Good. We're gonna go here. Thanks, everybody, for joining. I'm Nick Jones, Internet Analyst here at Citizens JMP. Really excited to have ACV Auctions here with us again this year. CEO George Chamoun, CFO Bill Zerella. Thanks for joining us. Yeah. Thank you, Nick. Thanks. So you guys went public in 2021. I think, you know, you guys have been a great performer. So I think a lot of folks probably know who ACV Auctions is. But for maybe those who are, you know, getting interested, particularly as you guys are getting to profitability, can you just kinda give a quick overview of what's ACV's business model? You know, what do you do? How do you compete in the ecosystem? Yeah. Certainly, Nick. So the primary market that ACV has gone after and I'll say primary and we'll also talk about the new markets we're going after. But the first sort of TAM we went after is the dealer wholesale market. And this dealer wholesale market is, it was really comprised because dealers are selling cars to consumers, taking in trades, looking to optimize their inventory. In pre-COVID, we're wholesaling over 11 million cars a year in the U.S. So historically, when we say wholesaling, these are dealers selling cars to other dealers versus selling them to consumers. We brought the opportunity to where dealers didn't need to go out and ship these cars off to a physical auction. We really brought the auction right to their lot by bringing a digital, really alternative to the market. And from our founding to now, we've taken, you know, pretty significant market share over the last handful of years and grown. And then we've also started to open up the opportunity for us to even broaden our TAM more recently with commercial. But our primary market opportunity has been digital wholesale. So as you look at the landscape, how would you describe the primary problem ACV's solving, compared to kind of what, what's been existing? So if you look at why dealers historically needed to go to a physical auction, or even go to a dealership and buy a car the old, old way, which was a dealer would go literally driving their car to another dealership's lot and then go look at a vehicle, is you needed to know the condition of a vehicle. Digital could never take off historically without really understanding the condition. What ACV has invested in is the technology and the people to appropriately get the condition of the vehicle in a manner where dealers can then buy the vehicle. They don't even need to know who the seller is. They're buying a specific car. And so we've invented a way everything from listening to the engine of a vehicle to having the exterior imaging leveraging artificial intelligence and think full, full condition of a vehicle, leveraging our inspectors, which is close to 800 inspectors across the country, and this unbelievable tech platform. So that, you know, brought the ability to be able to buy cars remotely. And the buyer is very consistently over 300 miles away from the seller. So by building this trusted marketplace for buyers, it meant that sellers can now increase their reach, who they're selling their vehicle vehicles to. So instead of just selling vehicles to people who showed up at the local auction, what ACV did was bring in trusted a buyer, meant increasing reach to the seller, and no need to ship it off. You could just sell it right from the dealer's lot instantly, faster cash for the seller, and more satisfaction for the buyer. So maybe taking a step back, talking, you know, macro. Within the auto industry, there's been supply challenges. Anyone who's kinda bought a car recently knows the affordability's becoming a, a bigger, problem or has been a problem. You know, how does maybe new car inventory trickle into used car and wholesale? And, how do these pricing dynamics kind of impact ACV? Yeah. So if you take a step back, you say, "Okay. What is the automotive marketplace?" Meaning dealer to consumer. There's approximately in 2019, 17 million new cars sold to consumers and approximately 34 million used cars of the 44 million used 'cause taken out basically peer to peer. So we look at the size of the market. Obviously, used has been larger than new for quite some time. But by new going down by several million vehicles a year, it meant there was less trades. And it meant that there was less cars coming into dealerships, which also meant that dealerships had less sort of optionality of what they could retail. So they really had to take whatever trades and sort of keep them. So it really contracted our available cars the last few years. So what's happening most recently over the last, you know, let's say 6-12 months is new cars are starting to come back, meaning now that's a way for dealers to get trades. Used cars are still a little low, compared to historical numbers. That probably has to do more with interest rates than anything else. But all in all, as new cars come back, used cars come back, more trades come into dealerships, and ultimately we will see behavior get a little bit more back to where it was in 2019, which means our market, which was about 11 million dealer wholesale cars a year in 2019 - this is dealer without commercial - went down to about eight million. So we should see the eight million sort of dealer wholesale market go back to 11 over the next few years. At what rate, it's hard to guess. We should see the market kinda come back. So, amid all of this, ACV's