Q2 2024 ACV Auctions Inc Earnings Call

August 7, 2024

[music].

Operator: Ladies and gentlemen, greetings and welcome to the ACV Q2 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 and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tim Fox. Please go ahead.

Operator: ..........

Ladies and gentlemen, greetings and welcome to the a C V Q2, 2024 earnings conference call.

Speaker Change: 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 zero on your telephone keypad.

Speaker Change: As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Tim Fox. Please go ahead.

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

Tim Fox: Good afternoon, and thank you for joining a T V's conference call to discuss our second quarter 2024 financial results.

Speaker Change: Being on the call today are George Shmoe, Chief Executive Officer, and builds the rollout Chief Financial Officer.

Tim Fox: Before we get started, please note that today's comments include forward-looking statements, including statements regarding future financial guidance. 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. 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. During this call, we will discuss both GAAP and non-GAAP financial measures. And with that, let me turn the call over to George. Thank you.

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

Speaker Change: 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 a.

Speaker Change: For 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.

Tim Fox: During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of gap-to-non-gap financial measures is provided in today's earnings materials, which can also be found on our investor relations website. And with that, I will turn the call over to George. Thank you.

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

Speaker Change: 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.

Speaker Change: Let me turn the call over to George.

George Chamoun: Good afternoon, everyone, and thank you for joining us. We are pleased with our second quarter performance. We delivered another quarter of record revenue that was above the high end of guidance, despite market headwinds related to the CDK software outage in June. We also hit a new milestone in the quarter, with half of our regional markets achieving 30% franchise dealer penetration. Adjusted EBITDA increased 65% sequentially, resulting in a 700 basis point year-over-year improvement in adjusted EBITDA margin. Along with Momentum and Dealer Wholesale, we are very pleased with the market adoption of ACV's consumer sourcing solution, ClearCar, and with our ongoing technology initiatives to address the commercial wholesale market.

George Chamoun: Tim, good afternoon, everyone, and thank you for joining us. We are pleased with our second quarter performance. We delivered another quarter of record revenue that was above the high end of guidance, despite market headwinds related to the CDK software outage in June. We also hit a new milestone in the quarter, with half of our regional markets achieving 30% franchise dealer penetration, adjusted even an increase of 65% sequentially, resulting in a 700 basis point year-over-year improvement and adjusted EBITDA margin.

George: Thanks, Tim.

George: Good afternoon, everyone and thank you for joining us.

George: We are pleased with our second quarter performance.

George: We delivered another quarter of record revenue.

Speaker Change: It was above the high end of guidance despite market headwinds related to the CDK software outage in June.

George: He also hit a new milestone in the quarter with half of our regional markets, achieving 30% franchise dealer penetration.

George: Adjusted EBITDA increased 65% sequentially.

Speaker Change: I'll say in a 700 basis point year over year improvement in adjusted EBITDA margin.

George Chamoun: Along with Momentum and Dealer Wholesale, we are very pleased with the market adoption of ACV's consumer sourcing solution, ClearCar, and with our ongoing technology initiatives to address the commercial wholesale market. As we pivot to the back half of 2024, we are encouraged by our strong performance in July and remain focused on driving top-line growth, expanding margins, and delivering our first year of adjusted EBITDA profitability. We're confident that executing on this profitable growth strategy will result in creating long-term shareholder value.

Speaker Change: Along with our momentum in dealer wholesale we are very pleased with the market adoption of Atvs consumer sourcing solution clarify and with our ongoing technology initiatives to address the commercial wholesale market.

George Chamoun: As we pivot to the back half of 2024, we are encouraged by our strong performance in July and remain focused on driving top line growth, expanding margins, and delivering our first year of adjusted EBITDA profitability. 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 recap, a second quarter result, and slide four. Second quarter revenue grew 29% year over year to $161 million.

Speaker Change: As we pivot to the back half of 'twenty 'twenty four we are encouraged by our strong performance in July and remain focused on driving topline growth.

Speaker Change: Fannie margin and delivering our first year of adjusted EBITDA profitability.

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

George Chamoun: With that, let's turn to a recap of second quarter results on slide four. We sold 187,000 vehicles, a year-over-year increase of 22%, reflecting strong listings growth, strong conversion rates, and execution across my ACV team. GMV declined modestly year over year, driven by a 19% decrease in GMV per unit as wholesale prices and vehicle mix compressed relative to Q2 2023. However, our POO increased 9% year-over-year, highlighting the value ACV is delivering to the market. Next on slide five.

Speaker Change: With that let's turn to a recap our second quarter results on slide four.

Speaker Change: Second quarter revenue grew 29% year over year to $161 million.

George Chamoun: We sold 187,000 vehicles, a year-over-year increase of 22%, reflecting strong listings growth, strong conversion rates, and execution across my ACV team. Gross vehicle volume declined modestly year over year, driven by a 19% decrease in GMV per unit, as wholesale prices and vehicle mix compressed relative to Q2 2023. However, our POO increased 9% year-over-year, highlighting the value ACV is delivering to the market. Next, on slide five.

Speaker Change: We saw a 187000 vehicles.

Speaker Change: The year over year increase of 22%, reflecting strong listings growth.

Speaker Change: Strong conversion rates and execution across my ACB teammates.

Speaker Change: G N V declined modestly year over year, driven by a 19% decrease in <unk> per unit as wholesale prices and vehicle mix compressed relative to Q2 2023.

Speaker Change: However, <unk> increased 9% year over year, highlighting the value ACB is delivering to the market.

Speaker Change: Next on slide five.

George Chamoun: Today's discussion will focus on the three pillars of our strategy to maximize long-term shareholder value: growth, innovation, and scale. I'll begin with Grub.

George Chamoun: Today's discussion will focus on the three pillars of our strategy to maximize long-term shareholder value: growth. I will begin with Grove.

Speaker Change: Today's discussion will focus on the three pillars of our strategy to maximize long term shareholder value.

Speaker Change: Both.

Speaker Change: And in scale.

Speaker Change: I'll begin with drugs.

George Chamoun: Turning to slide 7, I'll share our observations about the automotive market as context for dealer hotel buying. New retail sales got off to a positive start in Q2. However, the CDK outage resulted in flat year-over-year retail sales for the quarter, and used retail sales declined approximately 5% year-over-year, reflecting both the CDK outage and the ongoing affordability challenges facing consumers.

George Chamoun: Turning to slide 7, I'll share our observations about the automotive market as context for dealer wholesale buying. New retail sales got off to a positive start in Q2. However, the CDK outage resulted in flat year-over-year retail sales for the quarter, and used retail sales declined approximately 5% year-over-year, reflecting both the CDK outage and the ongoing affordability challenges facing consumers.

Speaker Change: Turning to slide seven.

Speaker Change: I will share our observations about the automotive market as context for dealer wholesale volumes.

Speaker Change: New retail sales got off to a positive start in Q2. However, the CDK out has resulted in a flat year over year retail sales for the quarter.

Speaker Change: Used retail sales declined approximately 5% year over year, reflecting both the CDK outage and the ongoing affordability challenges facing consumers.

George Chamoun: On a positive note, new vehicle inventories continue to normalize, and OEMs are increasing incentives, which should help support retail sales in the back half of 2024. In terms of used vehicles, overall inventory levels have recovered from the 2023 historical load. However, they remain about 20% below normal.

George Chamoun: On a positive note, new vehicle inventories continue to normalize, and only the ends are increasing incentives, which should help support retail sales in the back half of 2024. In terms of used vehicles, overall inventory levels have recovered from the 2023 historical low. However, they remain about 20% below normal.

Speaker Change: On a positive note new vehicle inventories continue to normalize and the Oems are increasingly incentives.

Speaker Change: Which should help support retail sell in the back half of 2024.

Speaker Change: In terms of used vehicles overall inventory levels have recovered from the 20th twenty-three historical lows.

Speaker Change: However, they remained about 20% below normal.

George Chamoun: As we discussed before, the used vehicle inventory shortage has been a headwind for dealer hotel supply, as dealers retained a higher percentage of trades for retail. However, we did see a modest uptick in the trade to wholesale mix in Q2. And we expect the mix to normalize as inventories recover. Lastly, wholesale price depreciation was above normal in early Q2, but has since stabilized. And we believe that prices will follow normal seasonal patterns for the balance of the year, despite the Q2 pricing pressure.

George Chamoun: As we discussed before, the used vehicle inventory shortage has been a headwind for dealer hotel supply as dealers retained a higher percentage of trades for retail. However, we did see a modest uptick in the trade to wholesale mix in Q2. And we expect the mix to normalize as inventories recover. Lastly, wholesale price depreciation was above normal in early Q2, but has since stabilized. And we believe that prices will follow normal seasonal patterns for the balance of the year.

Speaker Change: As we discussed before you used vehicle inventory storage has been a headwind for dealer wholesale supply.

Speaker Change: As dealers retained a higher percentage of trade for retail.

Speaker Change: However, we did see a modest uptick in the trade the wholesale mix in Q2.

Speaker Change: We expect the mix to normalize as inventories recover.

Speaker Change: Lastly, wholesale price depreciation was above normal in early Q2, but has since stabilized.

Speaker Change: And we believe that prices will follow normal seasonal patterns for the balance of the year.

George Chamoun: Despite the Q2 pricing pressures, Conversion rates were very solid and increased year over year, which we attribute to our marketplace investments driving dealer engagement. On Balance. We're seeing early signs of improvement in the broader automotive economy and believe the dealer wholesale market will continue to modestly recover in the back half of 2020. Movie of the Friday.

Speaker Change: Despite the Q2 pricing pressure.

George Chamoun: Conversion rates were very solid and increased year over year, which we attribute to our marketplace investments driving dealer engagement. On Balance. We're seeing early signs of improvement in the broader automotive economy and believe the dealer wholesale market will continue to modestly recover in the back half of 2020. Movie of the Friday.

Speaker Change: Conversion rates were very solid and increased year over year, which we attribute to our marketplace investments driving dealer engagement.

Speaker Change: On balance.

Speaker Change: We're seeing early signs of improvement in the broader automotive ecosystem.

Speaker Change: And believe the dealer wholesale market will continue to modestly recover in the back half of 'twenty 'twenty four.

Speaker Change: Moving to slide eight.

George Chamoun: Let's cover highlights and our value added, beginning with ACV Transportation. The transportation team once again delivered strong results, with over 100,000 shipments delivered in the quarter. AI-optimized pricing expanded significantly over the past year, and we achieved 95% lane coverage in Q2. By leveraging AI, our team delivered over 20% volume growth while driving operating efficiency. Revenue margin was again in the high teens and expanded 280 basis points year over year.

