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IAA Inc (NYSE:IAA)
Q1 2020 Earnings Call
May 6, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Insurance Auto Auctions Q1 2020 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Arif Ahmed. Please go ahead, sir.

Arif Ahmed -- Vice President, Treasury

Thanks, Keith, and good morning, everyone. Thanks for joining us today for IAA's First Quarter Fiscal 2020 Earnings Conference Call. Speaking today are John Kett, Chief Executive Officer and President; and Vance Johnston, our Chief Financial Officer. After John and Vance have made their formal remarks, we will open the call to questions.

Before we begin, I would like to remind you that certain comments made during this call regarding our plans, strategies, and goals and our anticipated financial performance constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management's current assumptions and expectations and are subject to risks and uncertainties that could cause actual results to differ materially from such statements. Those important factors are referred to in IAA's press release issued today and in the Risk Factors section included in our annual report on Form 10-K for the year ended December 29, 2019.

The forward-looking statements made today are as of the date of this call and IAA does not undertake any obligation to update those forward-looking statements. Finally, the speakers will refer to certain adjusted or non-GAAP financial measures on this call. A reconciliation schedule of the non-GAAP financial measures to the most directly comparable GAAP measures is available in IAA's press release issued today. A copy of today's press release may be obtained by visiting the Investor Relations page of the website at www.iaai.com.

I will now turn the call over to John. John?

John W. Kett -- Chief Executive Officer and President

Thanks, Arif. Good morning, and thank you all for joining us on our first quarter earnings call. Since we last spoke to you on March 18, the COVID-19 pandemic has intensified across the globe. Our thoughts continue to be with those affected by this pandemic directly as well as those on the front lines in helping our communities during this crisis.

First, I'd like to spend a few minutes providing an update on how we see COVID-19 impacting our business and the things that we are doing to address this challenge. Our business is classified as essential and we remain open at all of our locations. We have implemented strict health and sanitation protocols to keep our employees, customers and suppliers safe. We have also activated contingency plans to ensure continued operations and business continuity across our global network. We continue to maintain strong relationships with our buyer and seller partners and are communicating with them on a regular basis, providing solutions that will help them navigate in this new environment.

We offer many products and solutions such as inspection services, loan payoff and title services that health providers remotely manage their workforce safely and efficiently without human contact. We also have tools in place to help providers set reserve prices and negotiate digitally with buyers on individual vehicle transactions. And through our digital tools, such as 360 View, Feature Tour and Engine Start, along with buyer app enhancements, we are helping buyers navigate this new touchless world and purchase vehicles with confidence.

Turning now to our results. As we noted on our Q4 call, at that time, our Q1 performance was in line with our expectations, but we acknowledge that our business typically lags a drop in miles driven. As stay at home orders were executed across the U.S. beginning the week of March 16, we began to see an impact to our business. As a result, our Q1 year-over-year sales increase of 2.6% and adjusted EBITDA decrease of 5.6% were negatively impacted by these late March trends. Our focus right now is managing the impact of the reduction in miles driven, which has translated into a reduction in accidents and in turn vehicle assignments, by taking decisive actions to minimize costs and cash outlays and maximize our liquidity and flexibility for the duration of this crisis.

Before I discuss the actions we're implementing, let me take a moment to frame the impact that we have seen so far. First, on the seller's side. On average, since stay at home orders were executed, there have been reports that miles driven has declined between 40% and 50%. This has resulted in a sharp reduction assignments in the last two weeks of March, building to a 45% decline in mid-April. Since mid-April, we have seen vehicle assignments stabilize. However, given our existing inventory coming into the period, we have not seen as much of an impact on units sold. Although the impact of the decline in units sold has gradually increased since the inception of COVID-19, on average, it has been down approximately 22%. Road traffic has been slowly increasing since mid-April, and we do believe that we will continue to see that go up as states lift and relax stay at home orders.

