Greetings, and welcome to CarGurus, Inc. first quarter 2022 earnings results conference call. At this time, all participants are in listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I'd like to turn the conference over to your host, Kirndeep Singh, Vice President of Investor Relations. Please go ahead. Thank you, operator. Good afternoon. I'm delighted to welcome you to CarGurus' first quarter 2022 earnings call. We will be discussing the results announced in our press release issued today after the market closed and posted on our investor relations website. With me on the call today are Jason Trevisan, Chief Executive Officer, Scot Fredo, Chief Financial Officer, Sam Zales, President and Chief Operating Officer, and Bruce Thompson, Founder and Chief Executive Officer of CarOffer. During the call, we will make statements regarding our business that may be considered forward-looking within applicable securities laws, including statements concerning our outlook for the second quarter 2022, management's expectations for future financial and operational performance, our business and growth strategies, our expectations for CarOffer's business and acquisition synergies, the value proposition of our current product offerings and other product opportunities, the impact of the semiconductor chip shortage and other macro-level industry issues, and other statements regarding our plans, prospects, and expectations. These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed after market close today and in our most recent reports on Forms 10-K and 10-Q, which along with our other SEC filings can be found on the SEC website and in the investor relations section of our website. We undertake no obligation to update forward-looking statements except as required by law. Further, during the course of today's call, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our press release issued today as well as in our updated investor presentation, which can be found on the investor relations section of our website. With that, I'll now turn it over to Jason. Thank you very much, Kirndeep, and thank you to all those joining us today. 2022 is off to a terrific start. While macroeconomic factors continue to challenge the automotive industry, CarGurus remains at the forefront of providing innovative solutions to both our dealer partners and consumer audience during these dynamic times. In 2021, we transformed our business by acquiring CarOffer, launching CarGurus Instant Max Cash Offer, and accelerating our digital retail capabilities. 2021 was the year of transformation for our business, and 2022 is the year of activation, in which we plan to execute on the potential built last year by activating Digital Deal on our platform, lighting up new geographies for CarGurus Instant Max Cash Offer, adding more dealers on CarOffer's Matrix, and introducing new bundling options across our different offerings. As we initiate these new aspects of the business, we are also unlocking synergies that are made possible through the combined potential of our foundational listings business with the digital retail and digital wholesale businesses to create an end-to-end transaction-enabled marketplace for consumers and dealers alike. For consumers, this means a place to transparently shop, finance, buy, and sell from the largest selection of dealers inventory in the U.S. For dealers, it means the ability to efficiently source, market, and sell to the largest and highest intent consumer audience in the U.S. As we continue to make this vision a reality, I'm pleased to share CarGurus achieved exceptional results and exceeded our forecasted revenue guidance for the quarter. Revenue for the quarter from our CarOffer business, inclusive of our dealer-to-dealer business and Instant Max Cash Offer, was $267 million, growing 50% quarter-over-quarter and over 1,600% year-over-year. The industry's first instant trade platform for vehicle acquisition and disposition continues to garner dealer traction as indicated by the dealer base expanding to 10,850 in enrolled dealer rooftops at the end of Q1. The joint CarOffer and CarGurus sales teams added another 1,750 rooftops this past quarter. As we continue to grow the network, we're able to diversify the dealer base utilizing the Matrix and further enhance the types of vehicles transacting on our platform. Gross merchandise sales or GMS for our dealer-to-dealer business and Instant Max Cash Offer was approximately $2 billion, declining modestly quarter-over-quarter. Each quarter since the acquisition of CarOffer, we have gained a deeper understanding and appreciation for how fluctuations in wholesale and retail prices affect our dealer partners as they continue to navigate the ongoing semiconductor chip shortage. Two factors drove relatively more subdued dealer wholesale behavior in Q1. One, dealers witnessed wholesale prices start to retreat throughout Q1. Two, retail consumer demand continued to moderate as a result of historically high prices, rising auto loan rates, inflation, and delayed tax refunds. Nonetheless, our dealer-to-dealer business generated $105 million in revenue in the first quarter, growing approximately 12% quarter-over-quarter and over 575% year-over-year. The growth this quarter also included changes in our revenue mix. We saw a slight decline in transactions, but an increase in fee revenue as we increased our buy and sell fees at the beginning of March from $275 - $325, and increased inspection cost to $110 from $90. Additionally, we had an increase in transportation services revenue, which is low margin revenue relative to transactions through the assumption of transportation for a large customer who is experiencing a material backlog of vehicle pickups. In spite of continued unpredictability of the effects of the global pandemic and supply chain issues on the used and new car markets, I'm pleased with the impressive growth and adoption of CarOffer to date. There remains a long runway for growth as we continue to further penetrate the U.S. dealer market and provide them with our unique solution to meet their inventory needs. Furthermore, the profitability of the CarOffer business during its infancy highlights the efficiency of the model. Of the $267 million in CarOffer revenue, our Instant Max Cash Offer business generated approximately $162 million, exceeding the high end of our forecasted guidance for the quarter and growing 92% quarter-over-quarter. In Q1, we expanded our coverage to five additional states, now covering approximately 80% of the U.S. While expansion primarily took place towards the end of the quarter, expansion into new markets accounted for 23% of the quarter-over-quarter growth, while growth in existing