George Chamoun: Let's cover highlights and our value added, beginning with ACV Transportation. The transportation team once again delivered strong results with over 100,000 transport deliveries in the quarter. AI-optimized pricing expanded significantly over the past year, and we achieved 95% lane coverage in Q2. By leveraging AI, our team delivered over 20% volume growth while driving operating efficiency. Revenue margin was again in the high teens and expanded 280 basis points year over year. Lastly, our recently launched off-platform transportation service is gaining traction with our dealer partners. We are in the earliest stages but excited to deliver new value-added services that create long-term growth while accelerating network densities and deepening carrier relationships. Trying to slide back.

Speaker Change: Let's cover highlights on our value added services.

Speaker Change: Beginning with ACD transportation.

Speaker Change: The transportation team once again delivered strong results with over 100000 transported to lift in the quarter.

Speaker Change: AI optimized pricing expanded significantly over the past year.

Speaker Change: And we achieved 95% lease coverage in Q2.

Speaker Change: Leveraging AI our team delivered over 20% volume growth, while driving operating efficiency.

Speaker Change: Revenue margin was again in the high teens and expanded 280 basis points year over year.

George Chamoun: Lastly, our recently launched off-platform transportation service is gaining traction with our dealer partners. We're in the early stages, but excited to deliver new value-added services that create long-term growth while accelerating network densities and deepening carrier relationships. Try and Decide Now.

Speaker Change: Lastly, our recently launched off platform transportation service is gaining traction with our dealer partners.

Speaker Change: We're in the early stages, but excited to deliver new value added services that create long term growth.

Speaker Change: While accelerating network density and deepen carrier relationships.

Speaker Change: Turning to slide that.

George Chamoun: The ACV Capital team once again delivered growth while managing risk in an environment that continues to be challenging for independent dealers. Along with driving growth in the core floor planted, The capital team is piloting a new offering that expands the addressable mark. The new offering provides financing for consumer-sourced vehicles and dealer trading, that are then sold retail or on ACV's wholesale market. We are uniquely positioned to bundle ClearCar with ACV Capital.

George Chamoun: The ACV Capital team once again delivered growth while managing risk in an environment that continues to be challenging for independent dealers, along with driving growth in the core floor plan business. ACV Capital is piloting a new offering that expands the addressable market. The new offering provides financing for consumer-sourced vehicles and dealer trading, that are then sold retail or on ACV's wholesale marketplace. We are uniquely positioned to bundle ClearCar with ACV.

Speaker Change: The ACP capital team once again delivered growth, while managing risk in an environment that continues to be challenging for independent dealers.

Speaker Change: Along with driving growth in the core floor plan business. The capital team is piloting a new offering that expands the addressable market.

Speaker Change: The new offering provides financing for consumer source vehicles and dealer trade ins.

Speaker Change: And are then sold retail or E series wholesale marketplace.

Speaker Change: We are uniquely positioned to bundled clear car with a C V capital to support our dealers vehicle sourcing strategies.

George Chamoun: to support our dealer's vehicle sourcing strategy. We look forward to updating you on these new offerings in the coming quarters. Moving on, to the second element of our strategy to drive long-term shareholder value, innovation.

Speaker Change: We look forward to updating you on these new offerings in the coming quarters.

Speaker Change: Moving to the second element of our strategy to drive long term shareholder value innovation.

Speaker Change: On slide 11.

George Chamoun: I'll first recap some of our growth-oriented product innovations. Earlier in the call, I mentioned strong Q2 conversion rates, which is an important marketplace growth level. It's clear that our investments are paying dividends.

Speaker Change: Ill first recap some of our growth oriented product innovations.

Speaker Change: Earlier on the call I mentioned strong Q2 conversion rates, which is an important marketplace growth lever.

Speaker Change: It's clear that our investments are paying dividends feat.

George Chamoun: Features like advanced search, vehicle merchandising, AI-enabled pricing data, and flexible auction formats are delivering what we believe is the best dealer buying experience in the market. Our commercial technology investments are progressing, with our initial focus on integrating with Auto MS and delivering marketplace features to support commercial consumption. These key initiatives will help drive platform standardization across our growing footprint of remarketing.

George Chamoun: Features like advanced search, vehicle merchandising, AI-enabled pricing data, and flexible auction formats are delivering what we believe is the best dealer buying experience in the market. Our Commercial Technology Investments, our Progress Our Commercial Technology Investments, our Progressive Investments, our Progressive Investments, our Progressive Investments, with our initial focus on integrating with Auto MS and delivering marketplace features to support commercial consignment. These key initiatives will help drive platform standardization across our growing footprint of remarketing.

Speaker Change: Features like advanced search vehicle merchandising AI enabled pricing data and flexible option formats are delivering what we believe is the best dealer buying experience in the market.

Speaker Change: Our commercial technology investments are progressing with our initial focus on integrating with auto imas and delivering marketplace features to support commercial containers.

Speaker Change: These key initiatives will help drive platform standardization across our growing footprint of remarketing centers.

George Chamoun: The new ACV Max suite continues to gain traction in the market with key competitive displacements and very high retention rates in Q2, along with a growing pipeline of new processes. Lastly, in the dealer self-inspection category, we are excited to see strong interest in ACV's vehicle appraisal solutions across a number of use cases. Whether dealers are appraising trade-ins or consumer vehicles sourced through digital channels or making offers to consumers in their service drives, accurate pricing is the critical success factor.

George Chamoun: The new ACV Max suite continues to gain traction in the market with key competitive displacements and very high retention rates in Q2, along with a growing pipeline of new products. Lastly, in the dealer self-inspection category, we are excited to see strong interest in ACV's vehicle appraisal solutions across a number of use cases. Whether dealers are appraising trade-ins or consumer vehicles sourced through digital channels or making offers to consumers in their service drives, accurate pricing is the critical success factor.

Speaker Change: The new ACD Mac suite continues to gain traction in the market with key competitive displacements and very high retention rates in Q2, along with a growing pipeline of new prospects.

Speaker Change: Lastly in the dealer self inspection category. We are excited to see strong interest in a C vs vehicle appraisal solutions across a number of use cases.

Speaker Change: Whether dealers are appraising trades for consumer vehicles sourced through digital channels are making offers to consumers and their service drives accurate pricing is a critical success factor.

George Chamoun: Legacy tools don't fully capture the dynamic nature of the automotive market, making the appraisal process more of an art than a science. With ACV Solutions, we are delivering science. Our appraisal solutions incorporate AI imaging for damage detection and real-time localized pricing that is condition-enhanced, based on millions of inspections in our data moat. It's still early days in this category.

Speaker Change: Legacy tools don't fully capture the dynamic nature of the automotive market, making the appraisal process more of an art than a science.

Speaker Change: With HCV solutions, we are delivering science.

Speaker Change: Our appraisal solutions incorporate AI imaging for damaged detection and real time localized pricing that is condition enhance based on millions of inspections and our data moat.

Speaker Change: It's still early days in this category, but we believe self inspection kind of unlocked a number of exciting long term growth opportunities.

George Chamoun: But we believe self-inspection can unlock a number of exciting long-term growth opportunities, including TAM Expansion. Let's turn to slide 12 to highlight one of our fastest-growing self-inspection solutions, ClearCard. Marker Traction for ClearCar remains strong, with nearly 900 dealers live today and a growing pipeline of prospects. Regular feedback regarding lead generation and conversion remains very positive.

Speaker Change: Including Tam expansion.

Speaker Change: Let's turn to slide 12 to highlight one of our fastest growing self inspection solutions.

Speaker Change: Their car.

George Chamoun: Market traction for ClearCar remains strong, with nearly 900 dealers live today and a growing pipeline of prospects. Regular feedback regarding lead generation and conversion remains very positive. And based on transaction data, we estimate that dealers using ClearCar are increasing retail profits by 10%, improving Inventory Terms, and increasing wholesale profits by nearly 20% relative to legacy, and ACV is benefiting from increasing wholesale wallet share by becoming a deeper strategic partner in our dealers' retail and wholesale operations.

Margaret: Margaret traction for Claire car remained strong with nearly 900 dealers live today and a growing pipeline of prospects.

Speaker Change: Dealer feedback regarding lead generation and conversion remains very positive.

George Chamoun: And based on transaction data, we estimate that dealers using ClearCar are increasing retail profits by 10%, improving Inventory Terms, and increasing wholesale profits by nearly 20% relative to legacy, and ACV is benefiting from increasing wholesale wallet share by becoming a deeper strategic partner in our dealers' retail and wholesale operations. Again this quarter, we're very excited to share feedback from one of our dealer partners, Classic Elite Auto Group, which is using a broad set of ACV solutions, including ClearCar, ACV Max, and our marketplace.

Speaker Change: And based on transaction data, we estimate the dealers using cleared car are increasing retail profits by 10%.

Speaker Change: Improving inventory turns and increasing wholesale profits nearly 20% relative to legacy tools.

Speaker Change: And E. C V is benefiting from increasing wholesale wallet share by becoming a deeper strategic partner in our dealers' retail and wholesale operations.

George Chamoun: We posted a video on our IR website featuring the Classic Elite team describing the significant value they're deriving from ACV Solutions. It's another great opportunity to hear directly from a dealer partner. On slide 13, we highlight examples of technology investments that deliver customer success while reducing costs. For example, last quarter, we launched new versions of Copilot and ArbGuard. CoPilot 2.0 further leverages our vast dataset by adding visual representations of high-risk vehicle part failures based on the specific year, make, and mileage of the vehicle. ArborGuard 2.0 leverages industry-leading AI for vehicle condition diagnosis, and along with Monk's X-Tier Cosmetic Model.

George Chamoun: Again this quarter, we're very excited to share feedback from one of our dealer partners, Classic Elite Auto, which 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 Classic Elite team describing the significant value they're deriving from ACV Solutions. It's another great opportunity to hear directly from a dealer partner. On slide 13, we highlight examples of technology investments that deliver customer success while reducing costs.

Speaker Change: Again this quarter.

Speaker Change: Excited to share feedback from one of our dealer partners Classic Ali Auto group.

Speaker Change: Which is using a broad set of HCV solutions, including clear car ACD in Ax and our marketplace.

Speaker Change: We posted a video on our IR website, featuring the classic ALLETE team, describing a significant value they're deriving from ACP solutions.

Speaker Change: That's another great opportunity to hear directly from a dealer partner.

Speaker Change: On slide 13, we highlight examples of technology investments that deliver customer success, while reducing costs.

George Chamoun: Last quarter, we launched new versions of Copilot and ArbGuard. CoPilot 2.0 further leverages our vast data set by adding visual representations of high-risk vehicle part failures based on the specific year, make, and mileage of the vehicle. ArborGuard 2.0 leverages industry-leading AI for vehicle condition diagnostics, and along with Monk's Exterior Cosmetic Model.

