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[00:00:03] Good morning and welcome to the country's third quarter 2012 earnings conference call, hosting the call this morning is Alex Vetter, Chief Executive Officer, and Sonia Jain, Chief Financial Officer. This call is being recorded and a live webcast can be found. And investors Dakar's dotcom. A replay of the webcast will be available until November 2013. A copy of the accompanying slides can also be found on the company's investors site. Following today's presentation, there will be a question and answer session with Alex and Sonia. I'd now like to turn the call over to Kamal Hamid, director of Investor Relations.

[00:00:47] Good morning, everyone, and welcome to our third quarter Twenty twenty conference call. Before I turn the call over to Alex, I'd like to draw your attention for looking statement and the description and definition of our nongovernmental measures, which can be found in our presentation. We'll be discussing certain nongovernmental message today, including adjusted EBITDA adjusted EBITDA margin adjusted net income and free cash flow. Reconciliation's of these non-GAAP measures to the most directly comparable gap measure can be found on the financial tables included in our earnings press release in the appendix of the presentation. For more information, please report to the risk factors included in our FEC filings, including those in our annual quarterly and current reports. We assume no obligation to update any forward looking statements or information as a respective date at this time. I would like to turn the call over to Alex. Alex.

[00:01:45] Thank you. Come on, let me start by saying that I'm very proud of our performance this quarter to demonstrate the resilience of our business and the dedication of our team. We remain relentless in our focus on customer ROIC and value delivery, expansion and execution of our digital solutions strategy and a disciplined focus on profitability. This resulted in momentum across the business and is apparent in our results. Strong traffic growth and quality, early conversions, increased dealer customers and ARPU expansion. And we're back adjusted EBITDA growth. It was an impressive quarter and building on that success. Just two weeks ago, we achieved another significant milestone by refinancing our debt. We now have greater flexibility to make appropriate investments in the business going forward. So you will comment further on the refinancing in a few minutes. Although operating in a pandemic environment presents challenges, the upside is an accelerating trend of digital adoption by consumers and dealers that play to our core strengths and products solutions. Consumers increasingly want to complete more of their car shopping online from the convenience of their homes, and dealers are quickly ramping up their solutions to capture this opportunity. Our business is well positioned to enable our industry to accelerate the shift to a digital first strategy. We delivered two consecutive quarters of dealer customer growth and had momentum behind us to deliver a third, if not for covid, we grew our customers in Q4 of 2013 and Q1 of Twenty twenty, and we also managed the pandemic better than most. After the second quarter, covid impact, we added 97 new dealers in the third quarter of Twenty twenty, including growth in both marketplace and Web solutions customers. [00:03:33] We exited the quarter, growing to eighteen thousand one hundred and thirty…

[00:13:44] Thank you, Alex. Revenue for the third quarter of Twenty twenty was one hundred and forty four point four dollars million, compared to one hundred and fifty two point one dollars million in the prior year period. The decrease was primarily due to a 12 percent decline in national advertising revenue and dealer cancelations in the second quarter of Twenty twenty, largely attributable to covid and partially offset by continued growth and solutions revenue compared with the prior year period. Turning to expenses, total operating expenses were one hundred and twenty five point three dollars million, nine percent lower than the prior year period, if you exclude the four hundred and sixty one point five dollars million goodwill and intangible asset impairment charge, the decrease in total operating expenses compared to the prior year period is primarily due to reduced marketing spend and the cessation of our affiliate revenue share obligations in the second quarter. That's a net loss for the third quarter of twenty twenty twelve point three dollars million or 18 cents per diluted share, compared to a net loss of four hundred and twenty six point two dollars million or six dollars and thirty eight cents per diluted share in the third quarter of twenty nineteen. The net loss is primarily due to the thirty point nine dollars million previously disclosed non-cash charge for the correction of an error related to the calculation of the Q1 valuation. Allowing the valuation allowance for income taxes have been established in connection with an impairment recorded during the three months ended March. [00:15:18] Thirty first Twenty twenty adjusted net income for the third quarter of Twenty twenty improved to thirty four point six dollars million, or fifty cents per diluted share, compared to twenty one point three dollars million…