geographies accounted for 77% of the growth, largely driven by improved consumer conversion. This quarter, transactions more than doubled. Much like the last two quarters, we continued to optimize CarGurus Instant Max Cash Offer or Instant Max for short. We have added more self-service options as well as greater automation to further enhance the consumer experience. Our virtual inspection intake pilot allows consumers to set up a video call with a CarOffer specialist to improve our condition assessments. Our online appointment scheduling system allows consumers the flexibility to schedule driveway pickups online and was utilized by 85% of consumers. These enhancements provide users more optionality and convenience to complement receiving the highest and most competitive offer from thousands of dealers. As we approach national coverage, we will continue to optimize and refine the Instant Max experience for both our consumer and dealer partners. We believe over the long run, we are positioned to capture meaningful market share as CarGurus is the only U.S. marketplace where the largest network of dealers and the largest consumer audience can transact instantly and at scale using our Instant Trade technology. Turning to our foundational listings business, I'm thrilled to share we exceeded our forecasted marketplace revenue for the quarter. This robust performance was driven by healthy dealer additions and revenue expansion. In the U.S., our listings business had strong paying dealer additions in the quarter, up 359 from Q4, growing dealer counts across all our dealer segments. Net dealer adds this quarter were evenly split between new dealer additions, as well as dealers who churned off our platform during the pandemic and the semiconductor chip shortage and have since rejoined. In addition to improving dealer counts, we saw growth in quarterly average revenue per subscribing dealer or QARSD. This quarter, U.S. QARSD grew approximately 5% year-over-year to $5,713. QARSD growth was primarily driven by higher paying dealer additions, greater upsells, and increased adoption of RPM and Area Boost. In addition to growing and innovating our listings business, we're also focused on continuously providing exceptional customer service to our dealer partners with a strategic emphasis on retention and growth. This focus has allowed us to grow our dealer base while witnessing materially lower churn in Q1 when compared to historical averages since the beginning of the pandemic and chip shortage. Internationally, we ended Q1 with 6,648 paying dealers, down modestly quarter-over-quarter. We saw QARSD grow by 40% to $1,556 year-over-year as a result of existing dealer revenue expansion and one-time discounts offered to select accounts during the lockdown last year. In Q1, we launched Digital Display in both the U.K. and Canada, also known as RPM in the U.S. The pilot demonstrated that dealers utilizing digital display were able to target low-funnel CarGurus customers who have not only visited their own listings, but viewed similar vehicles from other sellers and drive them back to their own websites. Since launching digital display, we're seeing very strong click-through rates to drive dealer adoption. We are thrilled to see strong receptivity for digital display and are excited for our international dealers to leverage the same capabilities that are available to our dealers in the U.S. It is through product innovation and outstanding service that will continue to drive growth in our listings business and provide our dealer base with the highest ROI in their markets. In the spirit of always innovating the core functionality of the listings business, in the fourth quarter, we tested and launched new digital retail pilots for deposits and hard pull financing that allowed consumers even greater flexibility and optionality in completing their purchase. These pilots and existing offerings allow our dealer partners to offer our 31 million unique monthly visitors a convenient self-selective journey, all while providing trust, transparency, and the best pricing from the largest selection of inventory in the U.S. Following the success of our pilots, at this year's NADA conference, we shared a preview of our upcoming digital retail offering, Digital Deal. Digital Deal is an evolution of our CG Convert offering, helping dealers close more business from the 60% of CarGurus auto shoppers who prefer to do more of the car buying process from home. Our Digital Deal solution provides dealers with high-quality sales opportunities by moving shoppers further down the purchase funnel before a dealership visit by allowing them to build a near penny perfect deal online, including dealership, finance, and insurance offerings, and scheduling an appointment to visit the dealership to finalize the sale. If enabled by the dealership, shoppers will also have the option to place a $500 credit card deposit to reserve the vehicle for 72 hours. Digital Deal has been made available to select dealers at NADA and will be available for all dealers to opt into later this month. This new product is designed to help dealers compete with online retailers. It empowers dealers to close more business with less time and effort. Digital Deal leads are 2 x more likely to close than traditional leads. Combined with Area Boost, Digital Deal gives dealers the ability to sell online in both their local market and as far outside it as they would like. Not only does Digital Deal provide tremendous value to dealers, but car shopper satisfaction is 2.5 x higher than standard CarGurus leads, creating a mutually beneficial offering for our consumer audience and dealer partners. We're excited to launch Digital Deal later this month. With this launch, we're closer to creating a full end-to-end digital retail solution and providing a unique offering to serve our consumers and dealers who wish to have a digital to in-store experience. We believe our digital retail capabilities will level the playing field for our dealer partners who are unable to provide these solutions to consumers on their own and/or wish to utilize our largest consumer audience to sell additional inventory through the CarGurus digital retail platform to drive greater profitability. With innovative new solutions like Digital Deal and Instant Max Cash Offer, we've been able to realize the full benefits of the efficiencies and synergies that exist when you create a transaction-enabled marketplace. Formerly, the main value of each consumer came from their VDP lead submission. However, since expanding our business, we are able to increase the value of our shoppers as they interact with multiple products across our platform and thus increase our revenue per