Q4 2023 ACV Auctions Inc Earnings Call

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I would now like to turn the call over to your speaker for today, Tim Fox. Please go ahead.

Welcome to the a C V fourth quarter and full year earnings call.

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Good afternoon, and thank you for joining Acb's conference call to discuss our fourth quarter and full year 2023 financial results.

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With me on the call today are George Sherman, Chief Executive Officer, and Bill's Irrelative Chief Financial Officer.

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Before we get started please note that today's comments include forward looking statements, including statements regarding future financial guidance.

Please be advised that today's conference is being recorded.

I would now like to turn the call over to your speaker for today, Jim Fox. Please go ahead.

These forward looking statements are subject to risks and uncertainties and involve factors that could cause actual results to differ materially from those expressed or implied by such statements.

Yeah.

Good afternoon, and thank you for joining Acb's conference call to discuss our fourth quarter and full year 2023 financial results.

A discussion of the risks and uncertainties related to our business can be found in our SEC filings and in today's press release, both of which can be found on our Investor Relations website.

With me on the call today are George Sherman, Chief Executive Officer, and builds a rollout chief financial Officer.

During this call we will discuss both GAAP and non-GAAP financial measures.

Before we get started please note that today's comments include forward looking statements, including statements regarding future financial guidance.

A reconciliation of GAAP to non-GAAP financial measures is provided in today's earnings materials, which can also be found on our investor Relations website.

These forward looking statements are subject to risks and uncertainties and involve factors that could cause actual results to differ materially from those expressed or implied by such statements.

And with that let me turn the call over to George.

Thanks, Tim Good afternoon, everyone and thank you for joining US we are pleased with our fourth quarter performance.

A discussion of the risks and uncertainties related to our business can be found in our SEC filings and in today's press release, both of which can be found on our Investor Relations website.

Which capped off another strong year of execution by the <unk> team.

During this call we will discuss both GAAP and non-GAAP financial measures.

We delivered 21% revenue growth in Q4.

Reconciliation of GAAP to non-GAAP financial measures is provided in today's earnings materials, which can also be found on our investor Relations website.

And adjusted EBITDA at once again exceeded our guidance.

For the full year revenue grew 14%.

With that let me turn the call over to George.

We gained market share and exited the year with over 28000 dealer partners buying and selling on our marketplace.

Thanks, Tim Good afternoon, everyone and thank you for joining us.

We are pleased with our fourth quarter performance, which.

We launched new innovations that expanded our competitive moat and drove operating efficiencies, resulting in approximately 70% year over year improvement in adjusted EBITDA.

Which capped off another strong year of execution by the <unk> team.

We delivered 21% revenue growth in Q4, and adjusted EBITDA at once again exceeded our guidance.

Along with our continued momentum and dealer wholesale we expanded our Tam with the launch of <unk> consumer sourcing solution cleared car and.

For the full year revenue grew 14%.

We gained market share and exited the year with over 28000 dealer partners buying and selling on our marketplace.

And by building the foundation for our commercial wholesale strategy.

We launched new innovations that expanded our competitive moat and drove operating efficiencies, resulting in approximately 70% year over year improvement in adjusted EBITDA.

We are pleased to announce that our expansion into commercial wholesale will benefit from securing access to the auto IMF software platform.

And also by growing our Remarketing center footprint.

Along with our continued momentum and dealer wholesale we expanded our Tam with the launch of ACB as consumer sourcing solution cleared car.

On our commercial efforts later in the call.

As we turn to 2024.

<unk> is focused on accelerating topline growth.

And by building the foundation for our commercial wholesale strategy.

<unk> margin expansion and.

And achieving an important milestone with adjusted EBITDA profitability in 2024.

We are pleased to announce that our expansion into commercial wholesale will benefit from securing access to the auto IMF software platform.

We're confident that executing on this profitable growth strategy will result in creating long term shareholder value.

And also by growing our Remarketing center footprint.

With that let's turn to a brief recap of fourth quarter and full year 2023 results on slide four.

More on our commercial efforts later in the call.

As we turn to 2024.

<unk> is focused on accelerating top line growth.

Fourth quarter revenue of $118 million was in line with guidance.

Continued margin expansion.

It <unk>, an important milestone with adjusted EBITDA profitability in 2024.

And grew 21% year over year.

<unk> increased 6% year over year, despite a 9% decrease in <unk> per unit as wholesale prices continued to normalize.

We're confident that executing on its profitable growth strategy will result in creating long term shareholder value.

With that let's turn to a brief recap of fourth quarter and full year 2023 results on slide four.

We sold 144000 vehicles on our marketplace.

Growth of 15% year over year, reflecting solid listings growth and improved conversion rates.

Fourth quarter revenue of $118 million was in line with guidance.

For the full year revenue of $481 million increased 14%.

And grew 21% year over year.

<unk> increased 6% year over year, despite a 9% decrease in <unk> per unit as wholesale prices continued to normalize.

As unit growth rebounded year over year, along with strong attach rates for HCV transport and ACP capital.

<unk> for the year declined modestly to $8 8 billion.

We sold 144000 vehicles on our marketplace.

Due to a 10% decrease in <unk> per unit.

Growth of 15% year over year, reflecting solid listings growth and improved conversion rates.

Largely offset by a 10% increase in unit growth to just under 600000 units.

For the full year revenue of $481 million increased 14%.

On slide five.

I will again frame the rest of today's discussion around the three pillars of our strategy to maximize long term shareholder value.

As unit growth rebounded year over year, along with strong attach rate for ACB transport and ACP capital.

Both innovation and scale.

<unk> for the year it declined modestly to $8 8 billion.

I'll begin with growth.

Due to a 10% decrease in <unk> per unit.

Turning to slide seven I'll share our observation of our automotive market trends as context for dealer wholesale volumes in 2023.

Largely offset by a 10% increase in unit growth to just under 600000 units.

New retail sales increased 8% year over year recovering from a 10 year low in 2022.

On slide five.

I will again frame the rest of today's discussion around the three pillars of our strategy to maximize long term shareholder value.

While volumes continue to lag 2019 levels inventory has improved and the OEM incentives increase.

Both innovation and scale.

These are key factors in supporting a recovery in retail sell trade and therefore dealer wholesale supply.

I'll begin with growth.

Turning to slide seven I'll share our observation of our automotive market trends as context, our dealer wholesale volumes in 2023.

The used retail environment with a different story.

Units declined 1% year over year and 2023 down from what was also a 10 year low in 2022 as affordability issues continued to pressure consumer demand.

New retail sales increased 8% year over year recovering from a 10 year low in 2022.

While volumes continue to lag 2019 levels inventory has improved and the OEM incentives increase.

In terms of vehicle sourcing dealers continued to retain a higher than normal percentage of trades for retail inventory, creating a headwind for dealer wholesale supply.

These are key factors in supporting a recovery in retail trade and therefore dealer wholesale supply.

The trade to wholesale mix is expected to normalize over time, as new and used inventory recovers from depressed levels.

The us retail environment with a different story.

Units declined 1% year over year and 2023 down from what was also a 10 year low in 2022.

Each are currently about 30% below normal.

Affordability issues continued to pressure consumer demand.

On the supply picture remains muted and a positive note price depreciation and conversion rates across the industry recovered in 2023, following very challenging operating conditions in 2022.

In terms of vehicle sourcing dealers continued to retain a higher than normal percentage of trades for retail inventory, creating a headwind for dealer wholesale supply.

On balance we believe that end markets are showing early signs of improvement and while the shape of the dealer wholesale recovery is difficult to predict at this stage in the cycle. We do believe the market will posted modest growth in 2024.

The trade wholesale mix is expected to normalize over time at new and used inventory recovers from depressed levels.

Which are currently about 30% below normal.

On the supply picture remains muted and a positive note price depreciation and conversion rates across the industry recovered in 2023.

Moving to slide eight.

After declining 28% in 2022, we estimate that the dealer wholesale market declined 7% in 2023.

Following a very challenging operating conditions in 2022.

As new retail sales recovered from depressed levels year over year, given our 10% unit growth this implies 17% market share growth for ACB.

On balance we believe that end markets are showing early signs of improvement and while the shape of the dealer wholesale recovery is difficult to predict at this stage in the cycle. We do believe the market will posted modest growth in 2024.

Which is in line with our mid term target model.

