CAR Group Limited (CAR) Earnings Call Transcript & Summary

Thanks, Travis. Good morning, everyone, and welcome to the half 1 results conference call. Just before we start, we'd like to acknowledge the traditional owners of country throughout Australia. And we're here in Melbourne, which is the home of the Wurundjeri people. And we pay our respects to their elders past and present. Also with me this morning, I've got Will Elliott, our CFO; Ajay Bhatia, who runs carsales Australia; Paul Barlow, who runs carsales International. Lori Stacy is on the call. Lori is the CEO of Trader Interactive in the United States. We've got SB Kim with us. He's the CEO of our South Korean business in Encar; and Kane Hocking, who is the Head of Investor Relations. As we usually do, we'll just run through the slide deck fairly quickly. I'll call out the slide numbers that we're on. And then hopefully, we'll leave around 30 minutes for any questions that you might have. So maybe starting with Slide 5. And we're really pleased with how the business has continued to respond over the last 6 months in executing against our strategic plans while also managing the pandemic-related disruptions that we've all endured here in Victoria and New South Wales, in particular, with lockdowns for much of the first quarter. And as we'll discuss in a moment, we've seen very strong half 1 growth in revenue and earnings while also continuing to build on our long-term significant growth potential that we have. Our momentum in our domestic Australian businesses is strong, and we've executed well against our strategic priorities. A clear example of that is what -- in terms of what's working well for us is what we've seen with dynamic pricing in Private, the Private segment, which has made a significant contribution with -- to the 38% revenue growth that we've seen in Private in the first half. We're also making good inroads with the evolution of products like Instant Offer and SELECT. Our media strategy has seen strong execution over the last 6 months in diversifying our customer base and building on our product and insights capability with plenty more to come there. Internationally, businesses have performed very well. With the acquisition of Trader Interactive, it brings exposure to new large and attractive vertical markets that we have now in the U.S. And we feel the business is in a great place coming into 2022. Encar continued its stellar performance and grew its market penetration across its key priorities in Guarantee, Dealer Direct and Encar Home. Brazil has also had a very strong 6 months of executing against its strategic priorities, too, particularly with the regional expansion and the step change -- some step change that we've seen in CRM sales there. And so as we mentioned in December at the Investor Day, we are looking to become a carbon-neutral business here in Australia. And we expect that we'll be in that position by the end of the financial year. And just finally, looking at that slide, yes, our people are our greatest asset as an organization. And we do try to go above and beyond being an employer of choice. And you get the sense -- I mean, many of you guys in the call have been around the organization for some time. And you can see that on the slide that we value our people highly. But to keep people engaged and build a strong business culture, we also need to embrace difference and reduce barriers for people, too. So being a family-friendly business is a key element to this and being an inclusive workplace. So we're really pleased to receive that recognition from UNICEF and Parents At Work. So if we can just jump over to the next slide, Slide 6. And just looking at our half -- financial highlights for the half and which now includes a look-through perspective to demonstrate the contribution that Trader Interactive is making. But no matter what view you take, these numbers are a very good set of numbers. Strong revenue performance with growth across all major business lines, once again demonstrating our resilience and the diversity of performance drivers that we've got across various markets and geographies. Domestic revenue growth was highlighted by the exceptionally strong Private seller segment and a second consecutive half of double-digit media revenue growth. In the international markets, we saw excellent revenue performances across our major investments in South Korea, the United States and Brazil. And earnings growth was also a solid outcome for us, particularly if you exclude the federal wage subsidy we received in half 1 2021. And adjusted EBITDA then gets lifted to around 7% on pcp. Just over to Slide 7 and some of the key operating metrics here. They continue to reflect the value that we provide to our consumers and to our customers. As we've all observed over the past 6 months and slightly longer now, the automotive market has continued to trade very well with used car prices remaining at elevated levels. And that continues to be driven by strong consumer demand and some of the supply challenges that we've spoken about in the past. We do think this trend is slowly beginning to stabilize with inventory remaining tightly held but gradually rising, although still well below pre-pandemic levels. Time to sales has also risen slightly but still considerably faster than pre-pandemic levels as well. And both traffic and lead volumes are up strongly on pre-pandemic levels, too. On to Slide 8 and just making some observations around market. And while we're just looking at things in that space more broadly -- and there are a few areas at present we'd like to just comment on briefly. So looking at macro factors, particularly around inflation and interest rates and how that tends to play out in the used car market, and our historical observation here is that there is the strong -- there's not a strong link between interest rate rises and car buying and selling activity, particularly at the sort of low interest rate levels that we see today and have observed in the past. Over -- one of the other things to mention here is also around inflation. At carsales, there are 2 costs that we have, being labor and marketing, and we manage them both well. With labor, we've seen inflation, particularly in the tech area. But we're managing this by compensating in other areas and looking at ways to augment our workforce with talent from other parts of the world where that makes economic sense for