Q1 2024 ACV Auctions Inc Earnings Call

Operator: Greetings and welcome to the ACV Q1 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star, then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tim Fox. Thank you. You may begin.

Greetings and welcome to the H T V Q1, 'twenty 'twenty four earnings conference call.

At this time all participants are in a listen only mode.

Operator: A brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press Star then zero on your telephone keypad.

Operator: As a reminder, this conference is being recorded.

Operator: It is now my pleasure to introduce your host Tim Fox. Thank you you may begin.

Timothy Fox: Good afternoon, and thank you for joining ACV's conference call to discuss our first quarter 2024 financial results. With me on the call today are George Chamoun, Chief Executive Officer, and Bill Zerella, Chief Financial Officer.

Timothy Fox: Good afternoon, and thank you for joining <unk> conference call to discuss our first quarter 2024.

Timothy Fox: With me on the call today are George Simone Chief Executive Officer, and builds a roller chief financial Officer.

Timothy Fox: Before we get started, please note that today's comments include forward-looking statements, including statements regarding future financial guidance. These four different 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. A discussion of the risks and uncertainties related to our business can be found in our SEC filing and in today's press release, both of which can be found on our Investor Relations website.

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

Timothy Fox: 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.

Speaker Change: A discussion of the risks and uncertainties related to our business can be found in our SEC filings and in today's press release.

Speaker Change: So which can be found on our investor relations website.

Timothy Fox: During this call, we will discuss both GAAP and non-GAAP financial measures. The 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.

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

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

George G. Chamoun: Thanks, Tim. Good afternoon, everyone, and thank you for joining us.

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

George G. Chamoun: We are pleased with our first quarter performance, which demonstrated continued strong execution by the ACV team. We delivered another quarter of record revenue, which was at the high end of Guyana and grew 22% year over year. We delivered our first quarter of positive adjusted EBITDA since going public, and it was also at the high end of guidance.

George: We are pleased with our first quarter performance, which demonstrated continued strong execution by the team.

George: We delivered another quarter of record revenue.

George: Which was at the high end of guidance.

George: It grew 22% year over year.

George: We delivered our first quarter of positive adjusted EBITDA since going public.

Timothy Fox: So it's also at the high end of guidance.

George G. Chamoun: Our innovation engine continues to hum along, further extending our competitive moat and driving operating efficiency, resulting in an 800 basis point year over year improvement and adjusted EBITDA margin. Along with our continued momentum in dealer wholesale, we are very pleased with the early market adoption of ACV's consumer sourcing solution, ClearCut. We kicked off a number of tech investments to support our commercial wholesale strategy. ACV remains focused on driving strong top-line growth.

Timothy Fox: Our innovation engine continues to Hum along.

Timothy Fox: They're extending our competitive moat and driving operating efficiencies, resulting in an 800 basis point year over year.

George G. Chamoun: Adjusted EBITDA.

Timothy Fox: Along with our continued momentum in dealer wholesale we are very pleased with the early market adoption of AC nice consumer sourcing solution clarify.

Timothy Fox: We kicked off a number of tuck in Boston.

Timothy Fox: For our commercial wholesale strategy.

Timothy Fox: <unk> remains focused on driving strong top line growth.

George G. Chamoun: Continued Margin Expansion and delivering adjusted EBITDA profitability in 2024. We're confident that executing on this profitable growth strategy will result in creating long-term shareholder value. With that, let's turn to a brief recap of first quarter results on slide four. First quarter revenue of $146 million was at the high end of guidance and grew 22% year over year. GMV decreased 4% year over year, driven by a 16% decrease in GMV per unit as wholesale prices continue to normalize.

George G. Chamoun: <unk> margin expansion.

George G. Chamoun: Delivering adjusted EBITDA profitability in 2024.

Timothy Fox: We're confident that executing on its profitable growth strategy result, in creating long term shareholder value.

Timothy Fox: With that let's turn to a brief recap our first quarter results on slide four.

George G. Chamoun: Yeah.

George G. Chamoun: First quarter revenue of $146 million was at the high end of guidance.

Timothy Fox: He grew 22% year over year.

Timothy Fox: G N V decreased 4% year over year.

George G. Chamoun: Driven by a 16% decrease in JV or use.

Timothy Fox: It's wholesale prices continued to normalize.

George G. Chamoun: We sold 175000 vehicles in our marketplace.

Timothy Fox: With a 15% year over year.

George G. Chamoun: Reflecting strong listing sprouts and a modest year over year decline in conversion rate.

George G. Chamoun: We sold 175,000 vehicles in our marketplace, growth of 15% year over year, reflecting strong listings growth and a modest year-over-year decline in conversion rates. 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: growth, innovation, and scale. I'll begin with Gerald.

George G. Chamoun: 550, again frame the rest of today's discussion around the three pillars of our strategy will maximize long term shareholder value.

George G. Chamoun: Growth innovation and scale.

Gerald: I'll begin with growth.

George G. Chamoun: Turning to slide seven, I'll share our observations about the automotive market trends as context for dealer wholesale volume. New retail sales were flat year over year to continue to lag 2019 levels. However, the inventory picture continues to gradually recover, and along with increasing OEM incentives, we believe new retail sales will improve in the back half of 2024. The used retail environment remains soft, with units also flat year-over-year in Q1.

Gerald: Turning to slide five and I'll share our observation about automotive market right.

George G. Chamoun: Contacts or dealer wholesale volumes.

George G. Chamoun: New retail sales were flat year over year continued to lag 2019 level.

George G. Chamoun: However, the inventory picture continues to gradually recover along with increasing OEM incentives, we believe new retail salzwedel crew.

George G. Chamoun: Half of 2024.

George G. Chamoun: Used retail environment remains soft with units also flat year over year in Q1.

George G. Chamoun: As affordability issues and a lack of late-model inventory continue to pressure consumer demand, in terms of vehicle sourcing, dealers are retaining a higher than normal percentage of trades for retail inventory, continuing a headwind for dealer wholesale supply. The trade to wholesale mix is expected to normalize over time as new and used inventory recovers from depressed levels, which are currently about 25% below normal. Along with the supply picture continuing to normalize, we saw price depreciation and conversion rates in line with normal seasonal expectations.

George G. Chamoun: Portability issues and lack of late model inventory continue to pressure our consumer demand.

George G. Chamoun: In terms of vehicle sourcing dealers, while retaining a higher than normal percentage of trains retail inventory.

George G. Chamoun: Continuing a headwind if you are a wholesale supplier.

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

George G. Chamoun: Only about 25% below normal.

George G. Chamoun: Along with the supply picture continuing to normalize we saw price depreciation and conversion rates in line with normal seasonal expectation.

George G. Chamoun: On balance, we believe that M markets are showing early signs of improvement. While the pace for dealer wholesale recovery remains difficult to predict, we do believe the market will post modest growth in the back half of 2024. Moving to Friday.

George G. Chamoun: On balance we believe that our markets are showing early signs of improvement.

Timothy Fox: While the pace for dealer wholesale recovery I mean difficult to predict we do believe the market will cause a modest growth in the back half of 2020 four.

George G. Chamoun: Moving to slide eight.

George G. Chamoun: I would like to provide highlights on our value-added services, beginning with ACV Transportation. The transportation team delivered another strong quarter with attached rates in the mid 50% range, which is in line with our midterm target, resulting in 95,000 transport requests sourced from our market. The use of AI-optimized pricing, which we introduced in early 2023, expanded significantly, and we achieved 94% lane coverage in Q1. Leveraging AI, our transfer team drove growth and operating efficiency, resulting in a 300 basis point year over year increase in revenue margin, reaching the high team and in line with our midterm target model.

Speaker Change: I would like to provide highlights from our value added services, beginning with ACD transportation.

George G. Chamoun: The transportation team delivered another strong quarter with attach rates in the mid 50% range.

George G. Chamoun: Which is in line with our midterm target model.

George G. Chamoun: And 95000 transport requests from our marketplace.

Timothy Fox: The use of AI optimized pricing, which we introduced in early 2023.

George G. Chamoun: And its significance and we achieved 94 per cent lien coverage in Q1.

George G. Chamoun: By leveraging AI or transfer team drove growth and operating efficiency.

George G. Chamoun: Resulting in a 300 basis points year over year increase in revenue margin.

George G. Chamoun: Reaching the high teens and in line with our mid term target model.

George G. Chamoun: We also launched off platform transportation services for our dealer partners. While it's still early, we're excited to be delivering additional value for our dealers and another long-term growth buffer. Turning to slide 9, our ACV Capital team also delivered strong results in Q1. Attached rates in the low double digits combined with strong ARPU expansion resulted in 40% revenue growth year-over-year.

George G. Chamoun: We also launched our platform transportation services for our dealer partners. While it's still early we're excited to be delivering additional value for our dealers and another long term growth outlook.

George G. Chamoun: Turning to slide nine.