[00:19:58] Thank you, Sonia. As I said at the top of the call, I'm pleased with our Q3 results and the momentum we demonstrated on dealer count traffic growth and growth in LAPD. We continue to build on that strength with dealer growth in October as well. Despite the uncertain pandemic environment we are editing, Twenty twenty would strengthen our brand appreciation of our differentiated business strategy and the rapid adoption of our digital solutions, all of which positions us for a strong start to 2021. With that will now open the call for Q&A operator.

[00:20:33] At this time, as a reminder, please, press star, then the number one on your telephone keypad, if you would like to queue up for questions. Your first question comes from the line of Tom White from D.A. Davidson. Your line is open.

[00:20:49] Great. Good morning, guys, thanks for taking my questions, too, if I could. Alex, you talked about how the pandemic is accelerating the trend of digitization of the automotive retail space. Now, you guys clearly had some kind of foresight there when you when you bought Dealer Inspire, but kind of curious to hear if you can give us any color on how you're thinking about the product roadmap here. Is it is it kind of just reinforcing the core competencies, guys, are you focused on maybe with the marketing side of things, given the successes, but you will feel maybe there are other parts of the dealer operations where you think that value is going to be a not just a quick follow up on traffic to conversion. It sounds like that continues to improve, but just to have sort of sustainable that is the best benefiting from the pandemic with people just not going into showrooms until maybe later on in the process? Or are there things that you guys are doing that that that's impacting that and could sustain those improvements? Thanks.

[00:22:05] Sure. Tom, thanks. Well, first of all, you know, I think the consumer trend towards private vehicle ownership is going to be the lasting impact on uncoded. Our consumer surveys consistently show that users don't feel safe getting back on mass transit or ride sharing services and are and are upgrading their personal or private fleet. So we think that vehicle sales is going to have a prolonged strengthening as a result of the pandemic. On the dealer side, a grand experiment was run during covid and that was dealers cutting back all of their marketing budgets. But yet seeing these virtual marketplaces accelerate growth. And so dealers were realizing that they were generating the same number of sales, if not higher, on a much more radically reduced marketing and advertising investment. And dealers are realizing they're not going to fly around the marketplace. Experienced consumers are going to do heavy research prior to purchase. And marketplaces are the best place to do that because of the market wired and content view. I think on the dealer behavior, part of covid has been dealers now proactively contacting us about our digital solutions. So, you know, the dealer inspire who? You know, we've been growing the business on a steady basis, but there's been an acceleration there because of covid as dealers are wanting to upgrade their website and or use more technology. In fact, we launched more websites in the last quarter than we had in any prior. And so dealers are realizing that these digital storefronts are their primary channel. And so we are seeing a nice pick up on that business as well that we see it sustained. [00:23:50] I think the final point I'd say is that ultimately the businesses is performing extremely well, virtually to the traffic to lead conversion. [00:24:00] You know, both it's been organic and inorganic covid certainly shutting down showrooms, you know, is driving people to communicate directly to these channels, which is giving our value a lot more visibility. But at the same time, we're continuing to make tremendous product improvements that are also helping us get further credit and visibility in the eyes of dealerships. So, yes, I think lots of sustained advantages because of covid.

[00:24:29] Great. Thank you, guys.

[00:24:32] Your next question comes from the line of Gary Prestopino from Barrington Research. Your line is open.

[00:24:44] I'm sorry I lied to you. Can you hear me now?

[00:24:44] Yes, we can. Gary, go ahead.

[00:24:49] So good morning, everyone. Sorry I haven't called on you. Hey, when you talk about a factual, historical or level of operating expenses in going into Q4, I mean, could you give us maybe a range of what that may be?