With regards to our buyers, we began to see some reduction in demand in late March. However, in mid-April, we began to see buyer attendance and bidding activity improve, and proceeds and revenue per unit appear to have stabilized. During the last completed fiscal week, net revenue per unit was up slightly compared to pre COVID-19 levels versus down 7% during the first two weeks of April. This also incorporates the benefit and increased fees from moving to digital-only auctions. Given the sharp decline in vehicle assignments, we have reacted swiftly and aggressively. As I mentioned, we have been actively engaging with our sellers and providing both our sellers and buyers with an even higher level of service during this time.

As Vance will discuss in more detail shortly, we have also taken steps to manage cost, capital outlay and liquidity to increase our financial flexibility given the current environment and better align our cost structure to the decline in volume that we've seen. We also have expanded our revolver to provide ample liquidity to continue to navigate through this period while also continuing to execute on our strategic growth initiatives. While these are unprecedented times, our entire organization has been quick to act and I am proud of everyone at IAA for their dedication and commitment to our customers and to each other.

We believe that the impact of COVID-19 on our business is temporary in nature and we continue to have a strong position in the marketplace with tremendous opportunities in front of us that we plan to capitalize upon. We recently announced our exclusive partnership with NASCAR, expanding our catastrophe capacity footprint. This is the industry's most expansive catastrophe footprint to date and provides over 4,000 acres of vehicle storage. Even as we manage through the current environment, we remain very focused on executing against our strategic growth initiatives as well as our margin expansion plan.

Let me give you a quick update on our progress in this area. Most recently, we successfully expedited the work on our Buyer Digital Transformation. As of the second week of April, this work was complete well ahead of our prior schedule, which had contemplated the project to be complete by the end of Q2. As a result, we are seeing the benefits and cost reductions associated with this transformation earlier than we had originally envisioned. As it relates to enhancing our service offering, we have also continued to hear positive feedback from both buyers and sellers on our key innovations, including 360 View, Engine Start, Feature Tour and Digital Negotiation as well as our Buyer Recommendation Engine.

With respect to 360 View, in particular, we have received very positive feedback regarding the ability to get a more accurate inspection on the condition of the car. We've also continued to enhance our tools with further integration of Dealertrack and DDI into our loan payoff tool, and we have had great success with over 1,100 financial institutions and insurance partners currently on the portal.

In closing, I want to reiterate my appreciation and gratitude to every member of the IAA team. Despite the current challenges we are all facing, our teams have continued to exemplify the dedication and commitment throughout this time. We are staying focused, taking swift action to preserve our financial strength, while also executing against our strategic initiatives, including our margin expansion plan to ensure readiness to meet our customers' needs when volume ramps back up as it undoubtedly will.

To that point, we are encouraged by what we see in China in terms of an initial recovery as miles driven has started to rebound relatively quickly there and we are hopeful to see a similar rebound in North America in the near future as communities begin to open up again. I am confident in the resiliency of our team and our model and our ability to navigate through this current environment.

With that, I will turn it over to Vance.

Vance Johnston -- Executive Vice President and Chief Financial Officer

Thanks, John, and good morning, everyone, joining the call. Like John mentioned earlier, our hearts go out to all those who have been impacted by COVID-19. I want to start with a brief overview of our first quarter results and then spend more time discussing in detail how we are assessing and addressing the impact of COVID-19 on our business. For the first quarter, results were relatively in line with our expectations, notwithstanding the unexpected impact of COVID that COVID-19 had on our business during the second half of March, as John mentioned earlier. Organic revenue increased 2.1% to $364.6 million, driven by higher revenue per vehicle of approximately 3.3%, which more than offset the 1.2% decline in volume. If not for the impact of COVID-19, volume would have been positive for the quarter.

Adjusted EBITDA decreased 5.6%, primarily due to the decline in volume as well as an increase in cost of services and higher SG&A expenses, primarily due to the increased public company costs in Q1 2020 relative to Q1 2019. For complete details of our first quarter performance, please refer to our earnings press release issued earlier this morning. Let me now turn and take some time to detail the steps we are taking to assess and address the impact COVID-19 is having on our business. Very early into the news of the pandemic, we quickly put in place a centralized team to manage and address the rapidly evolving landscape. We enhanced our daily monitoring and reporting on key drivers of our business, including volume assigned and sold, inventory, buyer attendance, bits per vehicle, proceeds per vehicle and employee attendance, among others, in order to quickly assess the impact COVID-19 was having on our business.

