So thanks everyone for being at our 44th annual growth conference. My name is Michael Graham. I'm one of the tech research analysts here, covering ACV Auctions. Really excited to have George Chamoun, CEO, Bill Zerella, CFO. Guys, thank you so much for being here. Last week, you reported a really solid Q2. Congrats on the momentum. Thank you. Maybe just talk us through what you see as the key points to come out of your earnings report. Yeah, certainly. Well, first, good afternoon, and thanks for staying late at the 4:00 P.M. session here. Good to see you all. Yeah, Q2 was really just another great, solid quarter of execution. We really added some great themes, additional dealer wholesale growth. We had our value-added services continued to start to take on traction with our dealer and commercial partners. We've seen the beginning of our strategy for commercial start to take off. Where the market itself, the dealer wholesale market, I would say didn't go down as much as Q1, so that in itself was an improvement, and we started to see some other positive signs as far as new car incentives, used car factors. So overall, I would say Q2 was a solid quarter for us, and we also had, I think, a good outlook. So, that's great. You know, it's been a volatile couple of years for the used car market, and the auto industry more broadly. We still have, you know, constrained supply, although it's getting a little bit better. Your unit growth in the quarter was 22%. You sold 187,000 cars on the platform. But you also are still seeing noticeable declines in GMV per unit, after the price spike coming out of COVID. So, maybe just help us understand where we are in the auto cycle, and then how that translates to your, you know, corner of the auto market, which is the dealer wholesale market. Yeah, certainly. So, a way to look at what this whole shift of the lack of new cars, and we're in the midst of COVID, and the lack of trades, and what that sorta dealt us, was our TAM, which was in the, let's say, 10-11 million dealer wholesale cars a year, shrunk under 8, so it was in the 7-8. So that was a pretty significant decline of number of cars that were being traded and then wholesaled through the dealer wholesale channel. With that being a headwind, we've still grown well. We've still... We've grown our business, we've grown our value-added services, we've done well. And when you think about, okay, how does this market come back? Not only are we starting to see new cars, you know, new car incentives come back, we're also starting to see other positive. Well, positive for ACV, which is used cars are on dealers' lots longer, and the longer these cars are on dealers' lots, they're gonna think twice about retail versus wholesale, which, by the way, is normal. It's normal to think about, "What should I retail? What should I wholesale?" And where we can specifically look at things getting better, is the mix of what dealers end up either retailing or wholesaling, which have actually progressively gotten better throughout the year. So you'll see different data points that point to the market getting better for us. Right after earnings, actually, NAAA, which is an association of auto auctions, reported their AuctionN et data, and it said dealer wholesale was up in July, 7% year-over-year. That's not our data, right? That's July data, I'm sure that's third-party data. But these are all signs that we're starting to see the dealer wholesale market and overall wholesale market start its journey back to normal. I'm not gonna say it's all the way back to normal this year or even next year, but even to go from year-over-year negative compare to positive is a great start in the right direction. So this concept of normalcy, we'll come back to it later, too, when we talk about your midterm targets. But, when you think about normalcy and sort of how close we are to it, are there metrics that you think about? Are there market conditions that you can quantify, that we can think about to help us understand when we're there? So, when we get there, it would be a mixture of the following: One, SAAR back to normal, aged, dealers' lots are filled up, and at the end of the day, consumer demand for used is also back to where it was. I mean, normal is probably all of those factors coming together. But we don't need it to return back to normal to have a fantastic year this year or and also a fantastic year next year. It could be a path towards normal that takes place over a few years. But I think we're already seeing in each one of those elements, you know, things are getting better for us. So, your marketplace, you know, is a marketplace for used cars, and you've got to get the supply from a variety of different sources. I think in the early days of ACV, you had a lot of good franchise dealer relationships, but some of the inventory you were getting was maybe not their highest-end inventory. Maybe you had to, you know, prove out the model or earn their trust, and you've really been kind of moving upmarket since then. And you've also