us to do that. When it comes to marketing, we do tend to turn the tap on and off when we need to, based on our long-term strategic objectives and priorities. As you can see, we've had no problem growing our core margin over the half, too, and that's up as you can see on the slide on the left. In relation to just supply chain in the middle of the slide there, clearly, there's some ongoing disruption in some markets, and manufacturers tend to be impacted more so than others at the moment. Within the auto industry, the consensus here, just from talking to multiple manufacturers, is that supply levels won't normalize until the second half of the calendar year. What that means for us as a business is that we can expect to see probably used car prices remain high in the foreseeable term at least. Look, it's also -- looking at inventory levels, as they sort of normalize, there are still challenges in areas like trucks in the United States and cars in Mexico and Chile, where we've got subscription models. But we should be the beneficiaries of normalization as inventory returns. And the final observation on the right-hand side has been just around consumer trends largely caused by the pandemic and how they play out. So the preference for car usage continues to remain above pre-pandemic levels with consumer demand for lifestyle assets such as RVs and bikes and boats remaining very strong. And we see that trend continuing both here in Australia and in the United States at the moment. And there are positive trends for us here at carsales as well. If we move to Slide 10 and just looking at our group financial performance record over the last 5 years. And it is really pleasing to see the story of healthy growth here continue and with close to double-digit CAGR growth rates across all those major lines. As you'll see, when we step through the deck, the business is clearly focused on our operational performance, but we're also seeing the benefits from the execution of our strategy and continuing to deliver excellent long-term shareholder value creation. On to Slide 11 and just looking at segments and EBITDA. So you'll note here the inclusion of a new segment that we talked to you about in December, which is carsales Investments. That's there, and that includes RedBook Inspect, our tire businesses and Placie as well. Well, I guess, overall, this slide continues to reflect the strength of our diversity and the multiple growth drivers that we have, along with the resilience that we've got when we've just cycled through all the variability that we've seen with recent market dynamics. And maybe starting with our revenue segments -- and overall, we're obviously well placed and very pleased with the revenue growth that we've achieved of 16% on pcp growth. Or if you look at it from a like-for-like basis, it's 10% when you exclude the TyreConnect acquisition. Now we'll run through each of the segments in more detail in a few moments, but just a few things to call out here. So our dealer revenue growth was pleasing considering the lockdowns that we had in Victoria and New South Wales during the half and the strong comps that we had in half 1 2021 that we're up against. As we saw in the core Private, that is Private advertising and Instant Offer, and that remains very strong, up 38%. And that's been a combination of strong volume and yield growth. Similar to H2 last year, H1 this year, we've continued to see good double-digit growth in our media business, up 11% for the half and improving media market conditions there, lower prior period comps and good execution of strategic priorities. The team have been the catalyst for that. Our carsales Investment performance is largely driven by TyreConnect, and we're pleased with how that acquisition is going. Our international operations all delivered strong revenue growth, Asia driven by South Korea, which has had a really strong half with revenue up 19% on a constant currency basis, while other small Latin American businesses continued to persevere through enduring stock shortages. Trader Interactive and Webmotors had great performances as well, and we'll go through them in a few minutes as there are Trader associates here. In reportable EBITDA, 1% EBITDA adjusted growth to $126.7 million was a good overall outcome. Without last year's wage subsidy, as I mentioned, it was up 7% growth on pcp. On to Slide 12 and just looking at our margin summary. Our overall margins were slightly lower on half, but underlying margin remains very, very strong. Online advertising margin growth of 1% to 64% reflects a great revenue result in high-margin products, combined with our tight cost control while still investing in future growth initiatives. In Asia, our margins were lower by around 1% as we again invested in marketing for Dealer Direct, which is our C2B business there in Korea. And that's delivering very strong performance outcomes there. Without the marketing spend, margins would have increased by 1%. carsales Investments margin, also lower by around 1% as we've begun slowly investing in building Placie awareness, along with the lockdown impact on tire volumes and how that flows to areas like supplier rebates. In Latin America, the focus has continued to be on cost management while market conditions, particularly in the new and used stock areas, remain quite tight. And we've also called out the EBITDA impact on margin as a result of the TyreConnect acquisition. And we've -- like I mentioned before, we've been happy with that, but it does come with a slight -- with a lower margin. On to Slide 13 and just looking at adjusted NPAT and major movements below EBITDA. So you can see there, D&A has increased by about 19%, and that largely reflects the ongoing investment in further developing our future growth initiatives and the global tech platform that we have. Our net finance costs continue to decline, down 24% and reflecting a reduction in interest rates due to the exit of an unfavorable Korean hedge that we had in place there. Profits from associates was up significantly, and that's from the inclusion of Trader Interactive and the strong performance that we saw from Webmotors in Brazil. Adjusted NPAT growth of 20%, that was stronger than adjusted EPS, as you can see there. And that was due to the 35 million shares that we issued for the Trader acquisition. And the Board has declared an interim dividend of $0.255, and that reflects an 81% payout ratio