consumer. This allows us to gain leverage in our marketing spend as we grow the contribution from a consumer across multiple products. For example, approximately 50% of our Instant Max Offer savers view a VDP for a new purchase. These consumers are high intent shoppers at the bottom of our funnel who are interested in both selling their car and purchasing a new one. Increasingly, we're able to target these types of consumers and help them engage with even more of our product offerings. Heightened consumer activity creates leverage with our marketing, allowing us to capture synergies from a transaction-enabled marketplace that did not exist previously. Furthermore, as we create a stickier platform that services the full life cycle for dealers as well as consumers, we are able to bundle our offerings to capture additional synergies and revenue. This past quarter, we began two small pilots designed to increase dealer engagement in our full product suite. The first is offering advantaged pricing to non-listing dealers who are utilizing our CarOffer platform, and the second is offering dealers that are on both CarGurus and CarOffer favorable pricing on their listings subscription by meeting monthly CarOffer transaction volume thresholds. Although we are in the early stages of tying our offerings into one cohesive product suite for our dealer partners, bundling incentivizes dealers to utilize more than just one of our many offerings to improve their business. All in all, we're thrilled with our first quarter results. We're proud of the growth of our foundational listings business as well as the profitability of CarOffer, both driving incredibly strong top and bottom line results. While the semiconductor chip shortage continues to cause near-term inventory uncertainty and volatility, we continue to deliver tremendous shareholder value, all while pushing forward our vision of creating a full end-to-end transaction-enabled marketplace. We're combining our foundational listings business with digital wholesale and digital retail to create the only end-to-end automotive transaction-enabled marketplace in the U.S. for consumers to transparently and confidently shop, finance, buy, and sell from the largest network of dealers, and for dealers to efficiently source, market, and sell to the largest and highest intent consumer audience in the U.S. We are focused on increasing optionality and convenience for both dealers and consumers by providing consumers flexibility to complete a sale or purchase in a manner that works best for them and offering dealers more choice to tailor their product suite that best serves their individual business. Each transaction is unique. We are committed to creating solutions that mutually benefit the various needs of consumers and dealers. None of these incredible results or innovative ideas would be possible without each and every one of our team members. I would like to take a moment to express my gratitude and appreciation to our employees globally. After a little over two years, I'm excited to welcome our employees back to the office in June. The pandemic created new challenges and disrupted not only our work lives, but our personal lives as well. Nonetheless, over the past two years, our employees embodied our core values and continued to innovate and drive our vision forward. It's through their commitment and passion that we were able to turn our vision into a reality. Now I'll turn it over to Scot to discuss our financial results. Thank you, Jason. I'll provide a detailed overview of our first quarter performance, followed by our guidance for the second quarter of 2022. Total first quarter revenue was $430.6 million, up 151% year-over-year, and nearly $21 million ahead of the high end of our most recent guidance range. Marketplace revenue was $163.3 million for the first quarter, up 2% from the prior quarter and up 5% from $155.8 million in the prior year. The growth in marketplace revenue was primarily due to the increase in our foundational listings revenue, driven mostly by an increase in our paying dealers in the U.S. quarter-over-quarter. Wholesale revenue was $91 million for the first quarter of 2022, up 559% from $13.8 million in the prior year. Compared to the previous quarter, wholesale revenue grew 10% in the first quarter. The increase in wholesale revenue compared to the prior quarter is mostly due to the increase in transportation revenue that Jason mentioned. Lastly, our third and final revenue component, product revenue, was $176.3 million for the first quarter, up 9,896% from $1.8 million in the prior year, and up 84% from the previous quarter. The increase in revenue from the prior quarter is primarily due to transaction volume growth associated with Instant Max Cash Offer. I will now discuss our expenses and profitability on a non-GAAP basis, which backs out our stock-based compensation expense, amortization of acquired intangible assets, acquisition related expenses, and net income attributable to redeemable non-controlling interest. First quarter non-GAAP gross margin was 44% compared to 59% in the prior quarter and 86% in the year ago quarter. The change in non-GAAP gross margin is primarily due to the growth of Instant Max Cash Offer and its associated costs of acquiring vehicles directly from the consumer. Additionally, the contraction was due to an increase in transportation and arbitration costs associated with the dealer-to-dealer services. Total first quarter non-GAAP operating expenses were $125.2 million, up 27% year-over-year. Non-GAAP sales and marketing expense decreased 3% compared to the previous quarter and increased 28% year-over-year to $83.6 million. Non-GAAP sales and marketing expense represented 19% of revenue, down from 38% of revenue in the year ago period. The slight decrease in non-GAAP sales and marketing expense compared to the previous quarter is primarily due to the efficiencies in our paid traffic acquisition spend as we realize synergies that Jason previously mentioned. However, compared to the year ago quarter and moving forward in 2022, while we would expect these efficiencies to remain, we will have increased expense as we invest to market Instant Max Cash Offer and seek to increase our brand awareness among consumers. Our first quarter non-GAAP product, technology and development expenses grew 25% versus the year ago period to $24.3 million. The increase is primarily due to an increase in employee related costs as a result of a 30% increase in headcount and continued investment in our technology teams to grow our new areas in digital wholesale and digital retail, as well as new features and enhancements to our marketplace subscription products. We generated non-GAAP