Speaker Change: Last quarter, we launched new versions of Copilot and Arb Guard.

Speaker Change: Copilot shoot out further leverages, our vast data set by adding visual representations of high risk vehicle part failures based on a specific year make and mileage for the vehicle.

Speaker Change: Our guard Ciudadano leverages industry, leading AI for vehicle condition diagnostics.

Speaker Change: And along with monks exterior cosmetic model.

George Chamoun: We are now producing an even higher level of action. We are very excited to share that in Q2, our inspection technology contributed to record levels of VCI efficiency across our nationwide team of inspectors. A great milestone for the To wrap up innovation... ACV is 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 Chamoun: We are now producing an even higher level of ACV. We are very excited to share that in Q2, our inspection technology contributed to record levels of VCI efficiency across our nationwide team of inspectors, a great milestone for To wrap up innovation... ACV is 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, let me hand it over to Bill to take you through our financial results and how we're driving growth and scale.

Speaker Change: We are now producing an even higher level of accuracy.

Speaker Change: We are very excited to share that in Q2, our inspection technology contributed to a record level V C I efficiency across our nationwide team of inspectors.

Speaker Change: Great milestone for the team.

Speaker Change: I'll wrap up on innovation.

Speaker Change: ACD is delivering industry, leading technology to our dealer partners and to our own operations driving both growth and scale and.

Speaker Change: And we look forward to sharing more details with you next quarter with that let me hand, it over to bill to take you through our financial results and how we're driving growth and scale.

Bill Zerella: Thanks, George, and thank you, everyone, for joining us today. We are very pleased with our Q2 financial performance. Along with accelerated revenue growth, we delivered meaningful margin expansion and strong sequential adjusted EBITDA growth, demonstrating the strength of our business model. On slide 15, let's begin with a recap of our second quarter results.

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

Bill: We are very pleased with our Q2 financial performance.

Bill: Along with accelerated revenue growth, we delivered meaningful margin expansion and strong sequential adjusted EBITDA growth.

Bill: Demonstrating the strength of our business model.

Bill: On slide 15, let's begin with a recap of our second quarter results.

Bill Zerella: Revenue of $161 million was above the high end of our guidance range and grew 29% euro per year. Adjusted even 7 million was at the midpoint of our guidance range, and adjusted even a margin improved approximately 700 basis points versus Q2. We were pleased to achieve record adjusted EBITDA in Q2. It's worth noting that results would have exceeded the high end of our guidance were not for transient factors impacting revenue margin in the quarter.

Bill Zerella: Revenue of $161 million was above the high end of our guidance range and grew 29% year-over-year. Adjusted even 7 million, was at the midpoint of our guidance range, and adjusted even a margin improved approximately 700 basis points versus Q2. We were pleased to achieve record adjusted EBITDA in Q2. It's worth noting that results would have exceeded the high end of our guidance were not for transient factors impacting revenue margin in the quarter.

Bill: Revenue of 161 million was above the high end of our guidance range and grew 29% year over year.

Bill: Adjusted EBITDA of $7 million was at the midpoint of our guidance range and adjusted EBITDA margin improved approximately 700 basis points versus Q2 'twenty three.

Speaker Change: We were pleased to achieve record adjusted EBITDA in Q2.

Speaker Change: It's worth noting that results would have exceeded the high end of our guidance, we're not for transient factors impacting revenue margin in the quarter.

Bill Zerella: As George mentioned earlier, price depreciation was above normal during Q2, which pressured GMV per unit and ARPU relative to our forecast. We also had an increase in arbitration cases early in the quarter as dealers were digesting market price declines. I refer to these factors as transient because GMV per unit and arbitration rates have stabilized.

Speaker Change: As George mentioned earlier price depreciation was above normal during Q2.

George Shmoe: Which pressured GMB per unit and <unk> relative to our forecast.

George Shmoe: We also had an increase in arbitration cases early in the quarter as dealers work digesting market price declines.

George Shmoe: I referred to these factors as transient because G N V per unit and arbitration rates have stabilized.

Bill Zerella: And we are expecting price depreciation to follow normal seasonal patterns for the balance of the year. Finally, non-GAAP net income was at the midpoint of our guidance range, with margin increasing approximately 300 basis points year-over-year. Next, on slide 16, I would like to highlight additional revenue details. Auction and Insurance revenue was 57% of total revenue and grew 33% year over year. This performance reflects 22% year-over-year unit growth and an auction at Assurance ARPU of $493, which grew 9% year-over-year.

Bill Zerella: And we are expecting price depreciation to follow normal seasonal patterns for the balance of the year. Finally, non-GAAP net income was at the midpoint of our guidance range, with margin increasing approximately 300 basis points year-over-year. Next, on slide 16, I would like to highlight additional revenue details. Auction and Insurance revenue was 57% of total revenue and grew 33% year-over-year. This performance reflects 22% year-over-year unit growth and an auction at Assurance ARPU of $493, which grew 9% year-over-year.

Speaker Change: And we are expecting price depreciation to follow normal seasonal patterns for the balance of the year.

Speaker Change: Finally, non-GAAP net income was at the midpoint of our guidance range with margin, increasing approximately 300 basis points year over year.

Speaker Change: Next on slide 16, I would like to highlight additional revenue details.

Speaker Change: Auction of assurance revenue was 57% of total revenue and grew 33% year over year.

Speaker Change: This performance reflects 22% year over year unit growth in auction and assurance <unk> of $493, which grew 9% year over year.

Bill Zerella: Marketplace Services revenue was 38% of total revenue and grew 30% 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, with growth returning to positive territory. As George mentioned earlier, we are very pleased with the relaunch of ACV Max, and remain confident that the new ACV Max suite will drive long-term growth.

Bill Zerella: Marketplace Services revenue was 38% of total revenue and grew 30% 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, with growth returning to positive territory. As George mentioned earlier, we are very pleased with the relaunch of ACV Max, and remain confident that the new ACV Max suite will drive long-term growth.

Speaker Change: Marketplace services revenue was 38% of total revenue and grew 30% year over year.

Speaker Change: Results were driven by strong E C V transport performance and another record revenue quarter for a C V capital.

Speaker Change: Our saffron data services products comprised 5% of total revenue with growth returning to positive territory.

Speaker Change: As George mentioned earlier, we are very pleased with the relaunch of H C V. Max I remain confident that the new a C V. Max we will drive long term growth.

Bill Zerella: Next, on slide 17, I'll review costs in the quarter. Q2 costs of revenue as a percentage of revenue decreased approximately 200 basis points year over year. The improvement was driven by auction assurance results and by ACV transport. 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 400 basis points year-over-year in Q2.

Bill Zerella: Next, on slide 17, I'll review costs in the quarter. Q2 cost of revenue as a percentage of revenue decreased approximately 200 basis points. The improvement was driven by auction assurance results and by ACV transport. 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 400 basis points year-over-year in Q2.

Speaker Change: Next on Slide 17, I'll review costs in the quarter.

Speaker Change: Q2 cost of revenue as a percentage of revenue decreased approximately 200 basis points year over year.

Speaker Change: The improvement was driven by auction of assurance results.

Speaker Change: A C V transport.

Speaker Change: We continue to focus on expense discipline as we optimize the scale of our business.

Speaker Change: non-GAAP operating expense, excluding cost of revenue as a percentage of revenue decreased 400 basis points year over year in Q2.

Bill Zerella: 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 decrease in operating expenditure growth in 2023, yielding a significant improvement in adjusted EBITDA. For 2024, we continue to expect an increase in OPEX growth as we execute on our remarketing center strategy and commercial platform investment. Even with these investments, adjusted EBIT is expected to increase by approximately 800 basis points year over year.

Bill Zerella: 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 decrease in OPEX growth in 2023, yielding a significant improvement in adjusted EBITDA. For 2024, we continue to expect an increase in OPEX growth as we execute on our remarketing center strategy and commercial platform investment. Even with these investments, adjusted EBITDA margin is expected to increase by approximately 800 basis points year-over-year.

Speaker Change: Moving to slide 18, let me frame our investment strategy as we continue driving profitable growth.

Speaker Change: Our focus on spending discipline and operating efficiency resulted in a decrease in opex growth in 2023, you'll see a significant improvement in adjusted EBITDA.

Speaker Change: For 2024, we continue to expect an increase in opex growth as we execute on our Remarketing center strategy and commercial platform investments.

Speaker Change: Even with these investments adjusted EBITDA margin is expected to increase by approximately 800 basis points year over year.

Bill Zerella: Next, I will highlight our strong capital structure on slide 19. We ended Q2 with $273 million in cash and cash equivalents and marketable securities, and $110 million of debt on our revolvers. Our Q2 cash balance includes $168 million afloat in our auction business. The amount of float on our balance sheet fluctuates meaningfully based on business trends in the final two weeks of each quarter, which has a corresponding impact on operating cash flow.

Speaker Change: Next I will highlight our strong capital structure on slide 19.

Speaker Change: We ended Q2 with $273 million in cash and cash equivalents and marketable securities.

Speaker Change: $110 million of debt on our revolver.

Speaker Change: Our Q2 cash balance includes $168 million of float in our auction business.

Speaker Change: The amount of float on our balance sheet fluctuates meaningfully based on business trends in the final two weeks of each quarter, which has a corresponding impact on operating cash flow.

Bill Zerella: In the figure on the right, we highlight our strong operating cash flow for the first half of 2024. Note that when excluding change in marketplace flow, we generated $14 million of operating cash flow in the first half of 2024. This is a significant increase year over year, reflecting the transitions to profitability and strong margin improvement. Now turning to guidance on slide 20.

Speaker Change: In the figure on the right we highlight our strong operating cash flow for the first half of 2024.

Speaker Change: Note that when excluding changed your marketplace float we.

Speaker Change: Eight of $14 million of operating cash flow in the first half of 2024.

Speaker Change: This is a significant increase year over year, reflecting the transitions of profitability and strong margin improvements.

Bill Zerella: For the third quarter, we are expecting revenue in the range of $158 to $162 million, growth of 33% to 36% year-over-year. Adjusted EBITDA is expected in the range of $6 million to $8 million, consistent with our commitment to achieving profitability each quarter going forward. For the full year, we are raising the midpoint of revenue and even adjusting the guide. Revenue is now expected to be in the range of $615 to $625 million, representing growth of 28 to 30% year-over-year.

Speaker Change: Now turning to guidance on slide 20.