As I mentioned earlier, while there are cross currents still impacting the broader automotive market. We continue to believe at 2023 will be the trough for the dealer wholesale market.

Moving to slide eight.

After declining 28% in 2022, we estimate that the dealer wholesale market declined 7% in 2023.

Next I would like to provide highlights on our value added services.

As new retail sales recovered from depressed levels year over year, given our 10% unit growth this implies 17% market share growth for ACB.

First on slide nine.

The ACD transportation team delivered very strong results in 2023.

Attach rates for the year, we're in the mid 50% range in line with our mid term target model and our carrier network delivered over 325000 vehicles.

Which is in line with our mid term target model.

As I mentioned earlier.

There are cross currents still impacting the broader automotive market. We continue to believe at 2023 will be the trough for the dealer wholesale market.

Our tech investments yielded a greater than 20% improvement in cycle times, which is a key element of ACB value proposition for our dealer partners.

Next I would like to provide highlights on our value added services.

First on slide nine.

AI optimized pricing, which we introduced in early 2023 expanded significantly during the year and we achieved 90% lane coverage in Q4.

The ACB transportation team delivered very strong results in 2023.

Attach rates for the year, we're in the mid 50% range in line with our mid term target model and our carrier network delivered over 325000 vehicles.

By leveraging AI, our transport team drove growth and operating efficiency.

<unk> and a 900 basis point year over year increase in revenue margin, reaching the high teens.

Our tech investments yielded a greater than 20% improvement in cycle times, which is a key element of atv's value proposition for our dealer partners.

As a reminder, our mid term target model assumes transport revenue margins in the high teens.

AI optimized pricing, which we introduced in early 2023 expanded significantly during the year and we achieved 90% lane coverage in Q4.

While margins may fluctuate modestly over time, the fact that we already achieved our target speaks to the value, we're delivering to our dealer partners and our strong execution.

By leveraging AI, our transport team drove growth and operating efficiency.

Turning to slide 10.

Our ACB capital team also delivered very strong results in 2023.

Resulting in a 900 basis point year over year increase in revenue margin, reaching the high teens.

Attach rates in the low double digits resulted in 50% loan volume growth year over year.

As a reminder, our mid term target model assumes transport revenue margin in the high teen.

And combined with strong ARPA expansion resulted in over 80% revenue growth year over year.

While margins may fluctuate modestly over time, the fact that we already achieved our target speaks to the value, we're delivering to our dealer partners and our strong execution.

We are continuing to invest in new ACD capital capabilities, including bundled offerings with clear car and we remain confident that <unk> capital will be an important long term growth and profit driver.

Turning to slide 10.

Our ACB capital team also delivered very strong results in 2023.

Next I would like to wrap of the growth section by updating our progress on penetrating adjacent market that provides HCV with additional growth levers.

Tax rate in the low double digits resulted in 50% loan volume growth year over year.

And combined with strong ARPA expansion resulted in over 80% revenue growth year over year.

On slide 11, I'll begin with clear car.

We are continuing to invest in new HIV capital capabilities, including bundled offerings with clear car.

We remain confident that <unk> capital will be an important long term growth and profit driver.

Next I would like to wrap of the growth section by updating our progress in penetrating adjacent market, Hey, Brian HCV with additional growth levers.

On slide 11, I'll begin with clear car.

ACB consumer sourcing solution that Leverages, AI and real time market data to deliver highly accurate condition based pricing.

As a reminder, the consumer peer to peer market is large with about 10 million vehicles transacting each year outside the dealership ecosystem.

Given ongoing inventory challenges facing our dealer partners appear to care market is an attractive vehicle sourcing opportunity.

HCV is addressing this challenge with Claire car.

Adoption has been impressive with about 600 dealer rooftops live today, we have a robust pipeline of new prospects.

I'm pleased to highlight some exciting news related to our commercial wholesale strategy.

Based on dealer feedback lead generation and conversion rates are significantly higher than competitive sourcing tools.

At our analysts say last June we shared our rationale are expanding it to commercial wholesale.

Speaks to the power clear car and driving qualified leads and ultimately increasing overall dealer supply.

Why we believe a C V is well positioned to capture commercial market share and the investments required to service commercial consigners.

We are excited about the momentum that this value added solution, which adds another growth lever to our business.

And it turns out our timing could not have been better.

Commercial volumes in the rental repo and fleet categories are recovering at a strong pace.

Next on slide 12 I.

I am pleased to highlight some exciting news related to our commercial wholesale strategy.

<unk> will take a few years to normalize the overall commercial opportunity is very attractive.

At our analyst day last June we shared our rationale for expanding into commercial wholesale.

We believe the a C V is uniquely positioned to address this market with our deep data mouth and vibrant marketplaces.

While we believe ACB is well positioned to capture commercial market share and the investments required to service commercial consignment.

Along with a growing nationwide buyer base looking to secure commercial inventory.

And it turns out our timing could not have been better.

And we've expanded our remarketing center footprint with a recent acquisition of a Texas based auction group that provides additional locations for vehicle storage and light reconditioning to service commercial vehicles.

Commercial volumes in the rental repo and fleet categories are recovering at a strong pace.

Off lease will take few years to normalize the overall commercial opportunity is very attractive.

Lastly, we are thrilled to announce the a C V has secured licensing to auto I M S.

We believe the ACB is uniquely positioned to address this market with our deep data MAU and vibrant marketplaces.

This technology platform connects wholesale option to nearly all 1300 commercial consigners in the U S.

Along with a growing nationwide buyer base looking to secure commercial inventory.

And we have expanded our remarketing centre footprint with our recent acquisition of a Texas based auction group that provides additional locations for vehicle storage and light reconditioning to service commercial vehicle.

Our agreement enables ACD to deploy auto I mapped in a way it supports Ah remarketing centers and our digital focus business model.

Which will be an industry first capability.

Lastly, we are thrilled to announce the HCV has secured licensing to auto IMS.

To wrap up on growth.

We continue to execute on our playbook to capture dealer wholesale market share our.

This technology platform connects wholesale auction to nearly all 1300 commercial containers in the U S.

Our transport and capital offerings are gaining significant traction.

And we are well positioned to expand our Tam I executing on our consumer sourcing and commercial market expansion.

Our agreement enables <unk> to deploy Ottawa, Matt in a way that supports our remarketing centers and our digital focused business model.

Turning to the second element of our strategy to drive longterm shareholder value innovation.

This will be an industry first capability.

And 514th I will first recap some of our growth oriented product innovation.

To wrap up on growth, we continue to execute on our playbook to capture dealer wholesale market share.

Let me begin with the dealer buying experience.

We leaned in with tech to increase conversion rate by launching new auction format.

Our transport and capital offerings are gaining significant traction.

And we are well positioned to expand our Tam and executing on our consumer sourcing and commercial market expansion.

And improved user interface.

Better inventory notification.

And enhance pricing data.

Our private marketplace solutions experienced strong traction with some of the largest dealer groups in the country.

Turning to the second element of our strategy to drive long term shareholder value innovation.

And slide 14, I will first recap some of our growth oriented product innovation.

Enabling dealers to both easily auction inventory within their network and leverage Acb's open marketplace.

Let me begin with the dealer buying experience.

We launched new capabilities and our advanced buyer solution Sam.

Leaned in with Teck to increase conversion rate by launching new auction format.

Which enhances the buying experience through intelligent notifications and auto bidding capabilities.

An improved user interface.

Better inventory notification.

And as I discussed earlier are Claire car solution is gaining significant market attraction and are transferred team is leveraging AI to drive growth and operating efficiency.

And enhanced pricing data.

Our private marketplace solutions experienced strong traction with some of the largest dealer groups in the country.

Enabling dealers to both easily auction inventory within their network and leverage Acb's open marketplace.

And 515, we highlight examples of tech investments that extend into our operation delivering customer success, while reducing costs.

We launched new capabilities in our advanced buyer solution Sam.

Which enhances the buying experience through intelligent notification and auto bidding capabilities.

One of the key drivers is inspection accuracy.

Just as a reminder.

Each vehicle is unique with its own imperfections.

And as I discussed earlier are clear car solution is gaining significant market traction and our transport team leveraging AI to drive growth and operating efficiency.

We believe AI and are structured data is a massive competitive advantage.

Our field teams equipped with technology, such as Copilot, Our guard apacs and our AI powered imaging app to deliver high quality infection.