operating income of $62.2 million, representing a margin of 14% and in the middle of our guidance range. Non-GAAP diluted earnings per share attributable to CarGurus, Inc. were $0.36 for the first quarter, $0.03 above the high end of our guidance range. On a GAAP basis, we generated first quarter gross margin of 42% compared to 86% in the year ago period. The contraction in gross margin is primarily due to the reasons previously discussed, in addition to amortization of acquired intangibles of approximately $5.4 million that were previously recorded in operating expenses and are now included within cost of revenue. We incurred total operating expenses of $155.2 million, up roughly 28% year-over-year. The increase in operating expenses was primarily driven by an increase in payroll and employee related benefit expenses as we increased our headcount supporting our core business over the last year by 13% as well as increased headcount as a result of the CarOffer acquisition. First quarter GAAP operating income increased 3% year-over-year to $26.7 million. First quarter GAAP net income attributable to CarGurus, Inc. totaled $19.9 million, and first quarter GAAP net loss attributable to common shareholders totaled $62.1 million, primarily due to the accretion of redeemable non-controlling interests to redemption value of $82 million in the first quarter. We ended the first quarter with $375 million in cash and investments, an increase of $53.1 million from the end of the fourth quarter. The increase was driven by a $40 million decrease in our accounts receivable balance, a $30.1 million increase in accrued expenses, offset by $23.6 million in payments made to our third party processor related to CarOffer. We generated $93.1 million in cash from operations in the first quarter and $89.3 million of non-GAAP free cash flow, which includes capital expenditures and capitalized website development costs of $3.7 million. I'll close my prepared remarks with our outlook for the second quarter of 2022. We expect our second quarter revenue to be in the range of $480 million-$510 million. Similar to previous quarters, we are providing second quarter revenue guidance for Instant Max Cash Offer, which we anticipate to be in the range of $219 million-$239 million. We are estimating non-GAAP operating income in the range of $44 million-$52 million and non-GAAP earnings per share in the range of $0.26-$0.29. We expect non-GAAP operating income to contract in Q2 compared to Q1 as we increase our marketing spend to drive consumer awareness and continue to invest in technology and building our team to drive long-term growth. With that, we look forward to seeing some of you at our upcoming Investor Day, and now I'll open up the call for Q&A. Thank you. At this time, we will be conducting our question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. As a reminder, we request to limit to one question and one follow-up. Our first question is from the line of John Colantuoni with Jefferies. Please go ahead. Just looking at CarOffer, it looks like average gross merchandise sales per dealership moderated about 30% sequentially in the first quarter and about double -digits year-on-year. Can you just talk to how this compared to your expectations and whether any recent moderation in consumer demand for used cars is impacting, you know, how dealerships' willingness to buy programmatically? Then also, you know, maybe you could talk about how engagement at CarOffer has trended in recent months. I have a follow-up. Sure. Sam, you want to take a shot at this, and if, Bruce, you want to add anything? Happy to start, John. Thanks. Sam Zales, and I'll turn it to Bruce, the expert on this in a minute. You're talking about the sequential fourth quarter to first quarter, and I'd say the industry as a whole was impacted by wholesale pricing. When wholesale pricing drops, that is a volatile time, and it makes dealers cautious about buying and selling, and that's a factor we talked about last third quarter of last year. That dynamic impacts the business. Second comment is consumer demand, as you just said, is soft right now in the market, and that does also impact how dealers think about, you know, transactions and how much inventory they need. As you said it, and we look at second quarter starting to kick off, that wholesale pricing model changes. Wholesale pricing is starting to head up again, and that is always good news for confidence in dealers, transacting both on the buy and sell side. That is the impact, as you think about it from a macro perspective. Let me turn it to you, Bruce, if you have any more to share on that front. Yeah, I would just basically reiterate what you're saying, Sam. Also, that, you know, we had incredible December and January. Speaking to your point, I think wholesale prices came down 6.4% since the first of the year. That being said, you know, we have today more programmatic buyers on the system as of today than we've ever had. We've seen a rapid expansion of that. A ton of momentum going into this quarter. You know, given the headwinds there, and particularly February, you know, and our aggressiveness too in Instant Max Cash Offer, I mean, we're learning every day. Basically in about six months or so set up a billion-dollar business, and we wanted to get aggressive there. You know, as we're buying these cars, we're finding out, you know, picking up these cars from consumers, paying these consumers on the spot, we're learning a lot. Really getting that dialed in, feeling very, very good about that, you know, as we move into this month and next. Great. I wanted to ask one about the marketplace. You know, with dealerships seeing a moderation in used car demand, you know, could you see that benefiting CarGurus as dealerships look to boost sales by leveraging more digital advertising? I guess I'm trying to figure out the counterbalance between dealerships trying to offset a drop in demand and, you know, maybe being a little bit more careful about how much inventory that they keep at their dealerships. You could just talk a little bit about how you see that dynamic impacting CarGurus marketplace business? Thanks. Sure. Thanks, John. This is Jason. Yes. I mean, I think you've probably heard us talk in the past about how now that we have a broader and more complete platform that covers. Dealers sourcing, marketing, and selling and full life cycle for consumers as well. It does balance our business more. In a lot of respects, when there are tailwinds in one area, there you know may be headwinds in another and vice versa. As consumer demand does wane, and you've heard us say that, but you've probably seen that in other market data points as well, we do feel that