We then developed a number of scenarios based on projections of these and other key drivers to understand the impact on our business results and liquidity in detail on a weekly and quarterly basis throughout the potential duration of the crisis, and created the necessary plans to address the various levels of potential impact the disruption could have on our business. As part of our contingency planning, beginning in early April, we began to take swift action from a cost and cash flow outlay perspective. As we detailed in our press release, this included taking actions to better align our expense structure with the volume levels we are operating with, including significantly reducing travel and other discretionary spending, freezing hiring for open positions, reducing hours worked for branch employees to align with current volume trends as well as temporary reducing salaries at the senior leadership level and the election of our Board to reduce their cash fees for a period of time.

Let me provide some additional color on the degree of fixed and variable expenses within our cost structure. Approximately 50% of cost of sales are completely variable, including towing, reconditioning and certain auction and yard cost. Certain costs and cost of sales are semi variable, and that consists of branch labor, the cost of purchased vehicles, security and other yard and auction costs, which in total are approximately 20% to 25% of cost of services. And finally, we have costs that are largely fixed, including occupancy, utilities and certain labor costs, which is approximately 25% to 30% of cost of services. It is also important to note that since we completed our Buyer Digital Transformation, we will see a reduction in cost in the second quarter due to the reduction of costs specific to physical auctions.

While SG&A is less than 10% of sales and is mostly considered fixed, we've taken actions here as well, which include reductions in discretionary spending and the salary reductions I mentioned earlier, among other things. We have also taken advantage of deferrals where appropriate, including our 401K match as well as various government programs in the United States, Canada and the U.K. to defer cash payment of certain taxes, including payroll, federal, state, local and provincial taxes. We are also pursuing certain government subsidy and tax credit programs related to retention and support of our employees.

We have also reduced our noncritical capital expenditures at this time and have identified approximately $15 million of capex that we are reducing or deferring. Should the impact of COVID-19 persist, we have the ability to defer additional capex going forward. Between operating costs and capital spending, we've reduced our cash spending meaningfully for the remainder of 2020. As it relates to working capital, relatively speaking, we have a great working capital model with minimal upfront investment and very limited exposure on receivables. In most cases, when we sell a vehicle, we collect the cash immediately and net the seller fee and advance charges out of the proceeds remitted to sellers.

In almost all cases, buyers do not receive their car until payment has been received. As you saw, accounts receivable was a source of cash in the first quarter due in part to our ability to continue to sell and immediately collect cash from previously assigned vehicles that were ready for sale while assignments in the related upfront investment in working capital declined at a much greater rate than vehicle sales. This trend has continued to date in the second quarter. On the payables side, earlier this year, we had begun an initiative to extend our terms with many of our suppliers and we have accelerated our efforts in this environment. We have had success so far and believe there is further opportunity for improvement.

At quarter end, our total debt balance was approximately $1.3 billion. As a reminder, we have no debt maturities until September 2021 when $2 million will be due. Our quarter ending cash balance was $86.1 million and total liquidity which included $218 million in credit facility availability was $304.1 million. As we indicated during our earnings call in March, we saw increased free cash flow during the first quarter with working capital a positive contributor, which added to our cash balance and total liquidity since the end of 2019. On May 1, we increased the size of our revolving credit facility by $136 million to $361 million. As of May 4, our revolving credit facility is still undrawn and we have total liquidity, including cash on hand and net of letters of credit of approximately $469 million.

As John mentioned earlier, we believe that we have ample liquidity to navigate the current environment even under more extreme scenarios and to make the investments needed in order to execute our growth strategy and margin expansion plan. To reiterate, our revolving credit facility has a springing covenant, meaning it is only tested if we are drawn on the facility at the end of the quarter. As noted, we were not drawn on the facility at the end of Q1 and do not expect to be drawn at the end of Q2. If we were to be drawn, our net senior secured leverage, defined as total debt less our senior notes, less cash, must be less than 3.5 times consolidated EBITDA as defined in our credit agreement.