been able to gain share. So, you know, as interest rates come down, how quickly do you anticipate kinda the auto industry reacting? Can it react quickly? Kind of if so, or even if not, does ACV's share gain start to accelerate? Or do you just kinda continue to run the same playbook and gain the same level of shares just on a larger base? Yeah. One of the things we did in our recent earnings call, Nick, was to really state our midterm objectives as something we plan on hitting, sort of with or without the market coming back. And so instead of pointing to a specific year, really, to your point, if we just keep hitting our market share gains, we've had great execution. We've continued just to execute really, really well, consistent execution on taking market share. We've now opened up additional TAM opportunities with commercial. We've shared to our investors between from analyst day last year in June to now, like, how we think about the dealer wholesale market, how we think about the commercial market. And we're executing really, really well on that. So said another way, we're just gonna keep executing. The market conditions are the market conditions. We really feel great about over the next few years, you know, hitting the numbers we've been telling investors are now set as our midterm objectives. Kinda we don't have to always be kinda counting on our macroeconomics of, like, what's happening in the market. There should be a tailwind eventually, whether that's this year or next year or the following year. There should also be a tailwind. But if we just keep executing, we're gonna hit these objectives. Switching to dealers. So if we talk macro, let's kinda get into more of the nuts and bolts of ACV. You know, I think there's around a third of franchise dealers who are on, you know, on or using the marketplace. You know, what factors contribute to kind of winning those? And then when you think about the remaining dealers, is there hesitancy? Is there brand awareness? Can you speak to maybe, you know, what it takes to continue adding dealers? Sure. So I'll talk about both from a seller and a buyer perspective. From a seller perspective, you know, many of these dealers historically, you know, let's say they're using a physical auction. They're you know, they've already got somebody they're working with. They've been working with that company for, let's say, 30, 40, 50 years. You need to kinda pull them into our ecosystem by building the trust that our one, our product works; two, how we're gonna handle titles and getting them their funds and everything. It's all gonna go smooth. We'll we part of our value proposition is to tell them, "Hey, we've got this product called Go Green. We'll even take the risk of arbitration. You don't have to worry about the car coming back to you if it's not as represented." Okay. They have to. Does that go well? So look at it as the seller money needs to feel comfortable that this value proposition works. We've shown our investors that over the course of a handful of years in most territories across the country, we've been able to take market share. We start with a specific seller with, let's say, one car a month, two cars a month, three, four, five. Next thing you know, we've established ourselves as getting decent market share from that specific seller. So long-winded way of saying, Nick, it's not like it's an overnight thing. The good news is we started years ago. We're on our path. We're incrementally winning share, as you can probably see from our numbers, very consistently, taking almost the same market share quarter after quarter after quarter. We just plan to keep doing that. On the buyer side, about getting more and more buyers, it's a similar thing. Let's say that buyer buys 50 or 100 cars a month in the local auction, buy a car in ACV, the condition as described. You know, you feel comfortable. It shows up. The title shows up. You know, the vehicle shows up. ACV Transportation's being leveraged to have the vehicle shipped to them. So it's really just getting them to use it, get comfortable, and then we end up getting more and more wallet share. So look at that's really historically. Then in addition to all that, we've got new products to help us win share. And the new products are products like ClearCar. ClearCar's helping primarily our sellers buy more cars from consumers. This is leveraging our artificial intelligence, our data moat to help them buy cars from consumers. So think about at the end of the day, our share gains have come from just blocking and tackling, just going out there and getting dealers a trial of the product. And now we'll expand what we're doing by also bringing additional value added products that help dealers sort of win in their market. Maybe focusing a little bit on dealer behavior on both the sell side and the buy side. You know, as far as kind of winning new dealers and their behavior, is it fairly consistent? Do they kinda come on and do one or two and then ramp to more volume in kind of similar predictable patterns? Pretty consistent. You know, most companies aren't gonna take the 20+ wholesale cars a month and just give them to you the next day. They're gonna start trying you. They're gonna make sure it works. They're gonna give you a few cars. And then what typically happens, let's say after let's call it a year to two years, they end up deciding which cars they believe ACV's doing better