George G. Chamoun: Our ACB capital team also delivered strong results in Q1.

George G. Chamoun: Attach rates in the low double digits combined with strong ARPA expansion resulted in 40% revenue growth year over year.

George G. Chamoun: Given the current challenging used vehicle market, we are focused on balancing the growth and risk of ACV capital, resulting in a 1% credit loss provision in Q1. Moving to the second element of our strategy to drive long-term shareholder value innovation. On slide 11, I'll first recap some of our growth-oriented product innovation. Now, let me begin with the dealer buying experience. We continue to add new marketplace features to increase conversion rates, including advanced safe search capabilities and additional transparency of vehicle package information to help inform accurate pricing. The relaunch of ACV Max has been promising, with Q1 bookings at the highest level since 2021.

George G. Chamoun: Given the current challenging used vehicle market, we are focused on balancing growth and risk based capital, resulting in a 1% credit loss provision that you want.

George G. Chamoun: Moving to the second element of our strategy to drive long term shareholder value.

George G. Chamoun: <unk>.

George G. Chamoun: On slide 11, I'll first recap some of our growth oriented product innovation.

George G. Chamoun: You may begin to the dealer buying experience.

George G. Chamoun: We continue to add new marketplace features to increase conversion.

George G. Chamoun: Including advancing search capability.

George G. Chamoun: And additional transparency and vehicle package information help inform accurate pricing.

George G. Chamoun: The relaunch and I used to get mass has been promising with Q1 bucket at the highest level since 2021.

George G. Chamoun: We are in the early phases of ramping up our go-to-market and expect the ACV Max to be an additional long-term growth level. We kicked off tech investments to support our commercial strategy, including integration with Auto-IMF, new features required to service consignors, and integration efforts across our remarketing center. Lastly, you're in the pilot phase with our dealer self-inspection solution, initially targeted at two use cases: Private Marketplaces and Live Appraisers.

George G. Chamoun: We are in the early phases of ramping our go to market and expect excuse me Max and additional long term growth power.

George G. Chamoun: We kicked off tech investments to support our commercial strategy.

George G. Chamoun: <unk> integration with Ottawa, Matt.

George G. Chamoun: New features required of service can finders and integration efforts across our Remarketing Center.

George G. Chamoun: Lastly, in the pilot phase with our dealer self inspection solution.

George G. Chamoun: Initially targeted two use cases.

George G. Chamoun: Marketplaces lateral appraisal.

George G. Chamoun: Feedback from our dealers has been very positive, and we look forward to sharing more details throughout the year as we expand capabilities and scale the pilot. Turning to slide 12.

George G. Chamoun: Feedback from our dealers has been very positive and we.

George G. Chamoun: Look forward to sharing more details throughout the year, we expand capability and scale of the pilot.

George G. Chamoun: Turning to slide 12.

George G. Chamoun: We are very pleased with the market traction of ClearCard, ACV's consumer sourcing solution that leverages AI and real-time market data to deliver highly accurate condition-based pricing. Based on dealer feedback, feed generation, conversion rates, and margins are significantly higher than competitive consumer sourcing tools. This speaks to the power of ClearCar in driving qualified leads and ultimately increasing overall supply for our dealers. We are excited to share feedback directly from one of our dealer partners.

George G. Chamoun: We are very pleased with the market traction is clear.

George G. Chamoun: A T v's consumer sourcing solution that Leverages, AI and real time market data.

George G. Chamoun: Our highly accurate condition based pricing.

George G. Chamoun: Based on dealer feedback lead generation conversion rates.

George G. Chamoun: Margins are significantly higher than competitive consumer sourcing Charles.

George G. Chamoun: This speaks to the power of Clare car and driving qualified lead and ultimately increasing overall supply for our dealers.

Speaker Change: We are excited to share feedback directly from one of our dealer partners lesser Glenn Automotive group, who is he.

George G. Chamoun: Lester Glenn Automotive Group, who is using a broad set of ACV solutions, including ClearCar, ACV Max, and our Marketplace. We posted a video on our IR website featuring the Lester Glenn team describing the significant value they're deriving from the ACV solution. It's a great opportunity directly in my dealer park. On slide 13, we highlight examples of tech investments that extend into our operation. Delivering Customer Success While Reducing Cost

George G. Chamoun: Using a broad set of AC solution <unk>.

George G. Chamoun: Including Claire Hart, H T J maxx and our marketplace.

George G. Chamoun: We posted a video on our IR website, featuring the lessors 19, describing the significant value our driving from the easy installation.

George G. Chamoun: It's a great opportunity here directly my Delever.

George G. Chamoun: On slide 13, we highlight examples of tech investments that extend into our operation.

George G. Chamoun: Delivering customer success, while reducing costs.

George G. Chamoun: One of the key drivers is inspection accuracy. Leveraging AI and our structured data is a massive competitive advantage because each vehicle is unique and has its own imperfection. We recently launched version 2.0 of CoPilot and ArdGuard. For CoPilot 2.0, we further leverage our vast data set by adding a visual representation of common high-risk vehicle part failures based on the specific year, make, and mileage of the vehicle. ArpGuard 2.0 continues to leverage some of the industry's best artificial intelligence for vehicle condition diagnostics.

George G. Chamoun: One of the key drivers is inspection accuracy.

George G. Chamoun: Leveraging AI and our structured data.

George G. Chamoun: A massive competitive advantage.

George G. Chamoun: As each vehicles unique and with its own imperfection.

George G. Chamoun: The recently launched version Ciudadano copilot.

George G. Chamoun: And Arthur.

George G. Chamoun: Copilot Ciudadano, we further leverage our vast data, adding a visual representation common high risk vehicle heart failures based on specific here.

George G. Chamoun: And mileage of it yet.

George G. Chamoun: Our guard too that all continues to leverage some of the industry's best artificial intelligent vehicle condition dietmar.

George G. Chamoun: With the addition of Munk's exterior cosmetic model, we deepen our inspection capability, enabling our VCI to produce an even higher level of accuracy. We expect these innovations will drive both BCI efficiency and lower customer assurance costs over the long term. To wrap up on innovation, ACV remains committed to delivering industry-leading technology to our dealer partners and to our own operations, driving both growth and scale. And we look forward to sharing more details with you next quarter. With that, I'll hand it over to Bill to take you through our financial results and how we're driving growth and scale.

George G. Chamoun: With the addition of monks exterior asthmatic model, we deepen our inspection capability.

Bill: <unk> produced even higher level of that.

Bill: We expect these renovations will drive both BCA efficiency and lower customer assurance us all along.

Bill: To wrap up on innovation.

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

Bill: Driving both growth and scale.

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

George G. Chamoun: With that let me hand, it over to Bill to take you through our financial results and how we're driving growth and scale.

William R. Zerella: Thanks, George, and thank you, everyone, for joining us today. We are very pleased with our Q1 financial performance. Along with delivering accelerated revenue growth, we had meaningful margin expansion and recorded our first positive adjusted EBIT in a quarter as a public company, demonstrating the strength of our business model. Turn to slide 15, and I'll begin with a recap of our first quarter results.

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

William R. Zerella: We are very pleased with our Q1 financial performance.

William R. Zerella: Along with delivering accelerated revenue growth.

William R. Zerella: Meaningful margin expansion and record our first positive adjusted EBITDA quarter as a public company.

William R. Zerella: Demonstrating the strength of our business model.

William R. Zerella: Turning to slide 15, and I'll begin with a recap of our first quarter results.

William R. Zerella: Revenue of $146 million was at the high end of our guidance range and grew 22% year-over-year. Adjusted EBITDA of $4 million was also at the high end of our guidance range, and adjusted EBITDA margin improved approximately 800 basis points versus Q1'23. This demonstrates both the operating leverage in our model and continued strong op-ex management.

William R. Zerella: Revenue of 146 million was at the high end of our guidance range and grew 22% year over year.

William R. Zerella: Adjusted EBITDA 4 million. It was also at the high end of our guidance range and adjusted EBITDA margin improved approximately 800 basis points versus Q1 'twenty three.

William R. Zerella: This demonstrates both the operating leverage in our model and continued strong Opex management.

William R. Zerella: Non-GAAP Net Income also turned positive in Q1 and was at the midpoint of our guidance range, with margin increasing approximately 500 basis points year-over-year. Next, on slide 16, I will cover additional revenue details. Auction Assurance revenue, which was 57% of total revenue, increased 21% year-over-year.

William R. Zerella: non-GAAP net income also turned positive in Q1.

William R. Zerella: At the midpoint of our guidance range with margin, increasing approximately 500 basis points year over year.

William R. Zerella: Next on slide 16, I will cover additional revenue details.

William R. Zerella: Auction assurance revenue, which was 57% of total revenue increased 21% year over year.

