Operator: Good day, and thank you for standing by. Welcome to CarLotz Third Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded.

[Operator Instructions] Thank you. I would now like to hand the conference over to your first speaker today, Ms. Susan Lewis, Vice President, Investor Relations for CarLotz. Ma’am, please go ahead.

Susan Lewis: Thank you.

Good afternoon, everyone. With me on the call is Michael Bor, Co-Founder and Chief Executive Officer of CarLotz; and Tom Stoltz, Chief Financial Officer. Before we get started, I’d like to remind you of the company’s Safe Harbor language, which I’m sure you’re all familiar with. The statements contained in this conference call, which are not historical facts may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those suggested in such statements due to a number of risks and uncertainties, all of which are described in the company’s filings with the SEC, which includes today’s press release.

If any non-GAAP financial measure is used on this call, a presentation of the most directly comparable GAAP financial measure to this non-GAAP financial measure will be provided as supplemental financial information in our press release. Now, I would like to turn the call over to Michael Bor, Co-Founder and Chief Executive Officer of CarLotz.

Michael Bor: Thank you, Susan. Good afternoon, everyone, and thank you for joining us to discuss our third quarter 2021 results. I want to start by saying that despite the headwinds we have faced this year from an inventory standpoint, I’m encouraged by what our team has accomplished both during the quarter and year-to-date.

During the third quarter, we achieved record revenue of $68 million more than double our revenue last year. This 128% growth in revenue was supported by more than doubling our hub footprint of 58% increase in units sold and a 190% increase in F&I revenue versus last year. We started this year with exciting growth objectives for our hub footprint, brand awareness and technology transformation. All to create more value for our stakeholders through our unique consignment business model. The significant industry disruption caused by the ongoing chip shortage and the compression in the typical margin between wholesale and retail pricing in the first half of the year, however caused us to make several tactical changes.

Even with these challenges, we’ve accomplished a great deal. First, we more than doubled our hub base opening 12 units year-to-date for a current total of 20 versus only eight at the start of the year. During the third quarter specifically, we opened large hubs in Denver, St. Louis and Atlanta. Fourth quarter-to-date, we’ve opened hubs in Plano, Texas and Pomona, California, and have a couple more that we have announced, but not yet opened this year.

While we have increased the number of hubs by 150% year-to-date, we have increased our inventory capacity by 226% with these larger hubs. Second, we hired many talented teammates to build out new expertise in areas like product development, while also expanding our finance technology and marketing proficiencies. We also hired many talented teammates in the hubs who have been on the front line supporting lead conversion, unit sales and driving significant growth in F&I. We’re proud of the fact that in the midst of one of the greatest U.S. labor shortages, we are more than 90% staffed as we continue to grow.

Third, we have launched a marketing campaign designed to increase the awareness of our brand and focus on our consignment business model. As we enter new markets, most people don’t know the CarLotz name nor do they know what consigning their car for more money could even mean for them. It’s been challenging and fun to introduce our unique business model and value proposition to markets around the country and watch it grow. Fourth, we have continued our technology transformation focusing on increasing consumer engagement and improving the functionality of our website. There’s certainly more to do on the technology roadmap, but we are focused on enhancing the user experience and increasing conversions.

And lastly, we’ve been flexible in how we source inventory to navigate consignment headwinds and appropriately stock our hubs. While we still can’t predict when things will be back to normal, I’m encouraged by the sequential improvement of unit source non-competitively each month during the quarter and into the fourth quarter. And anecdotally have seen signs that the chip shortage is getting the attention it deserves from the companies that can work to solve the problem. Now, let me elaborate on sourcing, given its importance to our business model. As you’ll recall in Q2, one of our top accounts paused consigning inventory to us as we were also seeing a compression in the margin between retail and wholesale prices that significantly affected the inflow of vehicles from our traditional sources, which necessitated increased auction sourcing to fill up our hubs with inventory.