for the half. So just looking at Slide 14 and our look-through growth. And while our Australian businesses is performing very well for us, there is a real step change in the picture here, as you can see. And that's a result of the strong contribution of our offshore businesses, along with the inclusion for the first time of Trader Interactive, with our international marl now accounting for 33% of look-through revenue and 30% of look-through EBITDA. Now on to Slide 15 and just looking at cash flow and our balance sheet. So starting with the top left of the chart, and we all know we have a highly cash-generative business. And it was pleasing to see EBITDA conversion remaining at 100% mark. And the team does do an excellent job of managing cash flow and working capital for us. The 17% increase in underlying CapEx, that reflects the continued investment in technology to support our international markets and domestic product development. There's also an element of higher technology investment here and salaries in here to ensure that we're delivering on our strategic priorities in what's been a tight labor market. There was -- as you can see there, there was a $1.7 million incremental lease CapEx in South Korea. And we've developed an additional 3 branches there in the half. One of those was a particularly large branch in a mega complex that was some several times larger than the normal complexes that we developed. And that was probably the one that we had in the video on the Investor Day, I suspect, as well. Looking at leverage. And as you'll recall, when we announced the Trader transaction, we anticipate our leverage being at around about 2.1x within 12 months of the transaction. Our current leverage is around 2.2, but we're well and truly on track to getting to 2.1x by 30 June. Now over to Slide 17 and just looking at our Australian revenue now in Dealer and Media. Dealer revenue growth of 1% was a pleasing outcome in what's been another eventful half for the -- with the extended lockdowns that we've seen. And as restrictions ease, we did see conditions improve and continue to improve in what's been a good car market with demand for new and used cars remaining robust throughout the half and setting us up for a stronger half 2 performance. Revenue growth of 1%, like we normally talk about, primarily came from yield, while lead volume despite challenging comps were around the same, maybe slightly down. But -- and depth product was stable as well on pcp. We're also starting some traction with finance, and we've talked a bit about that over the last sort of 12 or 18 months. And we now have about 13,000 dealer cars with a finance offer against them and a lot more potential to realize here. And looking at the right-hand side of the slide, the media performance, as I mentioned, it was great to see another half of double-digit growth here, up 11%. And what's working for us here is our ability to diversify at both the customer and product level, which is paying dividends, along with improving media advertising conditions. Now on to Slide 18 and looking at just Private and Data and Research. So as I mentioned, Private had another -- an excellent 6 months, growing at the fastest rate that we've seen in many years at 38% up on pcp. Private no longer includes tires and inspections. And they're now, as I mentioned before, part of the carsales Investment segment. So the drivers for the strong market conditions for private sellers here at the moment are higher prices, which many of us have seen being achieved, and a lower time to sell, which is going to support strong ad volume through the platform. In addition to private seller ad volume, strength in advertising price changes we made here with the launch of dynamic pricing led to yield increasing by around 20% on pcp. Alongside private seller, Instant Offer is there as well. And that's also performed well despite the lockdowns with growth in volume from growing consumer awareness and improving conversion as conditions there is supporting strong double-digit revenue growth that we've seen there overall. Looking at Data, Research and Services revenue, and again, that was similar to half 1. And we felt that was a resilient effort given the market conditions and RedBook up and our dealer services slightly down on the half. Just looking at Slide 19 and carsales Investments. And material businesses here are the ones that we -- sorry, the reason why we have this and the business that we've chosen to put here is because they all stand alone pretty much from the rest of the Australian operations, and we control them all. So as you can see there on the right-hand side, they include tyresales, TyreConnect, our RedBook Inspect and Placie. The biggest contributor to that segment is the tire business. And with the 120% revenue growth for the half, that was primarily driven by the inclusion of TyreConnect. But without TyreConnect, we still saw 18% pcp revenue growth there, which was excellent. The other thing here is the launch of our new inspection products and some new facilities with RedBook Inspect. And we've seen a good volume pick up there, particularly around ride-sharing recently. And the integration of Ola onto the Placie platform and increasing registrations there month-on-month despite challenging market conditions for people using ride-hailing at the moment with lockdowns is -- yes, I mean that's been good to see there, too. But that is starting to get some traction. And on to Slide 21 and just looking at international and starting with Asia and Encar. And they've again delivered strong financial performance outcomes while investing in long-term future growth opportunities. Our revenue, up 19% on a constant currency basis, was underpinned by strong execution across the 3 key growth driving products. So in the case of Dealer Direct, the building of product awareness through increasing marketing, quality user experience, improvements in user experience, increasing dealer penetration, all key contributors to the 100-plus percent year-on-year growth that we saw there. Guarantee revenue growth of more than 30% was driven by branch network expansion and growing customer penetration within existing branches. 