William R. Zerella: This performance reflects 15% year-over-year unit growth and auction and assurance ARPU of $476, which grew 5% year-over-year. Note that ARPU increased year-over-year despite a 16% decline in GMV per unit, reflecting our Q3'23 price increase, and we believe we still have pricing headroom going forward. Marketplace services revenue, which was 37% of total revenue, grew 28% year over year. Results were driven by strong ACV transport performance and another record revenue quarter for ACV capital. Our SAS and Data Services products comprised 5% of total revenue and declined 3% year-over-year.

William R. Zerella: This performance reflects 15% year over year unit growth.

William R. Zerella: And auction and assurance, our pool of $476, which grew 5% year over year.

William R. Zerella: Note that <unk> increased year over year, despite a 16% decline in G. M D Prim unit.

William R. Zerella: Reflecting our Q3 23 price increase and we believe we still have pricing headroom going forward.

William R. Zerella: Okay.

William R. Zerella: Marketplace services revenue, which was 37% of total revenue grew 28% year over year.

William R. Zerella: Results were driven by strong ACB transport performance and another record revenue quarter for ACP capital.

William R. Zerella: Yeah.

William R. Zerella: Our SaaS and data services products comprised 5% of total revenue and declined 3% year over year.

William R. Zerella: As George mentioned, we are very pleased with the relaunch of ACV Max and with strong Q1 bookings. Note that this is a SAS-based product with routable revenue, so growth will take time to materialize, but we're confident that the upgraded ACV Max suite will drive long-term growth. Turning now to slide 17, I will cover costs in the quarter. Q1 cost of revenue as a percentage of revenue decreased approximately 300 basis points year over year. The improvement was driven by strong auction assurance results and by ACV transport.

William R. Zerella: As George mentioned, we are very pleased with the relaunch of ACB Max with strong Q1 bookings.

William R. Zerella: Note that this is a SaaS based product with ratable revenue so growth will take time to materialize, but we're confident that the upgraded a C V. Max suite will drive long term growth.

William R. Zerella: Yeah.

William R. Zerella: Turning now to slide 17, I won't cover costs in the quarter.

William R. Zerella: Q1 cost of revenue as a percentage of revenue decreased approximately 300 basis points year over year.

William R. Zerella: The improvement was driven by strong auction assurance results and by a C V transport.

William R. Zerella: As George mentioned, we deliver high-teens transport revenue margins, which is in line with our mid-term target model. We continue to focus on expense discipline as we optimize and scale our business. Non-GAAP operating expenses, excluding cost of revenue, as a percentage of revenue decreased 300 basis points year-over-year in Q1. Moving to slide 18, let me frame our investment strategy as we continue driving profitable growth. Our focus on spending discipline and operating efficiency resulted in a material decrease in OPEX growth in 2023, resulting in a significant improvement in adjusted EBITDA year-over-year.

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

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

William R. Zerella: non-GAAP operating expenses, excluding cost of revenue as a percentage of revenue decreased 300 basis points year over year in Q1.

William R. Zerella: Yeah.

William R. Zerella: Moving to slide 18, let me frame our investment strategy as we continue driving profitable growth.

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

William R. Zerella: And a significant improvement in adjusted EBITDA year over year.

William R. Zerella: As we mentioned on our Q4 call, OPEX growth is expected to increase in 2024 as we integrate our new remarketing centers and invest in our commercial wholesale platform. Even with this incremental investment, we continue to expect adjusted EBITDA margin to increase by approximately 800 basis points this year. Next, I will highlight our strong capital structure on slide 19. We ended Q1 with $341 million in cash equivalents and marketable securities and $125 million of debt on our revolver.

William R. Zerella: As we mentioned on our Q4 call Opex growth is expected to increase in 2024, as we integrate our new remarketing centers and invest in our commercial wholesale platform.

William R. Zerella: Even with this incremental investment we continue to expect adjusted EBITDA margin will increase by approximately 800 basis points. This year.

William R. Zerella: Next I will highlight our strong capital structure on slide 19.

William R. Zerella: We ended Q1 with 341 million in cash cash equivalents in marketable securities and 125 million of debt on our revolver.

William R. Zerella: Note that our Q1 cash balance includes $172 million afloat in our auction business. 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. In the figure on the right, you'll see that we delivered a strong quarter of operating cash flow. Note that for Q124, when excluding the quarterly change in marketplace flow, we generated $5 million of operating cash flow. This is a significant increase year-over-year, reflecting the transition to profitability and strong margin improvement. Now I'll turn to guidance on slide 20.

William R. Zerella: Note that our Q1 cash balance includes 172 million of float in our auction business you.

William R. Zerella: The amount of float on our balance sheet will continue to fluctuate meaningfully based on the business trends in the final two weeks of each quarter.

William R. Zerella: Which has a corresponding impact on operating cash flow.

William R. Zerella: In the figure on the right, you'll see that we delivered a strong quarter of operating cash flow.

William R. Zerella: Note that for Q1 'twenty four when excluding the quarterly change in marketplace float, we generated $5 million of operating cash flow.

William R. Zerella: This is a significant increase year over year, reflecting the transition of profitability and strong margin improvements.

William R. Zerella: Now I will turn to guidance on slide 20.

William R. Zerella: For the second quarter of 2024, we are expecting revenue in the range of $154 to $158 million, and adjusted EBIT is expected to be in the range of $6 to $8 million, consistent with our commitment to achieving profitability each quarter going forward. For the full year 2024, we continue to expect revenue in the range of $610-$625 million, representing growth of 27-30% year-over-year. Adjusted EBIT is expected to be in the range of $20 to $25 million, reflecting operating improvements in our core business and integration investments in our remarketing center.

William R. Zerella: For the second quarter of 'twenty 'twenty four we are expecting revenue in the range of $154 million to $158 million.

William R. Zerella: Adjusted EBITDA is expected to be in the range of $6 million to $8 million consistent with our commitment to achieving profitability each quarter going forward.

William R. Zerella: For the full year 'twenty 'twenty four we continue to expect revenue in the range of 600 and $625 million representing growth of 27% to 30% year over year.

William R. Zerella: Adjusted EBITDA is expected to be in the range of $20 million to $25 million.

William R. Zerella: Operating improvements at our core business and integration investments in our remarketing sensors.

William R. Zerella: As it relates to guidance, we're assuming that the dealer wholesale market grows modestly in the back half of 2024, and conversion rates and wholesale price depreciation follow normal seasonal patterns. Revenue growth is expected to outpace non-GAAP OPEX growth, excluding cost of revenue and DNA, by approximately 10 percentage points. And finally, moving to slide 25, we remain committed to achieving our midterm target model, which is underpinned by sustaining market share gains, penetrating adjacent markets, and expanding margins through revenue mix and scale, all of which we've clearly demonstrated in our performance.

William R. Zerella: As it relates to guidance, we're assuming that the dealer wholesale market grows modestly in the back half of 'twenty 'twenty four.

William R. Zerella: Version rates in wholesale price depreciation follow normal seasonal patterns.

William R. Zerella: Revenue growth is expected to outpace non-GAAP opex growth, excluding cost of revenue M. D N a by approximately 10 percentage points.

William R. Zerella: And finally moving to slide 25, we remain committed to achieving our mid term target model, which is underpinned by sustaining market share gains penetrating adjacent markets and expanding margins through revenue makes sense scale all of which we've clearly demonstrated in our performance.

William R. Zerella: Our mid-term targets are primarily predicated on the dealer wholesale market recovering to historical volumes over time. In addition, we are expanding our TAM and consistently taking share, which will drive long-term growth. And with that, let me turn it back to George. Thanks, Bill.

William R. Zerella: Our midterm targets are primarily predicated on the dealer wholesale market recovering to historical volumes over time.

William R. Zerella: In addition, we are expanding our Tam and consistently taking share which will drive long term growth.

William R. Zerella: And with that let me turn it back to George.

George G. Chamoun: Thanks Bill. Before we take your questions, I will summarize.

George: Thanks, Bill before we take your questions I will summarize we are very pleased with our strong execution in Q1.

George G. Chamoun: We are very pleased with our strong execution in Q1. We are especially proud of our ACV teammates that delivered these results. We continue to gain market share by attracting new dealer and commercial partners to our market while expanding our addressable market, which positions ACV for attractive growth as market conditions improve. We are delivering an exciting product roadmap to further differentiate ACV and drive operating efficiency. We are on track to achieve our near-term adjusted EBITDA targets and deliver on our mid-term targets that 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. With that, I'll turn the call over to the operator to begin the Q&A.

George: We are especially proud of our HCV teammate and deliver these results.

George G. Chamoun: We continue to gain market share, attracting new dealer and commercial partners to our marketplace.

George G. Chamoun: While expanding our addressable market, which positions a C V or attractive growth as market conditions improve.

George G. Chamoun: We are delivering an exciting product road map to further differentiate a C V and driving operating efficiency.

George G. Chamoun: We are on track to achieve our near term.

George G. Chamoun: Adjusted EBITDA targets and deliver on our midterm target that we believe will drive significant shareholder value.