The credit agreement definition has additional add-backs for items such as stock compensation, nonrecurring costs and certain cost saving programs that have been identified but not yet implemented, among other things. At the end of Q1, our net senior secured leverage ratio was 1.4 times. We believe all of these actions we have taken today will enable us to address the impact of COVID-19 and emerge in a strong position to resume our growth and margin expansion. While we had hoped to be in a position to provide guidance at this time, given the continued uncertainty due to COVID-19, we are not providing the financial outlook.

With that, we will open up the call to questions. Operator?

Questions and Answers:

Operator

Yes, thank you. [Operator Instructions] And the first question comes from Dan Imbro with Stephens Inc.

Dan Imbro -- Stephens Inc. -- Analyst

Yeah. Hey, good morning guys. Thanks for taking our questions.

Vance Johnston -- Executive Vice President and Chief Financial Officer

Good morning.

Dan Imbro -- Stephens Inc. -- Analyst

Vance, maybe starting on the first quarter. I wanted to touch on gross margin. Top line held in nicely, but gross margin showed greater pressure despite continued benefits to the revenue per unit in line. Can you maybe help to shed some light on the puts and takes of what went on in that line and then obviously, how the Buyer Digital Transformation will impact that going forward?

Vance Johnston -- Executive Vice President and Chief Financial Officer

Yes. So yes, as we kind of outlined in our prepared remarks, we did see a gross margin percentage decline in the first quarter and that was primarily due to some increased labor cost that we had in our branch network and our field operations. It was also due to some increased occupancy costs and then the timing of some certain benefit related costs that we expect throughout the remainder of the year to kind of stabilize and come back to an equilibrium. And then the other thing it was impacting would have been our purchased cars, the gross profit that we saw from purchased vehicles was left in the first quarter of 2020 than it would have been in the first quarter of 2019.

Dan Imbro -- Stephens Inc. -- Analyst

Got it. That's helpful. Maybe the second one from the Buyer Digital Transformation initiative. I think in the past, you guys and your peers have noted this should help you grow internationally as you kind of lower the barriers to entry. So maybe two questions. One, is that going to take an incremental marketing spend as you look to expand your international buyer base? And then secondly, can you just update us on the health of the international buyer. I think, John, you mentioned that activity at auction has increased and improved since mid-April, but any update on the health of the international buyer?

John W. Kett -- Chief Executive Officer and President

Sure, Dan. So we do think that BDT is going to help international buyers drive higher levels of participation. We are continuing to invest in that area. We've undertaken several initiatives. They are relatively modest in cost, but we think their effectiveness is going to be high and certainly before COVID-19 hit, we were really pleased with the results we were seeing and then we are seeing them, as I talked about, there was a several-week period where buyers were sort of trying to understand the environment, we have seen improvements in the international buyer demand. There are still some spots where it's difficult because of banking and port issues. But overall, we're feeling pretty good about the deployment of BDT and we do believe it's going to bring additional international buyers to our platform.

Dan Imbro -- Stephens Inc. -- Analyst

Got it. Thanks for the color, guys. First of all thank you, john.

John W. Kett -- Chief Executive Officer and President

Thank you.

Vance Johnston -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

And the next question comes from Craig Kennison with Baird.

Craig Kennison -- Baird -- Analyst

Hey, good morning. Thanks for taking my question. First, I wanted to ask about the total loss rate. Obviously, we're going to see fewer accidents, but I'm wondering if you expect to see a change in the total loss rate as a result of this, given that repair shops may be idle and have capacity to take on more work?