As we worked to improve all of our sourcing channels in the face of this adversity, we have made progress in lessening our reliance on options to source vehicles. While monthly sourcing can vary based on seasonality and growth needs in June about 70% of our inventory and flow is being sourced at auction, while in October that number was less than 50%. In part the increase in unit sourced non-competitively this past quarter is a result of new accounts, the rekindling of a prior account and the wholesale retail pricing environment making consignment more attractive than in the recent past. As we mentioned on our last call, the partner who paused our relationship during the height of the wholesale pricing disruption has returned and is now consigning again accounting for about 10% of our sourcing volume in October. In addition, we have added new corporate partners to our sourcing mix, while seeing more corporate sourcing partner pilots in Q3 than in Q2.

Also encouraging from a sourcing perspective is the increase in units sourced from consumers through consignment trade-ins and purchases. This is a primary focus for us given the attractive variety of inventory, faster sell through, and the relatively higher GPU generated from these units. As our name recognition and our brand grow in our new markets combined with the efforts we are placing on growing consumer sourcing, we anticipate continuing to see unit growth in consumer source vehicles going forward. While our non-competitively sourced inventory is improved incrementally in Q3 versus Q2, the inventory purchased at auction during the last two quarters pressured retail GPU during Q3 and resulted in an increased inventory reserve for owned inventory at the lower of cost or market. Historically, we have not needed a significant reserve, because the majority of our units have been consigned versus owned.

With the shift over the last two quarters to more owned units and the associated price depreciation on these units owned, we increased our inventory reserve. The factors that caused the increase were as follows. First, we purchased a significant amount of inventory at auction while wholesale prices were high. These auction units can be less desirable than commercial or consumer source vehicles and can experience higher depreciation and longer days to sell. In addition, we purchase vehicles at higher price points than our historical average.

These factors have resulted in the average age of our inventory increasing and the increase in the reserve. As you may know, the gross profit use to calculate retail GPU includes the lower of cost or market reserve booked on inventory still on our balance sheet and divides it by the retail unit that sold during the third quarter. Including the increase in the inventory reserve of $935,000 recorded in Q3, our retail GPU was $939. Excluding the increase in the inventory reserve, our adjusted retail GPU for the units actually sold in Q3 was $1,315. As Tom will discuss, we expect the retail GPU to improve in Q4 versus Q3.

While inventory continues to agent to Q4, we are making good progress in selling the aged units this quarter, along with the newer inventory we are sourcing and see that through the retail and wholesale channels, we should be able to reduce our aged inventory to more normalized levels over the next several months. The offset to these pressures on retail GPU is our strong backend profitability. Like Q2, we saw significant growth in F&I. As we mentioned on our last call, we have seen increased penetration and an increase in contribution dollars from several F&I products as we increase training, enhanced our technology and added new products and services. We are extremely pleased with these results and look to continue this momentum in Q4, by adding several financing partners who will help us to better serve our guests, who find themselves at the lower end of the credit spectrum.

Previously, without the right products to serve these guests, they have the lowest conversion rates, while accounting for the majority of the credit profile submitted at our hubs and online. With more diverse financing options, we expect to better meet the needs of more guests, which we expect will improve conversion rates. Some of these financing partners have just come on board and more will be added during Q4 2021 and early Q1 2022. Even with the industry disruption we have experienced this year, I remain optimistic about the long-term opportunity of our consignment business model to drive long-term value for all of our stakeholders. As we set on our Q2 call, we have not seen a structural change in the industry that would prevent us from returning to that model when the market normalizes.

We are making investments across all aspects of our business that will allow us to be in an even better position, when the industry emerges from the chip shortage. As you know, we have invested in expanding our hub footprint in both new markets and fill in markets this year, these new hubs are larger and have more processing capacity than our mature hubs, allowing us to do more work in house and address inefficiencies in the process. And while finding corporate consignment units has been more difficult due to the industry challenges, our retail remarketing team has done a great job of maintaining our current corporate sourcing partnerships, establishing new relationships and increasing the number of pilots. These relationships are core to our business model and will be a crucial factor in allowing us to further increase our consignment mix as the market allows. I would be remiss if I didn’t discuss our marketing initiatives.

We have increased our marketing investment in key geographies and launched our first major brand campaign, which aims to debunk preconceived notions about pre-owned vehicles and remind people that it feels good to be a used car person. It’s a big platform that allows us to increase brand awareness and help introduce people to our unique offering. The team will build on this campaign by focusing on the quality of leads and driving conversion. All of our initiatives and investments are in place to provide the best used car customer experience through our differentiated business model. We look forward to executing on our growth plan to achieve this goal.