[00:25:10] Yeah, sure, thanks for the question, this is Sonia Sotomayor, very where we're really looking to invest and in Q4 are in in marketing and then really in talent around our solutions strategy, completing data and innovation. Broadly speaking, I think when you think about marketing in particular, we expect in Q4 to have marketing spend kind of consistent with what you might have seen from us in in Q1. Now, bear in mind that that that number for sales and marketing line, there's a sales component to that. When you look year over year at the sales and marketing line, you know, it may appear to be flattish, but it's a little bit of a mix shift with some permanent savings in sales and some potential additional investment in marketing. I mean, bear in mind, right, it's a highly competitive environment and we evaluate marketing on a regular basis. And so to the extent there are opportunities to gain additional efficiency there, we absolutely will. And as Alex mentioned, we think we have a lot of, you know, just built-In benefits with the strength of our brand and content. But that that might be helpful color.

[00:26:21] Yeah, that does help. And are you giving the dealer inspire revenues on a quarterly basis anymore?

[00:26:29] You know what, we're expecting to continue to see that business grow and frankly, you know that that is one of the growth engines of the business. I point out while it comes, it does come with slightly lower margins. So it does impact margins a little bit as we continue to grow that business. What we believe that longer term, it is part of our diversified strategy and it's a very sticky business that will continue to provide value to dealers and frankly, to us as we continue to build out relationships there.

[00:27:04] Ok, but I want to just ask a couple of questions on these digital solutions, which seems to be accelerating. But, you know, the websites you talked about, the number of placements there as far as things like fuel, online shopper conversations, those are coming off fairly low base. Could you maybe just share how many dealers have adopted each of these solutions?

[00:27:29] Yeah, I mean, on fuel, which just started this year, we're talking just under 200 dealers, but significantly higher average revenue per dealer, Gary, so very accretive to the business. And again, we're not having to add more sales expense to bring these new solutions to market. We're running them through our existing platforms, writing online shopper and conversations got a lot faster acceleration during the covid pandemic. And so, you know, you're talking about a thousand plus dealers using those solutions park partially bundled with the website offering. So that's that's that's very good traction.

[00:28:07] I guess the question I have for you is this, Alex, because, again, they're not making more dealerships and, you know, going out and trying to kind of gain market share among dealerships, as, you know, a very difficult thing to do. But if you take your average revenue per dealer just based on your subscription, your model, and then what would be the lift if a dealership took a website, fuel online shopper and conversation those trying to get an idea of how revenue accretive are the solutions to, you know, to to a dealership, to average revenue per dealer? Was just the dealer that took your car post.com listing offering.

[00:28:45] Yeah, so if you if you think about the ARPU of some of our DIY products, you know, the website on average is going to bring you call it in the neighborhood of eleven hundred dollars of incremental RPV. And with the add ons that we have between conversations and online shopper, you could easily double that, that amount. So if you're thinking about an existing dealer, substantive opportunity to improve the RPV through just the incremental website and up for sale fuel, as Alex mentioned, it has an RPG at a minimum that is multiples higher than our average monthly ARPU. That's that's a product that's actually sold on a zip code basis. So know RPV complex up substantially depending on the number of zip code the individual dealer is interested in.

[00:29:36] Right, so it seems to me that that, you know, your your your marketing thrust, your sales thrust here has got to be the Crossley's the solutions.

[00:29:45] It is, and it's coming through in the numbers, Gary, I mean, if you look at the sequential improvement in RTD, the strategy's working. We're getting incremental take rate and dealers wanting to spend more money with us to garner higher share of opportunities in sales. And so we're seeing a nice, steady acceleration in our air speed growth. That's great. Thank you so much.

[00:30:11] Your next question comes from the line of Daniel Powell from Goldman Sachs. Your line is open.

[00:30:18] Great, thanks so much for taking the question. First question around that ad that you saw in the quarter, just curious and you could help us kind of break down if there was of even distribution across marketplace and solutions that are getting that number and sort of how that compares to the growth that you're seeing so far in October. And a follow up.

