the nature of wholesale so we're you know we're doing it in a very efficient way, it's very similar to how Carter's has grown up car offer does it in a very efficient way rather than having a big field sales force, but it's engagement that.
You see needed.
Most of the providers if not all of them.
Mhm Alright, that's very helpful. Thank Scott and Sam I mean, Jason and Sam and I didn't want to say you Scott and good luck on your next endeavor.
Thank you.
Ladies and gentlemen reminder, I need to restrict yourself to one question and one follow up.
Our next question comes from the line of Tom White from D. A Davidson. Please go ahead.
Oh, great. Thanks for taking my questions, maybe just a quick follow up on the on the last one can.
Can you just give us a little bit more color on on how you're going to get the enrolled dealers to use the matrix more is it is it purely just kind of outreach and communication or do you guys need to add new product features.
Total maybe make it more attractive for dealers to use it for different types of inventory and they're just as sort of a follow up any sense you can give us like of your average customer in that business like what percent of their total wholesale buying and selling do they do through car offering.
Where do you think you could hopefully get to that.
That percentage for you in the next two years.
Okay. Thanks, Tom Sam Zales here I'll take it and see if Jason wants to follow up.
There is both a technology and a and account management process that we focus on so you heard the investment in what we call a dealer sales managers at car offer they're experts in knowing the wholesale arena, they're speaking to experienced buyers on the buyers and sellers on the other side merchandise nurses on the other side of it.
The dealer equation and quite honestly our ratio of accounts to reps was or was not quite aligned over the last several months of the incredible growth of the business I want to take a minute just to stop and remind everybody. We're two and a half year old business at car offer the only pure play profitable digital wholesale business in the market and a company that's grown in <unk>.
Two and a half years to this incredible size. It is so you're asking great question, which is how do you focus on the people side of that we almost outgrew the operational capabilities. We have in that period of time, and we've right sized that with more investment in those dealer sales managers because their job is to analyze the performance and the opportunities those dealers have.
Taking a look at what price they can sell those vehicles vehicle for on the car offer platform and what profit they make on those versus keeping it in a retail environment and hoping in a depressed consumer active.
Activity period, whether a consumer will buy that vehicle for a slightly higher price. So they are doing that analyzing and engagement process to move an enrolled dealer to an active aggressive.
User of the matrix.
And as I said before that does take a bit of time to utilize this new system in a different kind of purchasing process to get used to that matrix buying process that typically takes the first 30 days of an onboarding in the training and use of that tool set and so we're investing on that front second is sort of the technology. As you said, yes, a constant investment in there.
Incredible matrix capability, there's a matrix analyzer function that allows a dealer to see through the the the machine learning what better bids they should be making what they are missing out on buying certain vehicles and their market think of combining that with our consumer data car gurus to say, we're seeing more interest in.
This type of vehicle it making model in this geography, here's something you can use and its downloading that data in a way that makes it very easy for the dealer to use it a wizard to use there.
Their technical capabilities more effective on the matrix. So it's a combination of those two.
And where we think those are the right investments to make and that's why you see this balance of <unk>.
Growth and profitability, while we saw a better gross margin to the car off our business in second quarter, where can they keep investing the right way to optimize that kind of revenue and profit growth for the business will continue to look at share of wallet to your other question. We haven't shared that data. We're researching it we're very proud of how quickly we've become an <unk>.
Port and part of the buying and selling activity for our dealers and we're doing that through our own research and we'll be looking at that more thoughtfully on a gross basis for the market as we get out of 2022.
Okay, that's great.
Yep.
Sorry go ahead.
Finish your thought sort of just.
I was just going to say to add on the wallet share point.
If you just if you think about it back of the envelope digital.
Wholesale is in the very early days and the share shifts from physical.
Is growing continues to grow and well for some time and in the last two years or two and a half years within digital.
Needless to say, we gained a lot of share, but it's still early and so if we're low sing if if digital is still single digits of the market and so we as a platform are some fraction of that then among the adopters that we have.
Our share of wallet them is above that low single digits.
But it's you know.
But it's still got extraordinary runway because we're such early days and what gets us, particularly excited as that.
You know we have a lot of examples where we are a.
Really compelling material percentage.
Dealers.
Wholesale purchases, our wholesale sales and we even have some dealers who are changing their strategy to leverage the flexibility and the capability of the matrix in and seeing tremendous growth as a result of it so.
We see both the potential of the heavy users and what they can accomplish with it but we also have.
The relatively low starting point that we have right now because of the early days of the markets, we see huge runway.
Got you I appreciate it I'll, let somebody else go next thanks.
