CarGurus, Inc. (NASDAQ:CARG) Q3 2023 Earnings Call Transcript

CarGurus, Inc. (NASDAQ:CARG) Q3 2023 Earnings Call Transcript November 7, 2023

CarGurus, Inc. beats earnings expectations. Reported EPS is $0.34, expectations were $0.27.

Operator: Greetings. Welcome to the CarGurus’ Third Quarter 2023 Conference Results [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Kirndeep Singh, Vice President, Investor Relations. Thank you. You may begin.

Kirndeep Singh: Thank you, operator. Good afternoon. I’m delighted to welcome you to CarGurus’ third quarter 2023 earnings call. With me on the call today are Jason Trevisan, Chief Executive Officer; and Sam Zales, President and Chief Operating Officer. During the call, we will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in such statements. Information concerning those risks and uncertainties is discussed in our SEC filings, which can be found on the SEC’s website and in the Investor Relations section of our website. We undertake no obligation to update or revise forward-looking statements, except as required by law.

Further, during the course of our call today, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to comparable non-GAAP measures is included in our press release issued today, as well as in our updated investor presentation, which can be found on the Investor Relations section of our website. We believe that these non-GAAP financial measures provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency as it relates to metrics used by our management in its financial and operational decision-making. With that, I’ll now turn over the call to Jason.

Jason Trevisan: Thank you, Kirndeep and thank you to all those joining us today. Before I begin, I would like to share the exciting news that we have accelerated the purchase of the remaining minority equity interest in car offer. Our decision to expedite the purchase was driven by our strong desire to accelerate new product opportunities that allow us to build an end-to-end transaction-enabled platform even sooner. Further, this decision aims to help us continue the momentum of our operational improvements to build a stronger platform for our dealer partners. We believe that by accelerating our purchase, we will realize synergies of our integrated platform sooner and create an even better consumer and dealer experience. I would like to thank Bruce Thompson, CEO of CarOffer for his partnership for nearly three years.

Upon Bruce’s resignation in connection with the expected closing of the acquisition in December, Zach Hallowell will lead the CarOffer business going forward. We are so excited for Zach to leverage the expertise and industry relationships from his prior roles at Manheim Auctions and OPENLANE to lead CarOffer and their incredible team during this exciting next phase. Now turning to our third quarter results. This quarter, we achieved significant milestones that we believe underscore the strength and progress of our transaction-enabled platform. On a global scale, we are thrilled that our UK business achieved profitability this quarter, a noteworthy accomplishment that further validates our success and opportunity in global markets, especially in the face of a challenging macroeconomic and automotive landscape.

In the US, we introduced the next iteration of Instant Max Cash Offer, referred to you as Sell My Car top dealer offer, which gives consumers the choice to either sell their car entirely online or to the highest bidding local dealership. And finally, we continued year-over-year revenue growth acceleration of our resilient high-margin listings business as we head into 2024 through pricing, packaging and product innovation. I’m extremely pleased that our achievements this quarter resulted in us exceeding our forecasted consolidated adjusted EBITDA guidance and set the stage for what we believe will be an even stronger, more profitable fourth quarter sequentially. Our performance this quarter was driven by our Listings business, which exceeded our operating plan.

Notably, a little over a year after Canada reached profitability and continues to produce improving year-over-year EBITDA margins, we are pleased our UK business is now profitable as well. The path to profitability for the international business demonstrates our ability to drive greater marketing efficiencies and value to both our dealer and consumer customers and position ourselves as a key player in these markets. While we exceeded our UK operating plan, we remain thoughtful in areas where we want to invest in the future to grow the business prudently. In the US, we continue to deliver more value to our dealers, which is reflected in higher quarterly average revenue per subscribing dealer or QARSD, and we believe will enhance customer retention and long-term expansion.

Growth in QARSD comes from adding new dealers at higher market rates and expansion of existing dealer wallet share through listing upgrades, product innovation and adoption, renewals, lead quantity and lead quality. One recent growth lever of QARSD is our annual business reviews, or ABRs, which delivered results in Q3, consistent with the prior quarter. We continue to see a strong percentage of dealers accepting our renewals motion and a robust win back rate for those who had churned in the prior quarter. Furthermore, we have also seen healthy product attach rates and higher adoption of annual contracts. In the fourth quarter, we expect to finish the remaining 25% of our planned ABRs, which will in total represent nearly 20% of our dealer base for the full year.