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

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

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star and then 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star and then 2 if you would like to remove a question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. The first question we have is from Bob Labick of CJA Securities. Please go ahead.

Speaker Change: Thank you we will.

Speaker Change: We'll now be conducting a question and answer session.

Operator: If you would like to ask a question. Please press star and then one on your telephone keypad.

Operator: A confirmation tone will indicate your line is in the question queue.

Operator: You May press Star and then two if he would like to remove your question from the queue.

Operator: All participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Robert James Labick: The first question, we have is from Bob Leduc of C. J a securities. Please go ahead.

Robert James Labick: Good afternoon. Hi, congratulations on a nice quarter. Thank you, Bob. Thanks.

Robert James Labick: Hey, Bob Good afternoon, Hi, congratulations on a nice quarter.

Robert James Labick: Thank you Bob.

George G. Chamoun: Lots of great stuff you already told us. I guess my first question would be, maybe give us a little update on your, I'll call it, the kind of commercial land and reconditioning strategy, if you could. I know, you know, we talked about, you had the Texas acquisition of a few locations to kind of experiment with this, given that the auto IMS, you finally got through the auto IMS lawsuit, you can now, you know, work with that.

Robert James Labick: Lots of Great stuff you already told US I guess my first question, maybe a give us a little update on your I'll call. It the kind of commercial land in reconditioning strategy. If you could I know you know we talked about you had the Texas acquisition of a few locations to kind of experiment with this.

George G. Chamoun: Given that the auto I M. S. You finally got through.

George G. Chamoun: This law suit you can now work with that so maybe just give us. The you know what have you learned so far in this in this.

George G. Chamoun: So maybe just give us an, you know, what you've learned so far in this emerging strategy for you as it relates to land reconditioning in the commercial market itself? What are the pros and cons, and what are the kind of next steps over the next several, I don't know, quarters or years or whatever your time horizon is?

George G. Chamoun: <unk> strategy for you.

George G. Chamoun: As it relates to land reconditioning in our commercial market itself, what are the pros and cons and what are the kind of next steps over the next several quarters.

George G. Chamoun: Three years or whatever your time horizon is there.

George G. Chamoun: Yeah, certainly, Bob. Thank you.

Speaker Change: Yeah, certainly Bob thank.

Bob: Thank you, so we're making really really great progress.

Speaker Change: The initial locations we have.

Speaker Change: Are helping us build relationships with commercial containers.

George G. Chamoun: So we're making really, really great progress. The initial locations we have are helping us build relationships with commercial consignors. Obviously, we're still in the early days here, but step one was for us to start to have, you know, a handful of locations around the country, start to get the technology in place, which we've got a phased approach here. The phased approach allows us to, at your point, get access to Auto IMS, and also allows us to begin our journey of leveraging the ACV tools, phase throughout this year. We'll be starting to bring the ACV condition report and methodologies of leveraging our inspections at these auctions, so that will be happening throughout the year.

Speaker Change: Obviously, we're still in the early days here, but step one was for us to start to have a you know a handful locations around the country started to get the technology in place, that's where you've got a phased approach here.

George G. Chamoun: The phased approach allows us to your point and get access to Ottawa mass.

George G. Chamoun: Also allows us to begin our journey of la.

George G. Chamoun: Averaging the ACB tools so.

George G. Chamoun: First.

George G. Chamoun: Phase throughout this year, we started to me the a C V condition report and methodologies of leveraging our inspections at these options so that will be happening.

George G. Chamoun: Throughout the year.

George G. Chamoun: A broader integration of activities is also going on as we speak, and we're also starting to get some early wins. A call to now, we've had both one rental car company and one bank where we get repos give us several hundred units at a new location, and they were previously just working with us at one location. So this idea of building a relationship with a commercial consignor, showing them that we're, showing them that we've got the right model for them. We had some early wins. I'll be at these are; we're sold early.

George G. Chamoun: The the.

George G. Chamoun: Broader integration, but I was just getting a lot of somebody like a broader integration of activity is also going on.

George G. Chamoun: As we speak and we're also starting to get some early wins.

George G. Chamoun: For example, even since our last.

George G. Chamoun: Called so now we've had both one rental car company and one bank.

George G. Chamoun: Where we get repos.

George G. Chamoun: Has given us several hundred units at a new location.

George G. Chamoun: And they weren't previously just working with us at one location. So this idea of building relationship with our commercial combine or show them. It works.

George G. Chamoun: Other than that we've got the right model for that.

George G. Chamoun: We had some early wins, albeit these are we're still early at least for hundreds of cars a month, but even hundreds of vehicles a month.

George G. Chamoun: These were hundreds of cars a month, but even hundreds of vehicles a month start to tell the story, start to prove that we're gonna be a great marketplace. So hopefully, that kind of gives you a really quick summary, but we're on the path, and really nothing has changed from our last call. We're on the path of executing on the strategy.

George G. Chamoun: Just show the story starts to prove that we're gonna be a great marketplace. So hopefully that's what you're looking for there that kind of gives I got like quick summary, but where we're on path and I'm really nothing has changed from our last call. We're on path of executing on this strategy.

George G. Chamoun: Great overview, appreciated. And then just one more for me; I'll jump back in the queue.

Speaker Change: Yeah, no great overview I appreciate it and then just one more for me and I'll jump back in queue. Yeah, obviously, a very strong quarter one of the things that stood out was the.

George G. Chamoun: Obviously, a very strong quarter. One of the things that stood out was the, I guess, operating leverage on your O&T, your operations and technology line. Can you talk about the drivers there, maybe the efficiency of your VCI's? How much more can you drive there? How do you feel about where the VCI's are currently? I know years ago we talked about them doing 6 a day, the best ones are doing 12 to 15 a day, or any other kind of metrics there and where you are moving on that path of increasing the efficiency of the VCIs. And obviously, you're leveraging that a lot because we can see it in the results.

George G. Chamoun: I guess operating leverage on your Oh into your operations and technology line.

George G. Chamoun: Can you talk about the drivers there maybe the efficiency of your V. C. I says you know.

George G. Chamoun: What's what how much more can you drive there how do you feel about where the V. C. R. Currently I know like years ago, we talked about they were doing six a day. The best ones were doing 12 to 15, a day or any other kind of metrics, there and where you are moving in that path of increasing the efficiency of V. C O I's and obviously, you're leveraging that cause.

George G. Chamoun: We can see it in the results.

George G. Chamoun: Yeah, certainly. I'll start, and then Bill can also chime in.

Speaker Change: Yeah. So I'll start and then bill can also chime in so I would say, we're making small incremental changes.

George G. Chamoun: So I would say we're making small incremental changes and enhancements to scheduling our inspectors, and so I would say small wins quarter over quarter. We're happy with some of those small wins, to your point. Those incremental changes will all add up, and as you know, in our more mature areas, we're already hitting our midterm targets. So we're very pleased there. There are also, to your point, broader operating efficiencies from our operations team, bringing in automation and some of our back-end functions as well beyond actual inspection. So, look at those results. We're in one area, like inspections. It was actually a broad, broad improvement. Bill, any more you want to share? Yeah.

George G. Chamoun: And enhancements to our scheduling or in factors and so that was a small wind quarter over quarter, we're happy with some of those small wins to your point those incremental changes will all add up.

Bill: And as you know in our more mature areas were already hitting our mid term target. So.

George G. Chamoun: We're very pleased there they're also to your point of water operating efficiencies from our operations team on bringing in automation in some of our back end functions as well beyond excellent inspection. So look at those results are words in one area like back then it was actually.

Bill: Abroad, a broad improvement in fill anymore you want here.

William R. Zerella: I would just add a couple of points. We've talked in the past about continuing to just optimize every aspect of our business, and we're continuing to do that every quarter. An interesting data set for you, if we look at just the organic growth rate of our op-ex in the quarter with no single digits. Yeah, great stuff.

Bill: Hey, Bob.

Bill: I would just add a couple of points so.

William R. Zerella: <unk> talked in the past about continuing to just optimize.

William R. Zerella: Every aspect of our business and we're continuing to do that every quarter.

William R. Zerella: You know an interesting maybe set of data for you. If we look at just the organic growth rate of our opex in the quarter was low single digits.

William R. Zerella: You know that.

William R. Zerella: Carved out the M&A impact in terms of Opex, so continuing to manage our opex as effectively as we can while making sure. We're also investing properly in the business seriously starting to see those results in our financials.

Robert James Labick: Yeah, great stuff. Thank you very much.

Speaker Change: Yeah, great. So thank you very much.

Speaker Change: Thank you. Thank you.

Michael Patrick Graham: The next question we have is from Michael Graham of Canaccord Genuity. Please go ahead.

Robert James Labick: The next question, we have is from Michael Graham of Canaccord Genuity. Please go ahead.