John W. Kett -- Chief Executive Officer and President

Yes. I mean, we've seen several a lot of commentary kind of both ways on that if there's if the other side of that as if there's fewer shops, there might be that might work in our favor if but it's still too early to tell, the other element again in that decision is what happens to used car prices. So if used car prices are under pressure, that again could be appositive to the total loss ratio because the value that they're comparing the repair estimate to, if that comes down, that's actually going to push more cars over the total line. So it's too early to tell. We're kind of we're assessing it. We're talking to our channel partners to understand what they're seeing, but don't have any definitive view on it yet.

Vance Johnston -- Executive Vice President and Chief Financial Officer

Graig, I would just add...

John W. Kett -- Chief Executive Officer and President

And then go ahead.

Vance Johnston -- Executive Vice President and Chief Financial Officer

Yes, I would just add. I think there's obviously been a lot reported recently about used car prices and what has already happened, what is expected. So I think that we do think that there's a likely situation where used car prices decrease and all things considered equal, that would have a positive impact on the total loss percentage trend.

Craig Kennison -- Baird -- Analyst

And then the supply impact is pretty clear. Apologies if you covered this in your prepared remarks. But on the demand side of the equation, how have your part recycler customers and your international buyers changed their behavior as a result of the pandemic?

John W. Kett -- Chief Executive Officer and President

Yes. Again, I think in the early weeks, we saw downward pressure on demand. But since the middle of April, we've been pleased. Domestic recyclers have been very active in the market. And again, we're seeing the international buyer come back. Yes, I think they're seeing the opportunities and they're thinking about the future and are thinking about if more if there's fewer new cars and more used cars that are going to need to be repaired, there's going to be an increased demand for recycled parts. So I think they're seeing they're thinking about that opportunity right now and are pretty active.

Craig Kennison -- Baird -- Analyst

Great. Hey, thank you.

John W. Kett -- Chief Executive Officer and President

Thank you.

Operator

And the next question Stephanie Benjamin with SunTrust.

Stephanie Benjamin -- SunTrust -- Analyst

Hi, good morning everybody.

John W. Kett -- Chief Executive Officer and President

Good morning.

Vance Johnston -- Executive Vice President and Chief Financial Officer

Good morning.

Stephanie Benjamin -- SunTrust -- Analyst

I was hoping you could discuss on the comment you made about the positive volume growth in 1Q ex kind of the impact of COVID and what you saw toward the end of March. Maybe if you could discuss what you're seeing from a competitive standpoint overall in the market, I think most expected, probably a little bit more of a headwinds of volumes, just given some share shift? So any additional color you can provide there would be helpful?

John W. Kett -- Chief Executive Officer and President

Sure, Stephanie. So I think as we've talked about in our calls in the past, we feel good about our competitive positioning. There are opportunities that we've seized upon to grow our volume. And yes, I mean there are puts and takes, but I think, overall, we feel pretty good about how we performed. And then in terms of the impact on Q1, Vance if you have any commentary?

Vance Johnston -- Executive Vice President and Chief Financial Officer

Yes, I think the way to kind of, I think, step into touchline that we said in our prepared remarks is that volume notwithstanding the impact of COVID-19 would have actually been up in Q1 2020 relative to Q1 2019. To give you some other sense for that, our total revenue had it not been for COVID-19, would have been in the range of our longer-term outlook of organic revenue growth of 5% to 7%. And then the other thing I would just add to what John was saying is that, we also we feel really good about our competitive position.

And as we've talked about in our prepared remarks quite a bit is that we're making really significant strides in our digital auction platform and our merchandising platform that goes along with that, specifically things like 360 View, Feature Tour, Engine Start, Digital Negotiations. And we feel really good about the progress we've made there and the feedback we're hearing from buyers and sellers. So we think that's a really important initiative going forward.

Stephanie Benjamin -- SunTrust -- Analyst

Got it. And just as a clarification. So there was really nothing other than COVID, I guess, in the quarter that was the onetime or abnormal or timing related to strong volume performance again ex COVID that was pretty clean?