[00:30:43] You know, we grew both marketplace and Solutions only customers in the quarter, so we were pleased to see both businesses step up in terms of dealer count, the dealer additions skewed more towards franchise dealers than independent. We saw bigger gains in our franchise dealer, Max.

[00:31:05] Got it, and then as it relates to the guidance on margin for Q4 realized, you know, there's reinvestment around around sales and marketing, but just just curious how much of the sort of negative mix shift to some of the solutions is also weighing on the margin expectations because you think.

[00:31:25] Yeah, no, that's certainly going to be a contributor here. The solutions business does require upfront investment in terms of the launch launch of website before we can really start start recognizing the revenue associated with that as that business scales, you know, we'll expect to see an improvement improvement there. But for the for the near-term, we're really excited about the growth and the long term health of the business that's going to drive. But it does it does have it does flow through to margin.

[00:32:01] Great, thank you.

[00:32:04] Your next question comes from the line of Lee Krowl from B. Riley Securities is your line is open.

[00:32:10] Great, thanks for taking my questions, guys. Just want to start out on the national advertising business. You kind of hinted at sequential improvement, but just kind of wanted to nail that down with improving inventory and OEMs re revamping their ad budgets for Q4, would you expect the national business to be up sequentially?

[00:32:31] You know, the national business is a little bit spottier and harder to predict because aliens come in and out, the business does lead to a little bit more to model launches with OEM. So as OEMs launch new makes and models, you know, in a period we can see an increase in overall spending. And we saw some nice sequential month over month pickup in national or September and heading into October. So we feel good about the signals we're getting. And then a big percentage of that business also is bought on an up front basis for next year where manufacturers are committing, you know, said times of the year that they want to promote new products. And we're seeing a very healthy discussion happening there for Twenty twenty one as well. So we feel good about the stability of the business and then hopefully moving it towards growth.

[00:33:22] Got it. And then, you know, in the flight deck, you put out some, you know, fairly significant double digit growth drivers to kind of highlight the shift to digital, you know, as we layer in kind of all these incremental revenue drivers on top of a fairly stable marketplaces business, when would you guys kind of expect to see year over year revenue growth inflection?

[00:33:46] You know, when we started the year, we were on a path for growth in the second half of this year until covid hit. And obviously that delayed all of our plans temporarily. But if you look at the trend and what we had been doing, we grew our dealer count in Q4 of last year. We grew it again in Q1, even with some of the pandemic starting in the first quarter, and then to see the business snap back both from our discounts and now accelerated solutions growth, we think we're back on track. Obviously, the covid period delayed our achievement of that growth objective in the second half of this year and will push us closer towards 2021. We're just not giving revenue guidance this time because the pandemic still being so I'm sure it makes predicting that revenue trends much more difficult.

[00:34:35] Yeah, the only other thing maybe I would add there is that, you know, in our subscription model, you do need to see that revenue build over time. So to Alex's point, the improvement in RPV, you know, growth in your account in three of the last four quarters. Right. In one of those with the comet quarter, all point to two really strong, strong underlying strength.

[00:35:00] Got it. And then last question, you know, you've seen kind of a secular shift to online and consumers, you know, obviously browsing a lot more and that Jesus traffic for sure, especially on an organic basis. But do you guys get the sense that you're continuing to see traffic share gain? I know in prior quarters you kind of have highlighted that as well, but noticed it was missing from the commentary, you know, maybe quantify or qualitatively speak about, you know, perhaps the share gains you're seeing across just the net traffic growth from your peers.