Michael Patrick Graham: Hi, thank you. I wanted to ask you two questions. The first is, it looks like auction revenue per unit stepped up about 5% sequentially, even though GMB per unit came down a bit. So just wondering if you could comment on whether you're seeing lower incentives or what's going on there. And then just more broadly, you mentioned that you're assuming for the year that the dealer wholesale market sees modest growth, which I think is consistent, but maybe you can just give us a little more depth on what you're seeing in the market and what you think the puts and takes are around the market, you know, really opening up to its full potential.

Michael Patrick Graham: Hi, Thank you I wanted to ask two questions. The first is it looks like auction revenue per unit stepped up about 5% sequentially, even though G. M. D per unit came down a bit. So just wondering if you could comment on whether you're seeing lower incentives or whats going on there and then just more broadly.

Michael Patrick Graham: You mentioned that.

Michael Patrick Graham: You're assuming for the year that the that the dealer wholesale market sees modest growth, which I think is consistent but maybe you can just give us a little more depth on what youre seeing in the market and what do you think the puts and takes are around like the market you know really opening up to its full potential.

William R. Zerella: Yeah, I'll start, and then you can... Sure. Yeah, so our auction ARPU went up 20 bucks quarter on quarter. I believe that's the highest it's been since we went public. So you're just continuing to see the benefit of our previous price increases and other optimizations that we're doing in terms of managing ARPU. So we're pretty pleased with that result, especially in the context of GMV per unit going down 16%, year-on-year. And that certainly drove the outperformance in our revenue margins for just our auction insurance revenues, which hit 73% for the quarter, which is also the highest since we've gone public.

Speaker Change: Yeah, I'll start and then.

Speaker Change: Sure Yeah. So our auction RFP went up 20 bucks or one quarter.

William R. Zerella: That's the highest actually its been since we've gone public.

William R. Zerella: You know, you're just continuing to see the benefit of our previous price increases and other optimizations that we're doing in terms of managing our pool. So.

William R. Zerella: No we're pretty pleased with that result, especially in the context.

William R. Zerella: G M D per unit going down 16%.

William R. Zerella: Year on year so.

William R. Zerella: And that's certainly what drove the outperformance in our revenue margins for just our option insurance revenues, which is 73% for the quarter, which was also the highest system.

George G. Chamoun: Yeah, what I'll add is we've been obviously pretty consistent in that we felt comfortable with that midterm market, midterm market sort of pricing our food targets that we've given, you know, our analysts and investors. And so we're on the path to hitting that.

Speaker Change: Yeah, what I'll add is we have been obviously pretty consistent that we felt comfortable with that mid term market mid term.

Speaker Change: Market sort of pricing.

Speaker Change: Are you, saying our targets that we've given you know our our analysts and investors and so we're on path to hitting that and even though <unk> pressure. We said what we said to you all is even with the G. M. B pressure meeting used car values going down we still feel good about our mid term target. So.

George G. Chamoun: And even though GMB has pressure, we said, what we said to you all is even with the GMB pressure, meaning used car values going down, we still feel good about our midterm target. So that should give investors confidence in our group. We feel good about that. And then your other question was really about the market. I would say it was okay.

George G. Chamoun: That should give investors confidence in our booth.

George G. Chamoun: We feel good about that and then your other.

George G. Chamoun: The question was really I would say generally about the market.

Speaker Change: Hey, Q1, I'm, a little maybe a little more color would be January sorry, I was a little hotter than maybe in March and then.

George G. Chamoun: Just generally if I saw that with some of our competitors and others out there in the marketplace are that the overall market in Q1.

George G. Chamoun: I would say was okay I mean it.

George G. Chamoun: It wasn't like the market sort of really, really came back just yet. Having said that, when you read all the TLEs, not just the volume, the dealer wholesale volume, I would say across the industry was not stellar yet, but you are seeing overall. You saw one of our competitors even recently say used car values are starting to go down. You're starting to see; we look at all the signs of market health.

George G. Chamoun: It wasn't like the market sort of like really really came back just yeah, having said that when you read all the tea leaves not just the volume of their dealer wholesale volume I would say across the industry, but it was not stellar yet but you are seeing overall you saw one of our.

George G. Chamoun: Competitors have been recently say used car values are starting to go down you're starting to see when you look at all of the signs of market health.

George G. Chamoun: We like where the industry is going. At the end of the day, used car values go down, which would mean that independent dealers will buy these cars more affordably. They can then retail them to their end consumers. So we look at all the signs, and even though some of them, at the moment, from an investor perspective, you may look at GMB going down as a concern on ARPA, I wouldn't worry about that too much.

Speaker Change: Yeah, they we like where the industry's call.

George G. Chamoun: At the end of the day used car values go down would mean that independent dealers into the body cars more affordably and resell it to their end consumers. So we look at all the time, even though some of them at the moment.

George G. Chamoun: From an investment perspective may look at AT&T going down I was like are concerned I wouldn't worry about that too much or where we feel good about our ARPA G. M b going down well actually I mean, you know independent dealers to buy these cars from trades and others. They can retail them to their end consumers so to.

George G. Chamoun: We feel good about our ARPA; GMB going down will actually mean independent dealers can go buy these cars from trades and others, and they can retail them to their end consumers. So to your point, I would say not a lot has changed from last quarter. Our feeling is things will probably get better. All right, perfect. Thanks a lot.

George G. Chamoun: To your point I would say not a lot changed from last quarter I'm feeling that things.

George G. Chamoun: Better for us.

Michael Patrick Graham: All right, perfect. Thanks a lot for all that color.

Speaker Change: Alright, perfect. Thanks, a lot for all that color.

Speaker Change: Yeah. Thank you Michael.

Ronald Josey: The next question we have is from Ron Josey of Citigroup. Please go ahead.

Michael Patrick Graham: The next question we have is from Ron Josey of Citigroup. Please go ahead.

Michael Waterman: Hi, this is James Michael. I'm for Ron.

Ronald Josey: Hi, It is James Michael one for one quickly for me it was encouraging to see the progress in transport with 95000 in sourced in that 300 basis points improvement in margin can you expand on the operation.

Michael Waterman: These improved trends.

Michael Waterman: And profitability.

Michael Waterman: Quickly for me, it's encouraging to see the progress in transport with 95,000 units sourced and the 300 basis points and improved revenue margins. Can you expand on the operational work you're working through to improve transport effectiveness and profitability? The Margin Expansion and Enhancements to Transport have been consistent, obviously, and we've done a good job of continuing to add to our product and tech, lane optimization, pricing, size of the vehicle, all the different attributes.

Michael Waterman: Yeah, Yeah yeah.

Michael Waterman: Yeah.

Michael Waterman: It's an expansion and enhancements to transport has been you know consistent obviously, we've done a good job of continue.

Michael Waterman: Continue to add them to.

Michael Waterman: Two our product intact lane optimization.

Michael Waterman: Good thing the size of the vehicle all of the different attributes we keep working on it.

Michael Waterman: We keep working on it, and we're doing this, actually, in, obviously, not an easy market. So overall, we're very pleased with our team. And we've got more work to do in this area, meaning that we have more investment in the technology of ACV transportation, but we're really just so pleased with the intelligence we're building into the lane pricing and sort of scaling, scaling for lane by lane across. A couple, thank you. And then I wanted to start with a clear card. Can you provide some additional color on how the lead gen conversion rates and margins are improving and the specific leverage you have to improve execution? Thank you.

Michael Waterman: And we're doing this actually I would say and obviously not an easy market.

Michael Waterman: So overall, we're very pleased with our team and we've got you know we've got more work to do in this area, meaning that where we've got more investment in the technology of Ace two transportation, but we're really just so please.

Michael Waterman: With the intelligence, we're building into the lane pricing and sort of scaling.

Michael Waterman: Scaling for lane by lane across the country.

Michael Waterman: That's helpful. Thank you and then I wanted to turn to clear card can you provide some additional color on how that lead gen conversion rates and margins improving the specific levers we have to improve execution. Thank you.

George G. Chamoun: ClickCart is going really well. We keep growing additional rooftops out there.

Speaker Change: Yeah, certainly and you know quite part is going really well I mean, we've got we keep growing additional rooftops out there dealers loved the product consumers really like the product we're seeing incredible feedback what are the things we did this.

George G. Chamoun: Dealers love the product. Consumers really like the product. We're seeing incredible feedback. I'm going to give you all a little bit more color because we went out and we had a video made of a dealer group called Lester Glenn Auto. I really would encourage all of you to watch this video.

George G. Chamoun: This quarter, giving you a little more color. If we went out and got a video game of a dealer group called lesser Gladden Auto I really would encourage all of you to watch this video that will give our investors really the voice of the customer and you'll hear them talk about how these tools are helping them.

George G. Chamoun: It will give our investors the voice of the customer. You'll hear them talk about how these tools are helping them, at the end of the day, make more money, and close more transactions with the end consumer. There's a quote in there about how they're doing so much better at their own internal conversion. Think about it like optimizing their inventory. Optimizing their inventory is really important. In the last couple of years, dealers have been selling cars they should not have been selling. They were really wholesale cars.