and which cars the physical auction locally's doing better. And so your objective is really then to, if you interview some of our dealers, some of them are gonna say, "ACV does better with the low-priced cars." If you interview the other half, they're gonna say, "ACV does better with the high-priced cars," which is just hilarious, okay, 'cause we do better in both. But it's really about them coming along, that path. Our objective is to really build, build that confidence that we can help them sell these cars for more money and faster. It, it typically takes several months. Maybe from the buy side, you know, conversion had some volatility as the market was volatile or the industry was volatile. What's going on with conversion in the business today? Is it stable from here? Yeah. Conversion rates are pretty much back to historic averages. So, conversion rates have settled in. What Nick's bringing up to those who not familiar is there, there was periods of times over the last couple of years where the number of cars that were selling in a given month either went higher or lower as used car values were all over the place. But you're just seeing a gradual decline in used car values. And that gradual decline in used car values is actually a good thing for the overall market. And so really we what we've settled in is then from a conversion perspective sort of back to normal. Let's shift gears to transportation. Today there's mid-50% attach rates. You always kind of talk to improving cycle times. 80% are self-dispatched. You know, high teens gross margin, I think, is already in line with kinda the midterm target. So the business line's performing well. You know, where do you see attach rates on this business going longer term? And, you know, how does the offering compare to other transportation solutions? You wanna start? Yeah. Sure. Yeah. So we're mid-50s attach rate. If you really take a step back and think about when transport is required, typically 25%-30% of buyers on our platform are local buyers. And therefore, they don't need our transport or anyone's transport. So that leaves 70%-75% of the unit volume that we can attach to. So, you know, mid-50s attach rate of the total means we're already kinda generating a significant portion of revenue from a lot of those transports. So we're pretty much where we wanna be, you know, both midterm and long term. And same thing goes for our margin targets. We've already achieved our mid and long-term margin targets as well on the transport side. The only other variable would be off-platform. So we've started just dipping our toe into the water. We've now got the platform available, you know, for transport outside of our marketplace. That's a relatively small number today. It'll probably grow to pretty good clip, but it's not necessarily material enough for us to really quantify at this point. So that, that would be the only future opportunity in terms of more unit volume, for our transport business. Great. Let's kinda do the same exercise with ACV Capital. Strong attach rates. It's low double digits, robust loan volume, RPU growth. Echoing kinda the previous question about transportation, what's the growth potential here? You know, how do you envision this business line long term? And kinda what are the key factors that drive the attach rate? Yeah. So for context here, our attach rate for ACV Capital today is just low double digits, so just over 10%. Our target attach rate is 25%. This is very attractive business. It flows through our P&L at roughly 90 points of margin. So it's highly accretive to the bottom line. You know, and really the opportunity there is pretty significant. You know, if you really look at some of the bigger players in this market, like AFC, which is, you know, part of OPENLANE, it's public, you know, you can see that these are pretty substantial businesses generating a lot of cash flow. So, for us, it's continuing to increase our attach rate. We just recently implemented what's called a loan management system, which is essentially an ERP system for a lending business. So we just literally went live with that, the last month or so. That'll give us kinda more flexibility in terms of the kinds of structures we can bring to buyers. And similar to transport, there's an opportunity for us to also go off-platform. You know, we have a lot of buyers on our platform today that use other floor plan providers. And they're still transacting on our platform. But you know, we don't get to compete for that business. So being able to offer services to those buyers, even though they may not necessarily be transacting all of their business on our platform, is another upside opportunity for us. So we still feel pretty good about the opportunity to scale that business. We are being a little more conservative right now, just due to the financial landscape and the risk profile of some dealers. So, you know, we're still growing at a really good clip. But, we've kinda metered back some of that growth just to manage, manage risk. Great. Great. Let's, I wanna switch gears to technology and innovation. There's always kind of a fun topic for ACV. You know, to name a few, there's ClearCar, which you already mentioned. There's Copilot. There's Apex, which I think is beta testing, being able to sense smells in a car, which is really interesting. Various AI-powered applications. How are dealers reacting to all these advancements? I'll