37% of Encar's vehicles on site are now inspected, which is great to see. We've also made changes to the Encar Home product, and we're seeing strong revenue growth there, along with a number of eligible cars on the platform now sitting at around 12,000 cars. On to Slide 22 and just looking at Trader Interactive. And we've had an excellent half 2 with revenue and earnings up 12% and 19%, respectively, on a constant currency basis and EBITDA margins expanding through operating leverage from around 54% to 57%. All the verticals grew. But RVs, you can see there, was a standout with revenue growth of 25% year-on-year. We also saw the same sort of growth here in Australia with our nonautomotive verticals. And that, I guess, reflects the move of consumers into lifestyle assets like RVs is a global trend, not just a trend in the United States. So -- also, higher demand and supply chain issues mean that, like we've seen with cars, inventory continues to be somewhat of a challenge in the market there. Although it's clear what happens, as you can see on the slide, when inventory starts to grow, and you can see that with RV and powersports revenue growth as inventory rose as well throughout the half, which is pleasing. Overall, business is well positioned for coming into half 2. We've got an average yield uplift coming of around the 7% to 8% programmed. And inventory levels are continuing to normalize, which is going to support incremental revenue growth moving forward. On to Slide 23 and just looking at Webmotors. And again, it's great and really pleasing to see how this business has performed here and continue to build on the resilience that it showed last year, finishing the half with revenue growth of 20% and EBITDA growth of 19% on pcp on a constant currency basis. Dealer revenue growth was strongly underpinned by new customer subs, up 14% on pcp across the country. And yield growth are the result of an increase in lead fees and the sale of some premium dealer products such as CRM. Our regional expansion that we've been talking about for some time, that recommenced. And we're clearly seeing some big growth opportunities being driven there. Dealer subs were up about 1,200 on the platform, which is good on pcp. In relation to inventory, like we're seeing in Australia and other parts of the world, inventory levels are recovering. In Brazil, it was up 32% on December last year. But we're still at around 80% of pre-pandemic levels at the moment. On to Slide 24. And it's been another challenging 6 months for our Chilean and Mexican businesses dealing with COVID. But the teams in both countries have done an excellent job in working together and keeping costs under control and looking for growth opportunities as market conditions improve. Being sub models, low inventory availability in these markets has been the biggest challenge that they've got. And as you can see from the charts, there are things that will work in our favor as those inventory levels improve. And we will certainly take advantage of the opportunities that we get as that inventory improves. Just looking at where we're at on strategy and starting with Slide 26 and some of the growth opportunities that we've raised over the last year and looking at Australia first. So with digital retailing or carsales SELECT, which is one of our highest priorities, we've been making solid progress since August and the launch there and seeing good outcomes for customers. But we're only really scratching the surface of that product at the moment. Digital trade-ins, which also feeds into carsales SELECT and products like Instant Offer and Appraisal Solutions, is critical for getting more stock in the hands of our dealers. And it's an area of ongoing focus to develop consumer awareness, growing trade, trade-in quote volumes, product improvement and conversion. The result here we're seeing is good. And you can see with Instant Offer quote up 52% on pcp, it's certainly heading in the right direction. But there is certainly a lot more that we'll be doing. Dynamic pricing. Having launched that product in August, we've seen significant potential for private sellers being realized. And we've made excellent progress here over the past 6 months, having just recently launched an upgrade to the sale funnel, I think it was last week or so. And that's going to facilitate Phase 2 of our dynamic pricing experience moving forward. But we'll just -- we'll cover dynamic pricing a little bit more in a second. Media, as we've been discussing, has been a good turnaround with 2 consecutive growth halves, more diversification in our customer base with 25% contribution coming from noncar sources now and new tech coming to improve capability and automation in the next months ahead. There's some opportunities for us to be chasing there as well. And Dealer Finance, I mentioned that a minute ago. But we're really starting to get some traction here now, which is pleasing. We've now got 13,000 dealer cars with a finance offer on them, which is great. But again, a lot more to do and looking forward to getting integration of financing to carsales SELECT at some point, too. Just speaking of carsales SELECT on Slide 27. And we've been discussing this over the last 6 months. We do think the car buying and selling journey over time is going to become more digitized. And we know from our own research, in the right circumstances, around 37% of consumers are willing to purchase a used car online today. We also think that long term, this is going to create a significant opportunity for ourselves, our customers and car-buying consumers. So with the launch of carsales SELECT in August, our focus at the moment has been on getting the first phase out, which is now, and that's about growing inventory. The trade customers using SELECT today tend to fall into a number of categories. There are those digital dealers or the digital-only dealers, the likes of, say, a CARS24; traditional dealers; and then what we call big-box dealers that tend to operate out of a large industrial building. As you can see, published inventory here is now starting to get some real traction. But it's going to take some time for us to really get it to where we want it to be in terms of building that up, but very happy with the progress. We're also seeing impressive performance results for SELECT with significantly higher page views and leads generated than standard listings and with time to sell nearly twice as quick as a standard listing, which is a great start, too. As we've already talked about, digital trade-in is a really important component to SELECT. And we've been working through different phases of what