George G. Chamoun: At the end of the day make more money and close more transactions with the end consumer they actually you know it was a quote in there about how they're doing so much better than their own internal conversion and then thinking about optimizing their inventory optimizing their inventory is really important.

George G. Chamoun: The last couple of years dealers are in retailing car. They should not have an retailing there they really were a wholesale cars. So.

George G. Chamoun: So yeah, we'd encourage you to watch this video because it'll give you a customer that's using ClearCar, ACV Max, and our marketplace, our ACV Auctions marketplace. So I think I'll leave you with that at least. I think that'll be better than me just telling you what's in the video. I really would love for you to actually watch it. Okay. Fair enough. We'll take a look. Thank

George G. Chamoun: Yeah, we'd encourage you to watch this video because they'll give you a customer that's using cleared car T V Max and our marketplace E auctions marketplace. So I think.

George G. Chamoun: I'll leave it with that at least I think that would be better than he just telling you but in the video I really would love for you to actually watch it.

Michael Waterman: Fair enough. We'll take a look. Thank you so much.

George G. Chamoun: Fair enough.

George G. Chamoun: So much.

Speaker Change: Thank you.

Rajat Gupta: The next question we have is from Rajat Gupta of J.P. Morgan. Please go ahead.

Michael Waterman: The next question we have is from Rajat Gupta of Jpmorgan. Please go ahead.

Rajat Gupta: Great. Thanks for taking the question. I just had one clarification, you know, from the prior answers. I think, Bill, you mentioned that organic OPEX was a low single digit. Does that also include some of the incremental investments related to auto IMS and other integration efforts? And what would be the organic volume number tied to that low single-digit OpEx number? And I'll follow up.

Rajat Gupta: Oh, great. Thanks for taking the question just had one clarification.

Speaker Change: When the prior answers I couldn't.

Rajat Gupta: Bill you mentioned that.

Rajat Gupta: Organic opex was up low single digits does that also include.

Rajat Gupta: Some of the incremental investments related to auto I am asked him like other.

Rajat Gupta: Integration efforts and and.

Rajat Gupta: And what would be the organic volume number no tie to that are tied to that low single digit opex numbers and I have one follow up thanks.

William R. Zerella: Hey Rajat, it's Bill. Yeah, so we, as you know, we're not breaking out specifically any organic versus inorganic numbers other than to say that the Alliance acquisition from last quarter will represent about 5% of revenue for the year, so a little less than that for the quarter. The organic growth in OPEX does partially include some of the investments that we're making in connection with the acquisitions that we did, but the balance of that is part of the M&A bucket, if you will, since those integration costs directly relate to the M&A transactions. And if you remember, in terms of the EBITDA that we inherited as part of those deals, we used part of that EBITDA to fund those integration costs.

Rajat Gupta: Every job Phil Yeah. So we as you know, we're not breaking out specifically.

William R. Zerella: Any organic versus inorganic numbers other than to say that the alliance acquisition from last quarter.

Rajat Gupta: Got it. Got it.

Rajat Gupta: Will represent about 5% of revenue for the year, so a little less than that for the quarter.

Rajat Gupta: The organic growth in Opex.

Rajat Gupta: Opex does include partially some of the investments that we're making in connection with the acquisitions that we did.

Rajat Gupta: But the balance of that is part of the M&A bucket.

Rajat Gupta: Bucket, if you will.

Rajat Gupta: So integration cost directly related to the M&A transactions. If you remember in terms of the EBITDA that we we inherited as part of those deals we use part of that he put out so far.

Rajat Gupta: Those integration costs.

George G. Chamoun: That's helpful. And just, you know, you know, I think in the past you've given us some color on market share. You know, every quarter, what would you say your due to market share performance was in the first quarter?

Speaker Change: Got it got it that's helpful.

Speaker Change: And just you know.

George G. Chamoun: I think in the past you've given us some color on market share.

George G. Chamoun: No every quarter, what would you say your market share performance was in the first quarter.

George G. Chamoun: Yeah, Rajat, if you remember our last call, we said we're going to start doing market share once a year. You know, obviously, we're doing it more often than before when the market was all crazy and wild. So, having said that, just to give you a little bit more color, I guess, but I guess moving forward, just keep in mind, we'd really like to be doing this once a year. One of our, you know, one of the outside sources out there, AuctionNet, which is NAAA, mentioned in their report that physical auction volumes were down 5% year-over-year.

Speaker Change: Yeah I bet you remember last call. We said, we're going to start to do market share once a year.

George G. Chamoun: You know obviously, we're doing it more often at Pryor.

George G. Chamoun: When the market was all crazy wild so.

George G. Chamoun: But having said that just to give you a little more color I guess, but I guess moving forward just keep in mind, we really really like between this once a year is one of our you know what are the outside sources out there auction, which is interplay.

George G. Chamoun: You mentioned that in their report that physical auction volumes were down 5% year over year. So that's not giving you like they just kind of gives us a framework of it.

George G. Chamoun: So that's not giving you like, that just kind of gives you a framework of at least what the collective, the physical auctions said that dealer wholesale, specifically, even though commercial was up, dealer wholesale was down 5%. So at least it can help you kind of get an idea. But having said that, as I mentioned, we'll be doing that moving forward now that things are starting to normalize. We'll start to do that.

George G. Chamoun: At least what.

George G. Chamoun: Collectively the physical auctions said that dealer wholesale.

George G. Chamoun: Specifically, even though commercial with a dealer wholesale was down 5%. So at least can help you kind of get an idea, but having said that as I mentioned.

George G. Chamoun: Where will we start we'll be doing that moving forward now that things are starting to normalize we'll start to do that once a year.

Rajat Gupta: Got it, got it. One more on OPEX, if I may. You obviously mentioned the step up and, you know, the remarketing integration, just the integration of the new marketing centers. You know, should we treat this like OPEX's step up this year? You know, because of that, there's more of a one-time thing or, you know, and then you have like better revenue versus OPEX leverage going forward. For example, if you're diving into like 17% OPEX growth and 27% revenue growth, for example, does that ratio get better? Going forward, you should assume this is more of a one-time dynamic for this year. I'm not sure if that question was clear, but any thought would be helpful.

Speaker Change: Got it got it does it does.

George G. Chamoun: I'm more of an Opex I mean, you obviously mentioned like the step up in.

Rajat Gupta: Are there any marketing integration because the integration of the of the new marketing centers or is this should be treated just like our opex step up this year.

Rajat Gupta: You know because of bad there's more you know like a one time thing or you know and then you have like better revenue versus Opex leverage going forward you know you know.

Rajat Gupta: For example, like you are guiding to like 17% Opex growth and 47% revenue growth for example, does that ratio get better.

Rajat Gupta: Going forward you should view this as more of like a one time dynamic forgive here I'm not sure. What the question was clear, but any color would be helpful. Thanks.

William R. Zerella: Yes, I'm not sure if I would look at it as one time only, in that we're going to be spending money on the integration through the end of this year. It'll certainly dip into next year.

Rajat Gupta: Yes, I mean, I'm not sure if I would look at it as one time.

William R. Zerella: Would it be spending money for the integration through the end of this year or certainly a good thing for next year.

William R. Zerella: That said, as we scale the business, we're going to continue to get OpEx leverage as we approach our mid-term targets across the P&L, right, as we get more scale. So as we drive towards those targets, you're going to see leverage throughout the P&L, right, from kind of revenue margin down through OPEX. So we're essentially going to get that leverage, but that doesn't necessarily mean we're going to incur a one-time cost that is just going to go away, since most of this is labor, right, because it's product development and the engineering teams.

William R. Zerella: That said as we scale the business, we're going to continue to get Opex leverage as we approach our near term targets.

William R. Zerella: Across the P&L right as we get more scale so.

William R. Zerella: Yeah, as we drive towards those targets, you're going to see leverage throughout the P&L right from kind of revenue margin down through Opex.

William R. Zerella: So where we're essentially going to get that leverage but that doesn't necessarily mean, we're going to incur.

William R. Zerella: Kind of one time costs that are just going to go away. Since most of this is labor right because it's part of our product development and engineering teams. So it's.

William R. Zerella: So I'm not sure I would look at it as per se one time, but we'll certainly get the leverage and continue to get the leverage that we've demonstrated in the past, and we'll continue to get that going forward as we scale.

William R. Zerella: Not sure I would look at it as per say one time.

William R. Zerella: But we will certainly get the leveraging because they've got the levers that we've demonstrated in the past and will continue to get that going forward as we scale.

Rajat Gupta: understood. Thanks for all the color and good questions.

Speaker Change: Understood. Thanks for all the color and good questions.

Speaker Change: Thank you.