give you a couple reactions. So the fun thing is, you know, when we started talking about ACV a handful of years ago, excuse me, dealers would say for fun, "Well, you can't smell a car over the internet." Well, now we can, right? Our device, Apex, and just to think about how significant any of you ever been in a rental car, and you've gone into a rental car, and somebody was a smoker, it's awful. Well, that changes the value of that asset. And with our device, Apex, it's got, you know, about a dozen sensors in it right now. One is listening to the engine. One is smell. If you look at it as almost like the anatomy of the vehicle, we're getting that. We're starting to get that breakdown. Then what this data does for you is you now know what a car's supposed to sound like, what how it's supposed to smell, and all these other aspects. Well, you know a good car from a bad car. So what dealers are asking is, "Listen, they want these tools not just for wholesale. They want these tools more generally." And it's one of the more requested things. So we've been careful not to create any precedent. But we're getting a strong request from dealers to say, like, "We wanna leverage your tools more generally." So more to come on that topic. But it's been an amazing journey 'cause we're really doing the things so far that dealers did not think was possible. Obviously, it's elevating our brand 'cause when you think about, you know, digital wholesale right now, more and more dealers think ACV. Two, when they think technology innovation, they're thinking ACV. So use your example with a new product, ClearCar. ClearCar is a brand new product. It's leveraging this data moat of one million inspections we're doing a year. And it's helping dealers buy cars from consumers. So it's expanding this data that we were just using for wholesale and now helping them, them really expand their reach of cars they're buying. So think not only will this data and technology platform help us keep winning share in our wholesale business, but it's gonna help us solve a broader problem set. Whenever you can add more value to a customer, to a partner, there's a higher chance not only you're gonna win their share, but there's a higher chance you could win more share, retain your share, and defend yourself against others. So we feel like we're in a really good spot to both win the business out there, retain the business because we've got this technology platform that really no one else in the world has. So as you integrate the technology into, let's say, the, like, the inspection process, does this get reflected in arbitration occurrences? You know, how are dealers using this? Does it help them better gauge, you know, how much reconditioning they may need to do? Is there any way to kinda quantify the impact on how this shows up and becomes a competitive advantage? Yeah. I'll start out at a high level and Bill, if you wanna add any more. But the key thing is our arbitration costs went down year-over-year, all right, in a tough market. Used car values were coming down. I think a lot of investors or the skeptics were thinking our arbitration costs were gonna go through the roof. Instead, they went down a little bit year-over-year in a tough market. It's easy to get your arbitration costs to go down in a market that's improving, okay? So that is purely us getting in there, knowing where are the areas of the vehicle being arbitrated. And we still have some more room to go here. But we've done a great job there. Second is just winning share. You're seeing us win share pretty consistently in a tough market. You win share because you've differentiated yourself. So look at both how it's impacting our model but also helping us win share. Great. Thanks, I think we had a question following up on this. Yeah. Just curious if you can just talk about, of your revenue, how much is coming from the buy side versus the sell side. And, you know, in marketplaces, it's usually born by the, the side that's sort of, I don't know, more desperate is the wrong word, more motivated. I would have thought that's the sell side. But my, my understanding is that you're getting more from the buy side. Can you just walk me through that? Yeah. Certainly. So this wasn't a, the area of dealer wholesale and, and also commercial wholesale, this wasn't like a new TAM, right, that we invented. There was already you know, when you look at dealer and commercial combined, somewhere around 20 million cars, you know, prior that were being bought by dealers. So as we came into this marketplace, you know, sellers historically were paying the lo the smaller amount. Buyers were paying the, the majority. So at a really high level, think about it as like one, one-third. It's about one-third, two-thirds. One-third, two-thirds. As like a rough, rough math, the sell side is pretty much flat fee. And the buy side is based on the price of the vehicle. And so you've seen our fee, you've seen our revenue per unit go up even with GMV going down. And that's because our buy side has historically been much lower than the traditional auctions. And we, we've demonstrated to our investors is we, we had a target revenue per unit between sell and buy combined from auction fees and Go Green look at us those three, three revenue streams together and sort of $500-ish in our RPU in our midterm model. Last year, we ended about $450-ish between those three fees, sell fees, Go