dealers are gonna have to market more aggressively, and that will help our marketplace business. You started to see some of that momentum already in Q1 as we added hundreds of dealers. As long as inventory does remain constrained, though, that is a factor that even if consumer demand goes down and dealer marketing, you know, is tended to go up, if they don't have a lot of cars on their lot, then they may not be as aggressive as they were, say, pre-COVID. But we think that the inventory situation, while remaining, you know, challenged for the foreseeable future, is probably improving from where it was. If consumer demand is less rampant than it was in the end of last year, second half of last year, then that bodes well for our listings business as well as RPM and some of the digital retail products that we're introducing as well. Appreciate the color. Thanks for the question. Thank you. We have next question from the line of Chris Pierce with Needham. Please go ahead. Hey, how you doing? I think Bruce sort of hit on it, but I kind of wanted to go deeper. I'm looking at slide 29. Can you just walk me through CarOffer non-GAAP gross profit margin heading lower? Does it relate to Instant Max Cash Offer where Bruce said you're learning every day? I guess, what are the inputs? Is there contra revenue in there that's causing gross margin to be lower from arbitrage? If you just kind of go deeper on that, I'd appreciate it. Yes. Scot, you wanna take a shot at that? You're on mute. Hey, Chris. How you doing? It's Scot. On slide 29, non-GAAP, I'm sorry, non-GAAP gross profit, that's what you're looking at? Yeah. I mean, we got a huge benefit from the amortization item, right? You can see that on the slide. That trended, you know, very high in Q4 because of that one-time pickup. With regards to overall, I mean, if you look at the GAAP gross profit line, you can see that there's a difference from Q4 to Q1, and that is just a mix issue due to some of the points that were mentioned on the call. We, you know, there was price volatility, so we got more aggressive on Instant Max with regards to pricing, and we compressed gross margins there a bit. We had more transportation costs associated that carried over from Q4 to Q1, so we mentioned that on the call. All of that led to some compression in gross margin quarter-over-quarter. Okay. Bigger picture, kind of what are dealers telling you as we get closer to, you know, the ADESA deal sunsetting or closing, and kind of how are dealers thinking about their sourcing of, you know, and their selling in the wholesale market? I can tell you. This is Bruce. I can tell you from my perspective, I think it benefits us. You know, we are already seeing some momentum there, and I think that will keep translating, you know, as dealers decide whether or not they're gonna, you know, participate with the ADESA brick-and-mortar auctions or the Carvana brick-and-mortar auctions moving forward. I think it bodes well for dealer-to-dealer moving forward, for sure. Okay. Yeah, I mean, this is Jason. Nothing specific yet. Okay. Well, this is Jason. We continue to see a share shift from physical to digital. That is, in the grand scheme of things, still in its early days, but it's a pretty steep transition now, and we think that's gonna continue for quite some time. There's a lot of share to be gained from that. I think, you know, the added element, added benefit that Bruce is referencing is that we have heard dealers specifically say that they're less inclined to work with a group that's owned by a competitor of theirs than they otherwise might have been. Thank you. Thank you. We have next question from the line of Tom White with D.A. Davidson. Please go ahead. Oh, great. Thanks for taking my question. Maybe just a follow-up on the comments about the sensitivity of the volumes in the wholesale dealer-to-dealer business to the wholesale prices. Jason, if you looked out like, I don't know, three or four quarters or whenever we think new inventory is gonna come back online in a meaningful way, do you expect that part of the CarOffer business to be sensitive to that as well? Curious whether you guys have given any thought to adding a subscription based element to that business? Sure. This is Jason, I'll take both of those. On your second question, we have a couple smaller products that are more subscription in nature in the wholesale arena, but it's not the bulk of the business. From, as you know, a wholesale sort of pure middle-of-the-fairway D2D perspective, we think a transaction model is much more sensible there. On your first question, you know, it's gonna be a while for new car production to ramp up and have a really meaningful impact in sort of a macro way on used car pricing. We did see used car pricing at the retail level decline in Q1 and in the wholesale as well, as somebody earlier mentioned some of the stats there. It's not so much that there is a decline per se, it's more that there's uncertainty among dealers in the form of volatility. You know, if dealers had a sense for what they felt was going to be, say, a steady decline in pricing over time, they would still need to source cars and they would still need to sell cars. It's more when there's uncertainty and, you know, concern that they have that there might be sharp changes in the near term or unexpected changes in the near term. You know, we've had such a frothy rising market in wholesale unit prices over the course of the last, you know, call it two years, with two periods where prices flattened and declined, and I think both times it was unexpected. I think it was that uncertainty and that volatility that drove a little hesitancy among them, you know, sort of skittishness, if you will. I think most people who look at wholesale unit pricing in general expect that over the next couple years it's going to return to some lower level than where it is right now, and dealers know that they're gonna need to source cars during that. That's how I would characterize the sensitivity. It's more around volatility than it is around whether it's a decline or an increase. That's great. Sorry, go ahead. Go ahead. Oh, yeah, I just had a quick follow-up. Even in the moments of skittishness, I mean, we think that, A, a digital model still makes more sense, and B, an instant trade platform where you can control your bidding and your selling in a much more, you know, sort of controlled and technical way actually provides comfort in periods of skittishness. You're not as reliant on the outcome of one or set of auctions. Got it. That's really helpful. Quick follow-up. I remember last quarter you guys talked about the rental car companies as being, you know, an active part of that the wholesale