Nicholas Freeman Jones: The next question we have is from Nick Jones of Citizens J&P. Please go ahead.

Rajat Gupta: The next question, we have is from Nick Chen of citizens JMP. Please go ahead.

Nicholas Freeman Jones: Great, thanks for taking the questions, guys. As you, you know, look to land more rooftops, and you're having those conversations with those dealers. You know how much of a factor kind of lower wholesale volume, potentially in the reluctance, to get on, just because maybe they don't feel the need or the pressure to diversify. And to the extent that that is part of the conversation, you know, things do start to improve in the back half and into next year, you know, how well-positioned is ACV to kind of accelerate landing rooftops while also kind of winning share?

Nicholas Freeman Jones: Yeah, great. Thanks for taking thanks.

Speaker Change: Thanks for taking the questions guys.

Nicholas Freeman Jones: As you.

Nicholas Freeman Jones: Look to land more rooftops.

Nicholas Freeman Jones: And you're having those conversations with with those dealers.

Nicholas Freeman Jones: You know how much of a factor is kind of lower wholesale volume.

Nicholas Freeman Jones: Potentially in their reluctance.

Nicholas Freeman Jones: To get out just because maybe they don't feel the need or the pressure to diversify into.

Nicholas Freeman Jones: To the extent that that is part of the conversation you know if things do start to improve in the back half and into next chair you know how well positioned is easy to kind of accelerate landing rooftops off of kind of winning share.

Nicholas Freeman Jones: And existing rooftops.

George G. Chamoun: Yeah, Nick, that's a really good question. And maybe when I'm not prepared, I'll do it on the fly.

Speaker Change: Yeah, that's a really good question.

Nick: And maybe when I wasn't prepared but I'll do it on the fly [laughter] I think you're really pointing out an interesting topic and that's that dealers have less.

George G. Chamoun: I think you're really pointing out an interesting topic, and that's the last thing the dealers have to wholesale. So it's really not the top of mind. Right. They're really trying to source more and trying to buy more from consumers. So your question, which I'll put back in the statement, is interesting. We could see a tail. As wholesale starts to come back, we start to see a conversion.

George G. Chamoun: To wholesale so it's really not the top of mind.

George G. Chamoun: There they're really.

George G. Chamoun: They're trying to source more of them trying to buy more from consumers.

George G. Chamoun: So yeah you. Your your question yourself on the back of the statement. It was interesting we could see.

George G. Chamoun: <unk>.

George G. Chamoun: As wholesale starts to come back we started to see a conversion.

George G. Chamoun: Yeah.

George G. Chamoun: I guess my initial gut reaction is probably favorable. Yeah, I think you're on to something there. But I wouldn't say I put a lot of thought into coming to this call. But I think your gut is probably favorable, that we could see as you. It's almost like anything in life; the more of it, the more of it comes to you, the more of a problem it is to address. There could be something there.

Speaker Change: I guess, Mike My initial gut reaction is probably favorable yeah, I think I think you're onto something there, but I wouldn't put a lot of thought going into it on this call, but I think you I think your guidance probably right now.

George G. Chamoun: That we could see as you it's almost like anything in life. The more of it tomorrow. When it comes to you the more of a problem is to address there there could be something there.

George G. Chamoun: Great, so then I guess my follow-up would be: to the extent that there's potentially a tailwind and you guys are approaching your midterm targets, I mean, how much of a North Star is the midterm target if there's an opportunity to kind of... Maybe, you know, more aggressively invest in technology or land those rooftops? I guess, you know, how nimble is the roadmap to the extent that maybe tailwind manufacturing

Speaker Change: Great. So then I guess my follow up would be.

George G. Chamoun: To the extent that there's potentially a tailwind and you guys are approaching your midterm targets I mean, how much of a north star as the midterm target, there's an opportunity to kind of.

George G. Chamoun: Maybe you know more aggressively invest in technology or landing those rooftops.

George G. Chamoun: You know cause technology investments always been kind of part of the story. It's I guess you know how nimble as the road map to the extent that maybe tailwind manifest.

George G. Chamoun: So I feel really good about the book. I mean, when you look at consumer sourcing, it will help these dealers get the right input. When you look at the pricing strategies, helping them price vehicles, and when you look at the way we're merchandising assets inside the platform, where we've got our commercial customers. I mean, you'll start to see commercial volume start to become more material over the next couple of years. Each of these areas is going to add up, and that's why I still feel great about our midterm targets.

George G. Chamoun: So I feel really good about the work I mean, when you look at consumer sourcing will help these dealers get the right inventory when you look at the pricing strategy, helping them priced vehicles correctly. When you look at the way, we're merchandising assets inside the platform.

George G. Chamoun: Where we've got a commercial customers I mean, you'll start to see commercial volume start to become more material over the next year.

George G. Chamoun: Each of these areas.

George G. Chamoun: Are all going at it.

George G. Chamoun: It's why I still feel great about our mid term targets.

George G. Chamoun: We, we really have a sizable product and tax investment going on here across several different areas, and as those areas mature, we're already doing great. But there could be an accelerant. I would say for now, instead of creating a new expectation, I think the expectation I'll manage right now is that I feel great about the new term targets. And I would say as we get closer to the end of it, then we'll create new expectations. But for now, I just leave it there. I think our product and tech investments and our overall position we're in, we're in a really good spot.

George G. Chamoun: We really have Oh.

George G. Chamoun: Quite sizable product and tech investment going on here across.

George G. Chamoun: Several different area and as those areas mature we're already doing right.

George G. Chamoun: But there are plenty of salary.

George G. Chamoun:

George G. Chamoun: It could certainly be an accelerant, but I would say for now it's like Hey, you got a new expectation I do think that the expectation on managed right now is I feel great about the midterm target.

George G. Chamoun: As we get closer he knows it will create new expectations, but for now I just leave it there I think our product and tech investments and our overall.

George G. Chamoun:

George G. Chamoun: The position we're in we're in a really good spot.

Speaker Change: Alright, Thanks George.

Speaker Change: Thank you Dan.

Gary Frank Prestopino: The next question we have is from Gary Prestopino of Barrington Research. Please go ahead.

Speaker Change: The next question, we have is from karri pre subpoena off Panton research. Please go ahead.

Gary Frank Prestopino: Hey, good afternoon George, Bill, and Kim. Hey, a couple of questions on ClearCar. And I know it's early in the game here, but how much has this really proliferated through your dealer-customer base at this point?

Gary Frank Prestopino: Hey, good.

Gary Frank Prestopino: Good afternoon, George Bill, Okay, I'll make a couple of questions on unclear car.

Gary Frank Prestopino: And I know it's early in the game here, but how much is this really proliferating through your deal with customer base at this point.

George G. Chamoun: You know, we didn't really come in with a number today, but I think we've got, you know, we don't want to broadcast a number on every earnings call. So I won't answer every call.

Speaker Change: You know it doesn't really come up with a number today, but I think we've got you know we.

George G. Chamoun: We don't want to broadcast the number every earnings call. So I won't answer every call, but I think we're close to the 700 rooftops or something like that.

Speaker Change: Okay. So.

George G. Chamoun: We're still early.

George G. Chamoun:

George G. Chamoun: But I think we're close to 700 rooftops or something like that. Okay, so we're still early. So Gary, I mean, that's fantastic for a brand new product that might be one of the fastest growing auto tech companies, and you can look at it as one product niche, probably one of the fastest growing ones. So we're, what's your point so early? I mean, there are 16,500 franchise rooftops; there are tens of thousands of independent rooftops.

Speaker Change: But Gary I mean, that's fantastic for a brand new product that you know it might be one of the fastest growing auto tech companies and even looking out it's like one product niche probably one of the fastest growth ones out there.

George G. Chamoun: So we're but to your point, it's still early I mean, there is 16500 franchise rooftops, there's tens of thousands of independent rooftops.

George G. Chamoun: But the signs are positive, the end results are positive, and we are not necessarily broadcasting everywhere either. Like, we focused on the ACV Max joint customers, we focused on our good wholesale customers, you know, and maybe towards the back half of this year, early next year, we'll start to step on the gas a little bit more from a sales perspective, but we kind of had our own pacing, and I will say we're a little, we're definitely ahead of our pacing, you know, which you just need to be set It's a lot to do. We feel great about it. We're ecstatic about our progress. You know that too.

George G. Chamoun: But the signs are positive and results are positive.

George G. Chamoun: We are not broadcasting necessarily everywhere either like we we focus on the ACD Max joined customers, we focus on our go to wholesale customers.

George G. Chamoun: You know maybe towards the back half of this year early next year, well start with step on the gas a little bit more from a sales perspective.

George G. Chamoun: But we kind of had our own pacing and I will say, we're a little we're we're definitely ahead of our pace you know.

George G. Chamoun: Which you just need to be set up to do so anywhere you are behind the scenes you're now you're trying to turn on you know 30, 40 50 customers a month right is that.