[00:35:35] The share gains have been very vivid throughout the past year and change we've grown, particularly when you look at just the old growth. There's been nobody that's taken more market share in terms of organic traffic, which that traffic has incredible conversion and is of the highest quality. So people set aside the fact that it's coming to us free in an organic capacity, that it's converting extremely well. And so the right mix of traffic has been in our favor now for a year, and we hope to sustain that when we launch our new data platform early next year. So that remains where we're obsessed, is continuing to generate high quality content that wins a disproportionate share of organic traffic. I think the larger traffic picture is somewhat hard to predict. I know there are lesser competitors that don't have the diversified strategy or differentiation in their business, and I think they will have a hard time sustaining growth next year, particularly if vehicle sales start to fall a bit. There's going to be a more intense competition for a lower volume of sales. And because we have a differentiated strategy, we just think we're really well positioned to take more share from others who say basically rely on search engine marketing arbitrage to generate value. We don't have that problem with the majority of our traffic coming to us organically or directly. [00:36:56] We're able to sustain our revenues and our customer relationships based on our own merits as opposed to having to drive up spending to generate volume. And so I think that's that's one of the material advantages that will set us up well for 20, 21.

[00:37:13] Great, thanks for taking the questions, Rachel.

[00:37:17] Your next question comes from the line of Nick Jones from Citigroup. Your line is open.

[00:37:23] Great. Thank you for taking the questions. I guess as far as you know, this is traffic share gains. We talked about, I guess, you know, the lead conversion to cars and then the conversion at the dealership to actually selling a car. And I guess, you know, how is how do you bridge kind of the traffic volume again, kind of, you know, supply constraints we've heard of in the industry. And how are these conversations coming up in terms of ARPU when you are talking to dealers? Thank you.

[00:37:55] Sure, Nick. Well, first of all, the lead conversion improvements have been substantial. And again, I'll point to the high concentration of organic traffic. So we're capturing a natural spring, if you will, of car buyers who are using the platform and contacting dealers directly coming in through organic channels. And so we're seeing our value delivery increase substantially. And then keep in mind, with dealer showrooms closed for a huge part of the country, all of that activity that was physical traffic has now shifted to digital conversion as well. So dealers are getting almost a two four lift in terms of our traffic value and visibility. I think the third thing is dealers have cut back a lot of their direct spending, most notably on Google. And so they're able to look at our volume and how it converts and attribute more of those sales to our platform versus, say, last click attribution or attributing sales to their own website because they lost sight of where that traffic source originated from. And so I just think dealers are understanding our value better today than ever before. That comes through in our our our record retention rates, you know, lowest cancelation rates we've ever seen in the business. And now you're seeing some dealerships come back because it's certainly a lot cheaper to advertise on a marketplace and to try to drive all the traffic directly to the store. And so those things have really come through in our value delivery and on the traffic share gain. I mean, we have a differentiated strategy. We're laying down meaningful lines of new product revenue, whether that's through dealer inspire our fuel business. And generating that revenue allows us to reinvest back into the business and the brand on a more sustainable way. And so I think we're really well positioned in the in the marketing war chest department, so to speak, and are really pleased with the organic trends and how we're generating our value, basically our competition.

[00:39:59] Thank you. [00:40:01] Your next question comes from the line of Steve Dyer from Craig-Hallum. Your line is open.

[00:40:07] Thanks. Well, someone answered at this point, but I just want to make sure I have the math on GM. Correct. [00:40:12] So my math is just under 200 or so GM cites launched during Q3, which to sort of get to the the the about half that you talked about, that would imply north of 500 that need to be launched in Q4, which seems like a steep ramp. Is that right? And then, you know, assuming that that's doable based on where we are in the quarter.

[00:40:38] Yeah. So let me let me clarify a little bit. You know, we had we had come out with just over 800 incremental GM website. We've launched over 200 of those. And we expect to be at kind of the halfway mark by the by the end of the year. Obviously, flight delays related to covid during Q2. But we're plowing ahead there with good traction.

[00:41:05] Yes, just as it relates to Q4, you know, revenue guidance, you don't seem to understand or to some degree, but you don't want to give revenue guidance or, you know, because you know, the method that returns. But this seems to have a lot of momentum. We're halfway through the quarter is a, you know, a subscription business. So I guess just, you know, directionally, would you anticipate being, you know, obviously Q3 this year, any color there would be great.