Vance Johnston -- Executive Vice President and Chief Financial Officer

Yes. No, it was. I mean, obviously, we talked about some volume movements in 2019. And so you would have had in we would not have yet anniversaried those in the first quarter of 2020. But outside of that, it was a pretty clean quarter and our business performed really, really well. And we were able to, obviously, implement and execute the Buyer Digital Transformation. We started that, I mean that made significant progress during the first quarter. So yes, it was fairly clean and we operated really well.

Stephanie Benjamin -- SunTrust -- Analyst

Great, thanks so much for the color.

Vance Johnston -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

And the next question comes from Bret Jordan with Jefferies.

Bret Jordan -- Jefferies -- Analyst

Hey, good morning guys.

John W. Kett -- Chief Executive Officer and President

Good morning, Bret.

Bret Jordan -- Jefferies -- Analyst

On the initial announcements of the digital auction product and the title transfer, you talked about some improved yields and cycle times. Are you still seeing performance consistent with what you saw when you first rolled those out?

John W. Kett -- Chief Executive Officer and President

We are. I mean in terms of the what we've done with loan payoff for the companies that have implemented it and that list keeps growing, they are seeing meaningful reductions in cycle times. Some as I think we talked about 19 days in the release, some are seeing that, some are seeing a little more, some a little less, but it's still a significant improvement that we're seeing. And then as we further our integration with Dealertrack, which we're still getting rolled out, we think there's going to be additional areas where we can take time out of the process and get deeper penetration of the lender market as well. So yes, we continue to be very excited about it and the customers that are deploying it are really pleased with it.

Bret Jordan -- Jefferies -- Analyst

Okay. And then a follow-up, I guess. You talked about the volume movements that we saw in 2019. Do you have any expectations of volume movements in 2020, I guess, that are of note or just more of the same?

John W. Kett -- Chief Executive Officer and President

Yes. Again, I think as we've talked about in the past, customers there are shifts in volume that occur, pluses and minuses that happens just as part of the normal course. There's nothing that we see changing of that behavior of our insurance carriers. And as, I think, Vance said and I said earlier, we feel really good about where we sit in the market with the parts and services that we're bringing to market, we feel good about our prospects.

Bret Jordan -- Jefferies -- Analyst

Okay. And then a housekeeping, I guess. Vance had mentioned that some of the gross margin impacts in the first quarter were maybe nonrecurring, binding of benefit costs. Could you maybe carve out what if the margin might be not impacting the second quarter?

Vance Johnston -- Executive Vice President and Chief Financial Officer

Yes. I mean we're not prepared at this point to give specific details on that. There was a portion of that decline in gross margin percentage that was some onetime benefit costs that we expensed in the first quarter that the kind of how that would have taken place in last year would have been a little bit different. We expect that over the year to kind of normalize itself relative to 2019. But that's just that's one of a number of elements that we mentioned related to the reduction in gross margin percentage.

Bret Jordan -- Jefferies -- Analyst

All right, thank you.

Vance Johnston -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

And the next question comes from Bob Labick with CJS Securities.

Bob Labick -- CJS Securities -- Analyst

Good morning, thanks for taking my questions. I want to start with a couple of kind of, I guess, more macro questions. On the Berkshire Hathaway Annual Meeting, they discussed a potential increase in uninsured drivers that could be a potential detriment to GEICO. But how does that flow through to salvage auctions in general, if there is an increase in uninsured drivers due to the recession?

John W. Kett -- Chief Executive Officer and President

So right, I mean, vehicles that are that don't come through insurance, that end up being in total loss, those do find their way into our ecosystem through a variety of ways. So if they then sell it to directly to a recycler potentially or they'll sell it to there are buyers of low-end damaged vehicles that then typically use our platform to liquidate those vehicles. So I do think there's we still would see those vehicles. And then you've also got the other side of an uninsured motorist potentially as an insured motorist who has coverage for that. So it's depending on who's at fault and so on. So I do think it would still find its way into our ecosystem. But just wouldn't be as direct.

Bob Labick -- CJS Securities -- Analyst

Got it. Okay. Great. And then also last recession, there was a Cash for Clunkers. There's increasing talk about that. Could you talk about how that impacts the industry or how it did last time? And thoughts if that could be is a potential stimulus and how it could impact the industry going forward?