Thank you.
Our next question comes from the line of <unk> Khan from Truest Securities. Please go ahead.
Alright, Thanks, a lot a couple of questions for me, maybe just on the on the dealers dealer sales manager.
You mentioned, you're understaffed, Oh, and I'm thinking if I look at the you know.
Expense line.
Is that fully is that additional hiring that we need to do is it contemplated in the back half guidance of a silicone marketing.
Flat with Q2 or how should we think about the allocation between.
English is AD spend so that's one and the other question I have is.
It was just on the gross margin for Aimco.
non-GAAP gross margin was 4%.
Sustainable is that going forward, how should we think about that thank you.
Sam do you want to take the first part and then I'll talk I'll speak to in some X gross margin.
Sure.
Yes, no. Thanks, Ed I don't think I said understaffed and you said the ratios we wanted or.
We're not optimized and I think this is this is to the point earlier on enrollment versus engagement.
We with that shift to <unk>.
Rolling thousands of dealers on the platform to now recognizing the work goes into the.
Into the engagement on the platform and utilizing it we have.
Tremendous tremendous.
Opportunity to turn those folks who are more of the hunters into farmers and we're doing that right now and making it a tremendous success for us so without adding any resources at all.
And then too.
And then to make sure the ratios as we use those technical tools I talked about earlier and the time in that early engagement to optimize them.
We're doing so I think you know I'll I'll remind everybody. This is the the lowest least capital intensive digital wholesale player in the market, we're profitable and extremely so in car offer I'm really thrilled to see that and getting more so as we talked about our results and second quarter.
And we're going to continue to do that with this low expense base and crank up what we're doing I'll, let Jason talk a bit about margins, but I couldn't be more proud of coming out of first quarter, saying there was some work we needed to do on gross margin in those two.
The second quarter and both on I M. C O N D. Our work to focus on profits and improve the gross margin of both of those businesses by hundreds of basis points was a really thrilling result of great and focused effort. So Jason I'll. Let you shared in detail then I can add to add on it.
If necessary.
Thanks, you touched on some of the things, but yes, we do think it's sustainable I think the better way to think about are the better adjective is that it's controllable.
We're nine months into instant Max nine to 12 months and its Max cash offer and any real.
Volume the market is evolving during that time unit prices have probably had more.
Flex and volatility than normal during that period and so every day we're testing.
And conversion rate and offer price are two of the things of the money that we're testing and as Sam said, we're so proud of that we went into this quarter.
Saying that we felt we could control it and that we could improve it and we did exactly that and in future quarters. As we learn more we may decide to slide you toggle slightly differently.
On the margin and growth.
Targets because those two things are inextricably linked.
But all the while in the background, we're improving conversion and just making it a more efficient machine.
Maybe just on the on the first question that you answered Oh can you maybe share with us some of the <unk>.
Improvements are you.
And you know through the.
All the dealer sales manager and the calendars of the touch on they have more.
Sort of.
They spend more time on how much improvement you have seen and.
What percentage of a challenge do you see where the opportunity exists to kind of optimize engagement and drive it higher.
Yes, I think I can point to a couple of general approaches.
I think one the.
The use of the hunting team to go back and initiate work with accounts that have been enrolled.
<unk> not yet fully activated their accounts remember in this process. When you signed 12 12000, plus dealers to our platform in many cases, it's a large large group or a national account, we're purchasing happens decentralized so you're going to get one or two stores that my test the platform first and have great success with it.
But getting to the rest of the.
The group in getting the rest of the stores involved involved and active on the program.
You need to make the outreach and make sure that happens. So we converted a set of our our hunting team the enrollment team to going back after those accounts and saying look at your other stores that are already having that success, let's start that process of training initiating the use of the platform getting used to the matrix buying process to get your pro.
Graham up and running and that has sustained exactly what I talked about earlier the last four months and increased in number of buyers transacting on our platform every single month for the last four months. So that tells me the results of an attack plan that focus on both the enrollment engagement training.
And activity. These dealer sales managers can do to optimize the platform for those customers hope that hope that makes sense.
Thank you.
Our next question is from the line of Ralph <unk>.
Schuch Hot.
From William Blair. Please go ahead.
Thanks for taking the question last call you talked about increasing price on the block.
Buy and sell fees I think also in inspection and as well just curious how those fees are absorbed on the platform what you've learned from that and sort of thoughts about your ability to continue to think about price going forward. Thanks.
Thanks, Ralph I think.
I don't think we saw any impact to.