touched on some kind of different and new sources of supply, whether it's the commercial market, you know, lease and rental cars, and stuff like that. So I'd just love to hear you talk about-... the supply, you know, that's coming into the marketplace, and how you feel about where you're positioned, and where do you see opportunities to, like, improve the supply mix? Yeah, certainly. So when you look at what we've built, we've built the technology and the infrastructure to support all types of cars. So whether it's a $1,000 used vehicle that's totally wrecked and doesn't run, or if it's a $100,000 great used car or even more... We, we just sold a $200,000 car last week. So whatever- What kind of car? It was a Bentley. All right. So whatever it is, we sell it. We're... It's really, we've built the tech, we've built the inspection, we've built... And at any one time, to your point, in the early days, we were kind of known as the junk your cars, and we kind of moved upmarket. And why that's important for our franchise dealers, they might have cars they tried to retail, and now they need to wholesale it. They tried to retail it. It's been aged for 90 days. They need to get rid of it. What they did was it built our buyer base to be both franchise and independent. So about 30% of our buying comes from franchise, about 70% comes from independent. Now that we're moving into other markets, like commercial, that mix of having franchise and independent buyers for commercial cars... So, you know, rental cars, you got a lot of franchise dealers who want to buy rental, as an example. A bunch of these repo cars, a lot of them are independents. So think about different parts of the commercial sector, you've got different types of buyers, and we've got a lot of buyers across the country. We've really spent a lot of time building this demand engine, and so that puts us in a great position as we get more supply, that we've already have got a mix of buyers that are buying, whether it be lower-price or higher-price vehicles. So, just focusing in on commercial, there are several segments, I guess, of the commercial market. You've got fleet, rental cars, off-lease cars. Maybe there are others that, you know, that maybe you could describe to us, but are there key, like, strategic imperatives for you to kind of move in, move more fully into those segments? Yeah, so if you look at the four segments of commercial, being repo, these are bank-owned vehicles. Repos tend to need a little bit of storage, meaning two to four weeks based on the state laws. And then also minor recon. When we say minor recon, think like it might need one tire just so it runs, or it may need, you know, a key. So recons' needs are primarily a little bit of land and very minor recon. Rental car, it depends upon the market. Some rental. In some areas of the country, if it's more suburban, they allow us to go to their rental car location and auction the cars. If it's a more. If it's a busy area like Boston, they really would rather we have land and just get the cars off their rental lot because, you know, the, in these areas, they're tight on space. So with rental, it's primarily just having a place to send the cars to. Fleet, and government cars, same thing. It's just, we just need somewhere to have the cars sent, so we can inspect them and launch them. Off lease is, it's really its own dynamic, where a car start out, it either can be bought by the consumer, then the dealer, and then if it's not bought anywhere, then it, it historically was shipped off to a physical auction. And we will hopefully, in time, have multiple ways we can sell those vehicles. So really four different segments, and we believe we have the demand engine for all four, and it's just about a matter of getting to the supply requirements for each one of them. You mentioned on the call, it kind of surprised me, you said dealers really want rental car-like cars coming off out of rental fleets. But I would've thought that off-lease would be, like, more, like, just kind of better cars, like, better maintained. Is that true, or is it just sort of like they like them both? I would say they like them all. Okay. There's certain cars that are coming off lease that consumers have really banged up, and there's certain cars coming off lease that are pristine, and same thing with rental cars, right? There's some rental cars that are all banged up. So, I really think if we asked dealers, "What do you prefer?" I think most would probably say off lease, to your point. But if you show them, you know, the rental cars they want, if it, you know, give them some, you know, they're gonna buy those as well, so- We'll get to your technology later, but your technology really helps them understand what they're getting, too, so- That's right. It's really about the condition. Yeah. Okay, so we'll talk about that in a moment, but, focusing in on your dealer partners, maybe talk about your go-to-market plan for, you know, getting more dealer partners on board, and how penetrated do you think you