John W. Kett -- Chief Executive Officer and President

Yes. I mean last time around, it was a benefit to us. We got involved with helping make sure those vehicles that were taken off the road were properly they had to seize up the transmission, so they couldn't physically operate and we were part of that protocol. So we did see an influx of volume and I do think it helped stimulate on the demand side vehicle purchases. So depending on what it looks like, we do think there would be an opportunity to benefit us in the short term if we can be a part of it and then stimulating further vehicle transactions, whether they're used or new, in the long run, we do think is good for our business. So I think we'd be again, depending on what it looks like, we're hopeful that something like that would come to fruition.

Bob Labick -- CJS Securities -- Analyst

Okay, great, thanks for that. And for all the great detail on the call today.

John W. Kett -- Chief Executive Officer and President

Thanks, Bob.

Bob Labick -- CJS Securities -- Analyst

Thank you all.

Vance Johnston -- Executive Vice President and Chief Financial Officer

Thanks, Bob.

Operator

Thank you. [Operator Instructions] And the next question comes from Greg Prestopino with Barrington Research.

Greg Prestopino -- Barrington Research -- Analyst

Hey, good morning everyone.

John W. Kett -- Chief Executive Officer and President

Good morning.

Greg Prestopino -- Barrington Research -- Analyst

John, could you maybe talk about I don't know if you touched on this, I was trying to take notes as quickly as I could. Are price realizations at the auctions for cars starting to mimic what's going on with the Manheim Index where car prices are coming down fairly dramatically?

John W. Kett -- Chief Executive Officer and President

So Gary, so actually, what we've seen in the last couple of weeks, we've seen demand improve. So we're actually seeing higher revenue per unit than we did right in the first several weeks in COVID. So we are seeing increased demand at auction for the vehicles that we sell. So it would be running counter to that.

Vance Johnston -- Executive Vice President and Chief Financial Officer

Yes. And Gary, one thing that we think, as we think about it, I mean, one thing is that you think about it kind of as units assigned comes down and there's less available units that we're able to for sale as we talked about in prepared remarks, there continues to be strong demand for people looking for those vehicles and the simple kind of equation of supply and demand is looked in, I think, our favor, in the sense that we've seen proceeds and revenue per unit per vehicle go up because there's less vehicles available to purchase, there still continues to be really good demand.

John W. Kett -- Chief Executive Officer and President

And our new digital platform, again, the feedback we're getting from our buyers is that they really like it. So we're it's hard to define the what's driving it up, but we do feel good that we're helping push up prices through the efficiency of our new model.

Greg Prestopino -- Barrington Research -- Analyst

Okay. And then you said assignments were down. But from the time you get an assignment to the time that's reflected in inventory, what's that time period? There's a lot of times there, but...

John W. Kett -- Chief Executive Officer and President

So from date of loss to when we get an assignment is typically 10 to 14 days. Now how long it takes us to sell it from when we get an assignment is anywhere from 45 to 90 days is typical.

Greg Prestopino -- Barrington Research -- Analyst

Okay. So if inventories were only down 11%, assignments are down. If nothing really changes here, then we're starting to see actually miles driven increase and all that. It's quite possible that your inventory could bottom sometime in Q2, reading just hypothetically with the way you're talking about the numbers with assignment and time to sell?

Vance Johnston -- Executive Vice President and Chief Financial Officer

Yes. No, Gary, I think that and obviously, as we talked about in our prepared remarks, we've run multiple scenarios, including assignments set for sale, units sold, the impact on the inventory proceeds and otherwise. And I think that the way you're thinking about it is a reasonable way to think about it.

Greg Prestopino -- Barrington Research -- Analyst

Okay. And then just lastly, quickly. In terms of what you've done with the SG&A expenses and I realize this is all short term, but can you just slap around some numbers as to what if your SG&A was $38 million in Q1, if you had these things in place for all of Q1, what would that have done to the SG&A on an absolute basis?

