Specialist
Former VP at KAR Auction Services Inc
Agenda
- Competitive dynamics in the US automotive auction market – KAR (NYSE: KAR) vs Manheim Auto Auctions
- Sales trends and impacts of pandemic-related supply and demand dynamics
- Revenue and margin profile across vehicle classes
- Market share gains in online penetration rates
- Costs associated with digital-native auctions vs physical lots
- Outlook for H2 2021 and beyond
Questions
1.
Could you give an overview of the US automotive auction industry, touching on the key trends and themes that you think the investment community needs to monitor?
2.
Could you elaborate on the geographies where digital penetration may lag physical penetration over the next couple of years? Are the barriers KAR needs to overcome to drive its digital presence in these areas significant?
3.
We understand the transitory headwinds around wholesale cars making it to auction. How could volumes trend longer term? Do you think KAR’s volumes will ever recover to 2019 levels?
4.
How could physical lots play a role in a digital auction world? How much of a competitive advantage is this for KAR on ACV?
5.
How much of a threat could ACV pose to KAR’s market share, given your comments around ACV figuring out the inspection process and doing it very seamlessly and at a low cost?
6.
Where are digital players such as ACV and Backlot primarily taking market share from? Is this from Manheim, or everybody?
7.
What are your expectations for KAR’s operating profits in five years’ time as more and more of the business moves online?
8.
How long do you expect the strong industry pricing environment to last? Could it remain through the end of 2021?
9.
Would KAR benefit from high pricing through the end of 2021, perhaps at the gross margin level? Could you quantify this for us?
10.
Do you think KAR’s physical lots could be a long-term competitive advantage over ACV?
11.
How do you think the independent auctions will perform through the remainder of 2021, especially relative to larger players such as KAR, Manheim and ACV?
12.
Could any inherent features of the online model enable ACV to source vehicles from sellers less expensively than traditional auctions?
13.
We’ve talked a lot about ACV vs Backlots/TradeRev. Do you think ACV or Backlots is better positioned now? How about over the next 2-3 years?
14.
What could differentiate KAR from Manheim in the long term? Could it be having Backlots within the corporate umbrella, or something more?
15.
What would be the implications for KAR and the wider industry if vehicle pricing didn’t drop until January or February 2022?
16.
Can KAR fight to keep inventory? Could retailers such as Carvana and CarMax sourcing vehicles directly from customers be a longer-term threat to the auctions from a market share and revenue perspective?
17.
CarMax’s profit margins haven’t increased despite higher prices in the used car industry. Why do you think this is? Is this because sourcing from auctions has gotten so expensive? If so, is this primarily coming from physical or digital auctions?
18.
What could be the post-pandemic new normal for the car auction industry once pricing normalises?
19.
ACV is obviously dealer-to-dealer, but what shifts could happen for the company around car rental companies and off-lease? Could these fleet operator segments go to ACV longer term, or do you consider them captive to Manheim and KAR?
20.
Could you outline any potential M&A scenarios for KAR or the industry over the next few years? Do you think ACV could ever be acquired? If so, who could be the acquirer?
21.
What are your thoughts on new KAR CEO Peter Kelly and the management team? How confident are you in the team’s ability to steer the ship in these uncertain times?
22.
Do you have anything further to say about KAR and ACV’s trajectories? How could their scale, growth, margin profiles and competitive positioning compare longer term? Is it reasonable to expect ACV to surpass KAR’s margin over the next few years?
23.
What are your best- and worst-case scenarios for KAR over the next 2-3 years?
Gain access to Premium Content
Submit your details to access up to 5 Forum Transcripts or to request a complimentary 48 hour week trial
The information, material and content contained in this transcript (“Content”) is for information purposes only and does not constitute advice of any type or a trade recommendation and should not form the basis of any investment decision.This transcript has been edited by Third Bridge for ease of reading. Third Bridge Group Limited and its affiliates (together “Third Bridge”) make no representation and accept no liability for the Contentor for any errors, omissions or inaccuracies in respect of it. The views of the specialist expressed in the Content are those of the specialist and they are not endorsed by, nor do they represent the opinion of, Third Bridge. Third Bridge reserves all copyright, intellectual and other property rights in the Content. Any modification, reformatting, copying, displaying, distributing, transmitting, publishing, licensing, creating derivative works from, transferring or selling any Content is strictly prohibited