I’ll now turn the call over to Tom to present our financial results. Tom?

Tom Stoltz: Thanks, Mike. For full details regarding our financial results, please refer to our press release available in the Investor Relations section of our website. For the third quarter, revenues were $68 million, an increase of 128% versus last year. Retail unit sales were 2,490 an increase of 58% versus last year.

For the year-to-date period, revenue increased 115% and unit sales grew 60% as compared to the same nine month period in 2020. Revenue growth was driven by F&I revenue of 190%, new hub growth of 125% and ASP growth of 34% year-over-year during Q3. Gross profit was $2 million for the quarter. Gross profit was negatively impacted by lower front end profits on owned vehicles, primarily driven by the large volume of auction purchases in Q2 and Q3, which are now aging into and through Q4 given the macro industry challenges already discussed and the increase in the inventory reserve of $935,000. These headwinds were offset by the significant increase and F&I profits, including the increase in the inventory reserve, retail GPU is $939.

Excluding the increase in the inventory reserve, reflecting the GPU on just the unit sold in the quarter adjusted retail GPU was $1,315. Third quarter SG&A expense excluding stock compensation and depreciation was $24.8 million. The increase in SG&A versus last year is primarily due to an increase in compensation expense related to the increase in support staff in home employees to support our growth strategy. The increase in SG&A is also driven by technology and marketing expenses. Net loss for the third quarter was $3.5 million versus a loss of $500,000 for the same period last year.

Q3 adjusted EBITDA loss was $22.8 million versus a loss of $571,000 for the same period last year. Now turning to the balance sheet. At quarter end, our cash and marketable securities were $201 million, which continues to rise us with flexibility. We continued to utilize our $40 million floor plan to support our vehicle purchases. At the end of Q3, we had $24 million outstanding under the floor plan.

Now moving to inventory and inventory reserve, as Mike explained earlier, until Q2 of this year, our inventory was primarily consignment. Our inventory reserves were insignificant until Q3, when our inventory composition became mostly owned versus consigned. Our owned inventory valuation has been impacted by a couple of factors. First, we purchased a significant amount of inventory from auctions, when wholesale prices were rising. These units purchased at auction can be less desirable than non-competitive sourced units.

As a result, we are seeing price depreciation in addition to longer days to sell on these auction purchase units. Secondly, unlike Q2, we have a higher percentage of units at meaningfully higher price points, which can take longer to sell and from an absolute dollar perspective are impacted more by depreciation. These factors resulted in the age of inventory and the inventory reserve increasing in Q3. Going forward, we do not expect large shifts towards owned inventory, and therefore, we do not expect large increases in our inventory reserve. We are managing our inventory more efficiently with the goal of ending the year with a significantly improved aged inventory profile and ready for the seasonally higher first quarter.

While we have provided some qualitative guidance today, given the continued uncertainty regarding our supply chain, we are not issuing comprehensive guidance at this time. However, we expect to provide guidance on our Q4 call in March of 2022. In summary, we expect sequential quarterly improvement in retail units sold and retail GPU in Q4. We will continue to be judicious with our corporate spend and how we allocate capital to maintain flexibility and manage through the continued disruptive market conditions and we expect to have fewer hub openings in 2022 than in 2021. Our 2022 hub opening schedule should enable us to have a greater focus on the productivity and growth of our existing hub footprint.

I will now turn the call back over to Mike for closing comments and Q&A.

Michael Bor: Thanks Tom. In summary, while the chip shortage has certainly caused unprecedented disruption across the industry, we are focused on maximizing the returns on our significant investments made this year, leveraging the assets we already have in place, offering the best customer experience in the industry and building awareness of the CarLotz name and what consignment means. We look forward to returning to a predominantly consignment business model as the chip shortage is resolved. We’ll now take your questions.

Operator?

Operator: Thank you. [Operator Instructions] Your first question comes from the line of Gary Prestopino from Barrington Research. Please proceed with your question.

