CAR Group Limited (CAR) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the carsales.com Limited Acquisition and equity raise presentation. [Operator Instructions] I'd now like to hand the conference over to Mr. Cameron McIntyre, Managing Director and CEO. Please go ahead.

Thanks, Darcy. Morning, everyone, and welcome to this morning's call. It's a very important day in the evolution and growth of the carsales so, so glad you can join us. On the call with me in my office, I've got the carsales CFO, Will Elliott. I've also got the CEO of Trader Interactive, Lori Stacy. So we're going to take you through the acquisition of the remaining 51% of Trader Interactive via our call option. We want to talk to you about why this acquisition is so attractive for our shareholders, why we like Trader Interactive and what our integration and growth plans will be going forward. We've released the presentation on the ASX. So I'm assuming you've all got that in front of you. I'll briefly run through the presentation and leave as much time as I can for Q&A. So we'll start with Slides 8 and 9 on the transaction summary. And as we usually do, I'll call out the slide numbers as we step through and here we go with Q&A. So just on Slide 8, 9. As you're all aware, Trader is the leading digital nonautomotive marketplace business in the United States and like carsales we own great businesses across truck, RV, powersports and equipment industries. These nonautomotive verticals, as we know, from our Australian businesses and as you've observed with Trader Interactive, are really attractive markets with a lot of upside. And they tend to be around 10 years behind automotive in their digital maturity. Trader has a strong financial profile and has delivered excellent growth and has a strong growth track record through cycles with attractive countercyclical attributes. Growth and trading momentum are strong and adjusted Q4 revenue and EBITDA of USD 151 million and USD 89 million, respectively are excellent. And more importantly, yes, we've got really good growth prospects into the future with this business. So look, from a valuation point of view, the acquisition price values Trader on a 100% enterprise value equivalent basis of USD 1.9 billion, which represents a Q4 annualized FY'22 EBITDA multiple of 21.3x. And we think that valuation reflects the quality of the Trader business from a multiple perspective. It's materially below when we purchased the first tranche for, but with a controlling stake in the business this time around. And it's also broadly in line with our trading multiple at carsales. The other thing to say is with this multiple, we expect the transaction to be low double-digit EPS accretive in the first year of ownership and growing from there. Debt accretions underpinned by the strong growth of the business and the financial and capital structure benefits that we'll receive and under our ownership. All carsales directors unanimously support this transaction, and we'll be participating in the equity raise. The strong cash generation of both carsales and TI will enable us to continue to invest in the business, delever it and also continue to pay attractive dividends and we'll be maintaining our dividend policy of 80% payout ratio. Just in terms of leverage, we'll have a net debt to EBITDA of 2.7x, which is exactly the same, pretty much as what we have today on an underlying basis. and we'll be reducing that to below 2x within 2 years we expect. And acquisition is clearly a highly strategic acquisition for us with strong revenue growth opportunities and cost synergies being unlocked through our 100% ownership. And this will come through the development of new product platforms and intellectual property. The company, as all of you know on the call, we've got an excellent track record in terms of delivering long-term shareholder value creation by building scale through our international acquisitions and we're really very positive about the opportunity that we have with the Trader Interactive. We've also provided you, in the deck, with an update on FY '22, which we'll take you through later. But we're very pleased with how the business is performing and it reflects the strength of our Australian and our international operations and the market positions that we occupy. So maybe turning to Slide 10. And look, the reasons why we're doing this transaction now are that we've spent in the last 12 months getting to know Lori, Lori's executive team and their business, and we're really impressed. We've spent time on the ground in the United States. And clearly, as you know, Lori is here with us on the ground here in Australia right now. It's fair to say that we have a great business culture connection between ourselves and the Trader Interactive business. And to be frank, I just get it. We talk the same industry language, and it's just -- it just seems like such a great fit. It's a high-quality business. And to be frank, we just want to own 100% of it. It's also why we structured this investment into two steps so we can get closer to the business and really ensure we understood it, and we see huge opportunity here and we basically just want to get going. So look, the things we talked about last year all remain -- we all remain very positive about. So the size of the market opportunity, the long-term favorable structural trends toward RV and they're lifestyle assets, the market-leading positions, particularly in RV and powersports with strong business model the company has and the relative under monetization of customer base are all there. And you sort of roll forward to today, and Trader is growing strongly, and we've got a strong conviction on the business with growth opportunities and synergies that we want to start delivering on. And we want carsales shareholders to realize the benefit of these fully. So now is the right time before we start delivering on them. Move to Slide 12. And look, I've already mentioned some of the things on this slide, but I just want to quickly repeat a few. So the transaction will deliver low double-digit earnings per share accretion to shareholders in the first 12 months of 100% ownership. Trader has market-leading positions in market 16x larger than the equivalent Australian markets with favorable structural trends, particularly towards RV and lifestyle assets. We've got a strong business model of recurring revenue that provides stability through economic cycles and has generated double-digit revenue and earnings