On slide 15, we highlight examples of tech investments that extend into our operations delivering customer success, while reducing costs.

One of the key drivers as inspection accuracy.

Co pilot and our guard leverage machine learning predictive analytics and sensor data to inform our V. C. I am vehicle specific issues before and after conducting inspections.

Just as a reminder.

Each vehicle is unique.

With its own imperfection.

We believe AI and our structured data is a massive competitive advantage.

This is an industry first.

Our field team is equipped with technology, such as Copilot, Our guard apacs and our AI powered imaging apps to deliver high quality infection.

Apacs deliver significant transparency the vehicle operating conditions.

Also increasing the inspection productivity of our V C I T.

Dealers often observed that you can't smell a car over the internet.

Co pilot and our guard leverage machine learning predictive analytics and sensor data to inform our ACI on vehicles specific issues before and after conducting an infection.

This is no longer true thanks to apex.

With smell being one of the many sensors it enabled.

And we continue to expand our a I M aging capability to identify specific important condition like the presence of damage and rust.

This is an industry first.

APAC delivered significant transparency and their vehicle operating conditions, while also increasing inspection productivity of our <unk> team.

Together these innovations contributed to a 10% reduction in customer assurance costs in 2023.

Dealers often observed that you cant malakar over the internet.

Credible performance in the current market.

This is no longer true thanks to apex.

Next I'd like to share some of the key focus areas of our tech roadmap for 2024 and 516.

Smell being one of the many sensors at enable.

And we continue to expand our AI imaging capability to identify specific important condition like the presence of damage and Ross.

First we plan to continue driving increase conversion rate I further tailoring the dealer experience on our marketplace.

Together these innovation contributed to a 10% reduction in customer assurance costs in 2023.

What was Max digital is now a C V Max.

This is more than a name change.

<unk> performance in the current market.

We integrated Acb's proprietary data mouth from our million annual inspection.

Next I'd like to share some of the key focus areas of our tech roadmap for 2024 and 516.

Enable dealers to make smarter sourcing decisions.

We introduced cutting edge re kind of alert I leveraging our guard.

First we plan to continue driving increased conversion rates further tailoring the dealer experience on our marketplace.

Build a seamless integration with clear car to help dealer source more vehicles from consumers.

Dealers now have a way to elevate their brand of becoming more consistent at all their stores.

What would Max digital is now ACB Max.

This is more than a name change.

Ultimately, enabling them to source more inventory and drive gross profits.

We integrated <unk> proprietary data amount from our million annual inspection.

Enabled dealers to make smarter sourcing decision.

Given the strong adoption of ACB transfer in our marketplace. We are sending these services to vehicles transacted off platform, enabling our dealer partners to further leverage our best in class transport services.

We introduced cutting edge re kind of alerts by leveraging our guard and.

<unk> built a seamless integration with clear car to help dealers source more vehicles from consumers.

He recently implemented alone management system to support our growing ACB capital business.

Dealers now have a way to elevate their brand becoming more consistent at all their stores.

Which enables us to offer a broader set of finance offerings and drive scale across the platform.

Ultimately, enabling them to source more inventory and drive gross profit.

For example, expanding our finance to dealers looking to source consumer vehicles.

Given the strong adoption of ACB transfer in our marketplace. We are extending these services to vehicles transacted off platform, enabling our dealer partners to further leverage our best in class transport services.

To accelerate our commercial strategy will.

We'll be focused on integrating our marketing sensors with ACB digital marketplace to create a range of cross-sell and upsell opportunity.

We recently implemented a loan management system to support our growing ACB capital business.

We are well underway selling vehicles from a remarketing centers and Acb's marketplace.

Which enables us to offer a broader set of finance offerings and drive scale across the platform.

Lastly, we are planning to leverage our industry, leading inspection technology to create dealer self inspection solutions for to use cases.

For example, expanding our finance to dealers looking to source consumer vehicles.

Marketplaces and live appraisal.

To accelerate our commercial strategy will be focused on integrating our marketing centers with HCV digital marketplace to create a range of cross sell and upsell opportunities.

These are examples of dealers directly using acb's inspection and auction capability.

To wrap up an innovation AC.

We are well underway selling vehicles from a remarketing centers on Acb's marketplace.

<unk> remains committed to delivering industry, leading technology tried dealer partners and to our own operation.

Lastly, we are planning to leverage our industry, leading inspection technology to create dealer self inspection solutions for two use cases.

Driving both growth and scale.

And we look forward to sharing more details with you next quarter.

With that let me a rebel and take you through our financial results and how we're driving growth at scale.

Private marketplaces and LIBOR appraisal.

These are examples of dealers directly using atvs inspection and auction capabilities.

Thanks, George and thank you everyone for joining us today.

We are very pleased with our two four in 2023 financial performance.

To wrap up on innovation.

Along with delivering accelerating revenue growth from the back half of the year we.

<unk> remains committed to delivering industry, leading technology to our dealer partners and to our own operation.

We had meaningful revenue margin and adjusted EBITDA Morton expansion.

Driving both growth and scale.

Which demonstrated the strength of our business model.

And we look forward to sharing more details with you next quarter.

Turning to slide 18 O begin with a recap of our fourth quarter results.

With that let me out of rebel and take you through our financial results and how we're driving growth at scale.

Revenue of $118 million was that the mid point over a guidance range <unk>.

Thanks, George and thank you everyone for joining us today.

Grew 21% year over year.

We are very pleased with our Q4 and 2023 financial performance.

Adjusted EBITDA loss of 5 million Vidor guidance range.

Along with delivering accelerating revenue growth in the back half of the year, we had meaningful revenue margin and adjusted EBITDA margin expansion.

You have a margin improved approximately 800 basis points versus Q4 22.

This demonstrates both the operating leverage and or a model and continued strong Opex management.

Which demonstrated the strength of our business model.

Turning to slide 18, I'll begin with a recap of our fourth quarter results.

<unk> 19 year will cover additional revenue details.

Revenue of $118 million was at the midpoint of our guidance range.

Option assurance revenue, which was 56% of total revenue increased 19% year over year.

<unk> grew 21% year over year.

Adjusted EBITDA loss of $5 million beat our guidance range.

This performance reflects 15% year over year unit growth and.

EBITDA margin improved approximately 800 basis points versus Q4 'twenty two.

An auction and assurance <unk>, $456, which grew 3% year over year.

This demonstrates both the operating leverage in our model and continued strong Opex management.

Nope that <unk> increase year over year, despite a 9% decline in G. M V per unit.

Next on slide 19, I will cover additional revenue details.

Reflecting a R Q3 price increase and we believe we still have pricing headroom going forward.

Akshay assurance revenue, which was 56% of total revenue.

Marketplace services revenue, which was 38 per cent of total revenue grew 29% year over year.

19% year over year.

This performance reflects 15% year over year unit growth in auction and assurance <unk>, a $456, which grew 3% year over year.

Results were driven by strong a C Z transport performance and another record revenue quarter for a C V capital.

Note that <unk> increased year over year, despite a 9% decline in <unk> per unit.

<unk> data services products comprise seven per cent of total revenue in revenue was flat year over year.

<unk>, our Q3 price increase and we believe we still have pricing headroom going forward.

<unk> E C V. Max revenue grew modestly year over year recall that we have been taking a measured approach to customer acquisition, while making significant improvements to the a C V Max platform.

Marketplace services revenue, which was 38% of total revenue grew 29% year over year.

As George discussed earlier, we recently launched the upgraded a C V Mac suite ever confident these improvements will drive long term growth.

Results were driven by strong ACD transport performance had another record revenue quarter for HCV capital.

Our SaaS and data services products comprise 7% of total revenue and revenue was flat year over year.

Turning out a slide 20, I will cover costs in the quarter.

Two four cross the revenue as a percentage of revenue decreased proximately 300 basis points here over here.

<unk> revenue grew modestly year over year recall that we have been taking a measured approach to customer acquisition, while making significant improvements to the HCV Max platform.

You approve it was driven by strong auction assurance results and buy a C V transport.

As George mentioned, we delivered high teams transport revenue margins, which is in line with our mid term target model.

As George discussed earlier.

Recently launched the upgraded HCV Mac suite ever confident these improvements will drive long term growth.

We continue to focus on expense discipline, as we optimize a scalar business <unk>.

Turning now to slide 20, I will cover costs in the quarter.