Gary Prestopino: Good afternoon, Mike, Tom. How are you?

Michael Bor: Doing well.

Thanks.

Tom Stoltz: Doing good.

Gary Prestopino: Mike, just a couple of questions here. In terms of – are you also still experiencing some issues with getting the cars ready for sale and through onto the sites and onto the website like you had experienced earlier this year, because every – the used car market is just so hot right now. I’m just trying to understand why you are getting depreciation in the prices, when everything seems to be flying off the shelves.

Michael Bor: Yes. So getting the cars ready for sale has – when we started the year and we’re launching as many new hubs as we did, was challenging for us as we were trying to hire up teammates to run our new processing centers and getting the technology and equipment in place very quickly. I would say, over the course of the year, as we’ve hired awesome people built the technology, gotten new equipment and our new startup hubs have matured, our time to get a car ready for sale has come down meaningfully at our new hubs and our legacy hubs have been performing well on the time it takes to get cars ready for sale. To answer the second part of your question, actually also – we have also been bringing cars in a much steadier cadence so that the hubs are not kind of overwhelmed with large buckets of inventory like they were in Q2 and earlier in the year. The cars that we sourced in Q2 and in Q3 as a result of the temporary pause of one of our top accounts, in addition to seeing a lot less consignment volume due to the wholesale and retail pricing inversion.

We were then forced to buy cars at auction at a time when cars going through auction were frankly the most desirable vehicles. And so we brought on a lot of vehicles that while a desirable vehicle was selling very quickly for a great price, not all vehicles are built the same, not all vehicles have the same trim level, and there were some vehicles through Q3 and really bleeding into Q4 a bit that are just taking longer to sell. And so we’re seeing that as we bleed through that early inventory that came in and then combining it with the inventory that we’re getting nowadays shifting a little bit more to consignment and non-competitively sourced inventory, we’re seeing all of that improved.

Gary Prestopino: Okay. And then in terms of some of these accounts or this legacy account coming back to you, as well as you’re getting some new accounts on the commercial side.

One would assume that they’re not getting the desired results from the auction side of the business, is that more or less the case, they’re not getting the price realization that they thought they could.

Michael Bor: Well, in a normal environment or even close to normal, retail will be higher than wholesale. So what we’ve seen in the first nine years of being a business, and then since the early part of this year is there is a gap between wholesale and retail, and that’s really where – that’s really the value that we add. So when the – in Q2, when many we’re seeing that – in some cases, wholesale prices were above retail, it was very difficult to make the decision to send a car that needs to be remarketed to retail. We have not seen inverted, wholesale higher than retail.

We have seen over the last several months that the gap between wholesale and retail has been – even in the last several months has been more volatile than we would like to see, but we’re definitely able to show our accounts lift over what they could make at wholesale. And we’re looking forward to time when that becomes a little more stable with our accounts. It drives a lot value to them when they can send us vehicles and make $1,000 plus over wholesale.

Gary Prestopino: Okay. Thank you.

Michael Bor: You’re welcome.

Operator: Thank you. Your next question comes from the line of Emmanuel Rosner from Deutsche Bank. Please proceed with your question.

Emmanuel Rosner: Thank you very much.

My first question is on the environment you’re seeing for this consignment model. I think some of your earlier remarks suggested that you’re seeing at least sequentially some improvements there. I just wanted to know, if you could give us a little bit more color there, obviously, wholesale price is continue to reach new records. And so I guess, what are you seeing that are sort of improving conditions for the consignment model?

Michael Bor: Yes, at the end of the day, it really comes from a couple different sources. One, we have legacy accounts that have been working with us for many years.

And there was a period earlier in the year, where they really had to think hard about sending a vehicle to retail, because the wholesale prices were increasing at such a dramatic rate. Now, eventually the retail price adjusts and there’s a gap between wholesale and retail and that’s where we add value. And so in Q2, we saw our commercial account inflows as low as 10% of our – of the vehicles that we were sourcing. And that was kind of midyear. And ever since then, we’ve seen significant improvements over that.