growth over the past 5 years. And with our investment, we are confident that we can accelerate that growth. There's significant future growth potential as well and synergies to be realized through our customer acquisition and customer monetization, revenue diversification and realizing the material growth opportunities that we have. On to Slide 13. And look, we estimate that the total addressable advertising market for non-auto in the United States to be around AUD 3.2 billion, which is almost 2x the Australian automotive advertising market, and 16x non-auto advertising market. Trader's market share is growing, but the relative monetization against the carsales peers remain relatively low at about 6% of TAM. As we've seen in Australia and the United States, there's been a real shift towards the ownership of lifestyle assets. And as you can see on that slide, over the last 20 years, RV and motorcycle ownership significantly has increased. And we know once people acquire lifestyle assets like these, they tend to remain industry participants after rating their RVs and powersport equipment over time. On to Slide 14. And as you can see, that market leaderships continue to grow or we've closed the gaps against nearest competitors over the past 12 months. And the strengths, particularly pairing RV and motorcycles as Trader, is the go-to place. which reflects the audience and inventory positions against our nearest competitors that we've got. On to Slide 15. And look, across both revenue and EBITDA, we've seen fairly consistent growth over time. And FY'22, the growth and EBITDA is up 14% and 17% on pcp, which is a continuation of that trend. But more importantly, the business is heading into FY'23 with excellent momentum, as you can see from last quarter annualized performance and having completed a price rise in March, April with minimal churn, it certainly supports that. On to Slide 16. And look, we're really pleased with how the business has performed over the past 12 months. And while we've collaborated well through our 49% interest in the company, the futures in what we can do to realize the company's growth potential and synergies with 100% carsales ownership. So I want to start discussing that. So look, in May last year, we said that 2 of the key growth drivers of Trader are the increase in customer penetration and take-up rates. And across the past 12 months, we've seen some improvements in these areas. And a considerable opportunity really remains for us to realize over time. And there's also other significant growth opportunities that we do want to talk about this morning. So on to Slide 17, and we acquired Trader Interactive for its strategic appeal as a stand-alone business, but with 100% carsales ownership, material growth opportunities do exist, and we're going to realize those over the long term with the company. So lots of scope for product improvement and technology innovation here. And look, a lot of work has been done over the past several months between the carsales and Trader management teams to really articulate each of these synergies that you're seeing on this slide here now, and we're highly confident in our ability to execute on all of them. The key synergy opportunities that we're seeing, and you'll all be familiar with many of these, if not all, are in dynamic pricing, digital tradings, media and dealer products and systems where we think Trader has enormous upside growth potential. And we'll discuss some of these over the course of the next couple of slides. In addition, there is some substantial cost synergies that will combine purchasing power of carsales and Trader will see us realize these savings across tech, largely, and a more efficient capital structure, which will lead to a materially improved interest rate at a carsales level. So on to Slide 18 and just expanding on some of these growth opportunities and starting on the left-hand side of the slide. Pricing is an area that's carsales has developed a strong capability over many years, particularly in aligning price and value and Trader is early in this journey, and we think we can leverage this capability, which has the potential to deliver great yield benefits over time. We think we can deliver upside to revenue growth in this space quickly by moving to tiered pricing in private seller. And if you think about 2016, we had a pretty simple approach to pricing via carsales and our model was pretty much a standard versus a premium ad product. And over time, we evolved to pricing brackets and now we have a dynamic pricing model. So as you can see here, our pricing capability has been refined and we've been able to double yields in around 6 years or so. Look, Trader is effectively where we were in 2016, more or less. So we see good opportunities for the yield growth here in private seller in the short term with ongoing upside over the years as we refine there. The online ad trading end market is a significant area of long-term growth opportunity. And yes, as we've been realizing here in Australia through products such as Instant Offer and in Korea with products like DealerDirect by leveraging our knowledge and capability in other parts of the world, Trader is well positioned to take advantage of this opportunity over time, and we intend to develop capability in this area and leverage the sizable market that exists in the United States. On to Slide 19. And look, I mean, media is another area of significant opportunity. Given the gap in the monetization rate of Australian non-auto marketplaces versus Trader. In Australia, we have made significant investment over time in our media business, and TI can leverage from that with our product, our tech capability to accelerate their own media growth. Look, Trader hasn't invested heavily in the media business and has limited product sophistication at the moment, and we think this is an area of real considerable opportunity as our Australian media business currently is about 6x ahead of Trader's in the ad market. And that's -- and their ad market is significantly larger than Australia's. And I think from our perspective, we want to invest in product tech and go-to-market, and we think there's excellent long-term growth upside. We will, of course, be cognizant in the space of market ambitions when deciding on the pace and scale of investment as we've done here with our business over time. One of the sources of competitive advantage is a strong focus on developing the capability of our dealers, and you've all seen