It to anybody any dealers not using the platform that that fact that more and more buyers are transacting on our platform tells me our price point is where it should be in the market I don't think we're going to continue to rise it at any point in the near term I think it's a.
I think it's exactly where it should be I think we are creating tremendous success in a very efficient way, we're inefficient business, because we're profitable and our customers are making more and more money on these transactions certainly from the <unk> side, but also because we're bringing in the instant Max inventory that they've never seen before on inspections. It's a you know it's a P.
Through cost its not a margin process for us I will tell you that as Jason alluded to we are improving the margin of those businesses. We're very proud of those results.
To you know to gross margin improvement in both D and C to D. In the last quarter that happens because we're improving our inspection processes, we're adding more and more of these partnerships in light capital model. Likewise on transportation and arbitration was a huge success for us last quarter, we knew we needed to attack. It we brought in an industry <unk>.
Or to focus on arbitration and that led to a percentage of transactions arbitrated decreasing we're already added we think as the market low rate on that front and we continued to decline decreasing overtime. The the loss per vehicle an arbitrator vehicles went down so all of that leading to the margin improvement.
<unk> inspection is one that will continue to invest in but I don't think we'll overcharge a price point for it we just want to have great customer satisfaction get more and more dealers to transact on the platforms. I think if you look at our average.
Selling price these vehicles are $25000 and not the high twenty's.
We think our price point is probably extremely competitive in the transaction fee, we're charging but all in this is this balanced Jason set of growth and profitability, we want to be good to our customers on a long term basis and run the continued tremendous profitable business at car offer.
Great. Thanks, Jeff.
Yes.
Thank you.
Our next question is from the line of John too long journey from Jefferies. Please go ahead.
Thanks for taking my question I just have one I had a question about arbitration looks like it grew about 50% sequentially in the quarter. Despite a flat G. M. V. In units can you just walk through the puts and takes driving that expansion in arbitration and when we should expect the measures that you're.
We're implementing to help mitigate some of the unnecessary arbitration starting to materially drive that lower over time. Thanks.
John Thanks.
What we look at and I think this is really important is the arbitration as a percent of transactions and that is that that is at a low point in the business. It's gone down three consecutive months through second quarter continues to go down overall and that's the critical factor to our.
This is juan.
It's well it's shrinking over each month, which is really important number two is R. R.
Our loss per vehicle in our arbitration. This is important because we do some spec buying when you think of consumer comes in and we talked about the deny M. C. O. There are times it will say, let's take a shot at the purchase on this vehicle. If we don't yet have a buyer will will create a transaction out of that as well and our loss per vehicle has gone down.
Over this quarter versus last and I think that's what the measure is when you look at our overall profitability of those two businesses <unk> and incident Max cash offer that's why you see the percentage gross margin improving.
From first quarter to second quarter, so that that's how we look at the numbers.
And that's the best I can answer for you, we're really happy with our percent of transactions in arbitration as I said, we brought in an industry leader to lead that for us and I think youre going to see continued focus on a good gross margin to those businesses, which drives our overall profitability of car offer and really pleased with what we did.
First quarter to second quarter.
Great. Thank you.
Thank you.
Next question is from the line of Nick Jones from J M. B Securities. Please go ahead.
Thanks for taking my questions I guess on the listing business is expected to grow in the back half how should we be thinking about the traffic declines I mean, how much of this is kind of a function of really kind of targeting qualified leads versus kind of softness in demand.
Yes, thanks for the question Jason.
It's a function of a continuation of what you've heard us talk about for the most part which is our focus on targeting low funnel.
Lee.
Low funnel of consumers, who are high quality leads.
And Ah and yeah, there's certainly some element which is in <unk>.
Lower demand consumer demand environment, youre going to have less.
Lookers browsers.
And the people who are engaging with our platform are probably going to be more serious.
And so as <unk>.
Especially as we move to.
Launching things like digital deal, where I mean, that's a step function change in the quality of the lead as you've heard us give some stats around that.
And we you know we don't need a lot of Oh.
You can replace a lot of lower quality leads with a much smaller number of digital deal leads and you're still going to have the dealers better off I think another good indicator of.
The proof of that is that we've had.
Extremely low dealer churn.
And we even had positive dealer counts.
So both of those are I think indicators that dealers are valuing what we're delivering to them.
And that's not just lead volume.
Sleep quality and I think as dealers embrace digital retail more and all of the features associated with digital retail more.
As we've talked about they've gotten hooked on this idea that they can sell just as many cars with fewer salespeople you're much more profitable dealers.
And so they love the notion that we would have higher quality leads that we're sending to them.