<unk> operating expense, excluding cost of revenue as a percentage of revenue decreased 4% year over year in Q4.

Q4 cost of revenue as a percentage of revenue decreased approximately 300 basis points year over year.

This reflects a more metered approach to growing opex relative to our revenue as we march towards profitability.

The improvement was driven by strong offshore insurance results and by a CV transport.

Moving to slide 21, let me frame or investment strategy in path to profitability.

As George mentioned, we delivered high teens transport revenue margins, which is in line with our mid term target model.

Our focus on spending discipline and operating efficiency resulted in the material decrease in optics growth in 2023.

We continue to focus on expense discipline, as we optimize and scale our business.

non-GAAP operating expense, excluding cost of revenue as a percentage of revenue decreased 4% year over year in Q4.

Resulting in adjusted EBITDA lawsuit declining by approximately 70% year over year.

And as you've seen reflected in our queue for results, we delivered margin expansion, while preserving our go to market and technology investments to ensure a C V as in a strong position as market conditions improve.

This reflects a more metered approach to growing opex relative to our revenue as we march towards profitability.

Moving to slide 21, let me frame, our investment strategy and path to profitability.

On slide 22, I would like to provide an update to regional profitability that we shared at our analysts say last June.

Our focus on spending discipline and operating efficiency resulted in a material decrease in opex growth in 2023.

Demonstrating why we're confident in our midterm target of achieving 25 per cent adjusted EBITDA margins.

Resulting in adjusted EBITDA losses declining by approximately 70% year over year.

In 2023 35 per cent of our region's comprising about 50 territory's achieved adjusted breakeven or better.

And as you've seen reflected in our Q4 results, we delivered margin expansion, while preserving our go to market and technology investments to ensure ACD is in a strong position as market conditions improve.

Of those regions three were in the 15% to 25% adjusted EBITDA arrange.

On slide 22, I would like to provide an update to regional profitability that we shared at our analyst day last June.

Additionally, we had three territories exceeding 25% adjusted EBITDA mortgages.

We believe that this performance demonstrates the inherent leverage of scale of our business model as we continue to drive top line growth.

Demonstrating why we're confident in our mid term target of achieving 25% adjusted EBITDA margins.

In 2023, 35% of our regions comprising about 50 territories achieved adjusted breakeven or better.

Next I will highlight are strong capital structure on slide twenty-three.

We ended two four with $411 million in cash and equivalents and marketable securities.

Of those regions three were in the 15% to 25% adjusted EBITDA range.

$115 million of that on a revolver.

Note that our cash balance includes $134 million, a float an auto auction business.

Additionally, we had three territories exceeding 25% adjusted EBITDA margins.

The amount of float on our balance sheet will continue to fluctuate meaningfully based on business trends in the final two weeks of each quarter, which has a corresponding impact on operating cash flow.

We believe that this performance demonstrates the inherent leverage and scale of our business model as we continue to drive topline growth.

Next I will highlight our strong capital structure on slide 23.

Cash flow from operations in 2023, <unk> a year over year.

We ended Q4 with $411 million in cash and equivalents and marketable securities.

75 per cent reduction in bird, reflecting the strong margin improvements in Opex management, we delivered and the leverage in our business model.

$115 million of debt on our revolver.

Note that our cash balance includes $134 million of float in our auction business.

Now I will turn to guidance on slide 24.

So the first quarter of 2024 were expecting revenue of the range of $141 million to $146 million.

The amount of float on our balance sheet will continue to fluctuate meaningfully based on business trends in the final two weeks of each quarter, which has a corresponding impact on operating cash flow.

Adjusted EBITDA is expected to be in the range of $2 million to $4 million consistent with our commitment to achieve a full quarter of profitability going to one.

Cash flow from operations in 2023 improved significantly year over year, a 75% reduction in burn, reflecting the strong margin improvements in Opex management, we delivered and the leverage in our business model.

For the full year of 2024, we are expecting revenue the range of $610 million to $625 million.

Representing growth of 27% to 30% year over year.

Now I'll turn to guidance on slide 24.

Adjusted EBITDA is expected to be in the range of $20 million to $25 million, reflecting operating improvements in our core business and integration investments in our remarketing centers.

So the first quarter of 2024, we're expecting revenue in the range of 141% to $146 million.

Adjusted EBITDA is expected to be in the range of $2 million to $4 million consistent with our commitment to achieve a full quarter of profitability in Q1.

As it relates to our guidance, we are assuming that the dealer wholesale market grows modestly in 2024 and conversion rates in wholesale price depreciation trouble normal seasonal patterns.

For the full year 2024, we are expecting revenue in the range of $610 million to $625 million.

We're expecting a Texas based option group acquisition to contribute approximately five per cent of the annual revenue in 2024.

Representing growth of 27% to 30% year over year.

Adjusted EBITDA is expected to be in the range of 20% to $25 million.

Be accretive to full year adjusted EBITDA.

Revenue growth is expected to outpace non-GAAP opex growth, excluding cost of revenue depreciation and amortization by approximately 10 percentage points.

<unk> operating improvements in our core business and integration investments in our remarketing centers.

As it relates to our guidance, we are assuming that the dealer wholesale market grows modestly in 2024 and conversion rates in wholesale price depreciation for our normal seasonal pattern.

And finally moving to slide 25, we remain committed to achieving our midterm target model, which is underpinned by sustaining market share gains.

We're expecting the Texas based auction group acquisition to contribute approximately 5% of annual revenue in 2024 and be accretive to full year adjusted EBITDA.

Penetrating adjacent markets and.

[noise] expanding margins through revenue mixer scale, all of which we have clearly demonstrated in our performance.

Our mid term targets are primarily predicated on the dealer wholesale market recovering historical volumes over time, but.

Revenue growth is expected to outpace non-GAAP opex growth, excluding cost of revenue and depreciation and amortization by approximately 10 percentage points.

But in addition, we are expanding our tan and consistently taking sure which will drive long term growth.

And finally moving to slide 25, we remain committed to achieving our mid term target model, which is underpinned by sustaining market share gains.

And with that let me turn it back to George.

Thanks, Bill before we take your question I will summarize.

Penetrating adjacent markets with.

Very pleased with our strong execution in 2023.

And expanding margins through revenue mix at scale, all of which we have clearly demonstrated in our performance.

We are especially proud of our a C V. T made it delivered these results.

Our mid term targets, primarily predicated on the dealer wholesale market recovering historical volumes over time.

We continue to gain market share by attracting new dealer and commercial partners to our marketplace.

But in addition, we are expanding our Tam and consistently taking share.

We're expanding our addressable market, which.

Each will drive long term growth.

Which physicians ACB or attractive growth as market conditions improve.

And with that let me turn it back to George.

Thanks, Bill before we take your questions I will summarize.

We're delivering an exciting product roadmap to further differentiate ACB and drive operating efficiency.

We are very pleased with our strong execution in 2023.

We are especially proud of our ACD teammate that delivered these results.

We are on track to achieve our near term adjusted and even a target and.

And deliver in our mid term targets.

We continue to gain market share by attracting new dealer and commercial partners to our marketplace.

We believe will drive significant shareholder value.

We are committed to achieving these results while building a world class team to deliver on our goals.

We are expanding our addressable market, which.

Which positions <unk> for attractive growth as market conditions improve.

With that I'll turn the call over to the operator to begin the Q&A.

We are delivering an exciting product roadmap to further differentiate ACB and drive operating efficiencies.

Thank you as a reminder, if you would like to ask a question. Please press star one one on your telephone.

We are on track to achieve our near term adjusted EBIT targets and deliver on our mid term targets.

As well please wait for your first and last name and company to be called before you proceed with your question one moment, while they compile the Q and a roster.

And we believe will drive significant shareholder value.

We are committed to achieving these results while building a world class team to deliver on our goals.

Our first question today will be coming from Michael Graham of Canaccord. Your line is open.

With that I will turn the call over to the operator to begin the Q&A.

Alright, Thanks, a lot for all the detail and congrats on the quarter.

Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone.

Wanted to ask on the on the.

2024 guide we understand that it includes about 30 million from the acquisition and I know you mentioned I'm expecting some recovery in the in the in the.

As well please wait for your first and last name and company to be called before you proceed with your question one moment, while we compile the Q&A roster.

The wholesale market underpinning that guidance, but just wonder if you go into a little more depth about what you're seeing.