that over time with us, providing them with world-class systems to drive their business performance and digital sophistication ensures that we're driving customer growth penetration of key products and supporting continued yield expansion. Given the low penetration of TI with dealers, we see a very significant opportunity for the business here as well. And dealers, as you all know, rely on autogate and related tools to manage their inventory and sales opportunity in digital marketplace environment. And it's very important -- it's a really important platform that we've spent the last 25 years developing and investing in. TraderTraxx is a great platform. That's the TI system of equivalence, but dealer usage is still relatively low when we compare to our Australian dealers. So what the plan is there is to improve the features, so we can increase customer stickiness, improve the quality of dialogue and customer dialogue and improve dealer upsell and add-on penetration, over time. On to Slide 20, and we're targeting good double-digit revenue growth and ongoing EBITDA margin expansion overtime. We believe increasing contributions from higher-margin private seller and media businesses will increase the diversification of the Trader revenue mix and strengthen EBITDA margin. Look, our focus on increasing dealer penetration, take-up rates and digital sophistication are really going to ensure that we achieve those growth objectives overtime. On to Slide 21. And look, the part of carsales' strategy has been for many years a bit about investing in large high-growth markets where we can [ lever ] our intellectual property and take to create long-term sustainable shareholder value for our carsales shareholders. And on the right-hand side of the slide, Trader Interactive, we've been able to also achieve good industry diversification into less digitally mature and high-growth nonautomotive markets as well. Slide 22 and look, here are the proof points on our strategy -- our strategies continue to perform well for our shareholders over a sustained long period of time, as you can see, our Korean and Brazilian businesses have been excellent growth drivers and we expect this to continue through FY'22 and into FY'23. I'd probably also like to point out on the right-hand side there, the Brazilian one, you can see we've delivered 48% revenue growth through the last Brazilian recession, which was a period of extreme high interest rates, as you can see on that chart and inflation. And that business, at the time, was exactly like the Trader business is today. It had a subscription model. It had low customer penetration rates and take rates and the market lacked digital sophistication through the dealer network. And there were lots of product opportunity, which highlights the resilience of the business and any business like this through economic cycles. On to Slide 24 and just reviewing the key people and performance of the Trader business and beginning with a brief overview of -- that most people have probably seen this, but Trader is a multibrand, multi-vertical marketplace business in the nonautomotive space, like carsales, it is supported by offerings in software, data and insights, as you can see that enhance the capability and information intelligence of our customers. On to Slide 25. Look -- and as you can see here, I mean, the quality of the management team is a key component for us in any of our international investments, and we want to make sure that we have great connections in terms of business culture and values and our own people. With Lori and the team here, there is a strong connection with the carsales exec team and strong alignment between the businesses. We've got to know the Trader has seen better over the past 12 months, and those connections have only grown strongly and we're really looking forward to working quite more closely with them over time as we get underway. On to Slide 26. And just speaking of growth and looking at some of the major operating performance metrics, pre-pandemic to today and like our financial performance the value proposition for our customers continue to strengthen with traffic, leads and leads per dealer, cost per lead and dealer satisfaction, all rising over the past several years. Slide 27. Look -- and Trader is a business that's proven its ability to remain resilient through economic cycles since GFC and has grown consistently through periods of market disruption, and that resilience comes down to a number of sources, such as the development of digital advertising markets in nonautomotive verticals, the need for customers to promote stock in more challenging environments in order to maintain inventory turnover. It's got a subscription model, wherein the dealer revenue tends to be more stable despite volatility with 84% revenue recurrence. And being on the buy-and-sell sides of activity and its diversity of verticals provides further resilience for the business as well. On to Slide 28. And like the carsales business, Trader has multiple growth drivers across multiple vertical marketplaces. Over the past 12 months, yield through price rises in particular, product upsells and increasing customer numbers have been good contributors to dealer revenue growth. Private seller, particularly in RV advertising volumes has been solid -- a solid performer for the company. The only challenge has really been in truck where a lack of inventory availability has remained acute and led to some customer churn over the past 12 months. Although customer numbers have been rising consistently since about January this year. Subscription-based business models like Trader tend to deliver consistent levels of recurring revenue overtime. But yes, can be sensitive to inventory availability or inventory levels and revenue tend to be more positively correlated. But since the beginning of the pandemic, Trader's business has been -- has seen inventory levels -- decline across most verticals, but we're slowly seeing that trend reverse and should provide us with additional growth opportunities moving forward. Just so in terms of Slide 29, over the past quarter in a rising inflationary market as well as uncertainty around the economy, we've seen leads, and traffic to our sites remain very strong, with traffic up 28% year-to-date on pre-pandemic levels. In parallel, we've also seen ongoing strength in our financial performance with revenue and EBITDA up very strongly against pre-pandemic levels. Maybe, Will, you want to take from here?