[00:41:41] Yeah. You know, we ended up obviously really excited to have ended Q3 up on dealer account. I think importantly, seeing that dealer account improvement on both the marketplace as well as the solution side of the business guy is back to a nice, nice, nice way to start Q4. And as Alex mentioned, we had a strong October from a dealer account perspective. V.I. has it continues to grow. And we saw some good traction in the national business when you look sequentially at performance from Q2 to Q3. So a lot of really positive signs when you look at just the last couple of months of performance.

[00:42:22] Got it. And then just sort of the dearth of inventory. Are you seeing, you know, do you think that there's still a negative impact to you guys just because a lot of dealers don't have anything to sell or so, you know, not or enough to sell? So certainly not a lot of reason to go out and spend significantly, whether that's national or on the individual level.

[00:42:43] You know, I think keeping the industry ternary going is something that everybody's trying to to contribute towards. We've seen an increased demand from dealers to buy trade in products so that they want to source vehicles directly through our marketplace. We have a higher concentration of private sellers listing their car for sales and than most of our competitors. So dealers are talking to us, not buying those opportunities and getting access to that inventory. So that's an opportunity. I think the second thing is that we're seeing just record dealer profitability. So dealers aren't in a typical Q4 mindset, which is about cutting back to hit a year in profit profit target. They've been able to hold their retail pricing, you know, and generate extraordinarily high profits because they're not spending to the degree they have in the past. But there are also times that these marketplaces are rich sources of opportunities and and certainly are very affordable to spend a few thousand dollars to list on a marketplace. So even with the inventory shortages, you know, there's a battle for market share out there and we're a fertile ground for it.

[00:43:58] Your next question comes from the line of Doug Arthur from Huber. Your line is open.

[00:44:05] Yeah, thanks. Just on the AARP strength, Alex, and you sort of touched on this in your remarks, but is there a way to sort of, you know, ballpark the contribution from news services as opposed to traditional listing services in terms of both the absolute level and the growth of that number?

[00:44:28] Sure, I'll you know, I'll point to just the LAPD growth is mostly driven by product mix and and in franchise dealer mix. So we are getting more franchise dealers subscribing not only to our marketplace, but also to our solutions platforms. And so you're getting to two mix shifts happening there in our Air PD, which is leading to sequential quarter growth as well as we saw that continue into into October. And, you know, we were pleased to also broker dealer count in October, and that's followed that same trend.

[00:45:04] And just to add, there might be might be helpful as you roll some of the numbers, you know, we ended with about 4000 Web customers in Q3. And, you know, if you if you think about the AI, the business is always been growing on the customer side. We did see kind of a return to growth on the top line as well in the in the high teens. So what do you think about the revenue we're generating there? Just wanted to make sure you had that piece of information.

[00:45:34] And I guess just as a follow up to mix, I mean, are you still seeing the small independent dealers struggle that's been mentioned by some of your competitors? And are some of them still turned off at this point because they just don't have they can't get inventory, they don't have marketing budget or or is that looking a little bit better going into the fourth quarter?

[00:45:57] I think we've always skewed towards the larger independent dealers as opposed to the longtail smallest independent. You know, Hertz would be probably the best example of losing, you know, smaller dealerships because Hertz says, I think like almost 100 locations with very few cars and then declaring bankruptcy, you know, that will hurt us on dealer count, but not very much on revenue. Right, because Hertz stores a very few pieces of inventory per location. So, no, besides that one example, we're seeing a healthy independent dealer base driven by the strength and used cars and retail pricing.

[00:46:37] Great, thank you.

[00:46:40] Once again, if you would like to ask a question, please, press star on the number one on your telephone keypad. Your next question comes from the line of Marvin Fong from BTIG. Your line is open.

[00:46:53] Great. Thanks for taking my questions. Just to kind of build on that last question, you know, so we are still down, you know, I guess 800 dealers on a net basis from last quarter. Just curious, you know, how are those conversations going in terms of winning some of those dealers back? What do you feel is holding them back now that the environment is a lot better? I think we would have guessed a couple of months ago. And then and then I have a follow up.

