IAA, Inc. Common Stock

Good day and welcome to the IAA Inc. first quarter 2021 earnings conference call. All participants will be in a 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 stars and one. Please note that this event is being recorded. I would now like to turn the conference over to Arif Ahmed, Vice President and Treasury. Please go ahead.

Thanks, Cole. Good morning, everyone. And thanks for joining us today for IAA's first quarter fiscal 2021 earnings conference call. Speaking today are John Kett, Chief Executive Officer and President, and Vance Johnston, 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. 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 IEA's press release issued today and in the risk factor section in our annual report on Form 10-K for the year ended December 27, 2020, filed with the SEC on February 22, 2021. The forward-looking statements made today are as of the date of this call, and IAEA does not undertake any obligations 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 the non-GAAP financial measures to the most directly comparable GAAP measures is available in IAEA'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. Good morning, and thank you all for joining us for our first quarter call. I'm going to make a couple of brief comments on the quarter before I talk about our initiatives. We were very pleased with a strong start to the year. We generated organic sales. 6% for the quarter. As we noted in our prior call, we came into the first quarter of 2021 with good momentum for assignments, volume sold, and revenue per unit. As the quarter unfolded, revenue per unit continued to increase each month, and assignments continued at a steady pace. In fact, March represented the first month of year-over-year assignment growth that we have seen since the pandemic began. Along with strong industry tailwinds, another key driver to our results continues to be the benefits generated from our buyer digital transformation. BDT has contributed to the significant increases that we experienced in revenue per unit over the past year. So now let me turn to our strategic initiatives. We continue to make good progress and are seeing positive results from our margin expansion plan. As we discussed on our last call, with the completion of our BDT last spring, our focus has turned to the other elements of the plan. Towing optimization, branch process improvement, and pricing optimization all remain on track. Our redistricting and consolidation of towing resources in several markets is beginning to pay dividends both in terms of improved service and lower costs. We're on target to complete these transitions by the end of 2021. We also made good progress in the quarter on both pricing optimization and branch process improvement. Shifting now to other initiatives, we continue to be excited with the progress that we are making with loan payoff in support of our initiatives to broaden our service offering. During the first quarter, we added over 100 new lenders to our loan payoff platform, and we ended the quarter with over 1,600 financial institutions on our portal. We also expanded our national footprint with DDI building out electronic title and registration processing expertise in both Michigan and Indiana. Our negative equity capabilities of loan payoff, which are unequal in the market, continue to be an important differentiator, particularly given the continuing increase in the percentage of vehicles with loans that exceed their pre-crash values. Our customers are continuing to see significant reductions, and in some situations, up to 22 days in cycle times using loan payout. For buyers, we continue to expand the enhancements that we've made to our tools and product offerings, and our growth and expansion of our global buyer network continues to be very successful. During the first quarter, we grew our international buyer network by 15% sequentially quarter over quarter, and over 50% on a year-over-year basis. This growth is both from traditional broker-buyers and market alliance partnerships and reinforces the great strides that we are making with digital marketing and search engine optimization to attract both domestic and global buyers to our platform. We also continue to make good progress in building out our strategic market alliance network most recently announcing that we added Karamoto, an experienced export supplier based in Moldova, which is a key element in providing access to our buyers in the growing Eastern European market. We also introduced two new value-added features to our UK merchandising platform, IEA Engine Start and IEA Key Image. These tools give buyers additional vehicle details, creating greater confidence to bid and purchase vehicles. We also expanded our merchandising platform, Interact, in Canada in the quarter after the positive reception that we received last year in the U.S. As we look ahead to the remainder of the year, we expect to continue to benefit in the progress we have made and continue to make with our strategic initiatives, as well as industry tailwinds that continue to support strong revenue per unit trends. Our non-insurance business also continues to perform well, with double-digit year-over-year volume growth in the first quarter, driven in part by growth in dealer volume. Our non-insurance team has done a nice job of growing both our base business and identifying and closing attractive new prospects in this space, and we will continue to pursue additional opportunities. Advance will discuss in more detail. We are also in a position, despite the ongoing pandemic, to provide guidance with respect to our expectations for revenue and EBITDA growth for the year. For the year, we expect organic revenue growth of 15% to 20% and organic adjusted EBITDA growth in the range of 23% to 28%. Our expectations incorporate currently known volume shifts, both negative and positive, including a shift away of additional volume from a top three customer. The timing of these shifts will impact individual quarters differently, but we expect a strong 2021 overall, which also incorporates some wins to date, including from a top customer, that are partially expected to offset the aforementioned negative volume shift. We also expect continued strong revenue for unit trends, as well as continued improvement in vehicles miles driven. IEA has made enormous progress in improving and enhancing our offerings, and I believe we are very well positioned going forward to drive higher levels of performance and expand our market position. So before I close, I also want to spend a few minutes on another important initiative within IEA, the continued focus that we are putting on diversity, equity, and inclusion within our organization. It was my honor earlier this year to sign the CEO Action for Diversity and Inclusion Pledge, the largest CEO-driven business coalition to advance diversity and inclusion in the workplace. We've also established a formal diversity, equity, and inclusion program within IEA with three different areas of focus, each with strong involvement from across the organization. We firmly believe that addressing these issues with vigor and transparency will allow us not only to create greater employee satisfaction, but also allow us to better serve our buyer and seller customers. So in closing, I want to thank all of our teams for all their hard work and dedication to IEA, and I will now turn the call over to Vance to review our results and outlook in more detail. Vance?