As we’ve mentioned in our remarks less than 50% of our vehicles now are sourced through competitive channels. So we’re getting much more now than we were getting earlier in the year from – we’re getting less from the auction and more from our commercial accounts and also seeing nice improvements in consumer sourced vehicles. And that’s because we’re starting to be able to provide significant value to these accounts who have vehicles that they otherwise would’ve sent to auction if the gap between wholesale and retail was too narrow.

Emmanuel Rosner: Understood. And I guess, just thinking a little bit deeper on the sourcing part and maybe a little anecdotally, but we’ve noticed decent ramp up of Tesla vehicles on the CarLotz website during September and October.

And they seem to be concentrated in like two hubs near one another in California. And so in light of this geographic concentration and very quick ramp in units, are you able to comment on whether these are consigned or owned by the company and if they’re coming from a fleet manager or they’re coming from Tesla. Any color you’re able to provide and how are you dealing with this sourcing?

Michael Bor: Sure. Well, we like many are very excited about this transition to EVs over time. And we’re seeing it.

Our guests, people who buy cars from us have great demand for electric vehicles. We think it’s going to be play a big part in the future of transportation. As we’ve managed through this year, we’ve picked up some great new accounts. A couple of which, well, one specifically, began sending us it’s a financing company, began sending us two or three or four year old Tesla’s a bunch of different models just to test out what the results could be. The company was on the West Coast, it was – these vehicles were on the West Coast, we – at the time in California only had our Bakersfield hub open.

And so we used our Bakersfield hub as the testing ground for this account. They saw very good results from the first many that we sold for them, both in terms of lift and days to sell. And so they started sending us more and more vehicles. And now as we – then we opened our Pomona location a few weeks ago, started sending some there. And because the results have been great, we’ve started to actually send them around the country, which is one of the benefits that we talked about – when we talked about geographic expansion being a key part of our growth strategy is that makes it really attractive for sellers of vehicles, our clients to be able to spread their inventory around the country.

And so even though, there’s a meaningful cost to ship a vehicle from California to Chicago, Texas, Florida, they’re seeing tremendous lift on the sale of these vehicles. And we’re sending truckloads around the country so that we can spread this inventory around and generate more eyeballs on their vehicles. So it’s been a great new account for us. We’re very excited about it. And we see a bright future for our relationship with this new account.

Emmanuel Rosner: And I guess, so my understanding is these are consigned vehicles. Is that right?

Michael Bor: They are consigned vehicles. That’s right.

Emmanuel Rosner: Okay. And so what would be a successful outcome of these partnership in – could the inventory from this account grow significantly?

Michael Bor: Yes.

I mean, they have a lot of vehicles. They manage all types of vehicles, so it’s not just Teslas. But they’ve been – they’re financing company. They just have a specialty in two, three year old Teslas, but they’ve been bringing us other vehicles as well. They’ve been testing some of their repossessed vehicles as well.

So we’re really kind of excited about this account branching out. Now, most of their vehicles are on the West Coast. So unless, we see the types of the kind of lift, the magnitude of lift that we’re seeing on the Teslas across other vehicle types. They’ll probably stay on the West Coast or close to it. We have two locations in California.

We have a location in Seattle and we’ve announced some other in Denver and we’ve announced some other locations that are kind of west of the Rockies. So probably most of the inventory will stay in that region, but to the extent, we can show significant lift, we’ll be spreading those vehicles around the country.

Emmanuel Rosner: Great. Thank you very much.

Michael Bor: You’re welcome.

Operator: Thank you. The next question comes from the line of Sharon Zackfia from William Blair. Please proceed with your question.

Sharon Zackfia: Hi, good afternoon. So I’m sorry, I missed the first part of the call.

I was on hold for quite a bit trying to get in. So hopefully, I’m not asking something that you’ve already answered. But in terms of the pullback on hub openings in 2022, are you already fully committed with leases? I mean, are there any financial ramifications from dialing that down a bit? And can you give us any metrics on how many leases you have signed at this point?

Michael Bor: Yes. So the process of opening hubs, as you know, is a many-months process. It can be many years, frankly, in some cases.

But in many cases, we have leases that we’ve scheduled to open, as you know, throughout the rest of this year and into next year. So we’re not pulling back from any commitments that we’ve made to-date. We’re excited about the hubs that we have planned for the rest of this year and into next year. And this year was a dramatic growth year for us, opening 12 so far with a few more on the way. Next year will also be a big growth year for us, just not as big as it was in terms of new hub openings as we saw this year.