Bill Zerella: For the third quarter, we are expecting revenue in the range of $158 to $162 million, growth of 33% to 36% year-over-year. Adjusted EBITDA is expected in the range of $6 million to $8 million, consistent with our commitment to achieving profitability each quarter going forward. For the full year, we are raising the big point on revenue and even adjusting the guide. Revenue is now expected to be in the range of $615 to $625 million, representing growth of 28 to 30% year-over-year.

Speaker Change: For the third quarter, we're expecting revenue in the range of a $158 million to $162 million.

Speaker Change: Growth of 33% to 36% year over year.

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

Speaker Change: Yeah.

Speaker Change: For the full year, we are raising the midpoint of revenue and adjusted EBITDA guidance.

Speaker Change: Revenue is now expected to be in the range of $615 million to $625 million representing growth of 28% to 30% year over year.

Bill Zerella: Adjusted EBIT is now expected to be in the range of $21 to $25 million. As it relates to guidance, we are assuming that the dealer wholesale market continues to modestly recover in the back half of 2024, and Conversion Rates and Wholesale Price Depreciation follow normal seasonal patterns. We also continue to expect revenue growth to exceed non-GAAP OPEX growth, excluding cost of revenue, depreciation, and amortization, by approximately 10 percentage points. And finally, moving to slide 21, 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.

Speaker Change: Adjusted EBITDA is now expected to be in the range of 21% to $25 million.

Speaker Change: As it relates to guidance, we are assuming that the dealer wholesale market continues to modestly recover in the back half of 2024 and.

Speaker Change: And conversion rates in wholesale price depreciation follow normal seasonal patterns.

Speaker Change: We also continue to expect revenue growth to exceed non-GAAP opex growth, excluding cost of revenue depreciation and amortization by approximately 10 percentage points.

Speaker Change: And finally moving to slide 21, 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 mixes scale all of which we've clearly demonstrated in our performance.

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

Speaker Change: Our mid term targets, primarily predicated on a dealer wholesale market recovering to historical volumes over time, but in addition, we are expanding our Tam and consistently taking share which will drive long term growth.

Speaker Change: And with that let me turn it back to George.

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

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

George Chamoun: We are very pleased with our strong execution in Q2, and we are especially proud of our ACV teammates who 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 on an exciting product roadmap to further differentiate ACV and drive operating efficiency. We are on track to achieve our 2024 adjusted EBITDA targets and deliver on our midterm 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 goal. With that, I'll turn the call over to the operator to begin the Q&A. Thanks.

Operator: We are very pleased with our strong execution in Q2, and 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 on an exciting product roadmap to further differentiate ACV and drive operating efficiency. We are on track to achieve our 2024 adjusted EBITDA targets and deliver on our midterm targets, which 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. Thanks.

George Shmoe: We are very pleased that our strong execution in Q2.

George Shmoe: And we are especially proud of our HCV teammates that delivered these results.

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

Speaker Change: While expanding our addressable market, which positions ACD for attractive growth as market conditions improve.

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

Speaker Change: We are on track to achieve our 2024 adjusted EBIT of targets and deliver on our midterm targets that we believe will drive significant shareholder value.

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

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

Speaker Change: Thank you.

Operator: Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and 1 on the telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. Ladies and gentlemen, we will wait for a moment while we poll you for questions. The first question comes from Michael Graham with Canaccord Genuity. Please go ahead.

Speaker Change: Ladies and gentlemen, we will now be conducting a question and answer session.

Speaker Change: If you'd like to ask a question. Please press star and one on the telephone keypad.

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

Speaker Change: You May press Star two if you would like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star piece.

Speaker Change: Ladies and gentlemen, we will wait for a moment, while we poll for questions.

Speaker Change: Yeah.

Speaker Change: The first question comes from Michael Graham with Canaccord Genuity. Please go ahead.

Michael Graham: Hi, thanks very much. Congratulations on the continued momentum. I had two questions. The first was, you talked about the market still being a little bit muted but seeing some signs of progress as we point towards the second half. Could you just maybe elaborate on what those signs of progress are? And could you just remind us what the market looks like when you are able to say that, you know, it has recovered? Like, what are the kind of key metrics that you're focused on there?

Michael Graham: Hi, thanks very much. Congratulations on the continued momentum. I had two questions. The first was:

Michael Graham: Hi, Thanks, very much congrats on the continued momentum I had two questions. The first was.

Michael Graham: You know, you talked about the market still being a little bit muted but seeing some signs of progress as we point towards the second half. Could you maybe elaborate on what those signs of progress are? And could you just remind us what the market looks like when you are able to say that, you know, it has recovered? Like, what are the kind of key metrics that you're focused on there?

Michael Graham: You know you talked about the market still being a little bit muted, but seeing some signs of progress you know as we point towards the second half could you just maybe elaborate on what those signs of progress are and could you just remind us.

Speaker Change: You know what the market looks like when you are able to say that you know it has recovered like what are the kind of key metrics that you're that you're focused on there.

George Chamoun: Yeah, thanks Michael. I appreciate it. This is George.

Michael Graham: Yeah. Thanks, Michael I appreciate it this is George.

George Chamoun: When we look at the positive signals out there, new vehicle inventory is continuing to normalize. We mentioned in the first part of the quarter here, the first few months of the quarter prior to the CDK outage, we saw that really go in the right direction. We believe the only reason why new vehicle inventory was flat was because of the CDK outage.

Speaker Change: When we look at the positive signals out there a new vehicle inventory is continuing to normalize we mentioned in the first part of the quarter here. The first few months of the quarter prior to CDK outage, we saw that really go into right direction. We believe the other reason why new was flat.

George Chamoun: So that was, you know, new going in the right direction, very positive. We're all seeing more and more incentives out there. We're seeing OEMs already, even with a high cost of capital, putting incentives out there for new cars. That's fantastic.

Speaker Change: But because of the CDK outage. So there was no new news going in the right direction very positive, we're all seeing more and more incentives out there we're seeing like seeing Oems already even with a high cost of capital putting the incentives out there for new cars that's fantastic.

George Chamoun: So that was new going in the right direction, very positive. We're all seeing more and more incentives out there. We're seeing OEMs already, even with a high cost of capital, putting incentives out there for new cars. That's fantastic.

George Chamoun: Back half of the year with lower interest rates, we may even see even more incentives going on when you think about what they could do with leases and other, you know, sort of products. So that's positive. One of the things we point to, as far as trends that help us see the dealer wholesale market returning back to 2019, is the trade-in to wholesale mix. This is okay, but when a consumer comes in trades in a vehicle, does the dealer keep it?

George Chamoun: Back half of the year with lower interest rates, we may even see even more incentives going on when you think about what they could do with leases and other products. So that's positive. One of the things we point to, as far as trends that help us see the dealer wholesale market returning back to 2019, is the trade-in to wholesale mix. This is okay, but when a consumer comes in trades in a vehicle, does the dealer keep it?

Michael Graham: The back half of the year with lower interest rate, we may even see even more incentives going on.

Speaker Change: Think about what they could do with leases and other.

Michael Graham: Sort of products. So that's positive well one of the things we point to.

Speaker Change: As far as.

Speaker Change: So the trends that help us see the dealer wholesale market, we're trending back to 2019.

Michael Graham: Is the the trade the wholesale mix. This is okay. When a consumer comes in trades in a vehicle that they feel or keep it.

George Chamoun: and Retail It or Wholesale It. And they've been keeping more vehicles from 2019 to now, really just because there was a lack of inventory. And there was obviously first a lack of new, then there was a lack of use. And, you know, use is still 20% below, or at the 2019 level. So we're working our way back towards normalcy here, but we did start to see a slight uptick in that sort of dealers willing to wholesale a vehicle versus retail, which says, okay, cars are starting to add up on their lots, still not back to where it was, but they're starting to add it back on their lots. As we start to see that, we will start to see dealers wholesale more vehicles. So Michael, hopefully that's helpful. Yep, thanks a lot, George.

George Chamoun: And they've been keeping more vehicles from 2019 to now, really, just because there was a lack of inventory. And there was, obviously, first a lack of new cars, then there was a lack of used. And used is still 20% below, are at the 2019 level. So we're working our way back. Towards normalcy here. But we did start to see a slight uptick in that sort of dealer willing to wholesale a vehicle versus retail, which says, okay, cars are starting to add up on their lots.

Michael Graham: In retail it or wholesale it and they've been keeping more vehicles from 2019 to now really just because there was a lack of inventory and AR.

Michael Graham: First of all a lack of new and there was a lack of use and you know use is still 20% below.

Michael Graham: For 2019 level, so we're working our way back.

Michael Graham: Towards normalcy here, but we did start to see a slight up tick in that sort of dealers wanting to.

Michael Graham: Our wholesale vehicle first retail, which says okay cars are starting to add up on their lots still not back to where it was but they're starting at it back on a lot as we start to see that we will start to see dealers wholesale more vehicles. So Michael hopefully that's helpful.

George Chamoun: Still not back to where it was, but they're starting to add up on their lots, and we will start to see that. We will start to see dealers wholesale more vehicles. So Michael, hopefully that's helpful. Yep, thanks a lot, George.

George Chamoun: Yep, thanks a lot, George; I appreciate it.

Michael Graham: Yep, Thanks, a lot George I appreciate it.

Michael Graham: Thank you.

Operator: The next question is from Bob Labick with CJS Securities. Please go ahead.

Speaker Change: The next question is from.

Michael Graham: Bob Lubbock with C. J S Securities. Please go ahead.

Peter Lukas: Yes, hi. Good afternoon. It's Pete Lukas for Bob. Can you talk about the commercial opportunity ahead and what the landscape is for acquisitions in the physical reconditioning auction?

Peter Lukas: Yes, hi, good afternoon. It's Pete Lukas for Bob. Can you talk about the commercial opportunity ahead and what the landscape is for acquisitions in the physical reconditioning auction?

Michael Graham: Yes, hi, good afternoon, it's Pete Lucas for Bob can.

Pete Lucas: Can you talk about the commercial opportunity ahead, and what is the landscape for acquisitions in the physical reconditioning auction space.

George Chamoun: Yeah, thank you. We're, we're, we feel really good about where we're at with commercial. We've got really two parts to the strategy here. One is getting our product offerings back and support to be able to really support commercial through leveraging auto IMS. In the use cases where the commercial partners don't need reconditioning, and as I mentioned in the past, Auto IMS is the middle where commercial partners use it now that we're included, as a methodology for commercial consignors. We're doing well.

George Chamoun: Yeah, thank you. We're, we're, we feel really good about where we're at with commercial. We've got really two parts of the strategy here. One is getting our product offerings, back end support, to be able to really support commercial through leveraging Auto-IMS. In the use cases where the commercial partners don't need reconditioning, and as I mentioned in the past, Auto IMS is the middle where commercial partners use it now that we're included, as a methodology for commercial consignors. We're doing well.