Hey. Good morning, everybody. Just moving to Slide 31. And look, I think Cam covered some of this detail in his summary of the transaction but I'll run through a few additional details around the funding of the transaction. So the purchase price is being funded by equity and the equity funding of $1.2 billion is via an accelerated renounceable rights issue and we think this is the most appropriate structure for all eligible shareholders to participate, recognizing the current market conditions. And look, from a debt perspective, we are replacing the $519 million worth of debt that sits at the Trader Interactive level with incremental debt at the carsales level. We will upsize our current facility from $900 million to $1.4 billion. And the debt will have multiple tranches with different maturities, multicurrency drawdown capability. And this will enable us to retain a level of debt denominated in U.S. dollars to ensure we still have a natural hedge against U.S. to AUD fluctuations. And replacing the Trader Interactive debt will bring significantly improved pricing from a margin perspective, given carsales has much lower overall leverage. We expect to complete late in Q1 of FY '23. And post-completion, our leverage ratio will be about 2.7x net debt to EBITDA. This is similar to our current leverage on a look-through basis. And look, we believe this is a good balance, particularly given our balance sheet does delever organically given the attractive free cash flows that we generate and also the Trader Interactive generates. And most importantly, we anticipate coming down to under 2x leverage within 2 years. On to Slides 32 and 33. Look, there's quite a lot of information on these next 2 slides. I won't go through all the detail, but I'll just call out a few key points. The pro forma historical performance shown on Page 32 demonstrates the impact of move in Trader Interactive from a 49% equity accounting associate to a 100% consolidated subsidiary. Under 49% equity accounting, we showed our share of Trader Interactive's profit through one line. Going forward, we'll show all the revenue and expenses of the Trader business in our consolidated group numbers. The slide also illustrates how moving to 100% ownership delivers EPS upside for shareholders. And it's delivered in three primary ways. The first is through adding more earnings from a high-growth business. The second is through interest cost savings from a more efficient capital structure. And the third is the favorable tax position that Trader has. The interest cost savings are shown in the adjustments column and these reflect the benefit from replacing the expenses debt at the Trader level with debt at the carsales level. And in terms of Trader's tax profile, as you can see from the small tax expense in the P&L, this attractive tax profile is driven by deductions for purchase price intangibles, carryforward losses and R&D tax credits. And these benefits will be inherited by carsales post acquisition. And look, as detailed in Note B, we expect we'll see Trader Interactive pay a minimal tax in its first full year of ownership. And then on to Slide 33. This just shows the pro forma impact of the acquisition on the balance sheet and the result of net debt position had the acquisition taken place on the 31st of December. Moving on to Slides 35 and 36. So, I mean, today the focus is on Trader Interactive, but given the proximity at the year-end it's appropriate for us to provide a more specific update on FY'20 earnings guidance. And the estimated results for FY'22 showed a continued strength of our Australian and international businesses and the growth that we've delivered through some of our key product focus areas. There's also some detail around current trading observations for both the domestic and international businesses. And again, I won't go through all the wording in detail, but we really do enter FY'23 with the excellent momentum, given the strong results in the second half of FY'22. We are seeing excellent activity on our sites across the world, and we are continuing to expand the penetration of the key products in our Australian, U.S., Korean and Brazilian businesses and this positions us well to continue delivering great results in FY'23. Moving on to Slides 41 and 42. These provide additional information on the equity raise and timetable. So -- sorry that's not -- I think I've got the slides wrong there, 38 and 39, yes, these provide additional information on the equity raising timetable. I won't go through any of the information there. That's it on the financial slides. So I'll now hand back to Cam to conclude.