that ultimate solution will look like here. We're also focused on finance integration, as I mentioned, and getting close to the offering of an integrated finance solution here. On to Slide 28 and dynamic pricing. Over the last 5 years, we've evolved our pricing strategy from -- for private sellers from the simple fixed price model that we had with the launch of a phased approach to dynamic pricing. And it's helping us develop our pricing capability even further by looking at factors such as location, demand for a car or time of the year the car is being sold, for instance. So we've been very happy with the impact that we've seen with the first phase of the products development, which has helped us achieve that 38% growth that you've seen in the first half. The phase -- first phase was location-based pricing for particular states where we're able to pass through a price rise in eastern seaboard states and a price decrease in other states, particularly WA, where our market share has traditionally been relatively weaker. In the eastern seaboard states, we haven't seen any impact to volume from the price rise, while in Western Australia, I mean, that state is now growing faster than any other state in the country. So we're very pleased with the outcome that we're seeing. Micro price bracketing is the next phase that we'll be introducing and using an algorithm to determine the price of a car and align it better with the car's value so that we can remove the current price brackets, you can see there on the right-hand side of the slide. And that will make our pricing more efficient. The long game here, though, is that every pricing is an opportunity to continue to build yield but through better targeting, desired outcomes so we can -- we think there's a volume benefit to come, and there's also a yield benefit to come as we're observing in the eastern seaboard states, in particular, at the moment. On to Slide 29 and Trader Interactive priorities and updates there. We presented to the Investor Day in December, and there are a number of achievements just to quickly mention here. So we've grown our market leadership in RV and closed the gap in trucks and equipment. The team has made good progress in building their lead attribution capability on top of increasing lead volumes per dealer, which is supporting improvements in dealer ROI, which you'll see on the next slide. Like Australia, Korea and Brazil businesses, the Trader businesses continue to make progress with digital retailing and looking to do a pilot for powersport dealers first there. Our focus is on working with the Trader team to leverage market expertise, tech and innovation and new product development to support the growth and development of their business. And overall, we're very pleased with the progress that we're making. And we're in a good place coming to 2022. On to Slide 30. And so just looking at some of Trader's current business fundamentals. And as I mentioned earlier, with subscription-based revenue model, lower inventory can be challenging. But we're beginning to see that trend reverse in all verticals with the exception of trucks, which is a very good sign. We're also seeing leads per dealers growing sharply against pre-pandemic lead volumes, which reflects strong consumer interest in lifestyle assets and equipment, as I mentioned earlier. And that's all heading in the right direction. Significantly higher lead volumes relative to cost to dealers, so growing their ROI. And it means, obviously, dealer's investment in Trader is improving considerably, as you can see on the chart. And while it may not be completely positively correlated to ROI for a dealer, we can see the very strong dealer satisfaction upturns in NPS scores across all verticals on pre-pandemic levels, which is excellent and shows the team are doing a fantastic job in market. Just Encar now quickly and their priorities on Slide 31. We're all familiar with the strategic priorities that they've got, and they'll continue to be leading into the next sort of 12 months or so as we go on this end-to-end digital retailing experience we're trying to get to over time. With Guarantee, we're continuing to see more of our inventory being Guarantee cars now up to 37%, and we're going to continue to open up new branches and increase customer penetration in existing branches. And you'll see that percentage keep growing. And we obviously want to make Guarantee a real currency for buyers and sellers of cars in South Korea. Encar Home inventory is now around 12,000 cars, and transaction volumes have doubled in the past 12 months. Priorities here will continue to be optimizing experience, minimizing dropout and increasing inventory penetration further. And in Dealer Direct, we've nearly doubled our transaction volume here and tripled dealer participation to over 2,300 dealers, worked on improving product performance and competitive position against the market leader there. And our priorities here over the coming 12 months will be more of the same effectively. And then on Slide 32, just looking at trade-ins and then ramping that up and building that a little bit more. So the opportunity that we have in Dealer Direct on the left side of the chart, we're repeating here some of the stuff that we had in the December investor deck relating to the TAM for Dealer Direct and the size of the prize. And it's certainly worth reiterating that as we think there's a material opportunity for growth, and we're beginning to see that materialize. The investment we're continuing to make in the product development, user experience and building consumer awareness and education is getting traction and becoming a material part of the Encar business, which is an important strategic element of the path to that digital retailing which we're aiming for. On to the last slide, which is the outlook statement. And I'm not going to run through the individual trading observations there for each segment. But I will just say, conditions across our domestic and international businesses remain favorable, as you can see from the comments. And we've reiterated the guidance given at the October AGM last year and reaffirmed at the Investor Day in December. And that is that we expect to deliver solid growth in group adjusted revenue, adjusted EBITDA and adjusted NPAT for FY '22, excluding acquisitions. So apologies, I've run a little bit over time, but happy to open up for questions now.

