IAA, Inc. Common Stock

Good morning and welcome to the IAA Inc. third quarter 2020 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchdown phone. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Arif Ahmed, Vice President, Treasury. Please go ahead, sir.

Good morning, everyone, and thanks for joining us today for IAA's Third Quarter Fiscal 2020 Earnings Conference Call. Speaking today are John Kett, Chief Executive Officer and President, and Vance Johnson, our Chief Financial Officer. After John and Vance have made their formal remarks, we will open the call to questions. Before we begin, I would like to remind you that certain comments made during this call regarding our plans, strategies, and goals and our anticipated financial performance constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management's current assumptions and expectations and are subject to risks and uncertainties that could cause actual results to differ materially from such statements. Those important factors are referred to in IAEA's press release issued today and in the risk factors section included in our annual report on Form 10-K for the year ended December 29th, 2019, filed with the SEC on March 18th, 2020, as updated in our form Q filed with the SEC on May 6th, 2020. The forward-looking statements made today are as of the date of this call, and IAA does not undertake any obligation to update these forward-looking statements. Finally, the speakers will refer to certain adjusted or non-GAAP financial measures on this call. A reconciliation schedule of a non-GAAP financial measure to the most directly comparable GAAP measure is available in IA's press release issued today. A copy of today's press release may be obtained by visiting the investor relations page of the website at www.iaai.com. I will now turn the call over to John. John?

Thanks, Arif. Well, good morning, and thank you all for joining us on our third quarter earnings call. As we noted in our Q2 call in early August, our third quarter started off strong, with continued improvement in assignment volumes and units sold, along with the continuation of the record level revenue per unit that we had experienced in the second quarter. As the third quarter progressed, we continued to see strength across our business, as both assignments and units sold continued to improve at a greater rate than we had anticipated. In fact, we exited the third quarter with assignments down only slightly from pre-COVID-19 levels. As we also noted in our Q2 call, we thought revenue per unit strength might moderate in Q3, but that did not prove to be the case. Similar to Q2, we ended Q3 with revenue per unit near record levels. As a result of these stronger than anticipated trends and the benefits we were seeing for our margin expansion plan, we saw a meaningful improvement in our overall results in Q3. with 8.8% growth in organic adjusted EBITDA versus Q3 2019, even despite a decline of 4.7% in organic revenue versus last year. As a follow-up to our discussion on the Q2 call, we continue to believe that some of the underlying drivers of higher revenue per unit can be attributed to, first, the additional revenue that's associated with the full rollout of our digital-only auction platform, Second, the positive impact from new products and tools that we are now offering buyers, such as 360 View and Feature Tour, as part of the Interact platform. Third, the positive impact that less supply may have on bidding activity and proceeds per vehicle. And fourth, higher used car prices. we are feeling more and more confident that the impact from moving to an enhanced digital-only auction model and the tools and information we are providing as part of the Interact platform are having a more significant and sustained impact on proceeds, revenue per unit, and importantly, returns for our seller partners. At this point, it is a bit unclear to the degree to which reductions in supply vehicles is impacting proceeds and revenue per unit. but we do believe that elevated used car prices is having a positive impact. The September Mannheim used car index was up 15.2% versus the prior year. Another notable bright spot in the quarter was the strong growth in our non-insurance business, which was primarily the result of a targeted focus from our sales force. Now let me shift gears to review our progress against our strategic growth priorities. With regards to our margin expansion plan, following on the successful rollout of the buyer digital transformation in early April in the U.S., we accelerated the transition to online-only auctions in Canada in late July, and I'm happy to report the transition was without incident. Similar to the U.S., we are seeing the benefits from the deployment of 360View in both Canada and in the U.K. As for the other aspects of our margin expansion plan, we remain on track with the timing and expected benefits from our initiatives around towing optimization, pricing optimization, and branch process improvement and efficiency. I'd like to turn now to talk about our focused effort on enhancing our buyer network and their experience. As we have transitioned the business to a fully digital model, we have been focused on a continued engagement with our buyer network and remain laser focused on further elevating the buyer customer experience that we deliver across our platform. We are surveying our buyers regularly with both quantitative and qualitative metrics and incorporating their feedback into our platform and service enhancements. As an example of this feedback, we recently have expanded our payment options, including, among other changes, the addition of PayPal, which provides increased purchasing power and flexibility for our buyers. While COVID-19 initially had impacted buyer attendance, we have seen steady improvement in attendance this quarter. Domestic buyer attendance was above prior levels throughout the third quarter, and by the end of Q3, international buyer attendance also exceeded the levels of one year ago. In addition, at quarter end, the levels of active international buyers was up nearly 15% versus the same time last year. As we look ahead, we will continue to focus on enhancing our international buyer network along with making further progress on our other strategic growth initiatives. Now shifting to talk about our CAT response efforts, there have been several hurricanes and tropical storms, primarily in the southeastern U.S., over the last couple of months. We have done an excellent job of serving our provider customers during this period, and the feedback that we have received from them has been extremely positive. In addition to taking advantage of our deep pool of towing resources, as well as leveraging our NASCAR partnership, Our flexible capacity model provided safe, accessible acreage and towing capacity where and when it was needed and in close proximity to the affected areas. With our customer safety and convenience in mind, we established cat yards and locations that ensured vehicles would not have to be moved far distances. Our employees put an incredible amount of planning and dedication towards these events, and I continue to thank them for their efforts. I'm very proud of our teams and the progress we have made on our initiatives throughout 2020, despite a very uncertain macro backdrop. We're a little over a month into Q4 and continue to see positive trends, but we're also mindful of the uncertainty that remains with the pandemic. With that, I'll turn the call over to Vance to review our financial results. Vance?