As we look ahead to next year, we will continue our ABRs for dealers that remain materially underpriced, while continuing our collaborative steady renewal process with other dealer partners to more closely align with the value we provide. Future QARSD growth will be fueled by all the levers I just mentioned, which we believe will realize via renewals, continual account management and deeper partnership with our customers. The foundation of listing upgrades are bundling and packaging initiatives that provide dealers with a suite of complementary features and products that make higher packages increasingly valuable. An example of a packaging incentive we launched in October was including digital deal in our new premium listing tiers, Feature Plus and future Priority Plus, combining the benefits of increased lead volume from premium listing placements with higher quality digital deal leads that are up to five times more likely to close.

Bundling products like digital deal also expedites the evolution toward digitally empowered sales for the 70% of consumers who are eager to complete more of the transaction online, allowing dealers to align with consumer preferences. Another feature we recently added to our paid packages is the first of our new dealer Data Insights initiative designed to bring valuable insights that will help dealers increase turn times. In October, we launched — next Best Deal rating and Insights tool that provides dealers the blueprint for the least amount of price reduction needed to achieve the next best deal rating on CarGurus. Dealers can specify price reduction thresholds on their specific inventory and receive an automated weekly report to inform price changes that will optimize their volume and margin.

As we progress toward an end-to-end transaction-enabled platform, we will have the ability to bundle a growing number of other products across the business and curate unique data insights. We believe this will result in comprehensive stickier solutions that enhance ROI, provide deeper insights, increase the overall value and foster strategic partnerships with our dealer customers. Another avenue that drives QARSD is ongoing product innovation and adoption. Although, new products may initially have limited revenue and QARSD impact, they have the potential to yield significant success and adoption as evidenced by our experience with digital deal. As such, we recently introduced a new subscription product known as Sell My Car, Top Dealer Offer.

After running a successful early access program in three cities, we evolved our existing Sell My Car functionality to provide consumers more optionality and dealers, greater value. Sell My Car presents consumers with two types of offers, a top online offer powered by CarOffers Instant Max Cash Offer, which includes white glove pickup service from the comfort of the consumer’s home, and a new Top Dealer Offer, which is the highest offer from a local dealership to which the consumers take the vehicle. Dealers can leverage CarOffer Matrix technology to instantly make tailored offers on CarGuru’s consumer vehicles and their choice and generate valuable trade-in leads for their business. Consumers can now choose between two selling options, providing more convenience and selection.

Sell My CAR Top Dealer Offer recently launched in 18 metro areas covering more than 40% of the US population. Early access dealers are reporting Net Promoter Scores of 86 exemplifying the unique value proposition we can offer to dealers with our new product innovation. Finally, the addition of new dealers who are paying more market rates remains a key driver for QARSD. This quarter, we grew our US paying dealer base sequentially by 148 through strong sales momentum and moderating churn, resulting in 24,368 dealers on our platform. In the third quarter, US QARSD was $6,332, growing 9% year-over-year. Growth came from all QARSD levers and, in particular, new dealer signings in Q3 resulted in our largest MRR customer acquisition quarter since 2018.

All of these factors combined are accelerating our growth. In Q1 this year, our marketplace revenue grew 2.4% year-over-year, and this quarter, we’ve grown 7.6% year-over-year. Appropriately, we are growing our sales team in response to the increased productivity and growing demand we’ve been experiencing. In Q4, we expect our Marketplace business revenue growth to accelerate year-over-year through the previously mentioned growth drivers. While the automotive industry has been anything, but normal these past two years, we are excited by our team’s ability to continue to overcome these obstacles, innovate, and drive value for our dealer partners. With our company’s technology roots and data-centric approach to innovation, we have grown our investment in artificial intelligence and machine learning in areas like search, sort, account management, content creation, and consumer support.