Speaker Change: Yeah. So thank you, where where we feel really good about where we're at with commercial we've got really two parts of the strategy here one is.

Speaker Change: Getting our.

Speaker Change: Product offerings back end support.

Michael Graham: To be able to really support commercial through leveraging Ottawa mass.

Speaker Change:

Speaker Change: And the use cases, where the commercial partners don't need reconditioning and as I mentioned, a pass Ottawa masses. The middleware our commercial partners used now that were included.

Speaker Change: As a methodology where for commercial containers, we are and we're doing well we're progressing on that integration and are looking to have that we're ready to go live before the end of the year. So very very happy about the progress there on that integration. So that use case specific but they would be a vehicle that doesn't need to get moved or it doesn't need to be a recon.

George Chamoun: We're progressing on that integration and looking to have that ready to go live before the end of the year. So, I'm very happy about the progress there on that integration. So that use case specifically would be a vehicle that doesn't need to get moved or doesn't need to be reconfigured, examples like that. And we need that integration in place to really support wherever the vehicle is. Then the second market, which you mentioned, is a large part of the commercial category vehicles need minor recon. We say minor recon because a lot of times it's just they need to put on a tire or change, you know, it needs a key. Within the repo category, that's in the category where there's some reconditioning.

George Chamoun: We're progressing on that integration and looking to have that ready to go live before the end of the year. So, I'm very happy about the progress there on that integration. So that use case specifically would be a vehicle that doesn't need to get moved or doesn't need to be reconfigured, examples like that. And we need that integration in place to really support wherever the vehicle is. Then the second market, which you mentioned, is a large part of the commercial category vehicles need minor recon. We say minor recon because a lot of times it's just they need to put on a tire or change – it needs a key. Within the repo category, that's in the category where there's some reconditioning.

Speaker Change: Examples like that and we need we need that integration in place to really support wherever the vehicles.

Speaker Change: Second market, which you mentioned is there a you know a large part of the commercial category vehicles need minor recon, we say minor re caused a lot of times, it's just they needed need to put out a tire or change it needs a key.

Speaker Change: Within the repo category, that's been a category of Red there's some reconditioning.

George Chamoun: We now have 10 locations, and we're very excited that we're on our way. I think 25% of the way to what we said, at least 40 locations, to get to over 80% of the population. So, very happy with our progress on that journey of having locations across the country to help us go after the commercial.

George Chamoun: We now have 10 locations, and we're very excited that we're on our way. I think 25% of the way to what we said, at least 40 locations to get over 80% of the population. So, very happy with our progress on that journey of having locations across the country to help us go after the commercial.

Speaker Change: Now have 10 locations.

Speaker Change: And we're very excited that we're on our way you know I think 25% of the way of what we said at least 40 locations to get to over 80% of the population so very happy with our progress.

Speaker Change: Hum on that journey of having locations across the country to help US go after the commercial space.

Peter Lukas: And as you mentioned across the country in terms of those locations, how do you look at the expansion? Is it prioritizing one area over the other or wherever the opportunity presents itself or kind of across, um.., there and then the timetable to get to that full footprint that you're looking for?

Peter Lukas: And as you mentioned across the country in terms of those locations, how do you look at the expansion? Is it prioritizing one area over the other or wherever the opportunity presents itself or kind of across? there and then the timetable to get to that full footprint that you're looking for.

Speaker Change: And I think you'd mentioned across the country in terms of those locations. How do you look at the expansion is at prioritizing one area over the other or wherever the opportunity presents itself or kind of a cross.

Speaker Change: There and then the timetable to get to that.

Speaker Change: Full footprint that you're looking for.

George Chamoun: Yeah, and locations, there are really two parts to locations. One would be if we're going to go in via an acquisition, which you've seen thus far; the majorities have been small acquisitions. So, really, if it's an acquisition, there's a viable... business, and that location we're going after, then the acquisition path would be: There are some markets in the country where there won't be a target for us to acquire. In those markets, we'll just rent some land, decide whether or not we're going to outsource the reconditioning and or do it in-house based on the market.

George Chamoun: Yeah, and locations, it's, there are really two parts to locations. One would be if we're going to go in via an acquisition, which you've seen thus far; the majorities have been small acquisitions. So really, if it's an acquisition, there's a viable business and that location we're going after, then the acquisition path would be... There are some markets in the country where there won't be a target for us to acquire, and in those markets, we'll just rent some land, decide whether or not we're going to outsource the reconditioning and or do it in-house based on the market.

Speaker Change: Yeah.

Speaker Change: The location, it's a there's there's really two parts of locations one would be if we're gonna go in via an acquisition, which you've seen us thus far the majority of these have been small acquisitions.

Speaker Change: Hum.

Speaker Change: So really if it's an acquisition there's a there's a viable.

Speaker Change: Our business in that location were going after than than the acquisition path would be a path. We can go down and there are some markets in the country, where there won't be a target for us to acquire.

Speaker Change: And in those markets will just run some land.

Speaker Change: Decided whether or not we're going to outsource the reconditioning and or do it in house based on the market.

George Chamoun: In many of these markets, you could just outsource the reconditioning. And so either way, we're going to bring the offering really to all the markets we want across the country, whether or not there was a small acquisition, or we go ahead and just rent the land we need to go to market.

Speaker Change: Many of these markets you could just outsource the reconditioning and so either way, where we're going to bring the b.

Speaker Change: The offering really for all of the markets, we want across the country, whether or not there was a small acquisition or we go ahead and just rent the land we need to go to market.

Peter Lukas: Very helpful. Thanks. I'll jump back in the queue.

Speaker Change: Very helpful. Thanks, I'll jump back in the queue.

Speaker Change: Yeah. Thank you.

Operator: Thank you. The next question is from Rajat Gupta with JP Morgan. Please go ahead.

Speaker Change: Thank you. The next question is from Rajat Gupta with JP Morgan. Please go ahead.

Rajat Gupta: Great, thanks for taking my question. I missed the initial part of the call.

Rajat Gupta: Great, thanks for taking my questions. I missed the initial part of the call.

Rajat Gupta: Oh, great. Thanks for taking my questions.

Rajat Gupta: And much like the initial our initial part of the call I was curious like did you quantify any impact from CDK.

Rajat Gupta: I was curious, did you quantify any impact from CDK on the business, either in revenue or EBITDA? I just needed that one clarification, and I have a quick follow-up.

Speaker Change: To the business either in revenue or EBITDA just.

Speaker Change: Just had one clarification and then I have I have a quick follow up thanks.

George Chamoun: Yes, certainly Rajat. I'll start, and then Phil if you want to chime in.

Speaker Change: Yes, certainly were shot I'll I'll start then if bill if you want to chime in.

George Chamoun: So, we didn't really... Stay Rajat, what was the impact earlier in the call? All we did was mention that we did see, as you know, you cover the space pretty broadly, that new cars were going off at a really good pace and CDK really slowed down new car sales and used car sales towards the end of the quarter. Our impact, it's really tough to put an exact number on it. It was definitely over $600,000 of EBITDA and definitely over a million dollars of revenue.

George Chamoun: So we didn't really... Stay Rajat, what was the impact earlier in the call? All we did was mention that, you know, we did see, as you cover the space pretty broadly, that new car sales were going off at a really good pace and CDK really slowed down new car sales and used car sales towards the end of the quarter. Our impact, it's really tough to put an exact number on it.

Speaker Change: So we we didn't really.

Speaker Change: Staggers out what was the impact earlier in the call. All we did as mentioned that you know we did see as you know you cover the space pretty pretty broadly that newest going off in a really good so far and CDK really slowed down in the new car sales and used car sales towards the end of the court.

Rajat Gupta: Sure.

Rajat Gupta: Our impact it's really.

Speaker Change: Tough to put an exact number on it it was definitely over $600000 of EBITDA and definitely over $1 million of revenue.

George Chamoun: It was definitely over $600,000 of EBITDA and definitely over a million dollars of revenue. The exact number, we don't really know. But it was, you know, it had an impact. Obviously, we still had a fantastic quarter. We, uh, but that would be, you know, an approximate range of what the impact was for us.

George Chamoun: The exact number, we don't really know. But it was, you know, it had an impact. Obviously, we still had a fantastic quarter. But that would be, you know, an approximate range of what the impact was for us.

Speaker Change: Exact number we don't really know, but it was.

Speaker Change: You know it was an impact obviously, we still had a fantastic quarter.

Speaker Change:

Speaker Change: We are but that would be you know an approximate range of what what they are.

Speaker Change: The impact was for us.

Rajat Gupta: Got it. Got it.

Speaker Change: Got it got it that's helpful. And then just on a related topic I mean, yeah.

George Chamoun: That's helpful. And then just on a related topic, I mean, given the experience that a lot of the dealers went through with CDK and, you know, we have heard from other dealers trying to explore redundancies and other options. You obviously are getting closer and closer to the dealer, getting more integrated with their systems, you know, with ACV Max and just all the other products. I'm curious, like, how do you see this event as an opportunity for ACV to maybe work more closely with the dealer, you know, I don't know, maybe, at some stage, get into the management system side of things? I was curious, like, you know, how you think about that opportunity.

Rajat Gupta: That's helpful. And then just on a related topic, I mean, given the experience that a lot of the dealers went through with CDK. And, you know, we have heard from other dealers trying to explore redundancies and other options. You obviously are getting closer and closer to the dealers, getting more integrated with their systems, you know, with ACV Max, and just all the other products. I'm curious, like, how do you see this event as an opportunity for ACV to maybe work more closely with the dealer, you know, I don't know, maybe, at some stage, you know, get into the management system side of things? I was curious, like, what you think about that opportunity.

Speaker Change: Given the experience you know a lot of the dealers run through with J D K and <unk>.

Speaker Change: You have heard from other dealers you know trying to explore redundancies and other options.

Speaker Change: You obviously are getting.

Speaker Change: Those are included in the dinner getting more integrated with their systems, you know with ACD backs.

Speaker Change: Yeah, and just all the other products I'm curious like how do you see this event as an opportunity.

Speaker Change: For E C D. Two to maybe work more closely with the dealer no I didn't know if maybe at some stage you know get into the management system side of things I was curious like Oh.

Speaker Change: Or you think about that opportunity.

George Chamoun: Yeah, Rajat, I think it's a great question. I was on, you know, the phone with a top, let's call it, top five or maybe top 10 dealer group.

Speaker Change: Yeah. It was a I.

Speaker Change: I think it's a great question I was on the phone with a top.

Speaker Change: Top let's call it top five or top 10 dealer group.