I think we're ready to go to Q&A, Darcy, so if you want to open up the lines for questions, that would be great.

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

Maybe if I can just start with this -- the question, I know you've been asked it over the last 12 months, but just a confirmation that this was the exercise of the option that was in place, and then the rationale for the exercise now given the potential slowdown of the U.S. consumer. I mean you've obviously spoken about the stability in earnings and perhaps whether we should read into it that you still think earnings will grow at Trader into FY'23, notwithstanding any consumer slowdown?

Yes. So to confirm, yes, it is us exercising our call option. And look, the rationale is, in short, yes, we've spent the time with the business. We love the business. We love the people. There's great connection. We've spent a lot of time on working out where our strategic opportunities are and where our cost synergies are. And I want carsales shareholders to realize 100% of the benefits that we're going to start delivering as opposed to 49%, that's what we ensure.

Got it. And just to be -- sorry to dwell on this point. Clearly, there are some overarching economic concerns in the market. Should we still expect that you can deliver growth, notwithstanding some of those concerns?

Yes. I mean that's what we've positioned the company for and we're confident about the execution and delivery of all the growth opportunities that we have. I mean you can see in the deck that Q4 continue to perform really, really well. So -- yes, we're very excited about where this takes us over the -- yes, and it's a little bit about the short term, but it's a lot about the long term as well.

Okay. Got it. And then sorry, a couple more, quick ones, hopefully. It sounds like you're pretty comfortable around the availability of the tax deduction. Is there a scope for a greater step-up than what you've got factored in because my understanding is part of it was the availability of goodwill as a result of the transaction. So could you build up some additional goodwill as a part of this purchase and have that deductible longer term as well, is any of that factored in?

Yep. No, thanks, Entcho. So it is. So we do get a step-up in the deduction for goodwill amortization as part of the transaction. That's not the full amount of the benefits that you see that we've explained in the pro forma P&L. And I think the -- obviously, one of the drivers of the deal being, and so attractive from an EPS perspective is that tax profile. I think as I mentioned, we're not expecting to pay material tax in the first full year of carsales ownership. And so that goes to both the amortization of goodwill and some other benefits that we're getting -- going to get, which includes some prior period tax losses and some R&D credits that we're going to get. The amortization benefits will last for about 9 years. The other benefits, which helped us for minimal tax in the next few years, but they will fall away, but there will be an ongoing benefit for the amortization.