are relative to the overall, you know, kind of dealer market? Yeah, so, a way that we described where we are is, one, look at it, we've already hired the executives out there, meaning these are the management team. We've got our vice presidents. We have 20 regional sales directors. We have 150 territory managers. So we've got a pretty significant spend on that field team that's already in our current budget. Regardless if that market is selling 10 cars a month or 1,000, we're already spending the money to go after these customers. So from a go-to-market perspective, you know, the majority of our sales spend is in the budget. For some markets, there will need to be incremental inspectors once we reach enough supply. So that's really high level about what we've done to go after the market. Where we are today, what we mentioned our last earnings call, is about in about half the our markets these regions, we've gotten to 30% of the franchise dealers already working with ACV, which is a pretty significant milestone. And they may be selling, you know, 10% of their cars to us, they might be selling 90%, but at least we've gotten in there, or we've got the traction. Again, some of these companies were working with local physical auction for 40, 50 years, and we've It also means that we've got a lot more growth ahead of us right? So we're happy with where we're at. We're really pleased. For a company that's, you know, you know, nine-ish years old, we've been able to build a lot of great relationships, you know, build a lot of scale. At the same time, though, we still have a lot of growth ahead of us. I can imagine, you know, every part, every dealer partner is different, but, you know, once you get in the door, it's a share of wallet kind of dynamic, where you're trying to encourage them to funnel more and more of their supply onto your platform as opposed to a competitor's digital platform or the, you know, in-person auction market. Is your pace of kind of penetrating share of wallet changing, you know? Are you gaining momentum, or just, like, how should we think about that? I think first and foremost, we've been really consistent. If you look at our growth, we've been a very consistent, you know, growth, taking share for several years, and I think that's healthy. We do now have more ways to win, so we're taking some of our new value-added services. One of the products, ClearCar, is this consumer acquisition allows dealers to go out and use AI to value a vehicle right in the consumer's driveway, or in their service drive, and come up with the right value. These are new tools that the dealers can use to acquire more vehicles, and what we're doing is we're instead of... There are some dealers who are just paying us a subscription, but if the dealer guarantees us a certain wholesale volume, we will give those services away for free as part of an overall bundle of value. So we do have more ways to win. That could, in the future, change our growth trajectory, but I would say for now, just to manage expectations, I would say we've been growing very consistently. And I think, you know, we're really proud of the growth so far. So I'm gonna go out of order for my questions, 'cause you touched on ClearCar, so let's knock out the technology- Sure ... part of your story. You know, I thought it was really cool at your IPO, and, you know, you could, like, listen to the engine, and it tells you whether there are any problems with it. So maybe just talk about, like, the technology platform that you've built for basically valuing cars accurately. Yeah, and... For those who have been following us for a while, or you're new to the story, you know, it's been, you know, the same message: each and every car is unique. Each and every car has its own story. So what's the actual cash value? What's the ACV? Well, you need to get in there and understand the condition to understand the value, and that, at the end of the day, is what we're up to. And we've built a way to understand, to your point, what's going on with from an engine perspective. We've built a way to scan the undercarriage. We now have imaging AI helping us understand the exterior condition of the vehicle. We have a way that has just been kicked off, to smell the interior and detect whether or not there's any significant odors. All of this goes to the value, and all of that data is being pumped into our, you know, unbelievable data scientists. And so when we were able to launch these new products, like ClearCar, it wasn't like just putting a widget on a dealer's website. It's taking the millions and millions of inspections we have, and all of our other data, so that you can just scan a VIN, understand the condition, and come up with a price. So yeah, we believe that we're, you know, in a unique spot, not only domestically, but globally, you know, in a unique spot to take all this data and come up with a condition-adjusted value, and it's really exciting. You just reaffirmed one of my key tenets of technology investing, which is follow George