George Chamoun: Some of them, you know, a senior person recently on this topic, and it was, it was, it was fun because there's somebody that doesn't work with us a lot today. And it was really interesting listening to how he thought about the category and how he wanted to make sure he had more options. So I think you said it well. You kind of answered the question while you stated the question. It's a category where dealers are probably going to be more careful about these all-in-one systems, is what I'm hearing. There are a couple of different software vendors that are trying to put everything into one stack.

Speaker Change: You know a senior person recently on this topic and it was it was it was fine but it was somebody who doesn't work where there's a lot today and <unk>.

Speaker Change: And it was really interesting listening to how he thought about the category and how he wanted to make sure he had more options.

Speaker Change: So I think you said it well you kind of answered the question. While you stated the question it is a category where.

George Chamoun: Dealers are probably going to be more careful about these all-in-one systems, is what I'm hearing. There are a couple of different software vendors that are trying to put everything into one stack. And I think they're gonna be a little bit more careful about that. I think they're gonna be careful to make sure they get the best of breed.

Speaker Change: Dealers are going to probably be more careful at these all in one system is what I'm hearing there's a couple of different software vendors are trying to put everything into one stack and that that I think there'd be a little bit more careful about that.

George Chamoun: And I think they're gonna be a little bit more careful about that. They're gonna be, you know, I think they're gonna be careful to make sure they get the best of breed. So I think those signals could be good signals for us. I don't know if they'll change our trajectory for ACMEX or any of these products in the next quarter or two, like they took off, you know. I don't wanna say like, "Okay, it'll go." We're gonna start selling this so much faster than we are today. But to your point, it definitely can't hurt.

Speaker Change: No I think they're going to be careful to make sure. They got best of breed.

George Chamoun: So I think those signals could be good signals for us. I don't know if it'll change our trajectory for ACV Max or any of these products in the next quarter or two, like they took off. I don't wanna signal like, okay, we're gonna start selling this so much faster than we are today. But to your point, it definitely can't hurt.

Speaker Change: So I think those signals could be good signals for us I don't know if it'll change our trajectory for AC Max or these products like in the next quarter or two like they put out you know I don't want to say like okay that is all.

Speaker Change: We're gonna start sounding so much faster than we are today, but to your point it definitely can't hurt it can only help the fact that word here. We've got great products. We've got a real attack team you know, we've got nearly 400 people between product and technology and I T and an incredible teammates in this area and we can help dealers are sorted.

George Chamoun: It can only help the fact that we're here. We've got great products. We've got a real tech team. You know, we've got nearly 400 people between product and technology and IT and incredible teammates in this area. And we can help dealers sort of diversify and sort of create strength in their backend systems. So I think that's all probably today on that, but I think it's also great.

George Chamoun: It can only help the fact that we're here, we've got great products, we've got a real tech team. You know, we've got nearly 400 people between product and technology and IT and incredible teammates in this area. And we can help dealers sort of diversify and sort of create strength in their backend systems. So I think that's all probably today on that, but I think it's also great.

Speaker Change: Diversify and sort of create.

Speaker Change: Create strength to their sort of their back end system. So.

Speaker Change: I guess I'll, probably today on that but I think it's also a great question.

Rajat Gupta: I understand. I do think it's a great opportunity. Thanks for taking the questions and good luck.

Speaker Change: And I said no I, just think it's a great opportunity.

Speaker Change: And the questions and good luck.

Speaker Change: Thank you have a shot.

Operator: Thank you. The next question comes from Naved Khan with B. Riley Securities. Please go ahead.

Speaker Change: Thank you.

Operator: The next question comes from Naveed Khan with Be Riley Securities. Please go ahead.

Speaker Change: The next question comes from David Kang with B Riley Securities. Please go ahead.

Naveed Khan: Yeah, thank you very much. I think in your prepared remarks, you talked about 50% of the market and achieving 30% penetration of franchise dealers. Is that just the count of the dealers, or is that wallet share? How should I think about that metric that you just shared? And then I have a follow-up.

Naved Khan: Yeah, thank you very much. I think in your prepared remarks, you talked about 50% of the market and achieving 30% penetration of franchise dealers. Yeah, is that just the count of the dealers, or is that wallet share? How should I think about that metric that you just shared? And then I have a follow-up.

David Kang: Got it thank you very much.

George Chamoun: Yeah, that's just a count of those working with us that good, good point of clarification. Thanks.

Speaker Change: Hum.

Speaker Change: In your prepared remarks, you talked about 50% of the market.

Speaker Change: Achieving 30% penetration of franchise dealers.

Speaker Change:

Speaker Change: Is that a just a calendar the dealers or is that wallet share how should we think about that metric that you just shared.

Speaker Change: And then I have a follow up.

Speaker Change: Yeah, that's just a count of those working with US that are good good point of clarification I think that's about it.

George Chamoun: I mean, it's not a full wallet. So we'd be selling a lot more cars, to your point, if we had also 50% of our wallets. So that's right. It means we're, think about it as the first flag of, you're sort of, when you think about your path to success, you're just celebrating each part of that victory. The first part of the victory is that they're working with us, and the second part of that victory is that we start to gain more wealth.

George Chamoun: I mean, it's not a full wallet. So we would have, we'd be selling a lot more cars to your point if we had 50. Also, you know, 50% of our wallets. So that's right. It means we're, think of it as the first flag of, you're sort of, when you think about your path to success, you're just celebrating each part of that victory. The first part of the victory is that they're working with us, and the second part of that victory is that we start to gain more wealth.

Speaker Change: I mean, it's a it's not full wallet share yet so we would have we'd be selling a lot more cars to your point.

Speaker Change: If we had 50 also you know 50% of their wallet share. So that that's right. It means we're a figure that was the first flag of Ah you're sort of when you think about your in your path to success you just celebrating each part of that victory. The first part of the Victor is they're working with us in this.

Speaker Change: And the second part of that victory as we start to gain more wallet share.

Speaker Change: Yep Okay.

Naveed Khan: Okay, great. And then just on ACV capital, what's the attitude there? Is there any movement on that front? And you also spoke of potential sort of new opportunities beyond the core, maybe off-platform financing. Maybe talk about that a little bit. How big can that be over time?

Naved Khan: Okay, great. And then just on the ACV capital, what's the attachment there?

Speaker Change: Great and then just on the U S T V capital.

Speaker Change: What's that's out there is there has there been any movement on that front and you also spoke about a potential sort of new opportunities beyond.

Speaker Change: Beyond the core maybe off platform kind of I'm, saying, maybe talk about that a little bit how big can that be over time.

George Chamoun: Yes, certainly. We're very pleased with our team's execution of ACV Capital. We did mention on the last few calls that we will continue to grow, but we obviously signaled to you all we weren't intending to grow this year as fast. Much of that is purposeful.

George Chamoun: Yes, certainly. We're very pleased with our team's execution needs to be capital. We did mention on the last few calls that we'll continue to grow, but I was to signal to all we weren't intending to grow this year. It's fast, but much of that is purposeful.

Speaker Change: Yeah, certainly so yeah, we're very pleased with our team's execution needs to be capital. We did mention on the last few calls that well we will continue to grow but we we obviously signaled to you all we weren't intending to grow this year as fast.

Speaker Change: Much of that is purposeful.

Speaker Change: We all saw the risk as it related to our independent dealers with higher interest rates in both for the both for the consumer and their ability to compete.

George Chamoun: So our team is doing a fantastic job of both growing but also managing bad debt and actually improving year-over-year on our bad debt expense, pretty meaningful improvement while growing in a tougher environment. So I'm just really thrilled with the team's execution of growing in a market there that's... I think independent dealers will get healthy. There's a little bit of a technical piece of this for independent dealers, as interest rates come down.

George Chamoun: We all saw the risk as it related to independent dealers with higher interest rates, both for the consumer and their ability to compete. So our team has done a fantastic job of both growing and managing bad debt and actually improving year-over-year on our bad debt expense, pretty meaningful improvement while growing in a tougher environment. So I'm just really thrilled with the team's execution of growing a market there that's... I think independent dealers will get healthy. There's a little bit of a technical piece of this for independent dealers, as interest rates come down.

Speaker Change: So our team has done a fantastic job.

Speaker Change: Both growing.

Speaker Change: They are growing but also managing bad debt and actually improving year over year on our bad debt expense a pretty meaningful improvement.

Speaker Change: Growing in a tougher environment. So I'm, just really thrilled with the team's execution of growing in our market. There that's I think.

Speaker Change: The dealers will get healthy Ah theres, a little bit of a cyclical peak.

Speaker Change: Piece of this for independent dealers are interest rates come down you know, we can see the independent dealer being a lot out there to kind of going into next year and you also see franchise dealers start selling some of the Junkier cars. So I think that will be another tailwind for the independent dealer next year, so fantastic job on the team.

George Chamoun: We can see the independent dealer being a lot healthier, kind of going into next year. And you also see franchise dealers stop selling some of the junkier cards. So I think that will be another talent for the independent dealer next year. A fantastic job on the team's execution for ACV Capital. The new product that we are just at the very early stage. I'm really excited about it. I wanted to, you know, one of the reasons I'm mentioning it.

George Chamoun: We can see the independent dealer being a lot healthier, kind of going into next year. And you also see franchise dealers stop selling some of the junkier cards. So I think that will be another talent for the independent dealer next year. A fantastic job on the team's execution for ACV Capital. The new product that we are just at the very early stage of, I'm really excited about it. I wanted to, you know, one of the reasons I'm mentioning it.

Speaker Change: Execution Phase V capital the new product.

Speaker Change: That we've are we we are just very early stage I'm really excited about it I wanted to one reason I'm mentioning it but I'm just you know you've got some of these products that I'm, just super psyched about but whenever you got bundle.

George Chamoun: You know, you've got some of these products that I'm just super psyched about. But whenever you get bundled, two of your products together add tremendous value, and that's bundling ClearCar with ACV Capital to help dealers buy cars from us. And this will be both franchised, it'll be independent, there will be others in the marketplace that just buy cars. And we're really excited about this. It's an area where we believe we have a competitive advantage because we, if you think about each time when you're extending credit in a way, you're doing it based on... our wholesale values based on our ability to price that vehicle. So we're in a very unique position to basically fund this consumer acquisition.

George Chamoun: You know, you've got some of these products that I'm just super psyched about. But whenever you get bundles... two of your products together add tremendous value. And that's bundling ClearCar with ACV Capital to help dealers buy cars from. And this will be both franchise, it'll be independent, it'll be others in the marketplace that just buy cars. And we're really excited about this. It's an area where we believe we have a competitive advantage because, if you think about each time when you're extending credit in a way, you're doing it based on our wholesale values based on our ability to price that vehicle. So we're in a very unique position to basically fund this consumer acquisition.