Okay. That's great. And just the final one, the debt cost that you've presented on Slide 32, do they reflect the recent increase in BBSW and just interested in whether the debt is locked in or whether you need to go after market to lock in some new debt?

Yes. So the debt on that slide does reflect the current BBSW rates. And I think the EPS accretion statement we have made does factor into account the fact that there's a changing profile out there from an interest rate perspective. I think the important thing to note is that the EPS accretion statement is made on the basis that in whatever interest rate environment we end up being in, Trader's debt was always going to be more expensive than carsales' debt because of the leverage. And so the benefit we're getting in any environment is that we're going to pay lower interest by moving to 100% ownership.

Our next question comes from Eric Choi from Barrenjoey.

I just had three as well, if that's all right. First one, can I -- just sat on the option again. I guess you've previously disclosed, if you didn't exercise that call option the other shareholders could have forced a sales process to third parties instead. So I'm just wondering if that risk played into the, why now, i.e., were we nearing expiry of that call option?

Thanks, Eric. As you know, we've said nothing about the call option ever. So -- and we'll continue to say nothing about the call option. There's other parties to the transaction aside from ourselves and we're -- that whole call option, as you know, has been held in commercial confidence, and we'll continue to do that.

So a related question, can we maybe talk through the valuation methodology used to come to the purchase price? And the reason I ask is bond rates are probably lifted 200 basis points since the first acquisition. So I'm thinking it's probably not DCF-based, so was this sort of a predetermined multiple or a nominal valuation that you guys had agreed to?

Will?

Yes, look, I don't think we'll talk to the mechanics of what was in the call option. I think what we're paying, Eric, is a price that we think reflects good value for shareholders and current market conditions. And so the multiple is lower than what we paid for the first 49% tranche and it obviously includes us taking control. So from that perspective, we think it's reasonable. If you look at it in comparison to carsales' current trading multiple, it's quite close. And then obviously, EBITDA multiple is one method of valuation. But given the tax benefits that we've sort of talked through on the call from a net profit multiple perspective, it's, obviously, much more attractive as well. And so I think all those things add up to what we think is going to deliver excellent value for shareholders. And you can see that through the accretion that we're expecting to generate in the first full year of ownership.

Very clear. Maybe one for you, Will, or for you, Lori, on the operations. I think you're expecting TI FY'22 revenues and EBITDA to be $142 million and $81 million, respectively, and that's pretty similar to the LQA numbers of $139 million and $80 million, you gave us at the AGM. So my question is that new LQA EBITDA of $89 million, could that be really pretty close to what you end up delivering in FY'23 as well?

Lori, do you want to answer this one?

Yes. So Eric, so when you think about the comparison to the prior numbers, what that doesn't take into factor or what really is driving that number is at the end or mid of last year 2021, we started to really see the decreases coming from the cycle inventory and the truck inventory, which were reflected in that. So beginning of the year, we've seen cycle and powersports start to rebound really nicely. So we are in a really good position there and seeing good growth. When you get into truck, it stabilized, so we feel like we'll be able to grow from where we are now. So as a subscription business, as you know, this really becomes the benchmark to grow from. Last year really reflects just a very weird anomaly around inventory. And so we feel comfortable with the numbers that are being -- that are in our forecast now.

And Lori, just on the RV, I mean, we can see the inventories have improved back to pre-COVID levels. But have we seen the full benefit of subscription uptiering and subscriptions returning. I'm trying to get a feel for if that 89 LQA number has the full benefit of the RV rebound within that.

Got it. Yes. So I think, for RV, we're actually continuing to see inventory increase. So as it came back and rebounded nicely. I think dealers still feel there are a little light on the motor home side. So I would expect to continue to see inventory increases there. And really what happens when inventory comes up, it's not so much inventory packages that are driving, that's a small percentage of the difference, but it's really in the confidence of the dealers where they're needing to sell these inventories, they're doing more premium listings, more enhance listings, retargeting, adding on new offerings. So we see that, it's been growing nicely. We see that continuing to grow nicely. And then, of course, as we do price lift as we get additional customers to onboard and we introduced the new products that Cam was talking about, there's still plenty of room in that industry as well. We feel very optimistic.