dealer to dealer business. Can you talk about kind of their level of activity in the second quarter? And just generally, do you view those, that segment as kind of a durable customer base, or are they just kinda more opportunistic, you know, given that they needed to kinda ramp up their fleets? This is Bruce. My discussion with the, you know, the fleets, you know, basically we think it is a durable channel for us and for quarters and quarters to come, if not indefinitely, as they basically had a migration or shift into buying from the OEMs to nearly new, you know, the channels actually fit very, very well for them. We're seeing that, you know, in the second quarter as obviously as you see transportation and travel across the country ramp up, you know. We anticipate that will continue for us. You know, quarter-over-quarter, I think even from the fourth quarter to the first quarter, you know, we were up nearly $100 million. We're pleased with the performance in the first quarter. You know, as Jason indicated, you know, when markets go up and down, just like the stock market today, you know, when you get a rapid decline, it creates some skittishness, but, you know, ultimately those work themselves out and you get normalization and stabilization and we feel very good about where we are today. Great. Thanks, guys. Thank you. We have next question from the line of Brad Erickson with RBC Capital Markets. Please go ahead. Hi. Thanks. Just on the margin guidance, you mentioned the sales and marketing expense. Can you just unpack the size of that marketing investment and give us some guardrails as to how to think about how much you intend to spend? Just curious also if there's any contribution in there from higher transport revs like there was in Q1, or is that not a factor? Hey, Brad, it's Scot. I'll take this one. There's a couple pieces there. You know, I'm not gonna get too specific on marketing spend, but there's really, I'd say, two underlying elements. Something that we've talked about for about a year with regard to needing to spend more on the core business, and that started to happen a bit in Q4 and Q1, a bit more than we saw in Q2 and Q3 last year, where we didn't have to spend, we spent a fraction of what we spent in Q1 of last year. We're spending more on the core business to drive traffic to the site, you know, good engagement with consumers on the site and convert those to valued leads for the dealers. What we're also investing more heavily in is marketing Instant Max, and that is sort of the other dimension of marketing that has been minimal spend so far on a relative basis. That's where we're spending a lot more in Q2 and expect to beyond Q2 as well. The guidance with regards to earnings really represents an investment in more marketing spend. Also we are, you know, continuing to ramp up the team. We've got a lot of headcount that we're trying to fill across the organization. You know, especially in tech, but really across all teams as well, and CarOffer is growing their team tremendously. It's really people and marketing. They're primarily the investment areas. Then, you know, we're investing a lot in digital retail as well. Got it. Thanks for that. Just on the buy button, you know, beyond what you kind of gave in the prepared remarks, just any updated learnings you can provide there, sort of evidence of success and just any update as you continue to pilot that? Happy to take it, Brad. Thanks. We can't be more excited about the Instant Max Cash Offer product. I think, our conversion rates from our site for consumer saved offers, conversions from saved offers to, transactions are all moving in the right direction, which we're excited about. Oh, I'm sorry, and maybe I'm jumping off here. That's Instant Max Cash Offer. On the buy button, sorry, I'm getting too excited about that one. That keeps moving in the right direction. Sorry, Brad. On Digital Deal, how excited we are for the next phase of that one. As Jason talked about, it's a next expansion of what the Convert product is. What we're adding in capabilities there, you know, is an opportunity for dealers to utilize and see the down-funnel shopper. We're getting data on the interest of that consumer to purchase, and we talked about the close rate on those leads being 2 x the already terrific close rate we get on our general leads that we get in the business. That's because we've now, you know, added this soft pull financing now to hard pull, getting a consumer into the dealer's transaction process. We're fully integrated into the CRM at the dealership, and that process of starting the shop, finance, and buy process for a consumer, we just think is where the industry is going. 60% of our consumers are interested in doing something digitally. They can do that fully digitally or in store to test drive that vehicle. We think we have an advantageous product in the marketplace. Excited to launch Digital Deal. You've heard at NADA, we announced it. We're moving out more formally this quarter, we're so excited to bring that to market in a much bigger way to get more consumers connected to dealers through a digital purchase. Got it. Thank you. Thank you. Your next question from the line of Jed Kelly with Oppenheimer. Please go ahead. Great. Two, if I may. Just one, can you talk about sort of the catalyst behind some of the price increases for CarOffer and you know how big of a pricing ramp do you have? Then just for the product or Instant Max Cash Offer, I mean, how should we think about the gross margin going forward? I mean, do you intend to run that business at you know break even margins to drive consumer engagement? Just how should we view the strategy around the product? Thank you. I'll take a crack at starting these, and others can add. Thanks for the questions, Jed. On the price increases at CarOffer, we were and continue to be a price-advantaged offer for dealers. We're, you know, lower priced from just a pure transaction fee basis than most, if not all, other digital offerings, and certainly on the physical side as well, coupled with all of the convenience elements that we add relative to the physical side, which I think if you looked at total cost of transaction, we would certainly shine there. Between that and dealer satisfaction, we saw an opportunity to increase prices to reflect more of how dealers value it in the market. Is there more in there? I mean, you know, we haven't spoken about that. We just did this one in March. We feel good about that decision, and we think dealers have been incredibly supportive. I think as there are a lot of competing alternatives out there that continue to burn capital, they're gonna feel more pressure to raise prices, which will only rise the tide