We’ll have more information on the new hub rollout plan early next year when we talk about the full year.

Sharon Zackfia: That’s helpful. And then did you comment at all on the kind of customer response to the kind of more pervasive, multimedia, ad campaigns that you’ve been having I know, I’ve seen a lot of billboards in the Chicago area. So I’m just curious on, if you can, if you have any metrics on how that’s been driving either traffic to the website or traffic into the stores and how you’re analyzing the ROI on that?

Michael Bor: Yes. We’ve seen in terms of like unaided awareness and site visits, we’ve seen an increase.

Unique visitors are up to 31%, for example. But probably still too early to tell, we’ve gotten anecdotally very positive feedback from guests who are starting to understand what it is that we do. And so it’s exciting and we think it’s a campaign that really kind of makes sense to people. It let allows them to understand what it is that we do, gain a lot of pride and being a used car person, which obviously historically has had negative connotations. So we’re pretty excited about rolling it out.

It’s being rolled out in certain markets, obviously you’ve seen it in Chicago. And so far, we’re excited about the early results.

Sharon Zackfia: Okay. Thank you.

Operator: Thank you.

[Operator Instructions] The next question comes from the line of Karen Short from Barclays. Please proceed with your question.

Karen Short: Hi, thanks. Just I wanted to see if you could give a little update on timing with respect to getting a car actually ready for sale like today versus what it would’ve been earlier in the year. And then wondering if you could just give a little bit of color in terms of finance and insurance, obviously that improved significantly, so a little color on that.

Michael Bor: Sure. Well, over the last year, I’ll say we had big inflows of vehicles that were not evenly – they weren’t coming in at a regular cadence. So we had kind of surges of inventory that definitely slowed us down. That was when we had eight hubs at the end of last year and very early part of this year. Then over the course of this year, we did several things to ensure that we can take in the volume of inventory that we need to hit – to grow like we want to grow.

And that was really a few things. One, it was hiring very talented people in our processing centers that can process vehicles quickly and know what to do. Two, it was tech – some technology backend, and three was the equipment that we’ve put into these hubs that enable more and more of our work to be done in-house versus outsourced. That’s all kind of internal. And then with our inventory team and working with our consigners, we’re working very hard to spread the inventory evenly over the hubs and ensure that we don’t have huge inflows of inventory that bogged down any one processing center.

Now with new processing centers, it’s always going to be a little slower than with ones that have been around for a while just kind of – just like anything new needs a little bit of time to get the processes working well. And so as a lot of these hubs that we open this year mature, we’re starting to see the time required to get a vehicle ready for sale coming down. At our mature hubs, we like to get a vehicle up on the website ready for sale definitely within seven days. We obviously have anomalies. We have vehicles that can be ready in a day or two and others that take a little bit longer given certain reconditioning needs.

At our new hubs, when we start out, we’re probably – well, quite a bit more than that, but very quickly, we are shooting for that one week turnaround time on average obviously with different needs determining how long it takes for any specific car. But we’re seeing that as a result of our investments in people, technology, equipment, and then ensuring that the inventory is spread out evenly that we’re able to process these vehicles quickly, so that we can get them sold quickly.

Karen Short: Okay. That’s helpful. And on the…

Michael Bor: Sorry.

On the F&I.

Karen Short: Yes.

Michael Bor: Yes. No. Yes, earlier this year when we launched our new website, we – the online experience made it, so that learning about your financing and figuring out the backend became more intuitive and easier.

And that in addition to training and working very closely with our F&I vendors has definitely increased our – as you can tell, increased our F&I book penetration and the profitability that we make on the back. It’s a huge benefit to us and supports our GPU in a great way. And we see that continuing to improve.

Karen Short: Okay. And then just one other for me.

I know you’ve been pretty consistently saying fewer hubs in 2022, but is there any way to kind of help us frame that? I mean we have eight modeled type of thing. But any color on that would be helpful.