Great and a follow up on digital deal so you're getting kind of an insight into how consumers are thinking about the price point, a bushel buy a car I mean, we saw some.
Data come out last week household debt up autos are big culprit of that I mean is there a risk that.
Consumers are such they don't have the money in a pool of people who can really.
I guess, a Ford cars is going to shrink rapidly.
Particularly as you know the auction markets.
Challenged as well potentially keeping prices higher it seems like potentially kind of a tough macro setup from the consumer standpoint, I mean, how are you thinking about that in terms of how it impacts the listings business.
Yeah, Great Great question, I mean, any consumer who has a car and is going to get to replace it.
Are we going to get quite a bit of money for their existing cars. We all know so.
In a lot of it depends on if there.
Trying to upgrade or if they're just looking at a car that could be an even swap in which case they wouldn't have to put much much money down.
Who are those certainly seeing lower AR auto finance, our conversion rates and accept rates as an industry. So.
It is I think undeniably harder for a consumer to get the same loan that they would've gone through you know what I've tried to have gotten six months ago or a year ago.
And so we are seeing some of that too.
But you know once they qualified for it then there.
Just as likely and capable to convert as they were when they had qualified for it.
In the past.
So, but again, that's all of all of these.
Factors.
Which right now as you just gave a few data points that point to a tougher environment for consumers.
All of those factors in good times and in bad are what make digital retail such a win win in digital deal.
Invest consumers more for dealers.
How's the consumer to spend less time in the dealership.
To accomplish the same thing that they were before.
And.
As you pointed out in tougher times, the dealership doesn't want to waste a lot of time on a consumer that simply can't afford it and likewise, the consumer doesn't want to get four hours into a visit and then realize that they're not going to get the funding. So.
We certainly we built digital deal and are investing in digital retail for good times and bad, but we're also seeing that it's really having a huge impact and what feels like.
You know relatively tougher times now.
Great. Thanks, guys.
Okay.
Thank you our next.
Question comes from the line of Doug Arthur.
From Wolfe Research. Please go ahead, yeah. Thanks, So I'll try to make this quick.
Scott in terms of your guide for instant Max in Q3 are you seeing slowness already in July or is this just overly cautious thanks.
It is thanks, Doug.
Any of our guidance on this is relative to recent trends that we've seen so.
We've got one.
<unk> under the belt, so anytime we're forecasting for the transactional businesses, it's sort of one third of the way there market market can move quickly as we've seen in prior quarters, but.
It's indicative of some of the seasonal.
Slowness that we alluded to in the call.
Okay I appreciate that thank you.
Yep.
Thank you.
Our next question is from the line of Jed Kelly from Oppenheimer. Please go ahead.
Hey, Thanks for taking my question.
Hal car offer.
Cell platform has the highest.
Margins in the industry I mean do you think you have to have any investment around sort of getting around I guess inspection or anything to kind of go.
Get more buy side activity from dealers. Thank you.
Hey, Jed Sam Zales. Thank you, yes, I do.
We're proud of the profitability of car offer and how capital efficient they've run the business, but if you look at each area of the operation and how to optimize that if you look at inspections as you've said, we're working with new partners broadening the capabilities. They are doing things in mechanical that we may not have in the past as we examine things like that.
And aggressively focus on optimizing that transaction in NPS for the customer.
The arbitration process, they talked about focusing on improving the processes that your margin goes up overall, that's an investment that improves the business result, overall transportation more partners doing things to improve the speed with which we get a vehicle to the customer both from a <unk> taking it from the home to the dealer's location those are.
Things that are really important for us and we've optimized and focused on more investments to make that work the way, we wanted to and creating technology to create portals in each of those area that optimize our national.
National coverage so.
Those are all investments that even though the focus that I made on how we look at our human resources to ensure the optimal.
Account to DSM ratio those are investments that we make from a profitability standpoint to keep growing and staying profitable. So I think youll see us continue to focus on innovation and optimization. So the customers are thrilled and we're still running a scaling and profitable business.
Thank you.
Thank you.
Ladies and gentlemen, we have reached the end of the question and answer session.
And now I would like to turn the conference over to Mr. Jason Harvison for closing comments.
Thanks, very much operator, so would just like to echo some of the comments made in the script, we really would like to thank all of our team members for their outstanding work on a really terrific quarter and also like to thank everyone for your interest in our business and you're really thoughtful questions. Today. So thanks, so much everyone have a great evening.
Thank you so the.
The conference of cargo to the zinc has now concluded. Thank you for your participation you may now disconnect your lines.
Okay.
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Yeah.
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