Our first question today will be coming from Michael Graham of Canaccord. Your line is open.

On the macro and.

How do you handicap sort of you know, whether the market might perform better or worse than than what some better than your guidance.

Hey, Thanks, a lot for all the detail and congrats on the quarter.

I just wanted to ask on the.

Hey, Michael discharge.

The 2024 guide we understand that it includes about $30 million from the acquisition and I know you mentioned.

I'll start first and then.

So yeah. Thank you thanks for your comments on the corner.

With another strong quarter integrate execution at the team I appreciate you, saying that that'd.

Expecting some recovery.

In the wholesale market underpinning that guidance, but just wonder if you could go into a little more depth about what youre seeing.

We we had some comments earlier that'd be Scott.

On the macro and.

Believe twenty-three you wouldn't be the trial.

How you handicap sort of whether the market might perform better or worse than what's embedded in your guidance.

Overall Taylor hotel.

When you look at the trend.

Hey, Michael It's George.

We saw.

I'll start first and then bill can always Dan so yes.

Even in queue for.

Another for the year over year decline in overall wholesale price.

Yes. Thank you thanks, Brian.

Comments on the quarter, yes.

Another strong quarter it'd be great execution by the team I appreciate you, saying that.

Savings or marginally better this year.

Yes.

I would say, maybe you'll get much more details on that.

We had some comments earlier that would be.

But it's not like we're expecting this year.

Scott Please.

I believe 23 would be the trough.

The market.

To improve.

Overall dealer wholesale.

Significantly so we said marginally.

Apply.

When you look at the broad trends.

Earlier on the call or speaking to new car supply is coming back nicely.

Yes.

Even in Q4.

Another is from a year over year decline in overall wholesale price, we do things David marginally better this year.

You used car year over year or retail is still a little.

Lower obviously with interest rates and everything.

I mean can you maybe give much more details on that.

We're we're still paying environment, so tough and used to reach out.

It's not like we're expecting this year to be.

Overall card card on dealer lots.

The market.

Improve.

Or about 30 per cent lower than 2019, so when you look at it overall.

Yes significantly so we said marginally.

Earlier.

The call we're speaking to.

We're still seeing.

Yes, new car supply is coming back nicely.

Take some time for the market to kind of get back to normal.

Used car year over year on a retail or it's a little.

We're thinking this year, if things marginally improved fill out I'm not sure if there's any more.

Lower obviously with interest rates and everything.

Communicating.

We're still taking environment until the tough on used retail.

I would just say the only other thing I would add Michael is that.

Overall.

When you subtract out this <unk>.

Cars on dealer lots.

A space acquisition right at the midpoint results in about 22% revenue.

30% lower than 2019, so when you look at it overall supply and a dealer slide we're still seeing.

Growth versus 14% for last year, So think of that as a combination of both an improvement in <unk> and then it's a modest improvement in the market.

So that takes some time for the market to kind of get back to normal.

This year things marginally improve so I'm not sure if there is anymore.

<unk>, so just to frame out the the math for you.

Alright that makes sense. Thank you guys.

Yes, I would just say the only other thing I would add Michael is that.

Thank you Mike.

If you subtract out.

Thank you.

One moment for our next question.

This Texas based acquisition right at the midpoint results in about 22% revenue growth versus 14% for last year. So think of that as a combination of both an improvement in <unk> and then it's a modest improvement in the market share.

Our next question will be coming from Chris peers of needed My company. Your line is open.

Hey, let's talk about the sequential downtick in F. T. On the platform is that a concerted effort to currently a different part of the market or is that just the market itself in wholesale prices.

Sure Okay. So.

Just to frame out the math for you.

Alright that makes sense. Thank you guys.

Thank you Mike.

Thank you.

Moving lower consistent link and then.

One moment for our next question.

Should that inform lower retail prices or you're just you're still not <unk> added.

Okay credit.

Our next question will be coming from Chris peers of Needham and company. Your line is open.

As we predict it at.

Decline.

Hey, you guys talk about the sequential.

Somewhat consistently with used car values declining we've been seeing decided two years in a row overall use character cars going.

<unk> Tic in ASP on the platform is that a concerted effort to kind of attract a different part of the market or is that just the market itself the wholesale prices.

Going down in value.

It's been pretty consistent decline.

Moving lower consistently and then.

I think you also noted are.

Should that inform lower retail prices or are you just you're still not baking that in.

Ah revenue premium.

It has gone up so we've got a great job.

Hey, Chris.

Mitigating alright.

As we predicted.

Last year.

Yes.

Facing.

Decline.

<unk>.

Somewhat consistently with used car values declining we've been seeing.

Can't be going down but.

Sang very strong so we're in a really good spot, but yeah that was as we predicted maybe look bad last year, we had predicted used car values with continued to decline.

Two years in a row overall used cars.

Going down in value.

And you have been seeing a pretty consistent decline.

And we also predicted we should be fine.

I think you also noted.

Our revenue.

From a revenue Prenup perspective, and I think for both of those are the main trip.

It has gone up so we've done a great job.

Okay. Okay, and then on the call you framed a million options per year and you did 600000 yet.

Alright.

Last year.

Facing the ESP.

Overall as you can be going down.

I mean is it right to think about that congratulate X, 60% because that.

We're seeing very strong so we're in a really good spot.

A thousand basis points ahead of industry sources. So is that sort of part of the go to market or do I kind of have to that plan.

We predicted maybe look back last year, we had predicted used car values continued to decline.

It's like a little lower than that there's a few options and their credit that are.

And we also predicted we should be fine.

From a revenue per unit perspective, and I think for both of Us endometrial.

Okay. Okay, and then on the call you framed a million options correct year than you did 600000 units.

Dealers retail are and also.

You as a month and then you know.

I mean is it right to think about that conversion rate of 60% because that.

There's a few other like commercial cars were back pain.

1000 basis points ahead of industry sources, so is that sort of part of the go to market or do I have the backlog.

Version of a little bit more.

Isn't that 60% ranch.

<unk>.

And the bar.

Hi.

Chris were fixed.

It's a little lower than that there is a few auctions and their credits that are.

Which is pretty consistent with historical.

Trust.

John in for <unk>.

With your historical terms or industry real quick then.

Alright, great.

Retail cars and also.

The more detail.

Both are historically.

A few months.

And then.

Okay perfect. Thank you.

There's a few others.

Thank you.

The commercial cars, where we're in this spot.

Thank you one moment to the next question.

But conversion is a little bit lower than that 60% range.

But.

My next question.

Paul.

<unk> will be coming from Bob <unk>.

Yes, Chris.

In the mid fifties, which is pretty consistent with historical.

C G S securities you're lying about.

<unk>.

With your historical terms of our industry and historical trends.

Yes, hi, Thank you, it's Pete Lucas for Bob.

More detail.

Guys covered a lot in the prepared remarks. Thank you for that I guess, just one for me in terms of innovation you guys have introduced a lot of cool tech over the years and you discussed innovation what has to be the most excited from that and where do you see the biggest impact coming from in 2024 in terms of the new stuff.

Hey, Bob.

Historically.

Yes.

Okay perfect. Thank you.

Yes. Thank you.

Thank you one moment to the next question.

Okay.

Our next question will be coming from Bob Lebbek.

Yeah <unk>, yeah, that's a great question.

C J F Securities Your line is open.

Yes, hi, Thank you, it's Pete Lucas for Bob.

T V like many companies out there.

You guys covered a lot in the prepared remarks, thank you for that.

Are faced with artificial intelligence changing.

Just one from me in terms of innovation you guys have introduced a lot of cool tech.

Really.

How we all operate changing our intelligence.

Over the years and you discussed innovation what has you the most excited from that and where do you see the biggest impact coming from.

Changing how we think about.

Everything from how much time, it should take that turns back to car. So.

In 2024 in terms of the new stuff.

Yes. Thank you, yes, it's great question.

I'll hit us this year, but we are in fact thing and.

HCV like many companies out there.

Capabilities to help us.

In fact cars faster, but yet with more accuracy.

Our faith.

Artificial intelligence changing.

That wasn't possible.

How we all operate changing our intelligence.

Last year or the year before.

Our focus on artificial intelligence.

Changing how we think about.

Focus on the acquisitions, we've made like punk with our team and by the same things like are in other areas, where we can approach a vehicle and know the economy issues, we've had on that vehicle.

Yes.