Green, and buy fees. We feel really, really good about that. Why is it that the sell side should be a flat fee? Why shouldn't you share the benefits of producing a vibrant marketplace where the price goes up and you get paid more? I mean, I love the idea. And we assume we try a lot of things, okay? That might be one of the many things we're trying. But it wasn't the market we came into. So whenever you're disrupting an industry, you wanna debate product disruption, you know, business model disruption, and pacing, right? So 'cause at times, you wanna go in there with a business model that they kind of understand. And then but to your point, as you launch new products, products like you mentioned, are things you can innovate over time. But we went into the industry with a big part of the business model being a model they already understood. But then we're starting to create a little business model innovation over time, certainly. Anyone else? Well, let's talk, you know, you mentioned data moats and your kind of data advantage. You know, I got to see a demo at NADA a few weeks ago. It was interesting 'cause one of, you know, one of your employees was giving me the demo. I think I got to see a car that just happened to hit the marketplace twice. Okay. And being able to see a lot of the data that they're able to kind of reference. So can you kinda speak to the, you know, the power of the data and, and situations like that? I don't know how frequent it is or just, you know, longer term. How interesting is the data you're gathering into kind of taking more and more share? Yeah. Certainly. So when Nick was referring to where he got this demo is, the National Automobile Dealers Association, referred to as NADA. It's once a year. This year it happened to be in Vegas. So you come in and dealers and commercial companies come in and get to see the latest and greatest. It's sort of like our Super Bowl in our industry. And then also some of the analysts like Nick go. And it's really great. So, to answer your question specifically, we the amount of data we're getting on a per-vehicle basis is just deeper, look at it as deeper than what anyone has ever done before, right? There wasn't a company that scanned the undercarriage of a vehicle, listened to the engine, paint metered, did a paint meter on each panel. This curation of data and all of you have been, you know, I try not to throw out the AI buzzword. You know, you'll hear me say machine learning. You'll hear me say AI just 'cause you're probably all tired of hearing every company talk about artificial intelligence. But look at it this way. The companies that are gonna leverage data, leverage artificial intelligence will be the companies with the largest but the most curated data pool, right? Not just largest. If you just have a trickle of data everywhere, right, you could have 50 million data entries. But if it's all vanilla, there's nothing to do with it. If you can say in that specific car Nick mentioned, to see the same cars ran on a platform twice by two different sellers over the course of probably three or four, five years, that's incredible. We got to look at it once. We got to scan the undercarriage. We got to listen to the engine. We got to have all this data. And so the whole mission here when we kicked off this business was we're gonna bring transparency and trust to used vehicles. Digital, I mean, really, what digital is, digital the opportunity to make digital a real thing in this industry is simply make transactions so simple, so easy. You can sell cars like you could any other asset. And that takes this real, material, and curated data moat. So we think it's really important. And we think that not only allows us to take the dealer wholesale TAM, it allows us to start to break into the commercial TAM. And it also allows us to launch new products that add more value. Great. So we're in overtime. So I guess just to wrap our conversation, what do you think the biggest misconception is by investors of ACV Auctions? And what do you want everybody to walk away from this conversation with? So I think this year is an inflection point. We probably went public and where you and many investors kinda looked at us as like a class of IPOs that, you know, us and among a few others. The one investor said it today. It was a bunch of folks that were just going after a large TAM. And will they ever make money? We're a unique company we believe to look at. One, execution here has been very consistent. We've been showing our unit economics at a territory and region level. If you go back to June of last year, we're hitting EBITDA targets at where we have density at a region level for our midterm model. We've been doing that. We show you those EBITDA metrics we're hitting. That's all in. It includes our tech team of 400 teammates, our G&A. It's all in. So one, strong execution, proven model. This year, we turned positive from an EBITDA perspective. And I think kinda dispels no longer attaching us to, like, the IPOs that went over a few of those years to not only a growth company, a growth company that's gonna make money. And I think this last earnings call was a little bit of a breakthrough of probably a bunch of investors who weren't looking at the stock now go, "Okay. This is a company that's also gonna make some real money. Great. Well, George, Bill, thank you so much for coming again this year. Yeah. Thank you, Nick. Thanks.