The next question comes from Kane Hannan from Goldman Sachs.

Maybe just TI, that 4th quarter margin, I think it's 59%. So is that how we think about the starting point for '23 or is that just a timing benefits of those price rises coming through and maybe the annual wage inflation comes through afterwards?

Will?

Yes. Look, I think it's a reasonable starting point. Yes, there's not a lot of seasonality in the TI business from a financial perspective, Kane. There's seasonality in terms of traffic and interest on site. But again, because of the subscription nature of the business, you tend to not see a lot of seasonality from a revenue perspective. There's a marginal step up in some of the nondealer based revenue in Q4. So you might see margins a little higher in Q4. But overall, we think that obviously, there's going to be a decent improvement in margin between FY'22 and FY'23.

Perfect. And then just on the dynamic pricing, just how are you thinking about sort of implementing those RV price tiers that you've called out, I suppose the risk of doing that into any slowdown in the U.S. economy?

Lori, do you want to fill in?

Yes. No, we're actually quite excited about it. I mean, right now, if you go to the site, we really have 3 offerings and it's based on featured versus actual unit price. So we think there's a real opportunity to do Phase 1, regardless of the environment, which is what Cam mentioned with the buckets of tiers. And I think it's a great starting point for us to test and learn, but we expect to see good growth coming out of that. I think the real opportunity is when you can actually get to real-time pricing. And even then, market conditions dictate it, right? So there's really not a risk associated with it. It's just going to price it accordingly to what the market will bear. So we feel really comfortable proceeding and think that it's going to be a nice way to drive high-margin offerings as well into the company.

Perfect. And is it right thing we start with RVs and then expand into the other segments, if it's successful. Or so how do I think about moving into the other categories of TI?

Yes, exactly. So we're going to start in RV, it's obviously the biggest book of business we have for private party. So we're going to start there, but we see it over time expanding across the platform and really that it can be a viable option for any of our verticals.

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

I had a few that have been asked, but just one quick one on the monthly visit metrics that you guys have put up. Some of them look like they're a bit lower than when you made the initial acquisition. So just that in some of the charts that fall on, on that sort of good things to describe differently. So I was just wondering if got a comment on sort of what's going on with the monthly visits stats for RVs and powersport.

Will, do you want to do?

Yes, I'm happy to take that, Paul. So look, I think there was a period where activity on site in RVs and powersports at the height of the pandemic really took off. And so the activity on site is potentially a little bit lower than those levels now. But I think what we've shown throughout the presentation is that versus pre-pandemic levels, the traffic is up significantly. So I think, like Cam referenced 28% versus pre-pandemic. And that is holding firm in terms of that level above pre-pandemic. And so no doubt, there was a spike at the height of COVID when people, obviously, couldn't travel internationally. But I think the really positive for us is that we're seeing those really strong levels of growth over prepandemic persist now that international travels opened up. And sorry, I just wanted to clarify one point I made during -- when I was talking about the funding of the transaction, which someone pointed out to me, I think, I said it was a renounceable offer, it's a non-renounceable offer. So I just wanted to clarify that too.

Your next question comes from Darren Leung from Macquarie.

Just a very quick one, if I may. I just wanted to understand a bit more around the strategic rationale. So as you mentioned that you can capture more of the economics on the 100% ownership scenario and you've detailed sort of all the strategic opportunities you're going to see like dynamic pricing, et cetera. I'm keen to understand why we haven't been very successful over the last 12 months, please?

So the reason why we haven't been successful is just because the ownership structure of the business was focused differently. We're a minority shareholder and the ownership structure -- the priority of the business was different. Now that we are going to be the owner of the business. We're focused on long-term growth opportunities, not short term. So we sit down with Trader. We come up with a combined product, perspective around where we can deliver the best opportunity, short, medium and long term for the business, and we start with that. So it was a prioritization between existing shareholders and new shareholders, effectively, that was the difference.

Understand. And on the synergies piece, in which there's cost synergies coming. Is there any communication done, for us to sort of think about this?

Will?