Everything from how much time, it should take us back to car so.

They are all ahead of us.

This year, but we are investing in capabilities to help us.

Going into next year, Alright recommendation will help us we believe both take the time down on attractions, but yeah improve accuracy and I'll put all my make us more efficient. So we're really excited about that.

Expand cars faster, but yet with more accuracy.

Is it possible.

Sure.

Last year or the year before.

Our focus on artificial intelligence.

So I had to pick one now I can go out and pick the.

We are focused on the acquisitions, we've made like Mark with our R&D team and benefit things like ours are another area, where we can approach a vehicle and know the common issues, we've had on that vehicle.

The whole call but.

I would probably be the one where generally our inspection case capabilities are just improving dramatically in artificial intelligence is gonna help.

Going into next year.

Oh, great. Thank you I'll jump back in the queue.

This year will help us we believe both take the time down on the inspections, but yes improve accuracy.

[laughter].

Thank you one moment for the next question.

Ultimately make us more efficient.

So we're really excited about that.

Our next question will be coming from Eric Shannon.

One I think one takes the whole call, but if I had to pick one that would have even one word.

Of Goldman Sachs. Your line is open.

Thank you so much for taking the question could you reflect a little bit on the key investments you see necessary to make another putting some pressure on margins in 2024, and I have a bridge that just sort of what you've talked about it prior analysts dates in terms of the exit velocity 24 against you more medium.

Generally our inspection capabilities are improving dramatically in artificial intelligence is going to help.

Great. Thank you I'll jump back in the queue.

Thank you.

Thank you one moment for the next question.

Tom EBITDA margin guidance that'd be super helpful. Thank you.

Our next question will be coming from Eric Sheridan.

When did you start let all at a church yeah, yeah, thanks or.

Of Goldman Sachs. Your line is open.

Thank you so much for taking the question can you reflect a little bit on the key investments you.

Lift up to you and I think we are on track with really each of these I just spoke a few minutes ago.

You see necessary to make that are.

Putting some pressure on margins in 2024, and how to bridge that to sort of what you've talked about it prior analyst days in terms of the exit velocity 24 against your more medium term EBITDA margin guidance that'd be super helpful. Thank you.

Our ability to inspect the car both deliver on fire satisfaction, but also hat R. A medium term arbitration objective, we're really doing a great job. So that's one area, what we're doing a fantastic job.

Conversion rates and what we're doing on our platform to keep them from a conversion rates. If you look at what we're doing with selling vehicles on our platform again spell it.

Chris.

Let me start and then I'll, let it sure yes, yes. Thanks.

Okay.

And I think we are on track with really each of these I just spoke a few minutes ago.

Mark.

Our peers never know it's kind of.

Tough market and our conversion rates have held up really well that finality Ah Ah.

Our ability to inspect the car both deliver on buyer satisfaction, but also head.

Improvements Mcdonald.

They can keep include me.

Our medium term arbitration objective, we're really doing a great job. So thats one area, where we are doing a fantastic job.

The conversion rate when you look at where rapid transport, we're already at a tax rate and we're right.

At our highest profile of our transport capital K Greg.

On conversion rates and what we're doing on our platform to keep improving conversion rates.

Really.

Nicely, we're paying thing basically.

And what we're doing with selling vehicles on our platform again, it's really a tough market and you could see with our peers never know it's been a tough market and our conversion rates have held up really well that's fine.

Basically as plan for Thanksgiving capital and that will also improve overall origin.

Religious growth homegrown because many of these areas across the country continuing to take part in a chair.

Improvements we've done on our marketplace to keep include enhanced.

It has the conversion rate when you look at where rapid transport, we're already at our attach rates and where we're at.

<unk> for that one territory of our reach and then bill shared data.

Call regarding our our original profile.

At our margin profile for transport capital take rate.

Where you want to expand on that yeah, I think maybe first I'll just take a step back Eric at a high level. So.

Really coming along nicely we're pacing.

As planned with HCV capital.

You know based on the modeling we've done for this year.

That will also improve overall margin.

If we look at.

And then really just growth for growth.

Revenue more than a dollar.

Many of these areas across the country continuing to take market share allow us for that one territory of our reach and then bill shared some data.

You're on year.

Take about 45% of that sandwich to adjusted EBITDA right. So.

So we will be growing opex. This year, but you may feel pretty good about the amount of margin that we're going to take down to the bottom line. So first just again just take a step back.

On the call.

Alrighty or a regional profile.

Obviously, the more you might expand on that.

Maybe first I'll, just take a step back Eric at a high level. So.

I would just add to everything that George said, we're also going to be.

Based on the modeling we've done it for this year.

Making a platform investments to further our commercial strategy in that space into our guidance in our opex envelope as well.

If we look at.

Revenue margin dollar growth year on year.

Take about 45% of that down to adjusted EBITDA Alright. So.

So it's kind of all all of everything that you are subscribed specifically drive on the commercial strategy and then outside of that is just really scaling the business.

So we will be growing opex this year, but we feel pretty good about the amount of margin that we're going to take down to the bottom line. So first.

As we continue to grow so hopefully that gives you a little more context.

Just taking a step back.

That's that's helpful context <unk>.

I would just add to everything that George said, we're also going to be.

Take care of it.

Thank you one moment, let the next question.

Making platform investments.

Further our commercial strategy and thats baked into our guidance and our opex envelope as well.

Our next question will be coming from Ron Hosey.

So it's kind of all of them everything that George described specifically driving the commercial strategy.

Citigroup Your line is open.

Thanks for taking the question George I Bill wanted to ask about clear car and then maybe another crack of the EBITDA longterm guidance still unclear car George talked about 600 dealer rooftops in higher conversion rates relative to the market talk to us about just the tie between your car and the core auction market place and all that is helping to improve.

Outside of that is just really scaling the business.

As we continue to grow so hopefully that gives you a little more context.

That's helpful context, thanks, guys. Thanks.

Thank you Eric.

Thank you one moment for the next question.

<unk> call. It dealer integration, if you will and then just don't need it done I know to Eric's question. We we talked about maybe how we get there, but still really helpful to see the regional break out again, an update on that post analysts say today. So it's not just about the expected and ran from regional profitability at 35% now of these C DS.

Okay.

Our next question will be coming from Ron Jose.

Citigroup Your line is open.

Great. Thanks for taking the question, Hey, George Hey, Bill wanted to ask about.

Clear car and then maybe another crack at the EBITDA long term guidance still unclear car George talked about 600 dealer rooftops and higher conversion rates relative to the market talk to us about just the tie between clear car and the core auction marketplace and how that's helping to improve call. It dealer integration. If you will and then just on EBITDA.

Call It 20 regions and and just want to understand how we sort of ramp to that number over time, given where up mid single EBITDA margins that accompany today. Thank you.

Yeah, Thanks trial I'll tackle declared Caroline.

To Eric's question, we talked about maybe how we get there, but feel really helpful to see the regional breakout again, an update on that post analyst day today. So.

So if you take a step back.

We mentioned, even though we had a fantastic quarter of 2023, we had a great road here tailors.

Just about the expected ramp in regional profitability at 35% now with ACD is call. It 20 regions in and just want to understand how we sort of ramp to that number over time, given we're up mid single EBITDA margins at the company today.

Still struggling to get the right inventory.

And.

With clear car.

We are helping dealers with that core of a problem.

10 million cars sell ear appear to care.

Thank you.

Yeah, Thanks, Brian I'll tackle declared in Taiwan.

Many of those hard if you just if you assume that all of our 50 per cent of those.

So if you take a step back.

A dealer credit purchased it whether it's 50 per cent or 60% that would be massive cam expansion for dealer spying cars from consumers.

We mentioned, even though we had a fantastic quarter of 2023, we had a great growth year dealers.

Are still struggling to get the right inventory.

And a lot of these cars.

And.

The profile of car dealers would like to reach out.

With clear car, we are helping dealers with that core.

And it's going after that car that core problem.

10 million cars sell ear appear to care.

Pardon I mentioned earlier that they're still 30% less inventory dealers web sites.

Those many of those cars. If you just if you assume that all of our 50%.

But the only will look at all inventory.

Dealer credit purchases.

Dealers should be.

It's 50% or 60% that would be a massive tam expansion for dealer buying cars from consumers.

[noise] retelling, the right inventory and wholesaling cars that don't match their inventory and the only reason why they're retailing. Some of these cars right now and.