[Operator Instructions] The first question comes from Entcho Raykovski from Credit Suisse.

I've got 3 questions. I might ask each of them in turn, gives you, I guess, some time to process. The first one, just on the outlook commentary, there is a slight change to the commentary on Encar and on Trader. On Encar, you're now guiding to good EBITDA growth. I think that was strong previously. And on Trader, you've now said you're expecting good revenue growth for FY '22. I think that word was strong before. So can you perhaps just start off just comment on what's driving some of those changes?

Yes. I mean, overall, Entcho, I mean, the guidance for the whole business hasn't changed. I guess it's -- some of them, it's a little bit of a marginal call with the way we use words to -- as you can imagine, having followed the stock for a long time. And with Trader, it's a very marginal call around what word we would use. But we want to err on the side of conservatism just given the truck market in terms of reestablishing inventory growth, which obviously is a key driver of their performance. So it's probably -- it's more around that. And with Encar, again, it would have been just around the edges, if there was indeed a change. But yes, that would be -- that would probably the way we'd answer to that. So what was the second question, mate?

Okay. So the second question, on Instant Offer, I mean, you've called that out as a contributor to the Private revenue growth, which was obviously excellent in the half. Can you give us an idea of what sort of monthly volumes you're seeing for the product? And I don't know if you can broadly comment on the expected revenue contribution from Instant Offer into the second half and the full year.

Yes. Ajay?

Yes. Thanks, Entcho. On Instant Offer, if you sort of take it more broadly, we had 38% growth overall in Private. More than half of that growth came from dynamic pricing, and the rest of the growth was split between Instant Offer and volume. So Instant Offer grew very nicely in the first half. If anything, I expect Instant Offer to grow faster than that in the second half. The first half was somehow impeded by these lockdowns. When dealerships are not operating, it's really hard for them to buy cars. And those conditions have significantly improved, and we're seeing that run rate. We are not commenting on specific volumes, but I'm more bullish about Instant Offer in the second half than even the first half, even though first half performance was still relatively good.

Okay. That's great. And just a final one, you've -- I mean, you say you've retained the full year guidance. You're talking about an expected improvement in dealer volumes into the second half given the absence of lockdowns. Can you perhaps give us an idea of how much comfort you've got around that improvement and how dealer volumes have behaved over the December, January period, which tends to generally be a slightly quieter period?

Yes. Thanks, Entcho. On dealer volumes, we were obviously impacted by lockdowns and towards the end of December, a bit of Omicron as well. What we've seen, however, is more recently a significantly improved run rate on the first half. And it's exactly what we expected, and we're seeing that through. So I feel very comfortable in saying that the second half is going to be significantly better than the first half on dealer volumes.

The next question comes from Eric Choi from Barrenjoey.

Cam and Ajay, just cracking result in Private, so well done. Three questions from me. The first one, on TI. I'm just trying to reconcile what you reported versus Lori's comments at the Investor Day that financials were improving month-on-month every month. So maybe if you can give us a sense of -- if the December quarter was actually meaningfully better than the September quarter or if there's actually some seasonality we need to take into account? The second question, just on TI again. And just thinking about if that 12% revenue growth you guys just -- could that be a bit of a low watermark? And my reasoning is that 44% inventory growth could be a leading indicator for paying subscribers, I guess. And you've called out another price increase, which is also a little bit earlier than the last one you did. So just wondering about the potential for that to accelerate. And then just a last question, just to clarify guidance. I guess given the strength of the first half results, do your previous comments around financials being more heavily second half weighted than usual, do they still stand?

Thanks, Eric. So I'll deal with the last question and maybe the second question as well. So I mean, just on guidance, so our guidance now is obviously for the full year. And we've now seen the half 1 numbers. So as you've seen, guidance hasn't changed. It was the same between August, October and December. So how that skews half 1-half 2, it clearly skews to half 2. But overall, for the full year, our guidance is still the same. And on the 12% revenue growth, I think as a business, I mean, we target double-digit growth for Trader Interactive. And that's where Lori's got her eye on the prize. So 12%, whether it's 12% or around that double-digit level is where we're continuing to target for the second half. Lori, I don't know if you're on the call. Do you want to talk about seasonality?

Yes. Sure. Yes. So as we think about last year or at the end of last year, we were trending positive month-over-month. We do see seasonality typically pick up around the Thanksgiving time in November through December, through January, and then things start to pick up as we go into the spring. So that is quite normal to see that. The second thing is that we just really haven't seen that truck inventory level pick up. So that, coupled with the seasonality, is really what's going into that right now.