Speaker Change: Two of your products together to add tremendous value and that's bundling clear car, where they used to be capital to help dealers buy cars from consumers and this would be both franchise it'll be a independent it'll be others in the marketplace that just buy cars and we're.

Speaker Change: We're really excited about this it if it we it's an area where we believe we have a competitive advantage because we if you think about each time when you.

Speaker Change: Extending credit in a way you're doing it based on.

Speaker Change: Our wholesale up based on our ability to price that vehicle. So we're in a very unique position.

Speaker Change: To basically fund this consumer acquisition, having said that we're very early I think first few dealers about my it will you know it wont really ramp until next year. This was just I was just excited that we got live with it and we launched our first we're protected they not actually lie we're tackling a pilot, but I'm happy to announce that at.

George Chamoun: Having said that, we're very early. I think the first few dealers have gone live. It won't really ramp up until next year. This was just, I was just excited that we got live with it and we launched our first. We're technically not actually live, we're technically in pilot, but I'm happy to announce that at least it's starting.

Speaker Change: We have started.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Operator: Thank you. The next question is from Chris Pierce with Needham & Company. Please go ahead.

Operator: Thank you. The next question is from Chris Pierce with Needham and Company. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Next question is from.

Speaker Change: Chris B S with Needham and company. Please go ahead.

Christopher Pierce: Hey, good afternoon, everyone.

Chris Pierce: Hey, good afternoon, everyone.

Speaker Change: Hey, good afternoon, everyone has anyone else kind of competitive intensity yet.

George Chamoun: Hey Chris, do we have any competitors? I'm just joking.

Speaker Change: Hey, Chris do we have competitors I've just okay well.

Chris Pierce: Well, from talking to customers and investors, I understand that, by the way. CarMax is ramping up Max Offer, Copart is making noise in wholesale, and then on the physical side, America's Auto Auctions has bought a couple of local physical auction houses. So I just want to get a sense of how you think about the competitors broadly. Are they coming to this market because it's a growth market, or are they trying to defend share? How do you think about the competitive intensity from some of these newer players?

Christopher Pierce: From talking to customers and investors.

Speaker Change: I spent time talking to customers and investors.

Speaker Change: I appreciate that by the way a carmax.

Speaker Change: Suffer co parties, making noise in wholesale and then on the physical side Americas Auto auctions has bought a couple of local physical auction auction houses. So I just wanted to get a sense of how you think about the competitors' broadly are they coming to this market because it's a growth market or are they trying to defend share like how do you think about competitive intensity from some of these newer players.

George Chamoun: Yeah, I mean, Chris, if you look back, there have been physical auctions, whether it be owned by the group you mentioned or somebody else, there have been hundreds of physical auctions across the country from day one when we started this journey. So, whether Company A or Company B owns that auction really doesn't change the competitive nature. Even some of the other folks who are in the salvage category you mentioned have been on and off in this category for a long time.

George Chamoun: Yeah, I mean, Chris, there have been physical auctions, whether it be owned by the group you mentioned or somebody else, there have been hundreds of physical auctions across the country from day one when we started this journey. So, whether Company A or Company B owns that auction really doesn't change the competitive nature. Even some of the other folks who are in the salvage category you mentioned have been on and off in this category for a long time.

Speaker Change: Yeah, and Chris if you look back.

Speaker Change: They're span physical auctions, whether it'd be owned by the group you mentioned or somebody else.

Speaker Change: Theres been hundreds of physical auctions across the country from day, one when we started this journey so weather company, a or company B owns that option really doesn't change the competitive nature.

Speaker Change: Even some of the other folks who are in the salvage category you mentioned they've been on and off in this category for a long time, you can go back and look at the press release, there's whole lot.

George Chamoun: You can go back and look at the press releases; how long. So, there's really been no change in my mind about the competitive nature. I think even when you look at our other direct competitors, I think you're going to see we've done better quarter over quarter. So, I would say the simple, quickest answer would be that you respect your competitors. We've got very strong competitors, one really big one, who I think we are doing a great job as well. But we've got some competitors in every market we're in. It's been that way since I started this journey in 2016.

Speaker Change: So theres really been no change in my mind on the competitive nature I think even when you look at our other direct competitors I think youre going to see we've got better quarter over quarter. So I would say the simple quickest answer would be you respect your competitors, we've got very strong competitors, one really big one.

Speaker Change: You know who we are I think we are doing a great job as well, but you know you know.

Speaker Change: We've got some we've got some competitors in every market. We're in that it's been that way since I started this journey in 2016 I'm sorry.

Chris Pierce: So, a short answer would be that nothing has changed. Okay, perfect. And then...

Speaker Change: Well the short answer would be nothing has changed.

Christopher Pierce: Okay, perfect, and then... Perfect. And then, what would you say if, you know, I kind of posited a theory of second half strength in used car macro given the CDK disruption and the easy comps we have on 22 and 23 in the second half of the year, and these are durable goods and interest rate cuts are coming? I know you guys don't like to make macro predictions, but does this line up for a stronger second half than we normally see in the used car industry?

Speaker Change: We've always had come back and then you got it.

Chris Pierce: And then what would you say if, you know, I kind of posited a theory of second half strength in used car macro given the CDK disruption and the easy comps we have on 22 and 23 in the second half of the year? And these are durable goods, and interest rates, you know, cuts are coming. I know you guys don't like to make macro predictions, but does this line up for a stronger second half than we normally see in the used car industry?

Speaker Change: Perfect and then what would you say is you know I kind of positively the theory of second half strength in used car macro given the C. D K disruption and the easy comps, we have them 22 and 23 in the second half of the year and these are durable goods and interest rate you know cuts are coming.

Speaker Change: I know you guys don't like to make macro predictions, but does it line up for a stronger second half than we normally see in the used car industry.

George Chamoun: I think that's, I think that's the question, if you would. We, We we, We believe things will, you know. We owe it to them if they are. We are planning for it to moderately improve. Bill might need to try many. Okay. But we're not, we're not banking on a huge, And actually, Bell, I'll be safe for here. You go.

George Chamoun: I think that's, I think that's the question, if you would. We We, we. We believe things will, you know. We owe it to them if they're here. We're planning for it to moderately improve. Bill might need to try many. OK. But we're not, we're not banking on a huge, And actually, Bell, I'll be safe for here. You go.

Speaker Change: I think that's a I think that's the question if you would [laughter] we.

Speaker Change: We we.

Speaker Change: We believe things will.

Speaker Change: Well, let me say it this way.

Bill: We're planning for it to moderately improve bill might need to chime in and say.

Speaker Change: Okay.

Bill: We're not we're not banking on a huge improvement.

Bell: And it actually bell that'll be safer here, you got [laughter] sure sure.

Bill Zerella: Sure, sure. Hey, hey, hey Chris.

Bill Zerella: Hey Chris, so... Hey Chris.

Bill Zerella: Hey, Chris. I think if you take a step back and let's start with our guidance, right? We raised... the lower end of our revenue guide, and so we moved the midpoint up, right, to a full-year revenue growth of 28 to 30 percent, which you know is a pretty good growth rate considering the current macro environment. That said, you know, we mentioned in our prepared remarks that, you know, we've seen a strong start to Q3, and that was certainly the case in July, and it's carrying over so far into August.

Chris: Hey, Chris so.

Bill Zerella: I think if you take a step back and let's start with our guidance, right? We raised the lower end of our revenue guide, and so we moved the midpoint up, right, to a full-year revenue growth of 28 to 30 percent, which, you know, is a pretty good growth rate considering the current macro environment. That said, you know, we mentioned in our prepared remarks that, you know, we've seen a strong start to Q3, and that was certainly the case in July, and it's carrying over so far into August.

Chris: I think if you take a step back and let's start with our guidance we raised.

Chris: The lower end of our revenue guidance. So we moved the midpoint up right to a full year revenue growth of 28% to 30%.

Speaker Change: Which you know it was pretty good growth rate considering the current macro environment.

Chris:

Speaker Change: Yeah, that's and we mentioned in our prepared remarks that we've seen a strong start to.

Chris: Q3.

Speaker Change: That certainly was the case in July.

Speaker Change: It's carrying over so far in August.

Bill Zerella: However, we're really not extrapolating that growth rate yet, even though our Q3 guide is basically 33 to 36% revenue growth. So the caveat here is the dealer wholesale market improved modestly in Q2, but it still declined based on auction net data, roughly 3% year on year. So we still believe dealer wholesale is going to recover, but it's unclear, you know, how much of a tell when that's going to happen in the second half.

Christopher Pierce: However, we're really not extrapolating that growth rate yet, even though our Q3 guide is basically 33 to 36% revenue growth. So the caveat here is the dealer wholesale market improved modestly in Q2, but it still declined based on auction net data, roughly 3% year-on-year. So we still believe dealer wholesale is going to recover, but it's unclear, you know, how much of a tell when that's going to happen in the second half.

Chris: However, we're really not extrapolating that growth rate yet.

Chris: Even though our Q3 guide is basically 33% to 36%.

Speaker Change: Revenue growth.

Speaker Change: So the caveat here is you know the dealer wholesale market improved modestly in Q2, but it still declined based.

Speaker Change: It's an auction that theater.

Speaker Change: 3% year on year Okay.

Chris: We still believe dealer wholesale is going to recover but it's unclear.

Chris: How much of a tailwind that's going to provide in the second half and you've got all these macro cross currents at play right.

Bill Zerella: And you've got all these macro cross currents at play, right? So, you know, the net for us is we feel like we're, you know, we've got into a really strong revenue growth in the second half. We certainly see a nice start to Q3, but we're just a little cautious here because we're a week away from only being halfway through the quarter, right? But certainly, these are positive trends that we're seeing so far. So that hopefully gives you a little more context. Yeah, I appreciate the time.

Christopher Pierce: And you've got all these macro cross currents at play, right? So, you know, the net for us is we feel like we're, you know, we've got into a really strong revenue growth in the second half. We certainly see a nice start to Q3, but we're just a little cautious here because we're, you know, a week away from only halfway through the quarter, right? But certainly these are positive trends that we're seeing so far. So that hopefully gives you a little more context. Yeah, I appreciate the time.

Chris: So the net for US is we feel like we're getting to a really strong revenue growth in the second half.

Speaker Change: We certainly see a nice start for Q3, but where we're just a little cautious here because were.

Chris: A week away from only halfway through the quarter right, but.

Chris: Certainly these are positive trends that we're seeing so far.

Chris: So that hopefully gives you a little more context.

Chris Pierce: Yeah. I appreciate the time. Thanks and good luck.