[00:47:23] Yeah, I mean, the conversations are actually going quite well, in fact, one of the big shifts that's happened in the past 120 days is the number of inbound dealer inquiries we get. We used to be 100 percent outbound sales focus. And again, part of the covid response is now we're actually getting dealers calling us directly about engaging. And so I would I would signal that is a real shift in dealer awareness on what's working out there. And this is a small community. Dealerships talk. They actually understand value really well. And dealers are starting to realize that we are much better than some of the competitive services which are just search, arbitrage, offering offerings where we have high organic traffic concentration that dealers can't buy elsewhere. And so that's leading to, I think, a very healthy discussion about visibility of our value. These are the other services. What was your second question there?

[00:48:19] It was on fuel. I know it's early days, but it looks like it's doing very well. Just curious if you're already able to kind of calculate and compare how efficient it is from a cost per lead or a cost per sale basis. You know, very difficult to even track that for like traditional media. But how does it cost per lead for fuel compared to, you know, perhaps other forms of digital marketing or even a leaf through the marketplace? Thanks.

[00:48:49] Yeah, we wanted to feature the example on the call of how a dealership is looking at their market share overall pre and post fuel. And they shared some pretty amazing results in terms of how they saw materials share shifting in those geographic markets. And that's an important distinction for fuel because we sell it on a geographic exclusivity. Viewers can actually benchmark their market share down to the zip code level. And we've seen enormous renewal rates already from the dealers who started with us in fuel in Q1 and largely not seen much, if any, attrition yet, because dealers are able to see notable share shifts in their overall market share as measured by retail sales and its video messaging. So we're not demanding consumers fill out forms and we are very upfront about that with dealers. Is that look, you're tapping into the cars, that kind of marketplace audience side. And by doing that, you're able to message with frequency about why buy from your dealership vis a vis someone else's. And so now this is going to be a smaller segment of dealers, call it 2000 dealerships who actually know digital works and won't be obsessive about a digital KPI. But more will trust that this will shift market share in their favor. And that's why we're commanding, you know, materially high, higher ARPU. An average annual subscription could be anywhere from eight to ten thousand dollars a month for a geographic zone. And dealerships aren't balking at it because they know how much a SharePoint would cost them to generate on their own.

[00:50:25] That's terrific. Thanks, Alex, for that, appreciate it.

[00:50:29] Thank you.

[00:50:31] Your next question comes from the line of Tom White from the image of your line is open.

[00:50:37] Great, guys. Thanks for calling me back in the queue here. You mentioned a couple of times this dynamic where dealers maybe during kind of the height of the pandemic, cut a lot of their marketing in areas they can't direct marketing in areas like Google. And then we're able to replace that traffic via post.com. And I think you said sort of at a fraction of the cost. And I guess I'm curious whether that dynamic has you rethinking at all how you think about unit pricing in the core listing's business. You know, it seems like a lot of the growth you're kind of forecasting in revenues, you know, for the for the future come from the new product adoption. But, you know, is it possible that, you know, you guys might be able to kind of find or extract some pricing power out of out of what's happened here recently?

[00:51:31] Thanks, Tom. Well, certainly the restoring of our our our great strategy post pandemic shows a lot of durability in our pricing. Right. We were able to restore after the covid discounts go back to full pricing relatively quickly. And then we saw dealers increasing take rate of new solutions. And so, you know, the fact that we're growing our dealer count and you're also seeing sequential improvement in air speed shows that we're not having to discount to generate volume. We're holding our rates and we're getting more products sell through at the same time while we're growing dealerships. And that's that's going to produce a very healthy trend going into 2021. I think in terms of the marketing experiment, their dealerships cut back heavily across all their advertising and marketing that saw these these marketplaces generate much more volume during the Soviet period and also beyond. And so I think they have a greater appreciation that this is traffic that they have to compete for. And keep in mind, we see very clearly through dealer inspire. I've basically got 4000 dealers where I can look at competitive traffic and what is converting for dealers. And we see very vividly, number one, that cars dot com generates two to three times as much traffic into the dealer's website versus other marketplaces. And number two, what we see is our traffic is converting it almost four times the rate of all the dealers, other website traffic sources combined. So we see both our value in volume and in quality through the dealers own website analytics. And so I think our team feels very front foot of our of our pricing and our.