Michael Bor: Yes. The full plan on for 2022, we’ll talk about it more – when we talk about the year, we have hubs that we’ve already announced that, that are not going to be opening this year. We have a few more this year, but we have several that we’ve announced that are – will be next year.

So the Q1 plan is like internally is baked. But we’ll talk about the full year rollout when we talked to you again early part of the year.

Karen Short: Okay. Thank you.

Operator: Thank you.

The next question comes from the line of Gary Prestopino with Barrington Research. Please go ahead.

Gary Prestopino: Yes. I just wanted just some follow-up questions here. I mean, Mike, how has the commercial, not the commercial consignment, the consumer consignment model, how is that being accepted with retail sellers? I mean are you starting to get some traction there?

Michael Bor: Yes.

Gary, as you know, that’s kind of our DNA that’s how we started. We were essentially 100% consumer consign back in 2011. And as we found the commercial assignment business and the volume, the huge volumes that can bring in, we just – we left the consumer consignment piece of our business to just grow on its own. I would say at the beginning of this year or earlier this year, we really decided to lean back into the consumer sourced segment. And we spent a lot of time and energy making the consumer consignment product that we offer a lot easier.

We’ve hired very talented resources to help manage that process. We’ve brought on people on a product team to help us build out that part of the – of our business. And we’re seeing and it’s a decent part of our marketing initiative. And what’s great about the consumer consignment offering is that when you sell a vehicle for somebody, you’re essentially creating two fans. The seller makes a lot more money than their next best alternative.

And the buyer gets a great vehicle that they otherwise would’ve had to go to a traditional dealership and pay much more for. So it’s – what’s great about the consumer business model is it’s – it helps you bring your fan – build your fan base in a new market very, very quickly. And so we’re seeing that. We leaned into it with a specific campaign in certain markets earlier this year and saw tremendous increase in leads, in lead conversion. And we’re really doing a lot to help amplify the stories of the people for whom we’re selling vehicles.

And it’s – it – also it helps internally. I mean it’s really exciting for our team when you see like massive wins for some of these sellers who are selling their vehicle and making thousands and thousands more than they otherwise would’ve made on a trade in. So it’s definitely an awesome part of our business. One, we’re very proud of it. It’s in our DNA.

And it’s one that we’re going to lean into – continue to lean very heavily into as we go forward.

Gary Prestopino: But is it safe to say at this point, you said in October less than 50% of your cars were sourced at auction, is the majority of that really more commercial consignment versus consumer consignment at this point?

Michael Bor: It’s – yes, I mean it’s split not necessarily evenly, but it’s split between commercial and consumer. We don’t breakout the specific sources, but it’s not the vast majority commercial. It’s a close majority.

Gary Prestopino: Okay.

And then I just wanted to ask as a writing lot of this stuff down, you said that the commercial account that kind of left came back and to started supply you with vehicles. Have you made any inroads and trying to diversify your base of consumer? I mean about commercial accounts? I know it’s pretty early, but one time that account was I think given 60% of your cars. So any color you could give on that in terms of the reps – receptivity to your consignment model among commercial consigners would be great.

Michael Bor: Yes. So the account that paused you mentioned was a significant part of our business.

They came back. But in the meantime, we’ve been growing across our existing accounts and bringing on new accounts. The account – and also we’ve grown as a business. And so we’re obviously selling more vehicles than we have in the past. And so they are now – the account that pause and came back is now about 10% of our business – of our sourcing.

They have sort terrific cars. They sell well. We – it’s a great partnership works well for us, works well for them. And so it’s a piece of business that we want to continue to grow. Whether it’s going to grow at the percentage probably depends more on what our growth rate is more than what their growth rate is.

But it’s a great account. They supply us with vehicles at multi – many locations. So we’re excited to continue working with them closely.

Gary Prestopino: Okay. Thank you.

Operator: Thank you. And this does concludes our question-and-answer session. I would now like to turn the conference back to Mr. Michael Bor. Sir, please go ahead.

Michael Bor: Thank you. And before we end the call, I just want to reiterate our optimism regarding our long-term consignment model. We’re making the necessary adjustments to operate effectively and efficiently until the environment returns to normal. Thank you for joining us today. And we look forward to speaking to you again soon.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.