in the market for us if we wanted to follow suit. We're pretty committed to delivering a ton of value to dealers in that respect. Actually, before I go to Instant Max, Sam, Bruce, anything, or did I cover it? I think you covered it. Okay, great. On Instant Max, Jed, I mean, it is a massive market opportunity. Like we've done in other areas of our business and at earlier stages of our business, we're really focused on the unit economics to make sure that we've got them right enough before we really blow it out. We're focused on the gross margin, and that's why we've put in some extra work to show that this quarter we were at the, you know, low- to mid-single-digit gross margin that we were. Some months we had even higher than that. Other months where it was lower, it was because we were getting more competitive with our offers. We were consciously bringing our spreads down a little bit. We're testing things in these early days where we're you know we tested you know sort of a special offer period where we too you know compressed our spreads again by design even more. We can toggle that up and down. In this early stage, we're focused on positive gross margins at the unit level. I don't see a scenario where we take that to negative. It's a matter of when we think we have it right enough, how much do we want to invest in marketing to tell the world about this? We continue to think that from a business model perspective, the fact that we get dealers to offer, you know, get hundreds or thousands of dealers to offer a bid on a car, that is just a fundamentally better consumer value prop than a consumer having to deal with just one dealer. We need to tell the world and the market about that better value prop that we have. As Scot said, we are gonna ramp the marketing for it. We do wanna get the word out into the user base. We are seeing sort of cross-pollination between Instant Max users and those who are shopping and submitting leads and using consumer finance and vice versa. We're also seeing the virtuous cycle of it in our platform more generally. Positive gross margin as far as we can tell or plan to do forever. But we are gonna invest more aggressively in marketing because of how great the product is. This is Bruce. I would just say these are very, very early days too, right? We stood up a business that didn't exist here with the company six months ago. I would tell you, I think we've probably grown this buying from consumer business to C2D business probably faster than any other company out there. We are learning. As we learn, you know, buying a car from a consumer and buying a car sight unseen, we are now just really starting to dial in, you know, the algorithms and picking up the car from the consumer and the processes and those type of things. I would say that we're gonna get better and better at it every month. We're already seeing those improvements and couldn't be more excited about Instant Max Cash Offer. Thank you. Thank you. We have next question from the line of Naved Khan with Truist. Please go ahead. Yeah. Thanks a lot. A couple of questions. Maybe just on CarOffer. Can you talk about what are you seeing in terms of your older dealer cohorts, dealers who came on board maybe three to four quarters ago? Are you seeing them use the platform more and more to buy cars? Are you seeing them shift share from other channels to CarOffer? Just curious about all the trends in that. Then, in your prepared commentary, Jason, I think you mentioned some backlog in vehicle pickup. Was that on the IMCO side or was that with the car rental companies? Naved, I can jump in first. It's Sam Zales. Jason, add more detail or Bruce if you'd like to. The cohorts are going in the right direction, and I, you know, wanna be careful about that they're all moving in the right direction. The diversity of dealers getting on the platform and participating in either a buy or a sell fashion and the cohorts themselves moving up into the right is a really great sign for us. But I wanna mention that the macro environment that we talked about earlier on the call as relates to wholesale pricing volatility impacts that. In a quarter where we didn't see that, it's, you know, it like the fourth quarter, you saw everything go up into the right. Again, the cohorts going up into the right, but it mutes a little bit when all dealers get skittish, if that's the right word we used earlier on, the factors of just what's going on in the market. Those cohorts are going in the right direction. They are moving up into the right, and we're proud of that, and we see that expanding as we sign more and more dealers to the platform and initiate their matrices. To your question on transportation, the backlog was from the dealer to dealer, a large partner there. We took over their transportation for them. That was the one-time change that happened in the first quarter, if that was the question you asked. Bruce, anything? Is that correct? I think you're correct, yes. Maybe can you explain that a little bit when you said you did the transportation versus them doing it themselves. Is that the right way to understand it? Typically, we handle the transportation for all of our clients. We had one large fleet client in particular that handled their own. They got a bit behind. We've since taken that transportation on, cleaned up all that, and that's what you saw there in the first quarter, which is the cleanup of really fourth quarter units. Got it. Maybe just to dig a little bit more into that. Is that something that might have affected Q1 volumes or not? That wasn't really a factor? It didn't affect volume so much, but it did affect the margin profile because it was sort of disproportionately higher revenue that was transportation related, which as you know, is lower margin, certainly lower margin than our fee revenue. This is Jason. This was a unique situation. I mean, we do the transportation in the vast majority of transactions, but in this case, they had historically done it. Dealer experience is really important to us. It's a key focus of ours. When that became an issue for them, we offered to help make sure it was a great experience for everyone. Thank you. We have next question from the line of Marvin Fong with BTIG. Please go ahead. Great. Thanks for taking my question. Just one for me. I think everything else has been asked. For second quarter, your guidance, just curious, you know, on the dealer to dealer side for CarOffer, it looks like gross margin was 30% in the first quarter. With the price increases, any thought about what they might be in the second quarter that you're implying in guidance? Should we expect it to be a little bit higher, both in second quarter and maybe just on a structural