Yes. Look, I think, Darren, it's fair to say, that the biggest cost synergy or efficiency we're going to get is the capital benefits, I talked through around moving debt out of Trader and into carsales, that's quite material. And you can see in the P&L that we've quantified what that would have looked like on a historical basis. It's nearly north of $10 million. The other cost of efficiencies primarily come from purchasing synergies around technology contracts. So AWS, Google, those sorts of things. And so we can get discounts by bringing ours and Trader Interactive's accounts together. Now they're not as material as the interest savings that I've talked about, but they are decent and there the key driver of the other cost efficiencies we'll get from bringing the businesses together.

Understood. And maybe just a final one for me, just on that point. Can you confirm what the sort of rate is, at the moment, on the TI debt versus what the new facility is, or that you're planning to get to? And then the sort of a follow on to that is, it looks like the net debt balance has actually increased in Trader since the acquisition of 12 months ago. And so given we haven't really seen a dividend out of Trader [indiscernible] the net debt balance would have gone down, but I just can't understand what has moved in the balance, please?

So second part of your question, net debt balance has come down. We've repaid debt, maybe in Australian dollars when you translate it, it's that may be impacting it because it's, obviously, denominated in U.S. dollars. The -- your first point around what's the rate? It's sort of close to 6% all in at the moment. We're not specifying what rate we think we're going to get under the new deal because we are currently undertaking a refinancing, and that will be obviously subject to where rates move. I think the point that I made previously was around the difference between what we can get at Trader and what we can get at carsales is around the 2% mark in terms of the margin above the base rate, and that's LIBOR that we were paying in the U.S. and it's BBSW in Australia.

[Operator Instructions] The next question comes from Wei-Weng Chen from RBC Capital Markets.

A couple of questions. So just on the last question, the differences between new shareholders and shareholder priorities. Are you able to give some color on what some of those differences were? And was that a driving factor in, I guess, taking up your option?

So look, I mean, the priorities, differences that -- and thanks for the question. Priority and differences, yes, the previous shareholders, our partners with private equity and our private equity, their time line is not long term like ours as we're strategic investors. Our view on the business is long term. And so yes, I mean, clearly, if I'm a short-term investor, my priority is going to be around driving short-term outcomes. carsales is about making a significant change to the business so that we're driving long-term outcomes to shareholders that are sustainable and growable over the long term, like you've seen us do with Encar and in Brazil are really good examples of how we go about things?

Yes. And can you just clarify, what frustrations, I guess, with that differences in priority kind of a driver of taking up the option?

I mean our partners there were awesome. We really -- we got along very well. They're extremely accommodating, excellent to deal with. So not at all. It was -- it's just -- we see significant opportunity. We've got great alignment and we want to get on with it. And that's it.

And then just last one. And of the 51% that you're acquiring. How much of that is owned by management. And just wondering if you've put anything in place to, I guess, ensure key personnel remain.

Lori, do you want to talk about remun?

Yes, sure. So I mean clearly, being in private equity, right, there's some compensation that has ownership there. But I really, with carsales, we spent a significant amount of time working with consultants and really completing a remuneration study to say, we were in a -- preprivate equity, we were in a family-owned organization, I think, shifting to private equity, the remuneration was more of a shock. I think coming into a more standard structure similar to our carsales is what we're really used to. And so I think that offers a strong plan with both short-term, long-term incentives. But I think outside of the remuneration part, I think, what we are most excited about is that we have a team that we're aligned with, that we're excited about working with and that we really want to be able to move forward on some of those longer-term transformations within the company. And I think that's really what people are going to be most excited about.

I'm just wondering if there's anything, I guess, that's put in place to ensure that key personnel remain.

Yes. No. I mean we've -- as Lori said, we've put in a remuneration structure that's compelling. And we made sure that we've retained the talent, the great talent, that Lori has got the team. So yes, we're very comfortable that we're in a great position moving forward. But that's been put in place. I think that's all the questions, Darcy?

Yes, that's correct. There are no further questions.

Excellent. Well, thanks, everyone, for joining the call this morning, and we look forward to catching up with you on our travels over the course of the next 24, 48 hours. Thanks, everyone.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.