Our Find My Car functionality, which allows shoppers to search for vehicles using conversational language matching their preferences to relevant listings is now being piloted in the UK and Canada. Moreover, in our ongoing efforts to enhance the shopping experience for consumers, we are leveraging original content from our editorial teams to automatically generate comprehensive vehicle comparisons. This approach simplifies the vehicle purchasing process for consumers, allowing them to easily compare the specifications of two vehicles side-by -side as they shop online. As consumers and dealers alike move toward an increasingly digital-first environment, we are equipping them with tools necessary to do so. We are creating a platform that tailors the shopping journey for our consumer customers, while simultaneously leveling the playing field for our dealer partners who may be unable to develop these solutions independently or who wish to leverage the breadth of our consumer audience.

Digital Deal is a stepping stone in our journey that transforms the car buying experience for consumers by harnessing advanced online functionalities to deliver a seamless online to in-store transaction. This includes providing trading estimates, offering prequalification or hard pull financing options, facilitating the purchase of dealer or vehicle-specific finance and insurance products, placing a deposit and scheduling an appointment. We ended the quarter with 3,388 digital deal dealers representing over 250% growth year-over-year. We have now launched digital deal in our new featured listings tiers as of October. This strategic move enables us to enhance the ROI for dealers by affording them greater visibility with higher quality leads.

Overall, digital deal leads as a percentage of total leads continue to grow. Top-performing digital deal users, on average, receive 30% of their total e-mail leads from high intent, ready to purchase shoppers that are up to 5x more likely to close. As we continue on our journey of creating an end-to-end offering for our dealer partners, we are building out our digital retail capabilities so that dealers can sell their preowned inventory more efficiently to the approximately 70% of consumers who want to do more from home. While digital deal enables dealers to offer consumers an online to in-store experience on cargoes, the future of digital retail will empower our dealer partners with greater optionality to service consumers fully online through every step of the car-buying journey.

As such, we are working with a small subset of dealers to test and facilitate online purchases to out-of-market customers using dealer-friendly delivery capabilities in an asset-light model. In addition to delivery, our pilot offers a CG guarantee, which comes with a seven-day return policy and a limited warranty to ensure a worry-free post-sale experience for both dealers and consumers. The ultimate goal of digital retail is to empower all dealers to compete and sell more cars while meeting evolving consumer demand in a digital-first environment. In digital wholesale, our primary focus has been sustaining the positive trajectory of our operational enhancements as we aim to return to profitability and growth even in the face of less favorable wholesale environment.

We’re also continuing to engage with our dealer network to rebuild confidence. Our initial focus is on establishing a dedicated retention team designed to foster greater customer trust and confidence. And the progress we’ve made in operational enhancements and Matrix innovation represent significant steps in the right direction. We have seen an increase in dealers that are utilizing our new matrix tooling like 24-hour approval and buy it now To drive greater certainty and comfort in their purchases during a volatile pricing environment and large players continue to find programmatic buying to be an efficient and effective way to source and sell inventory. For example, rental fleet customers who seasonally de-fleet in the back of the year have pivoted to selling on our platform.

We ended the quarter with 13,562 transactions, down approximately 35% quarter-over-quarter. The decrease in transactions resulted in gross merchandise sales, or GMS, of $350 million for the third quarter. While there’s more work to be done with our dealer partners, we believe we are well positioned to grow and regain market share as the automotive market normalizes. In the interim, we continue to leverage our Matrix technology to innovate and provide dealers with offerings such as sell my car top dealer offer to demonstrate the uniqueness of the car offer platform coming together with CarGurus. We are proud that our results this quarter reflect an accelerating listings business, as well as meaningful progress toward an end-to-end transaction-enabled platform that provides consumers with the trust, transparency and choice they need to confidently shop, finance, buy and sell a vehicle and empower dealers with innovative tools to source, market and sell vehicles.

As we continue to build new products and capabilities, we are helping our consumer and dealer customers achieve their goals of more digital transactions, while at the same time, fueling top line growth and profitability in our business. We are excited by the trajectory of our platform and all of our accomplishments this year, we believe, have set us up for an exciting 2024 with ongoing growth and innovation to best service our dealer partners and largest consumer audience. Before I provide a detailed overview of our third quarter performance, followed by our guidance for the fourth quarter and full year 2023. I would like to formally welcome Elisa Palazzo as our new CFO beginning in December. We are thrilled to have her join the CarGurus team and know Elisa’s background and expertise in online marketplaces will be extraordinarily valuable to us as we grow and expand our business.