Vance Johnston -- Executive Vice President and Chief Financial Officer

Yes. I think we would prefer not to provide that type of detail as we outlined earlier. We're not providing guidance for the year because of the uncertainty around COVID-19. There are also a number of things, I think we did as we said in the prepared remarks, we have made reductions in SG&A. And between those and the ones we're making in cost of services along with our capital deferrals and reductions, we believe it's meaningful for the full year of 2020.

But we did make reductions both in terms of discretionary spend and these have actually already been acted upon in terms of reductions to senior leadership compensation, things of those nature. So they're meaningful, but there are other puts and takes as it relates to SG&A as well, including things like bonus accruals and things of that nature as well. So I think that's probably the level of detail that we prefer to get into at this point in time.

Greg Prestopino -- Barrington Research -- Analyst

Okay. And then I promise, just one last question. Realizing there's very few independents left out there, but are you seeing the insurance companies maybe starting the channel assignments that would have gone to the independents to the major players like yourself, given the fact that there could be some financial duress on their end as well as the smaller players don't have the technology to compete and maybe do an entire digital auction?

John W. Kett -- Chief Executive Officer and President

In the salvage space, that's really been happening for the last 10 or 15 years. And as I think you said, there's really very little independent volume left in the insurance world. So it's I don't see it as a meaningful opportunity. It doesn't mean it doesn't exist, but I don't think it's a meaningful one.

Greg Prestopino -- Barrington Research -- Analyst

Okay, thanks a lot.

John W. Kett -- Chief Executive Officer and President

Thank you.

Vance Johnston -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Thank you. And the next question is a follow-up from Daniel Imbro with Stephens Inc.

Dan Imbro -- Stephens Inc. -- Analyst

Yeah, hey guys, thanks. Going to quick follow up. I had a question on the revolver expansion, Vance. And maybe actually following up on the last line of questioning. You just mentioned it's a pretty consolidated industry. But I think one of the phrase you used, Vance, was purpose of debt was to continue your corporate growth initiatives. Curious if that was an indication of the M&A market, potentially some remaining independents looking to sell? Or any update you can give us kind of clarifying what you meant by that comment on uses of the corporate debt, maybe in this backdrop?

Vance Johnston -- Executive Vice President and Chief Financial Officer

Yes. No, Daniel, thanks for the follow-up question. So no, what we were really commenting on was that we raised $136 million of additional liquidity by expanding our revolving credit facility, which was the revolving credit facility that we already have in place with the bank group that we already have in place. And so that provides, we now have a revolving credit facility of $361 million. And really, what we also commented on is that we believe that provides ample liquidity along with the cash that we have on hand, one, to navigate through the COVID-19 pandemic and the impact on our business.

But also during that time, to continue to make the appropriate investments in our business and do the things that we think are important, both from the growth initiatives that we're executing on as well as our margin expansion plan. And so it was really meant around that. We don't see it's not really earmarked for specific M&A or anything of that nature at this point in time.

Dan Imbro -- Stephens Inc. -- Analyst

Got it. Really helpful. Thank you.

John W. Kett -- Chief Executive Officer and President

Thank you.

Vance Johnston -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Thank you. And as that was the last question, I would like to return the floor to management for any closing comments.

John W. Kett -- Chief Executive Officer and President

Well, thank you all for your participation. Thanks for your interest in IAA, and we look forward to talking to you all soon. Have a great day, and be safe and healthy.

Operator

[Operator Closing Remarks]

Duration: 42 minutes

Call participants:

Arif Ahmed -- Vice President, Treasury

John W. Kett -- Chief Executive Officer and President

Vance Johnston -- Executive Vice President and Chief Financial Officer

Dan Imbro -- Stephens Inc. -- Analyst

Craig Kennison -- Baird -- Analyst

Stephanie Benjamin -- SunTrust -- Analyst

Bret Jordan -- Jefferies -- Analyst

Bob Labick -- CJS Securities -- Analyst

Greg Prestopino -- Barrington Research -- Analyst

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