George G. Chamoun: It's a lot to do [laughter], we feel great about it but were static amount of progress, though know that that is good and they're just gives us an idea of the growth potential growth trajectory and then I have two other questions regarding clear car.

Gary Frank Prestopino: No, that that is good, and it just gives us an idea of the growth potential and growth trajectory. And then I have two other questions regarding clear car. The dealers that are sourcing cars through clear clear car. Are you finding that the majority of them will sell something through your

Gary Frank Prestopino: All the dealers that are sourcing cars through clear clear car.

Gary Frank Prestopino:

Gary Frank Prestopino: Are you finding that the majority of them.

Gary Frank Prestopino: Hum.

Gary Frank Prestopino: Well, we'll sell something through your.

Gary Frank Prestopino: Through your platform.

Gary Frank Prestopino: Because they're sourcing the car through you were clear car product.

George G. Chamoun: Yeah, so they have two options. They can either pay for the subscription, like look at this like a bundle like that with what we're doing with ACV Max. And so either they're paying us, you know, a healthy subscription, or they're actually giving us wholesale deals. So we're getting one of the two. Most of the customers we've turned on have agreed to the wholesale volume commitment, and some of the customers that have come on have gone down the subscription bundled in with ACV. So we're happy with both. So we're not pushing every dealer down a path. They have two options, go down path A or path B, and both are positive rates.

Gary Frank Prestopino: Yeah. So yeah. The two two options they can either pay us a subscription like look at this is like a bundle with it with what we're doing with HBO Max.

George G. Chamoun: And so either they're paying US you know.

George G. Chamoun: I'll be subscription or are there actually giving us wholesale cars.

George G. Chamoun: So we're getting one of the two.

George G. Chamoun: Most of the customers we've turned on have agreed that our wholesale volume commitment.

George G. Chamoun: And some of the customers that have come on have had gone down the subscription bundle them with HBO, Max So where we're happy with both so rapidly pushing you have read you laid out a path. They have two options, but I've found their pathway and both are positive crazy.

Gary Frank Prestopino: And then just lastly, there's a lot of these kind of products out there dealers can use. How are you differentiating this competitively in the market? Yeah, there are a few elements to why our product is different.

Speaker Change: And then just lastly, there's a lot of these kind of products out there dealers can use how are you differentiating this competitively.

Gary Frank Prestopino: In the market.

George G. Chamoun: Yeah, there are a few elements why our product truly is unique. Before I get into those features, and I'll just remind everyone, you know, we're inspecting, you know, somewhere around a million cars a year with humans. That's an inspection, is giving us a dataum of detailed information about cars that really no one else we believe in the world has. Well, we're leveraging our technology, using products like Monk to go around the vehicle, and we're getting this unbelievable data load.

Gary Frank Prestopino: Yeah, there's a few elements of why our products are truly as you need them.

George G. Chamoun: Before I get into those teachers and I'll, just remind everyone you know where.

George G. Chamoun: We're expecting somewhere around a million cars a year with humans.

George G. Chamoun: That's inspections.

George G. Chamoun: Giving us a data MAU and detailed information about cars that really no one else we believe in the world.

George G. Chamoun: Well, we're leveraging our technology, you think products like months.

George G. Chamoun: Go round of vehicle and where we're getting this unbelievable data now.

George G. Chamoun: And what it's allowing us to do is take our inspection data and we've created this consumer offering where all the consumers do is go around the product basically using Monk, it's called Clear Car Capture; we don't call it Monk for the end consumer. We asked the consumer a few questions. Well, those questions map to the same data in our inspection report. And we all know that the real benefit of machine learning and leveraging artificial intelligence is having a really deep, deep, deep data profile.

George G. Chamoun: We got to do is take our inspection data.

George G. Chamoun: We've created this consumer offering where all the consumers do is go around the product basically using month, it's called our capture they don't call. It for the end consumer.

George G. Chamoun: And then they get their prior condition based on and having a consumer app.

George G. Chamoun: We ask the consumer a few questions well those question map to the same data.

George G. Chamoun: Sure.

George G. Chamoun: And and we all know that's really the.

George G. Chamoun: The benefit of.

George G. Chamoun: Machine learning and leveraging artificial intelligence is having a really deep deep deep data profile, we have that.

George G. Chamoun: We have. So, at least for right now, we have a huge competitive advantage over anyone else trying to price the consumer. Now it's just a matter of taking that competitive advantage, being in front of dealers, and helping it, you know, sort of transcend to sort of value for ACV as well. Thank you. Good answer.

George G. Chamoun: So we at least right now we have a huge competitive advantage over anyone else trying to price to consumer.

George G. Chamoun: Now just a matter of us taking that competitive advantage to be in front of dealers.

George G. Chamoun: And in helping US you know.

George G. Chamoun: And it's sort of a value add for ACP as well.

George G. Chamoun: Good answer.

George G. Chamoun: Okay.

George G. Chamoun: Yeah.

George G. Chamoun: Yeah.

George G. Chamoun: Mhm.

Gary Frank Prestopino: Ladies and gentlemen, just a reminder, if you would like to ask a question, you're welcome to press star and then 1. The next question we have is from Naved Khan of B Riley Securities. Please go ahead. All right, this is...

George G. Chamoun: Ladies and gentlemen, just a reminder, if you would like to ask a question Youre welcome to push Star then one.

Naved Ahmad Khan: The next question we have is from innovate Kang of B Riley Securities. Please go ahead.

Naved Ahmad Khan: Hi, This is Ryan on for Nevada, I was just hoping you could talk about plans for cash usage and also the M&A M&A appetite going forward. Thanks.

Naved Ahmad Khan: Hey, it's Bill. So yeah, we certainly did consume some cash in Q1 for some of the M&A transactions. We still have a fair amount of cash on the balance sheet, but what I would point you to are two factors. Number one, look at cash net of the outstanding debt that we have on our credit facility, which was $125 million at the end of March. And also keep in mind that at the end of Q1, $574 million of our cash was comprised of marketplace float, which is volatile quarter to quarter.

Gary Frank Prestopino: Hey, it's Phil So yeah, we certainly did consume some cash in Q1 for some of the transactions.

Naved Ahmad Khan: We still have a fair amount of cash on the balance sheet, but what I would point you to a two factors number one.

Naved Ahmad Khan: Look at cash net of.

Naved Ahmad Khan: And that's what we have on our credit facility.

Naved Ahmad Khan: Which was $125 million at the end of March.

Naved Ahmad Khan: And also keep in mind that I'm at the end of Q1 174 million of our cash was.

Naved Ahmad Khan: Comprised of marketplace float.

Naved Ahmad Khan: It is volatile quarter to quarter is typically the high point for the year is at the end of Q1.

Naved Ahmad Khan: And typically, the high point for the year is at the end of Q1, and that tends to trend down through the rest of the year. So at this point, we feel pretty good about our liquidity position. We certainly have some flexibility and want to retain that flexibility for other tokens. You know, they come about as part of executing on our strategy to be in a position to penetrate the commercial market. Hopefully, that answers your question. You know, I'll just add to that.

Naved Ahmad Khan: And that tends to trend down through the rest of the year. So at this point, we feel pretty good about our liquidity position. We certainly have some flexibility we want to retain that flexibility for other tuck ins.

Naved Ahmad Khan: You know as they come about as part of executing on our strategy.

Naved Ahmad Khan: To be a position to penetrate the commercial market.

Speaker Change: Hopefully that answers your question.

William R. Zerella: You know, I'll just add to what Bill said: we're in a very, obviously, lucky and favorable position with a strong balance sheet to be able to go after these tuck-ins and other opportunities. So, we don't take that favorable opportunity lightly, and we're leveraging it to our advantage.

Speaker Change: Yeah, and I'll, just add to what Bill said I mean, we're we're in a very have you seen lucky and favorable position of a strong balance sheet to be able to go. After these tuck ins and other opportunities. So we don't take that favorable opportunity lately.

William R. Zerella: And where we're leveraging into our advantage.

Speaker Change: That helps thank you.

William R. Zerella: Yeah.

George G. Chamoun: There are no further questions at this time. I would like to turn the floor back over to Tim Fox for closing comments. Thank you, everybody. Thanks, Eileen. We'd like to thank everybody for joining us.

Speaker Change: There are no further questions at this time.

Timothy Fox: [inaudible]

George G. Chamoun: I would like to turn the floor back over to Tim Fox closing comments.

Timothy Fox: Great. Thank you what honey chicken Buddy.

Speaker Change: Sure sorry.

Timothy Fox:

Timothy Fox: We look to thank everybody for joining us on the call.

Timothy Fox: Call and look forward to see you on the conference Circuit. This quarter again. Thank you for your interest in HCV and have a great evening.

Operator: Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.

Speaker Change: Ladies and gentlemen that concludes today's conference.

Operator: Thank you for joining US you may now disconnect your lines.

Operator: Yeah.

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Operator: Yes.

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