Now, turning to our results. Total third quarter revenue was $219.4 million, down 49% from the year ago period. Our total revenue for the third quarter was at the high end of the guidance range of $221 million. Marketplace revenue was $177.9 million for the third quarter, up approximately 8% from $165.3 million in the prior year and up 4% from $171 million in the prior quarter. Excluding comparisons to periods where we provided pandemic-related concessions to dealers, this represents the highest year-over-year growth rate since the first quarter of 2020 and the highest sequential growth rate since the fourth quarter of 2019. The increase in marketplace revenue compared to the prior year was primarily due to higher listings revenue as a result of 9% year-over-year cars to growth.

Sequential growth was driven by strong MRR acquisition and stabilization of our OEM advertising business. Wholesale revenue was $21.7 million for the third quarter of 2023 down 54% from $47 million in the year prior and down 32% from $32 million in the prior quarter. The year-over-year decrease in wholesale revenue was due to our continued prioritization of operational improvements, coupled with less favorable market conditions. Quarter-over-quarter, we saw a decrease in dealer-to-dealer transaction as dealers experience price uncertainty, coupled with typical retail seasonality in retail sales and rental fleet. Lastly, product revenue was $19.8 million for the third quarter, in line with the midpoint of our most recent guidance range. Product revenue was down 91% from $214.1 million in the prior year and down 46% from $36.8 million in the prior quarter.

The year-over-year decline was primarily due to our decision to limit transactions for Instant Max cash offer. In addition, the third quarter continued to have meaningfully lower arbitration rate and consequently, low arbitration revenue driven by our enhanced inspection capabilities and arbitration policy. Quarter-over-quarter, lower product revenue was due to fewer transactions and lower ASPs on our platform. Instant Macs Cash Offer generated $18.2 million in revenue. I will now discuss our expenses and profitability on a non-GAAP basis. Third quarter non-GAAP gross margin was 77% compared to 37% in the year ago quarter. The change in non-GAAP gross margin year-over-year was primarily due to the shift in revenue mix to our high-margin marketplace business.

Total third quarter non-GAAP operating expenses were down 1% year-over-year to $126.1 million. Non-GAAP sales and marketing expense was down 11% year-over-year to $74 million. The decrease in marketing expense compared to the prior year reflected our decision to continue limiting marketing investment for Instant Max cash offer. Non-GAAP sales and marketing expense represented 34% of revenue, up from 20% of revenue in the year ago period. Our third quarter non-GAAP product, technology and development expenses grew 14% versus the year ago period to $29.7 million. Similar to previous quarters, the increase was primarily due to an increase in salaries and employee-related costs as a result of an 8% increase in headcount from the year ago period though it was relatively flat sequentially as we slowed our pace of hiring in the third quarter.

As a result of our prior headcount growth, we expect this expense to remain elevated as a percentage of revenue relative to prior years as we continue to develop and grow our expanded product offering to build our end-to-end transaction-enabled platform. Consolidated adjusted EBITDA of $48.6 million in the third quarter was $4.6 million above the high end of our most recent guidance range. This was due primarily to the overperformance of our listings business. As we previously mentioned, our UK business reached profitability this quarter, driven by revenue growth, prudent expense management and favorable FX rates. Non-GAAP diluted earnings per share attributable to common shareholders, was $0.34 for the third quarter, $0.07 above the high end of our most recent guidance range.

On a GAAP basis, we generated third quarter gross margin of 75% compared to 35% in the year ago period. In the third quarter, we incurred total operating expenses of $141.2 million, up 16% year-over-year. The increase year-over-year was primarily driven by higher stock-based compensation. In Q3 2022, we had negative stock-based compensation expense as a result of favorable adjustments relating from the revaluation of car offer incentive unit and subject unit awards. Third quarter GAAP operating income decreased 19% year-over-year to $23.1 million. Third quarter GAAP consolidated net income was $19 million. Net income attributable to CarGurus totaled $22.3 million, and third quarter GAAP net income attributable to common shareholders was $22.3 million.