Jetson, because they had Smell-O-Vision on George Jetson, you know, way back in the day. All the things he talked about, it's all happening. It's all happening. Okay, so you've got some value-added services. You referenced them a couple times. Yep. The first one is transportation, which is basically, you know, it's obvious, but if a dealer puts their car on your platform and they sell it, like, you'll take it to the buyer for them. You had 55% attach rate in the quarter, which is fantastic. How high can that attach rate go over time, do you think? And I'd also like for you to touch on... You've just opened up, like, off-platform transportation services, so maybe talk about that and how big of an opportunity that is. Why don't you take some of these, just because- Sure, I'll give you a break, George. Yeah, sounds good. Yeah, so first, for those of you who are not familiar with it, so we have our own transport marketplace. We have about 3,000 transport providers around the country that will bid on jobs. So, you know, when a buyer wins an auction, they can basically hit a button and select ACV Transport... and then that will, through software, about 80% of our, what we call dispatches, are just happening automatically through Auto Dispatch, where there's no human intervention, and software will basically provision that particular transport move. So as you mentioned, our transport attach today is 55%, roughly. We think that can get into the mid-60s, maybe a little bit higher, but not necessarily much higher than that, because to the extent there's a local buyer, then that local buyer is not going to use transport. They'll just, you know, have someone drive to go pick up the car. Recognizing that in a digital marketplace, our average buyer is around 400 mi away. So that attach rate, when you, when you take into account, you know, the number of transactions that we're processing, and then the amount of local buyers, we're actually, right now, pretty significant in terms of our share of transports. And this has also been a business, for, for the context that until recently, we were losing money, and needed to get to a certain level of scale to be profitable. We set a midterm target margin of high teens, which may not sound like a lot, except we have to record this revenue from a GAAP basis on a gross basis. So the revenue that flows through our P&L is the actual value of the transport. High teens percent, as a percentage of that, is actually a really healthy margin, and if you look at just independent companies that are in the transport business, you know, around 20% margin or so is pretty typical, and those are businesses that are very large scale. So right now, this is a great business for us. The team has done a great job. In terms of off-platform, that's really small today. I'm not even sure we've quantified the opportunity- Yeah. Frankly, it's, I think what we've basically said is, it's a value-added service for our dealer partners. The main reason why we launched it was dealers were asking us, "We love what you do for us on ACV if we need you to move a car," you know? And maybe in the next year, or two years, or three years, we'll actually put a really dedicated sales effort. Right now, it's not that intention. Our intention right now is satisfy our dealer partners, be this incredible partner, add more value. You're seeing a very consistent theme. And that's really the primary use case for it today. I remember a few years ago, I felt like that service was underpriced relative to the market to maybe boost that attach rate and gain some share. Do you feel that you're still at a value price, or are you, kind of at parity with the market at this stage? I would say in probably, I don't know, this is approximate, maybe a third of the country, we're near market pricing. Probably a third, we're a little under, and probably a third, we're, you know, we're pretty materially under. But that's the beautiful thing about owning the marketplace, is you could use products like transport to also help you drive conversion on your platform. And as long as we hit the EBITDA number we told you all, then we still look good, right? But the goal here is not to always take—when you're building a great business like this, you don't always want to take everything at once. You know, you wanna do things incrementally. You wanna build a great customer experience. You want to build the whole business, but yeah, there's definitely... The revenue there could be a little bit higher, and the margin could be a little bit higher. But it's- Is the mid-teens, like you're at now, like, how much higher do you think it could be? I don't think we're gonna discuss that yet. But what this number does is it also enables us always to, you know, in a way, treat the entire business as one core business. I think once we're comfortable saying what it could be, we would broadcast that. It's actually high teens. Oh, yeah, sorry about that, high teens. Thank you, Bill. And that alone- Keep me honest. ... we did go from mid teens to high