basis? Thanks. Structurally, this is Jason. You know, we talked about sort of this one-time event related to transportation. We talked about some of the dynamics related to arbitration, and then you're right, it'll be a full quarter of the new fee structure. For all three of those reasons, if you were to consider sort of a apples to apples in terms of transaction volume, yes, you'd certainly see higher margin in Q2. Okay, great. Thanks, Jason. Thank you. We have next question from the line of Doug Arthur with Huber Research Partners. Please go ahead. I think my question's been answered. I mean, I'm not quite totally understanding why the product gross profit margin went negative, but you've certainly cited a lot of issues. I would assume over time, the kind of stable to growing margin there is more low to mid-single digit over time. Is that still a fair, you know, cut at it? Yeah, 100%. I'll, Scot, maybe you can give a little more detail as it relates to Q4 to Q1. Keep in mind, Doug, the product section of the P&L category segment of the P&L is not exactly Instant Max Cash Offer. Right. It does not involve transportation and inspection related to Instant Max. It does involve D2D arbitration, et cetera. It's more related to those other things that it was negative. In fact, if you look in our investor deck, we do a different cut at it that shows that Instant Max Cash Offer on more of sort of a pure basis, if you will, from a business perspective, was 3% non-GAAP gross margin. Like I mentioned a few minutes ago, we had months where it was higher than that, and then we had months where we consciously brought it down because we brought down spreads to test competitiveness of our offers. That's the specifics related to Q1. Longer term, you know, I'd reference some of the comments made earlier too, which is we are getting smarter about our bidding algorithm and pricing. We're always improving our conversion funnel. Then the pickup and the landed dealer concept. I mean, those are all things that are still, you know, six, eight months since we began them. We have total confidence that the gross margin there has room for upside, and that longer term, it's absolutely mid-single digits. We're even seeing that, you know, in periods now, but we're also testing a lot of other things that brought Q1 down to 3%. Great. That's really helpful. Thank you. Sure. Thank you. We have next question from the line of Alex Potter with Piper Sandler. Please go ahead. Great, thanks. Just one for me. It's related to arbitration. You mentioned some arbitration costs had an impact on margins in the quarter as well as confidence that should improve. If you could just give a little bit more, I guess, qualitative commentary. Is this an inspection quality issue? You know, I guess what levers are you pulling to try to make sure that those inspection reports are more accurate? I don't know. I don't wanna put words in your mouth, but anything you could talk about with regard to arbitration and inspection accuracy would be helpful. Thanks. Alex, I'll jump in first and turn it to Bruce, who's an expert at this. From our perspective, and couldn't be more excited about what the CarOffer business is doing for us. You know, from an arbitration perspective, when prices decline in the market, that's a sign. First of all, I should just say our arbitration numbers are a very, very small percentage of our gross merchandise sales, and that's a critical measure of our business. As prices drop or get fluctuating, as Jason said, you know, a dealer will look at that and say, "Well, I'm gonna push back in some cases when the prices are going down. I'm buying a vehicle, but the price continues to drop." We have a no-questions-asked return policy. We're really defaulting to dealer satisfaction, and our approach is to say, "Let's broaden our inspection process," and we've done that, adding more inspectors. We talked about adding virtual inspection to our C2D cars as well. That's a huge advantage to our process. As Bruce keeps saying, we're learning in the process when the price point in the wholesale market is dropping or fluctuating, there are going to be more of those situations that come up. We said that revenue mix went up for us overall. We've looked at that process of inspection and said, "Let's double down on that, and let's also look at our dealer processes, our dealer results to say if some of them are pushing back on results, you know, pushing back on vehicles because the macro environment's lowering prices." We're gonna be careful about balancing customer satisfaction with the right kind of business decision. Overall, as I said, the arbitration number is a very, very small percentage of our gross merchandise sales, and we've made those adjustments as we head into the second quarter to do that. Bruce, anything more you wanted to add? Yeah. To your point, I think it's arbitrations were about 1%, right, of GMS. You know, you come off a really good December and January. You know, if you're gonna get any type of arbitration volume, it's subsequent, right, to February, where you did see the drops. We're very disciplined in terms of, you know, units that we take, so we gonna liquidate those and make sure we're prudent in that regard. We are also adding a lot of other tools that, you know, will help us moving forward to mitigate that. Yeah, it was a unique situation, I think, coming off of a December and January. You know, we handled the liquidation primarily in February, but we have a good handle on that, I think, moving forward. Okay. Understood. Thanks, guys. Thank you. Ladies and gentlemen, we have reached the end of the question and answer session, and I would like to turn the call back to Jason Trevisan, CEO, for closing remarks. Over to you, sir. Thank you very much. So thanks, everyone, for your for tuning in today. Thanks for your questions. We're, you know, as I said in my prepared remarks, we're really excited about how we performed in Q1 but also about what we have coming up in Q2 and the rest of the year. You know, I think it what it shows is that we have really transformed the business to be transaction enabled in all types of transactions on top of our marketplace and that we're now capturing sort of full lifecycle needs of both dealers and consumers. What that does is it opens up new markets for us and allows us to operate a profitable, a very profitable business to fund all that investment and growth. We're really excited to see all of you in person if you can join us at our Investor Day on May 25th and to dive deeper into our story. Again, thanks very much. Appreciate it. Appreciate all the questions. Have a great evening. Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.