We ended the third quarter with $447.2 million in cash and cash equivalents, a decrease of $6.4 million from the end of the second quarter. We generated $26.4 million in cash from operations in the third quarter and $17.2 million of non-GAAP free cash flow, which includes capitalized website development and capital expenditure costs of $9.1 million. Cash provided by operations in the third quarter was primarily driven by our results, partly offset by a $7.7 million decrease in our working capital accounts. During the third quarter, we repurchased 956,000 shares for an aggregate purchase price of $17.1 million. As of September 30, we had repurchased a total of $122.9 million in shares and had approximately $127.1 million remaining available for share repurchases.

Additionally, I’m pleased to share that our Board has authorized another $250 million share repurchase program commencing in 2024, underscoring our commitment to strategically returning value to shareholders. I’ll close my prepared remarks with our outlook for the fourth quarter and full year 2023. We expect our fourth quarter revenue to be in the range of $208 million to $228 million, and we expect full year revenue to be in the range of $899 million to $919 million. In the fourth quarter, we expect similarly high single-digit year-over-year marketplace revenue growth as we saw in the third quarter. In our Digital Wholesale business, we expect revenue in the fourth quarter to be in line with third quarter results as dealers remain cautious, coupled with typical seasonality.

We are excited about the launch of top dealer offer, which we expect to cannibalize Instant Max gross revenue. We believe it provides a better experience for consumers and dealers and yield high-margin gross profit dollars given the subscription nature of the offering relative to Instant Max Cash Offer. Accordingly, we forecast fourth quarter revenue for our product line item to be in the range of $12 million to $22 million, and we anticipate full year product revenue to be in the range of $108 million to $118 million. We expect a modest sequential decrease in operating expenses as we still expect full year 2023 marketing spend to be below 2022. With lower operating expenses and accelerating Marketplace year-over-year revenue growth, we expect Marketplace EBITDA to improve sequentially.

We expect digital wholesale to remain unprofitable until market conditions and customer buying activity pick up. We expect our fourth quarter non-GAAP consolidated adjusted EBITDA to be in the range of $46 million to $54 million and non-GAAP earnings per share in the range of $0.30 to $0.33. We expect full year 2023 non-GAAP consolidated adjusted EBITDA to be in the range of $181 million to $189 million and non-GAAP earnings per share in the range of $1.19 to $1.22. Year-to-date, we have made substantial progress toward our vision of being the only end-to-end automotive transaction-enabled platform, as we launch Sell My Car top-dealer offer, continued innovation in digital retail, and accelerated growth in our Marketplace business. The progress we have made, which sets us up for an exciting 2024 would not be possible without the dedication and unwavering commitment of our extraordinary employees globally who continue to push us forward in making our ultimate vision and reality.

With that, I’ll open up the call for Q&A.

See also 11 Most Undervalued Solar Stocks To Buy According To Hedge Funds and 15 Best American Dividend Stocks To Buy Now.

Q&A Session

Operator: Thank you. [Operator Instructions] Our first question is from Rajat Gupta with JPMorgan. Please proceed.

Rajat Gupta: Great. Thanks for taking the question. I just had a couple. Firstly, on the fourth quarter guidance, it implies a flattish sequential EBITDA, maybe like $1 million higher, but if I hear your comments around the Marketplace business, it would suggest that increase as you confirmed that in the prepared remarks as well, but it kind of implies the cargo for EBITDA, kind of, flattish sequentially. So is that just seasonality? Or because I would have expected with the operational focus we continue the improvement. So maybe if you can just clarify that, and then I have a follow-up.

Jason Trevisan: Sure. Thanks, Rajat. So yeah, I think in our remarks, we talked about given the growth in Marketplace and the comments on OpEx that sequential EBITDA there should be higher. But I think it’s also fair you’re in the ballpark to say that car offer is expected to be flat.

Rajat Gupta: Understood. Got it. And just on the car offer purchase decision, obviously, a little surprising that you decided to buy the remaining stake a little earlier. You mentioned some of like the product integration efforts that led to that decision. But I’m curious, was there any increasing visibility around the business turning to profitability in the near-term or anything around broader market condition that also lead you to act sooner on the purchase? Thanks.

Jason Trevisan: Sure. I wouldn’t say that the broader market led us to act sooner. In terms of visibility, I think we have, as we all know, it’s a transaction business, and so it’s much harder to forecast that in our subscription business, but we have gotten better at predicting it and forecasting it because of the operational challenges that we’ve made. And we’ve talked about — but I would say the four reasons that we accelerated this are: one, it’s been accelerated for product innovation between our two platforms. Two, it allows us to have full ownership to have more ball control on the operational improvement. Three, we’re excited about Zach’s industry experience brought to bear on it. And then four, it sort of reaffirms our conviction of our long-term vision of having these platforms together.