And a lot of these cars.

Profile of cars dealers would like to recap.

Now I'm thinking the franchise killers, because they don't have the right mix.

And it's going after that report card.

The core problem.

And so the franchise dealer, sorry, static, but the fact that we're not.

And I mentioned earlier.

There is still 30% less inventory.

Play and we're here to help them fix that problem.

Website.

And we offer them two minutes of spots.

When we look at all inventory dealer should be.

Has a monthly subscription.

Or even preferably they could give us a fair share of their hotel.

Re tally the right inventory and wholesaling cars don't match their inventory and the only reason why the retail like some of these cars right now and then.

So we offer them more of a partnership model RFP model. The majority of our partners I'm sure, you're saying about a hotel a motto many of that by taking a cleric or an elaborate on.

I'm thinking the franchise dealers because they don't have the right mix.

On their website either chat.

Franchise dealers are ecstatic with the fact that we're not complacent. We're here to help them fix that problem and we offer them to business models. They can pay us a monthly subscription.

Channels, creating separate landing page is using billboards.

Their service dry.

Consumer comes in a change their oil and I said, Hey, we want we want to buy your car.

Or even preferably that could give us our fair share of their earnings.

Now dealers have in it.

In fact, a tool to do that it focuses on their brand their cars like Ah Ah Ah call Brad.

So we offer them more of a partnership model RFP model. The majority of our partners are thinking about wholesale model, meaning that by taking a clarifier and leveraging on their website.

And we're hoping that witness really key problem.

If I were ecstatic really about just using our technology and they are machine learning using our massive data while we had.

There are other channels, creating separate landing pages using billboards there.

And over the next few years, we're gonna help dealers buy more cars from consumers trade prior to more effectively online.

Service drive I think a lot about it.

<unk> comes in or change their ROI on them.

We want to buy your car.

Yes, now dealer to have an effective tool to do that it focuses on their brands.

And ultimately help them out of the rights apply there are a lot of <unk>.

They'll go back over the next few years will go back up wholesaling the percentage they were wholesaling in 2019 at prior.

Yeah.

Hello, Brad.

And we're helping them with its really key problems.

Where is that really about just using our technology.

Okay.

Yeah, let me handle the second question.

Machine learning using our massive data we have and over the next few years, we're going to help dealers buying more cars from consumers trading higher than more effectively online.

So.

Again, just to kind of review the.

[noise] territory data that we just put out our prepared remarks right. So we had approximately 50 territories, which is about a little more of that.

And ultimately help them at the right supply there are a lot more that will mean they'll.

A third of the country.

Already at breakeven are better right.

They'll go back over the next few years, we'll go back to wholesaling the percentage they were wholesaling in 2019 at Pryor.

And we've got a number of 20 temperature that number of territories over 20 could have double double digit adjusted EBITDA margins in several they're already you know in order to twenty-five percent. So the way we get from here to our mid term targets Israeli twofold, if it's number one growing or.

Yes, let me handle the second question Ron.

No.

Again, just to kind of review that.

The territory data that we just put out in our prepared remarks right. So we had approximately 50 territories, which is about.

Our our margins to around turnaround, 50%, which is where they are now to 60%.

Roughly a third of the country.

You can expect to see some progress that's baked into our 2024 guidance as part of that path. So that is one component.

We're already at breakeven or better right.

And we've got a number of <unk>.

A number of territories over 'twenty could have double double digit adjusted EBITDA margins and several are already north of 25%. So the way we get from here to our mid term target is really twofold.

The other component really is.

Next leverage we will get on the engineering sales or marketing and G&A side. So if you go back to our materials for analysts say last June.

Roughly 75% to 80% of those costs are are very sixth in nature versus variable. So.

One growing our margins.

You've come around 50%, which is where they are now to 60%.

All about continuing to gain scale gained market share increase our unit volume and then getting that leverage and the model. So that's ultimately how won't get there but.

And you can expect to see some progress that's baked into our 2024 guidance as part of that path. So that's one component and the other component really is the opex leverage if you will get on the engineering sales and marketing and G&A side. So if you go back to our materials for our analyst Day last June we would run.

Yeah. We've got some territory is that are already in today's cost structure already heading double digit switch.

It gives us comfort of knowing that we can get there overtime as the rest of our territory scale.

At least 75% to 80% of those costs are our various fixed in nature versus variable. So it's all about continuing to gain scale and gain market share increase our unit volume and then getting that leverage in the model. So thats ultimately, how we will get there but.

Thank you George Thank you, though.

Thank you.

Thank you one moment to the next question.

Our next question will be coming from Russia, <unk> Uhm J P. Morgan Chase your line is open.

We've got some territories that are already even in today's cost structure already hitting double digits, which.

Great. Thanks for taking the question and congrats on good quarter here, just a couple of questions on the 2024 guidance methodology.

It gives us comfort in knowing that we can get there over time.

The rest of our territory scale.

Thank you George Thank you Bill.

Unfortunately are there any meaningful assumptions victim from you know the commercial business.

Thank you.

Thank you one moment for the next question.

Or any any assumptions and the revenue.

Our next question will be coming from Rajat Gupta of Jpmorgan Chase Your line is open.

From you know the off platform transportation product.

Does that clarification and I have just a quick follow up.

Great. Thanks for taking my question and congrats on good quarter here.

Yeah, Yeah. Thank you for saying that you had with great choir, we appreciate it.

Just a couple of questions on the <unk>.

2024 guidance methodology.

The commercial star and a bill can chime in.

Firstly are there any meaningful.

Commercial for this year.

Assumptions baked in from the commercial business.

We're not assuming like a significant rack well, we will start winning some business, but just to be just to sort of level of that we just got auto IMS done like in the last.

Or.

Any assumptions on the revenue.

From the off platform transportation product.

Okay, and just a clarification and then.

24 hours, so we still need to integrate with Amazon that might take.

Just a quick follow up thanks.

Yes, yes.

Yes, thank you for saying that yes, it was great quarter I appreciate it.

A few quarters and then on the we're we're having land to help us on commercial it's great that you know.

The commercial I'll start and then bill can chime in.

And commercial for this year.

Eight locations, but as we mentioned it would take for your location to get two.

We're not assuming like.

Significant ramp we will start winning some business.

80% of the population. So we will have it done when did this year.

Just to be.

Just to sort of levels that we have.

We don't have a huge ramp expectation for this year.

Scott Auto IMS done like in the last.

So we don't get over our skis from like how fast that will be but what we think al over the next couple of years.

24 hours, so we still need to interact with Amazon that might take.

Few quarters, and then on the where we are having land to help us on commercial it's great that's correct.

Last thing now really for the next few years and we're really excited about that that Tam. It's convenient I would think very significant tam expansion for us.

Eight locations, but as we mentioned it would take for your locations to get to.

Both for the commercial accounts.

80% of the population. So we will have some wins this year.

Donald accounts don't mainland some cough do either way and we're here to help support them and getting auto IMS in the way.

We don't have a huge ramp up expectation.

Was huge.

This year, just so we don't get over our skis for Mike how fast that will be but when we think out over the next couple of years that we're in.

On that transport sorry are shot so.

We're really pleased with the progress of the team is making that's ramping really nicely, but the numbers are still relatively small so it's not going to materially change <unk>.

Last thing now really for the next few years and we're really excited about that.

I would say very significant Tam expansion for us.

Expected results in terms of transport revenue.

Both for the commercial accounts.

Assuming that attach racer in the mid fifties, so there'll be some incremental revenue there, but it's really not going to move the needle yet.

Some accounts may land, some cough do either way and we're here to help support them in getting auto IMS in the way.

Potentially go into next year I might be more meaningful, but we'll cross that bridge when we get through it.

With huge yes.

And then on the transport side.

Got it got it quick follow up you know.

Yes look we're really pleased with the progress the team is making that's ramping really nicely, but the numbers are still relatively small so it's not going to materially change.

Mentioned in your your prepared remarks describe that ground.

How how about turning 23 prior years were impacted by like a very low.

Our expected results in terms of transport revenue.

<unk> do wholesale ratio.

We're still assuming that attach rates are in the mid fifties. So.

Curious like in your expectation.

Modest recovery, you're expecting dealer wholesale this year.

There'll be some incremental revenue there, but it's really not going to move the needle yet.