The next question comes from Kane Hannan from Goldman Sachs.

Just 3 for me as well, please. Just on TI, so that 8% price rise you're talking about, so I'm using the revenue contribution you broke out sort of for CY '20, just confirming that's still roughly ballpark in terms of trucks and RVs and the like and then saying that would roughly imply sort of a 4% revenue tailwind to TI overall?

Are you happy to deal with that one, Lori? Or Will, do you want to take that?

Sure. Yes. So the price increase, the 8%, is in our verticals outside of truck. So that's really where it nets out. It's slightly higher in some verticals, slightly lower, and it varies by customer segment. So that's really where we expect it to net out. And then I think we've been a bit modest on the customer count growth and things like that because of trucks right now, as we're really hoping that those start to show some improvement, but very modest estimates based on what we're seeing there right now.

Okay. Perfect. So that's -- so net debt at 8% for the TI overall? Or sorry, I'm just a little bit confused by those comments.

Yes. 8% overall in price lift minus truck. We're really kind of holding off on that one. That one's really more midyear. And so we're doing the price lift on RV, powersports and equipment in that March-April time frame. And those rate increases will net out to about that 8% lift.

Okay. Perfect. And then I suppose on Private, obviously, very strong yield performance in the half. Just interested, I suppose, relative to some of the previous comments you guys have made, expecting to exceed the double-digit revenue growth you've historically done, and when I think about the introduction of dynamic pricing and the strong '22 number with a bit of a pull forward in that outperformance, and from here, it's back to in line to sort of historical averages. Or do you still think you're going to be able to outperform those historical numbers going forward?

Thanks, Kane. So on Private, that 38%, if you sort of peel it down, there's 3 growth drivers. There's volume growth, there's yield growth, and there's IO growth in there. IO is going to continue, if anything, accelerate in my view. Then if you look at yield growth and if you look at that, I think it was Slide 26 or 28 or something on dynamic pricing, we are now introducing micro bracketing. We haven't even done micro bracketing yet. There's a lot to go in terms of alignment of demand and supply at that sort of more micro level. So there's a lot of optimization left. And the way I look at it, that gives me confidence that we can do double-digit growth for some time to come. Exactly how much that double-digit growth will look like, I don't want to talk in detail about that just at this point. But it will be double-digit growth for some time to come.

And then just lastly, carsales Investments, I'm not sure if you commented in -- anywhere in the deck. But just in terms of the losses that Placie is making, I suppose the impact TyreConnect had on that earnings, just trying to get a sense of what we think about Placie investment going forward.

Yes. Will?

Yes. Thanks, Kane. So I think it would be fair to say we're investing several million dollars into Placie at the moment, low single-digit millions. In terms of TyreConnect, so I think you can see the contribution of revenue there is sort of around the $12 million, $13 million mark. We've called out that contribution. Limited positive impact on earnings to date, but we see good opportunity going forward. So as we combine the tyresales and TyreConnect businesses, we see rebate upsides, volume upsides and some decent earnings upsides going forward but limited in this financial year.

The next question comes from Tom Beadle from UBS.

Great results. I just had 2 questions, please. Just firstly, on the outlook, I'd just like to go into current trading observations in a bit more detail, a bit of a follow-up from Entcho's questions. So you've mentioned that underlying conditions in Australia are solid. How are your volumes looking, whether it be leads in dealer or private listings? How do they compare with pre-COVID levels? Are you still seeing volumes below what we may consider normal volumes just with the Omicron variant impacting people's movement patterns still? So I guess the point is, is there any sort of assumption in there that there could be a further pickup in activity or have volumes now normalized? And just the second question is just around costs. I haven't seen any specific update for the outlook for domestic core cost. Apologies if I've missed it. I know in the past, you've been talking about cost growth greater than revenue growth, obviously, including JobKeeper. I realize there's some flex in there to deal with inflation or any other changes to the revenue outlook. But just wondering if you could talk about how we should think about that underlying cost growth, excluding JobKeeper, in your core domestic business in the second half?

Do you want to do the cost one?

Yes. Happy to take the cost question, Tom. So I think, look, we've done a pretty good job in the first half, as you can see. So we look at cost across the different segments. And if you look at the core Australian business, which is Online Advertising and Data, Research and Services, we've expanded margin, excluding the impact of the wage subsidies. We think we're still going to be in a pretty good position from a margin perspective in the second half. The only callout to that is we did make a comment in the Private section of the outlook statement that we're looking to invest some money in Instant Offer. Obviously, you can see we had a stellar Private result, and a part of that was Instant Offer really performing well. And so we're going to support that -- continue to support that. So that would be the only comment around that. And we're a business that has a strong ability to flex our cost base, depending on the circumstances that we find ourselves in. And so we're always looking to grow margin, and the operating -- inherent operating leverage of our business is very strong.