Christopher Pierce: Yeah. I appreciate the time. Thanks and good luck.

Speaker Change: I appreciate the time, thanks and good luck.

Speaker Change: Okay. Thank you.

Operator: A reminder to all the participants that you may press star and 1 to ask a question. The next question is from Curtis Nagel with Bank of America. Please go ahead.

Speaker Change: A reminder to all the participants that you May press star and one to ask a question.

Speaker Change: Yeah.

Speaker Change: The next question is from Curtis Nagle with Bank of America. Please go ahead.

Stephen McDermott: Hi guys, this is Stephen McDermott on behalf of Curtis Nagel. Um, you talked more about kind of your profitable investment philosophy in the prepared remarks. Do you mind just expanding on kind of what investments are still needed to reach your targets and, as well, kind of what margin expansion would look like if you were to exclude those investments? Yes, thank you, and then I have another one after that.

Operator: Hi guys, this is Steven McDermott, author Curtis Nagel. Um, you talked more about kind of your profitable investment philosophy in the prepared remarks. Do you mind just expanding on kind of what investments are still needed to reach your targets and, as well, kind of what margin expansion would look like if you were to exclude those investments? Yes, thank you, and then I have another one after that.

Curtis Nagle: Hi, guys. This is.

Curtis Nagle: Curtis Nagle.

Curtis Nagle: You talked more about kind of your profitable investment philosophy in the prepared remarks.

Curtis Nagle: Do you mind, just expanding kind of what our investments are still needed.

Speaker Change: Richard.

Speaker Change: [noise] targets and as well kind of what would margin expansion look like if you were to exclude those investments.

Speaker Change: Yes, thinking that I had another one out there.

Bill Zerella: Phil, a bunch of guys.

Speaker Change: So a bunch of God.

Bill Zerella: Yeah, so the way we think about this is, you know, how much incremental EBITDA will we generate for every given incremental dollar of revenue? Right, which is next to any investments that we're making. So let's start there.

Steven McDermott: Yeah, so the way we think about this is, you know, how much incremental EBITDA will we generate for every given incremental dollar of revenue? Right, which is next to any investments that we're making. So let's start there.

Speaker Change: Yeah. So the way the way we think about this is you know how.

Speaker Change: How much in incremental EBIT.

Speaker Change: EBITDA will be generated for every given an incremental dollar of revenue.

Speaker Change: Right, which isn't that well then the investments that we're making so let's let's start there.

Bill Zerella: Last year we had significant incremental leave at a margin because we were really tightly managing op-ex. This year, as we pursue the commercial strategy through M&A, that obviously has an impact in terms of how much incremental margin we deliver, even the margin we deliver for every incremental dollar, since we're bringing on additional op-ex as part of that strategy. So all the modeling that we're doing going forward basically gets us to a place where when we take into account that commercial strategy and those investments.

Bill Zerella: Last year we had significant incremental leave at a margin because we were really tightly managing op-ecs. This year, as we pursue the commercial strategy through M&A, that obviously has an impact in terms of how much incremental margin we deliver, even the margin we deliver for every incremental dollar since we're bringing on additional op-ecs as part of that strategy. So all the modeling that we're doing going forward basically gets us to a place where when we take into account that commercial strategy and those investments.

Speaker Change: Last year, we had significant incremental EBITDA margin.

Speaker Change: Because we were really tightly managing opex. This.

Speaker Change: This year as we pursue our commercial strategy.

Speaker Change: You know through M&A that obviously has a has a impact in terms of how much incremental margin, we deliver EBITDA margin, we deliver for every incremental dollar since we're bringing on.

Chris: Additional opex as part of that strategy.

Chris: So all the modeling that we're doing going forward basically gets us to a place where when we take into account that commercial strategy and those investments.

Bill Zerella: We expect to deliver about 40% of every incremental dollar of revenue down to EBITDA, which we feel is a pretty good track to execute on going forward. Assuming we can drive good growth on the top line, we can really build a really nice improvement and even a margin over the course of the next few years as we head towards our midterm targets. So that's the kind of way we think about it in terms of the model.

Bill Zerella: We expect to deliver about 40% of every incremental dollar of revenue down to EBITDA, which we feel is a pretty good track to execute on going forward. If we can drive good growth on the top line, we can really build a really nice improvement and even a margin over the course of the next few years as we head towards our midterm targets. So that's the kind of way we think about it in terms of the model.

Speaker Change: We expect to deliver about 40% of every incremental dollar of revenue down to EBITDA.

Speaker Change: Right.

Speaker Change: Which we feel is a pretty good pretty good track to execute on going forward.

Speaker Change: And assuming we can we can drive good growth on the top on the topline we can really really oh.

Speaker Change: Really nice improvement in EBIT EBITDA margin over the over the course of the next few years right as we head towards our midterm targets. So that's that's that's the kind of what do we think about it in terms of the model if we weren't making these investments I mean frankly.

Bill Zerella: If we weren't making these investments, I mean, frankly, that would be kind of hard to discern because if we weren't making those investments, that would impact our revenue. So it's not easy to parse that out because if we don't make those investments, we've got less revenue generation and margin generation as well. So that's not the way we think about it.

Speaker Change: That would be kind of hard to discern because if we werent, making those investments that would impact our revenue growth.

Speaker Change: So it's not easily easy to parse that out.

Speaker Change: Because if we don't make those investments we've got less revenue generation and margin generation as well. So that's not the way we think about it.

Steven McDermott: Got it. Yeah, makes sense. And then I think typically, or at least historically, you've raised prices in 3Q. I was just wondering this time around if you're thinking kind of along those same lines this time around, and is that across the board, or is that more targeted towards a certain product, a certain service, etc.? Thank you.

Stephen McDermott: Got it. Yeah, makes sense. And then I think typically, or at least historically, you've raised prices in 3Q. I was just wondering this time around if you're thinking kind of along those same lines this time around, and is that across the board, or is that more targeted towards a certain product, a certain service, etc.? Thank you.

Speaker Change: Yeah makes sense, and then I think typically or at least historically you've.

Speaker Change: Raised prices and three Q I was just wondering this time around.

Speaker Change: If you're thinking kind of along those same lines and is that across the board or is that more towards that towards a certain product or certain service et cetera. Thank you.

Speaker Change: Yeah.

George Chamoun: Yeah, certainly we did have a small raise in price for some of our fees. And we So that was part of our plan for this year. But we were always looking at the timing based on market conditions and other factors.

Speaker Change: Yeah, certainly we we did have a small a raise and price them for for some of our.

Speaker Change: Fees and we are.

Speaker Change: So that was.

Speaker Change: Part of our plan for this year.

Speaker Change: We're always looking at the timing based on market conditions and other factors.

George Chamoun: We did see, obviously, used car values start to decline quicker in Q2. So we decided to make a small change there. And when you look at our target, which we've told you all, we're targeting $500, if you take the buy fees, the sell fees, the assurance product we call Go Green, you put all those fees together, we are $493 in Q2. And our midterm model is $500. So, you know.

Speaker Change: We did see obviously used car values start to decline.

Speaker Change: Quicker in Q2.

Speaker Change: So we decided to make a small change there and when.

Speaker Change: When you look at our target.

Speaker Change: That we've told you always we're targeting $500. If you take the buy fee for selfies. They assurance product we call go Green.

Speaker Change: Put all those pieces together.

Speaker Change: We were $493 in Q2.

Speaker Change: We are mid term model as it was $500. So look at you know.

George Chamoun: There'll be puts and takes in any one quarter based on what's going on, but, you know, between now and over the next few years, we've got a target, with the last quarter being $493,000. Everything else going on, and going forward, I feel very confident about our goal, $500. And then the second part of your question, beyond doing these small fee increases. We do have the opportunity to expand other value-added services. So think about value-added services, products that could offer more assurance to the buyer, as one example.

Speaker Change: There'll be puts and takes any one quarter based on what's going on.

Speaker Change: But you know between now and over the next few years that that's we've we've got a target.

Speaker Change: Last quarter being four ninety-three everything else going on and going forward I feel very confident about our goal of $500.

Speaker Change: And then the second part of your question beyond doing these small fee increases.

Speaker Change: We do have the opportunity to expand other value added services.

Speaker Change: So think about our value added services.

Speaker Change: Products that could either offer either more assurance to the buyer.

Speaker Change: As one example, so we're always a trialing. These additional value added services. So I think your second question, but it's also a great question and that in time it doesn't have to be just the small fee increases it could be we start to see.

George Chamoun: So we're always trialing these additional value-added services, so I think your second question was also a great question in that, in time, it doesn't have to be just these small fee increases. It could be we start to see some opportunity in any one of the products we're trialing that relates to these value-added services. Awesome, thank you, I appreciate the time.

George Chamoun: So we're always trialing these additional value-added services. So I think your second question was also a great question in that, in time, it doesn't have to be just these small fee increases. It could be we start to see some opportunity in any one of the products we're trialing that relates to these value-added services. Awesome, thank you, I appreciate the time.

Speaker Change:

Speaker Change: There's some opportunity in any one of the products, we're trialing them.

Speaker Change: That relates to these value added services.

Speaker Change: Awesome. Thank you I appreciate the time.

Speaker Change: Yes, certainly thank you.

Speaker Change: Thank you.

Tim Fox: Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Tim Fox for closing remarks.

Operator: Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Tim Fox for closing remarks.

Speaker Change: Ladies and gentlemen, there are no further questions I would now like to hand, the conference or Tim Fox for closing remarks.

Operator: Thank you. And I'd like to thank everybody for joining us on the call today. We look forward to seeing you on the conference circuit this quarter. You can check out our website for all the different conferences we'll be attending over the next month or so. And again, thank you for your interest in ACV and have a great evening.

Tim Fox: Thank you. And I'd like to thank everybody for joining us on the call today. We look forward to seeing you on the conference circuit this quarter. You can check out our website for all the different conferences we'll be attending over the next month or so. And again, thank you for your interest in ACV and have a great evening.

Tim Fox: Thank you and like to thank everybody for joining us on the call today, we look forward to seeing you on the conference circuit this quarter you.

Tim Fox: You can check out our website with with all of the different conferences will be attending over the next month or so and again. Thank you for your interest in the C V and have a great evening.

Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and more. Thank you for watching. See you next time.

Speaker Change: Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

Operator: [music]

Speaker Change: [music].

Naved Khan: Is there any movement on that friend? And you also spoke of potential sort of new opportunities beyond the core, maybe off platform financing. Maybe talk about that a little bit, how that could be over time? Yes, certainly. So yeah, we're very excited.

George Chamoun: We all saw the risk as it related to independent dealers with higher interest rates, both for the consumer and their ability to compete. You. You.

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