Is it I mean, what kind of like embedded in terms of like <unk> Ah mix in that garden are you expecting like meaningful change their behavior or.

Potentially as we go into next year, it might be more meaningful, but we'll cross that bridge when we get to it.

Got it got it.

Follow up.

You mentioned in your prepared remarks in the slide deck ground.

There are other factors, that's giving you some blood around <unk> outlook.

How like 'twenty two 'twenty three prior years were impacted by like already low.

Trade to wholesale ratio.

Yeah.

We're seeing modest improvement.

Curious what your expectation of the modest recovery, you're expecting dealer wholesale this year.

You know.

Really kind of coming into this quarter.

And we are determined achieved dealers.

Is it I mean, what's kind of like embedded in terms of like two wholesale mix in that guidance.

Oh, I would say the overall supply hasn't improved material, yet, but we are seeing some time.

Are you expecting like meaningful change their behavior or.

Dealers are a little bit more willing to wholesale so very small and I would say our assumptions of this year has just continued small improvements were not assuming.

Or are there other factors, that's giving you some color around that low single.

Modest growth outlook.

Yes.

Significant improvement.

Seeing modest improvement.

But just I would say, it's consistent with the trends where we've already been observing.

Over.

Really kind of coming into this quarter.

So I think we're being very reasonable.

And we are starting to see dealer.

Obviously, the majority of the growth comes from taking market share.

Obviously, the overall supply hasnt improved material, yet, but we are seeing some signs.

So that's where the majority is coming from.

Which we've been doing very consistently.

Dealers are a little bit more willing to wholesale so very small and I would say our assumptions of this year.

And then I sat at a very.

Very small additional gains a commercial but you know.

I would tell you the overall market improvements, we're assuming very very modest improvements.

Small improvements we're not assuming.

A significant improvement.

But I would say consistent with the trends, where we've already been observing.

Got it got it great. Thanks for the color of jump back into your.

Take your shot.

So I think we're being very reasonable.

Thank you one moment to the next question.

I would say the majority of the growth comes from taking market share.

So thats, where the majority is coming from.

Next question will be coming from Gary Crystal Pino Barrington Research line is open.

And which we've been doing very consistently.

And then Patrick.

Very small additional gains in commercial but I would tell you that overall market improvements, we're assuming very very modest improvement.

Good afternoon, gentlemen, I I have a couple of questions surrounding auto IMS first of all.

As you prepare to utilize this license what are your P. D. D. You have to sell the con signers on your services or the fact that the deal was already have your product. They can just once you hook into you.

Got it got it great. Thanks for the color I'll jump back in queue.

Thank you Richard.

Thank you one moment. Please next question.

Hooking whatever integrate they can just use it.

Next question will be coming from Gary Chris The P&L of Barrington Research. Your line is open.

To buy these cars that are offered by auto y M S.

Good afternoon, gentlemen, I have a couple of questions surrounding auto Oems.

Yeah, Gary Thank you for the question.

I'll take a step back and just explore.

First of all.

Explain.

As you prepare to utilize this license what do you have do you have to sell the con signers on your services or the fact that the dealers already have your product. They can just once you hook into.

I am at.

Mental where in the industry.

Train commercial Consigners. So these are folks like banks, who have repose.

Cooking whatever integrate they can just use it.

Fleet account fleet of Couch like company cars government vehicles.

Two.

By these cars that are offered by auto Oems.

And other sort of fleet lease type accounts so.

Yeah, Hey, Gary Thank you for the question.

About 1300 other the commercial Consigners.

I'll take a step back and.

Sure.

Explain.

Who use auto I am at.

Okay.

Middleware in the industry.

Too cause they are going to automatically they sign a vehicle today to a physical option.

<unk> commercial signers. So these are folks like banks, who have repo.

It it's been in that role for many years, so it really doesn't touch the dealer at all.

Fleet account fleet account for like company cars government vehicles.

And and that.

Some of <unk>.

And are there sort of lease type accounts so.

Many commercial accounts that excludes could've easily with auto IMS, meaning.

About 1300 out of the commercial titers.

Only waive amendment provision of vehicle if they go through auto Imas.

And so that's the way they are provision, okay, I'm going to spend.

We use auto I am too.

Vehicle to those specific option and.

Automatic may sign a vehicle today to a physical auction.

And then the auction company that would be responsible to auction that vehicle off to dealers. So this is a middle where it doesn't really touched beyond dealer. It's just based commercial accounts.

Yes.

It's been in that role for many years, so really doesn't touch the dealer count at all.

And in that ecosystem.

Seminar vehicles to auctions.

And there are many commercial accounts that exclusively use auto IMF, meaning they only way and then the provision that vehicle if they go through auto IMAX.

Wait.

We had access to auto ironmaster, only and a few locations.

Up until recently like things like literally three or four locations across the whole country.

And so the way they are provision as they would say, okay I'm going to this specific.

Specific vehicle to this specific akshay.

Only aware.

We had lab and now.

And the auction company that would be responsible to auction that vehicle up to dealers.

It's a.

Lost to be behind us and et cetera.

Middleware it doesn't really touch the end dealer. It's just these commercial accounts.

Will and collaborate.

Collaboration with Ottawa.

Doing integration.

Their vehicles to auctions.

That is true it allows her to a different ways for a commercial consignor again, when I say that I think bank take a plane company.

Great.

We had access to auto imac only in a few locations.

Up until recently things like literally three or four locations across the whole country.

When they have a card I think either sinus to one of our locations.

Or other locations wherever the vehicle may be.

Only.

Where we had land.

And now with this.

The first meeting sent again to go.

Yes.

Lots to be behind us in the central Harbin ice.

Except that they've already been doing this other which is more suitable price digital model they've never done this before.

We will.

In collaboration with auto Oems.

<unk> integration.

And once he got it.

That is true it allows for two different ways for our commercial.

I'm not exactly sure yeah, that's going to take us three months or six months or nine months out again, and we just got the last lawsuit guidance.

<unk> again, when I say that I think bank take a fleet company.

But we will work in good faith.

When they have cars I think either one of our locations or to other locations wherever that may be.

Ah.

You are all five where are they kind of time.

Have a commercial consignor the vehicle wherever that vehicle may be so again to summarize.

Makes sense I guess to kick it off.

They've already been doing this other which is more suitable for our digital model they've never done this before.

That is.

Middleware Hawaii.

The methodology for outcome.

It will take us.

The car today, so are we Atlanta, and and hopefully in the very near future thing, while I got into this year to support our digital hot.

Not exactly sure, yes, it's going to take us three months or six months or nine months I guess, let me just kind of a loss last year.

Yeah.

But we will work in good faith.

Okay, but it does open up a market of a couple of million vehicles, a year or two you will eventually right.

As you are all five where are they kind of time.

Commercial's consignor.

Yeah at least a few million into your point.

The vehicle wherever that may be.

Pretty significant Catholic fashion.

So again to summarize.

Okay.

Thank you.

<unk>.

Hello. Thank you appreciate it.

The methodology for us.

Thank you one moment for the next question.

Consignor to kind of the car today to where we have ladder.

Hopefully in the very near future, we will again this year.

[noise] and our next question will be coming from my V com.

Our digital model.

Okay, but it does open up a market of a couple of million vehicles, a year or two youre eventually right.

B <unk> security.

Yes at least a few months to your point, it's a pretty significant Tam expansion.

[noise], Yeah, I'm waiting for the line to open up.

Okay.

Is he still there.

No. Thank you I appreciate it.

One moment please.

Okay, I would like to just turn the call back over to Tim Fox for closing remarks. Thank you.

Thank you one moment for the next question.

Great. Thank you and thanks, Lisa thank for everybody for joining us on the call today.

And our next question will be coming from E com.

Look forward to see you on the conference circuit this quarter and again. Thank you for your interest in ECB and have a great evening.

B Riley Securities.

Okay.

This concludes today's conference call you may I'll disconnect.

Yeah.

We can't hear anything.

Okay.

Yes.

Okay.

And when he first line to open up.

Is he still there.

One moment please.

Okay.

Okay.

Okay.

Okay, I would like to just turn the call back over to Tim Fox for closing remarks. Thank you.

Great. Thank you.

Thanks, Lisa and thanks to everybody for joining us on the call today, we look forward to see you on the conference circuit this quarter and again. Thank you for your interest in ACB and have a great evening.

This concludes today's conference call you may all disconnect.