[00:53:14] Thank you.

[00:53:16] Your next question comes from the line of Dan Kurnos from The Benchmark Company. Your line is open.

[00:53:24] Great, thanks. Good morning. I want to go back to something you said about creating basically a source of inventory on on trading on the marketplace. I know that there's been a lot of talk in the industry about trying to figure that out. Obviously, things being the way they are now is probably not the way things will be 12 months from now. Where he can get a used car basically sells in like 24 hours one day. It's a lot, but just takes time that you have an opportunity to expand that if that is a thought process. I'd love to hear that. And then I want to ask you some more questions about traffic and weeds. But let's start with a tour then.

[00:54:09] Well, first of all, even though the retail dealer network sells 44 million used cars a year, as you know, there still almost 11 million cars that are sold, private party, peer to peer that sit outside the retail system. And we get a very natural organic stream of those people listing their car for sale on our website every day. And dealerships, to your point, needing to acquire inventory. We see that as a new revenue opportunity. In fact, we're in beta right now with a pretty healthy degree of dealerships testing, you know, vehicle acquisition products from private parties listing on our website. And so dealers now are looking to us to accelerate the digitization of their buying strategy. I'd rather buy a car from a private seller to go to the auction and compete with 20 of my dealer friends is a common phrase. We hear playback so we can be a reliable source of inventory for dealerships. And again, we're in pilot right now with that solution and expect to see more from us there.

[00:55:16] Got it super helpful and then I know you're excited. We're excited to talk more about the growth and profit growth. I just said continue robust growth off of 10 percent profit growth. I mean, could you delay growth faster or slower than the traffic growth without giving us an absolute number? And then I just want to understand it. It sounds like we're getting, you know, into Q4. You know, we're not obviously not back to normalized inventory levels yet. It sounds like you're starting to lean a little bit back more into things, as is the broader peer group. Was the strength you had an organic, more pressing different channels this time around? You know, there are different ways to market because I think you continue to point it out here and it extends, as you can tell us, you know, I know it's really if you drive the lead to have any visibility, but to talk about tend to buy now that you are seeing with the organic traffic on you believe it takes more than in this market would be helpful.

[00:56:27] Sure. You broke up a little bit there, but I think I got the essence of both questions. So, yes, our value delivery and our lead growth has outpaced our traffic growth. And that was driven partially by, you know, the covid elevation to all these digital channels. So we got a much higher growth in our lead counts and our conversion rate, which translates to deliver value. I think on the traffic side, you know, keep two things in mind that that we have a robust new car business as well. So consumers still vacillate between new and used even up until the day they buy. And so we have a ton of phenomenal new car content. So as the new and used car market shift back and forth, car start time is being heavily sought out for advice. And then I think also just our differentiated reviews and content strategy. You know, our our expert editorial team is generating critical assessments of all new cars being sold today. And then we've got more reviews than any other platform out there, not only for for cars, but for dealerships as well. And so that content is what's helping us generate a higher degree of organic traffic concentration than any of our peers. And so as dealers look to who do I get incremental sales from, first time becomes much more valuable because they know that they can't buy that traffic directly where other competitors who just take the dealer's money and bid up search and sell it back to the dealerships, that's not going to net them the incremental sales that, say, tapping into organic traffic well, is going to generate for the dealership. And so I think our traffic strategy is starting to be rewarded, which is why we had dealer growth in Q4 again in Q1 snapback dealers in Q3 and saw dealer growth again in October this past month.

[00:58:19] That's really helpful. Thanks, Alex.

[00:58:24] There are no further questions I want to thank everyone for joining the courage to come third quarter 2012 earnings call. You may now disconnect.

[00:58:36] Thank you.