Rajat Gupta: Understood. Thanks for the clarification I’ll jump back in queue.

Jason Trevisan: Sure. Thank you.

Operator: Our next question is from Nick Jones with JMP Securities. Please proceed,

Q – Nick Jones: Hi. Thanks for taking the questions. I guess maybe sticking on the kind of fully acquiring car offer. Does this change how meaningfully does it change kind of the investment cycle on the platform? And I guess, ultimately, margins as we look maybe further out into next year and beyond.

Jason Trevisan: Hi, Nick, Jason. It does not change our perspective on the investment thesis. We continue to — as you’ve heard us talk about in the last couple of quarters, expand the product portfolio to be more resilient in up and down markets. And so we’re investing in the technology. We’re investing in client service. We’re certainly investing in the stability and future growth of the company, and I think that will continue. And in terms of long-term margin targets, no, those remain the same as well.

Q – Nick Jones: Great. And then maybe one on just dealers and the ABR. It sounds like you’re getting quite a few to come back. Maybe they say no to the increased price and they come back. How is that dynamic changing, if at all, from last quarter? Are you finding it to be easier? And are you finding people maybe or dealers coming back faster? Thanks.

Jason Trevisan: Sure. The two things — so not much change. Our results were similarly as strong. When we talked about return rates of the Q1 cohort in Q2 being around 40%. That has since increased because there’s another quarter under our belt. And then our Q2 cohort had similar return rates in Q3 as our Q1 cohort did.

Q – Nick Jones: Great. Thanks, Jason

Operator: Our next question is from Tom White with D.A. Davidson. Please proceed.

Q – Tom White: Great. Good evening. Two, if I could. Just US dealer growth, it increased quarter-over-quarter kind of despite the account reviews which is encouraging, I’d say. Just curious whether US dealer growth could be a meaningful growth sector for you guys next year as inventory sitting on dealer lots presumably kind of continue to build up? Or is growth in the US marketplace going to be still mostly person driven? And then I got a quick follow-up.

Jason Trevisan: You want to jump in…

Sam Zales: Thanks, sure. Thanks Tom, thanks. It’s Sam Zales here. Thanks for the question. It was a terrific quarter for new customer acquisition. That’s a big part of our Carstead number two. We’re bringing in customers at a higher price point. I think what you’re seeing in the market is two types of customers, those who are staying from a dealer perspective, I want to be aggressive in this tough market of high interest rates. There’s not as much consumer demand. How do I win? Let me get on the best platform that drives the largest audience and the largest down funnel customers. And those are more conservative saying, “I’m only going to play with one of the marketplaces, I would go with, again, the marketplace that’s driving the down funnel and largest quality of audience in the marketplace.

We had our biggest MRR customer monthly recurring revenue, customer acquisition numbers we’ve seen since 2018. So despite, as you said, our ABRs, the annual business reviews, which do involuntarily kick out some customers who won’t pay a fair market price, they’re coming back, as Jason said, more than half of them from the first quarter coming back in after saying no to the price point and coming in at double-digit significant price increases. And number two is we’re winning — to rewinning is working very effectively. And then we’re plus on the customer acquisition side, which I think puts us in our own stratosphere in the market in the last quarter. That number is in the 150 range. So it’s a good quality number for new customer — net new customers acquired.

But I think our plan is to keep growing the expansion of our current MRR with our customers and win back those customers who don’t choose the price point and the ABRs and then keep winning new business. So I do think that’s a lever that our incredible sales and service team is finding a way to continue reaccelerating the growth of our business. It doesn’t happen at a company our size, and we’re just growing that business and reaccelerating it. We think that’s going to continue as we go forward.

Q – Tom White: Great. Thanks for that. And maybe just a quick follow-up, Jason, you touched on engagement of the fleet buyers, the rental car companies on the car offer platform. I’m just — are they returning to the platform like more quickly than local dealerships are to transact? And maybe could you share your latest thinking on what their engagement levels might look like kind of early next year in the run-up to kind of peak travel season? Thanks.