teens recently in the way we've talked about it. You went from mid-teens to high-teens, [Raz, in the last 30 seconds? Exactly. Yeah. Well, more to come. So we have a couple minutes left. I wanna hit two more topics. The first one is your other major add-on, which is capital. Where are we in the evolution of ACV Capital, and you know, where are we in the evolution of, like, not funding the loans on your own balance sheet, but like, scaling it up and bringing in some other lenders? I'll take that one also. So, this is a lending business. We're lending money to independent dealers who buy on our platform. You know, of course, as we have some franchise dealers that buy on our platform as well, except the cost of capital is too high, and those guys can finance it on their own. So we're at roughly 10% attach rate for providing, you know, ACV Capital lending to independent dealers. Our target is 25% attach rate. That business has grown very rapidly the last few years. However, most recently, in the last few quarters, we've kind of metered back our growth a bit and have been much more risk-averse, since, you know, a lot of these independent dealers are under financial stress. You know, interest rates are really high. It's really expensive to buy a used car. You know, prices have come down, which has helped, but we're really sensitive to their ability to, you know, to pay us back, obviously. It's short-term collateralized lending, so it is lower risk. However, we've been managing kind of our bad debt expense, which actually went down year-over-year, 35% last quarter. So it's a great business. It flows through at 90% margins in our P&L, so it's very accretive. But, you know, we're gonna be careful in terms of that growth until, you know, we see the economy improve a bit, and as rates come down, that'll help independent dealers. So, you know, we can ramp this thing up faster when we want to. We turn away more business now than we take because of being risk-averse. In terms of how we finance this business, so this shows up as a separate receivable line on our balance sheet. We just recently, last quarter, put in a warehouse facility through Citi. That's a $125 million facility that's dedicated just to financing those receivables. Up until now, we've been using a revolver that we have with a J.P. Morgan-led syndicate for $160 million. So now that we have this new facility in place, we'll start borrowing on that, and we'll kind of segregate, you know, that lending to be specifically dedicated to ACV Capital. We'll be able to expand that line to $200 million or so as we grow the business. Once we get, you know, well beyond $200 million, then we can go to the debt markets, which is what the larger players do, and that'll lower our cost of capital. So we've been working on the financial infrastructure to do that. There are a lot of reporting requirements and what have you. That's probably 1-2 years away. Okay, fantastic. We hit the time, but and I would just wanna cover this. I think it's really important. In 45 seconds or less, I just would love for you to talk about your EBITDA margin, goals, and, you know, I think part of the reason the stock's been working nicely lately is a lot of investors screen for profitability and expanding margins, which you now offer. But maybe just spend 30, 45 seconds talking about that. Why don't I start, and then you go? Sure. And Bill. So one is, what we've also shown you all, and not just recently, is our most mature territories are already reaching the 25% EBITDA margin, and why that's important to start with, and Bill will tell you where we're at and where we're going, is it shows with scale the model works. It worked months ago. It worked last year. This model works. You're already... Basically, you've got this spend of all these amazing teammates that you're investing to build the market. You just gotta get the scale locally, so that's first and foremost, but then you can go ahead and answer the question. Yeah. Yeah, so we'll be at 4% EBITDA margins this year. That's with roughly half of our 150 territories at positive EBITDA and the other half negative, so that's a blend. And to George's point, we have, you know, very profitable territories, and that's at today's scale. So how do we get from 4 points to 25 points? It's basically 8 points of incremental revenue margin, which is basically gross margin. We don't report it as such on our P&L, and then the rest is OpEx leverage as we scale. And I would point you folks to our Analyst Day in June of last year, where we segregated out for OpEx the amount of variable versus fixed, and you can see how we can, you know, rapidly scale and kinda add more leverage. And then those 25% EBITDA territories today will either have even higher EBITDA margins. So at full scale, and this would be, you know, years down the road, this business could potentially exceed 25%. It's all about scale. Perfect. Okay. All right. Thank you, gentlemen. Really appreciate it. Thank you. Thanks for having us, Michael. Appreciate it. Thank you.