CARMEL, Ind. -

KAR Auction Services chief executive officer Jim Hallett spent much of Tuesday’s conference call with investment analysts talking about volume and dealer consignment rather than the company’s latest financial performance.

The dialogue stemmed in part from ADESA sustaining a year-over-year drop in vehicle conversion percentage to 55.6 percent, excluding OPENLANE activity. In the second quarter a year ago, the level came in at 60.8 percent.

Hallett emphasized the softening conversion percentage derived as a result of dealer consignment volume that’s as high as the company has ever generated. This past quarter, KAR calculated ADESA’s dealer consignment volume constituted about 43 percent of all volume.

When commercial volume constituted much of the company’s lane activity during the height of off-lease volume, dealer consignment penetration dipped as low as 25 percent, according to Hallett.

“Our dealer consignment has come a long way,” Hallett declared.

With ADESA moving so many dealer consignment units, a Wall Street analyst asked if that volume could soften, too, because of strategy utilized by larger dealer groups. The questioner referenced commentary by several publicly traded companies that indicated a reinvigorated effort to retail as many trade-ins as possible either at the dealership where the transaction happened or by transporting the unit to a store where it might turn more quickly.

“There’s always been dealers who have elected to try to wholesale their own cars and rental companies have attempted to sell their own cars,” Hallett responded.

“When you think about it from an industry standpoint, it’s really immaterial,” he insisted. “We don’t see it as having a major impact on the industry. We certainly don’t see it as having a major impact on our results.

“Our value proposition has always been that we’re going to put thousands of eyes on these vehicles both from the physical and virtual standpoint. That’s what we’ve been able to do for the consumer, and we think we drive much higher proceeds. Although there’s been some recent noise about that, I would just say it’s nothing we would term material,” Hallett went on to say.

The questioner quickly followed up, asking whether Hallett thought his estimation represented a short-term assessment, or into 2013 and beyond.

“For the few clients that have announced the desire to wholesale their own vehicles, we’ve gained multiple customers in that segment and have continued to grow that area of the business with many of those like customers,” Hallett said.

Before elaborating about what he deemed sure footing with the dealer consignment segment, Hallett touched on how he believes commercial client volume is expected to climb next year and beyond.  He predicted ADESA’s activity would help the auction industry move 8.4 million units next year and close to 9 million units by 2015.

“Looking forward, I’m really excited about the supply and how ADESA is positioned going forward to take advantage of what’s coming at us here,” Hallett stated.

“As you know, ADESA is naturally weighted toward the institutional side of the business,” he continued. “We have very good long-term visibility with our leading commercial consignors. In fact, we know what their volumes look like two and three years out, what those returns are going to be. I think ADESA, as these returns come in, is in a very strong position to take advantage of these volumes.”

Meanwhile, Hallett pledged ADESA won’t leave dealer consignment efforts by the wayside.

“I don’t want to lose sight of the tremendous work that we’ve done on dealer consignment over the last couple of years, “Hallett stressed. “I think we’ve done a great job in training our dealers, creating some good behavior both by our dealers and also some good training with our employees.

“As we stay focused on dealer consignment, as we get the onslaught of commercial volumes coming back, I think this is going to put ADESA in a very good position,” he continued.

“The combination of both is a pretty good recipe for success,” Hallett went on to say

Second-Quarter Performance Assessment

In looking at the Q2 figures, Hallett reiterated to investment analysts what he shared in previous calls.

“We felt the second quarter would be a challenging quarter, and there’s no question that it did prove to be challenging,” Hallett said about how KAR posted a 3-percent gain in revenue but watched adjusted EBITDA slide by the same rate.

KAR released its second-quarter financial statement late on Monday, and Auto Remarketing published the details here.

Update on CarsArrive Integration

In another discussion that might be of interest to dealers, Hallett indicated that the integration of CarsArrive into all of ADESA’s U.S. locations is projected to be finished by the end of the year.

Hallett added that the transportation solution is scheduled to be integrated into ADESA’s Canadian locations during the first quarter of next year.

The company reiterated that CarsArrive, the transportation solution KAR acquired when it purchased OPENLANE, is one of the industry leaders in transportation options with more than 16 years of experience. The CarsArrive network includes more than 4,500 transport companies and 30,000 trucks, and all carriers are fully bonded and insured.

Customers can use the company’s Internet-based system to instantly review price quotes and delivery times, check available loads and also receive instant notification of available shipments.

The system also is able to consolidate shipments and optimize both full and partial loads in real time.