Just on your question around some of the metrics. And I'd probably start with saying, yes, if you look through the slide deck, our comments pretty much through the deck are -- inventory is probably the area that's still not at pre-pandemic levels, but it's getting better. And we can see that in carsales, see that in Trader. Time to sell. Time to sell, another metric that we monitor closely around consumer demand and how quickly the inventory is going through the platform, that's come up a little bit over the last sort of 6 months. But it's still well below pre-pandemic levels. If you look at traffic or lead volumes across any of our countries pretty much against pre-pandemic levels, traffic is up, lead volumes are up. So as a comp to pre-pandemic levels, we've continued to grow nicely during the pandemic. There can be a little bit of noise. But I guess pre-pandemic numbers, we're doing quite well.

The next question comes from Roger Samuel from Jefferies.

I've got 2 questions. First one, just on South Korea, just wondering if you will continue to invest in marketing in the second half and also in FY '23. And when can we expect the margin to improve from the current levels? Second question is, in your previous presentation slide, you mentioned that one of your strategic priority is to increase the recurring promo products in the dealer segment. Just wondering how is that tracking in this result, given that you mentioned the time to sell is now slowing. And do you see an increased take-up of this product?

Yes. SB, do you want to talk to...

Yes. Sure. So regarding the Dealer Direct investment going forward, we continue to believe that we need to invest given that opening and the cost of this segment as well as competition. I mean, regarding the precise or correct size of investment, we continue to be in discussion how much we will be continuing to invest. But we assume that pretty much the same with the first half going forward at this moment. Improving -- the margin improvement, we do believe -- I mean, ROIC will be getting slowly improving over the time as we accumulate our experiences in spending our marketing spending. On the top of that, I mean, we began to spend our Dealer Direct investment beginning of last year, which is from the January to the June last year. So in terms of the pcp growth, I mean, next second half of the FY '22 will be better than the growth of the FY -- the first half of FY '22.

Ajay?

Yes. And thanks, Roger, for the question on recurring revenue. You're right, we've been focusing on recurring revenue for a number of years now. And I'm very pleased with how the team has done on recurring revenue over the years but also in the second half. So when I look behind the depth results, even though depth was flat year-on-year, underlying, we signed up high single-digit number of more dealers than we had in the previous corresponding period on to our depth products. In normal circumstances, if yield would have either stayed the same or increased, that would have led to double-digit depth growth for us on pcp period because of how many dealers we've signed on to that platform. Unfortunately, in an environment when stock is limited, our yield on depth has been down. But pleasingly, number of dealers paying us has gone up high single digit.

We probably have time for one more question.

The next question comes from Paul Mason from E&P.

I have 2. I'm sure you've got time for another one. The first one, I was just wondering if you could give us a bit of color around the SELECT product in terms of how dealers are interacting with it, whether at the moment, you'd characterize it more as people still experimenting? Or whether any dealers have actually sort of committed to the product and are putting a large percentage of their inventory through the product? And then the second one, if there's time, is just on the media business, if there's any color you can share on sort of how conversations are going with OEMs about their intentions for advertising in the second half that might align with your comments at the start of our presentation.

Ajay?

Yes. Thank you for that. On the first question around SELECT, SELECT -- as you probably see from the graphs, inventory is increasing month-on-month quite a lot. We had some initial issues, operational issues around just inspecting cars and getting cars up, et cetera, which was one of the larger impediments in accelerating inventory. Over the last month or so, the team has been focused on inventory acceleration. And I'm very proud to see more than 500 cars live on SELECT right now, which has come up substantially just in the last 2 months. In January alone, we sold 200 SELECT cars, and the number just keeps increasing. And we're also seeing the rate of selling these cars is twice as fast as normal cars on carsales. And that's what's very attractive for dealers and going more and more into the transaction model. So we're very bullish on the long-term prospects of SELECT. There is a lot of work to be done. There's a lot of pieces that we want to bring together, be it dealer finance, be it trade-ins, be it deliveries. But the premise of the product and the product -- the product market fit has clearly been proven for us. Now it's a matter of inventory growth and a bit of tech work to improve the user experience, to go on a multiyear journey to capture that addressable market that Cam mentioned right at the start. And just on media, I'm very pleased with what the team has done in terms of that 11% growth that you see over the last 6 months. In my conversations with OEMs and with the team's conversations with OEMs and agencies, every month, feeling good in automotive but also some of our nonautomotive advertisers about the coming next 6 months. Our pipeline looks really good. Our bookings for January were very pleasing. Our bookings for February have been very pleasing, and our March pipeline looks really good. So I'm fairly confident of that media line [ itching ] to perform. And the team has truly done some really remarkable work to turn that around into double-digit growth.

Okay. So I guess that's all we've got time for today. Look forward to catching up with people over the course of the next few days. But thanks for joining the call this morning. Thank you.