Q3 2024 ACV Auctions Inc Earnings Call
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Operator: Good day, everyone, and welcome to today's ACV Third Quarter 2024 Earnings Conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one on your telephone keypad. You may withdraw yourself from the queue by pressing star and two. Please note, this call is being recorded.
Speaker Change: Good day, everyone and welcome to todays H D V third quarter 2024 earnings conference call. At this time all participants are in a listen only mode. Later, you will have the opportunity to ask questions. During the question and answer session you may registered Oscar.
Speaker Change: Jan at any time by pressing the star and one on your telephone.
Speaker Change: You may withdraw yourself from the queue by pressing star and Jim.
Speaker Change: This call is being recorded lastly, if you should require operator assistance during the conference today. Please press Star Zero. It is now my pleasure to turn the conference over to Vice President of Investor Relations Tim Fox. Please go ahead.
Operator: Lastly, if you should require operator assistance during your conference today, please press star zero.
Timothy Fox: It is now my pleasure to turn the conference over to Vice President of Investor Relations, Tim Fox. Please go ahead.
Timothy Fox: Good afternoon and thank you for joining ACV's conference call to discuss our third quarter 2024 financial results.
Tim Fox: Good afternoon, and thank you for joining Hev's conference call to discuss our third quarter 2024 financial results.
Timothy Fox: With me on the call today are George Chamoun, Chief Executive Officer, and Bill Zerella, Chief Financial Officer. 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. The discussion of the risks and uncertainties related to our business can be found on our SEC filings and in today's press release, both of which can be found on our investor relations website.
Tim Fox: With me on the call today are George Simone Chief Executive Officer, and builds a rolla Chief Financial Officer.
Tim Fox: Before we get started please note that today's comments include forward looking statements.
Statements regarding future financial guidance.
Tim Fox: These forward looking statements are subject to risks and uncertainties and involve factors that could cause actual results to differ materially from those expressed or implied by such statements.
Tim Fox: 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.
Timothy Fox: During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is provided in today's earnings materials, which can also be found on our investor relations website.
Tim Fox: During this call we will discuss both GAAP and non-GAAP financial measures.
Tim Fox: 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.
George Chamoun: And with that, let me turn the call over to George. Thanks, Tim. Good afternoon, everyone, and thank you for joining. We're very pleased with our third quarter. We delivered another quarter of record revenue and adjusted EBITDA, both exceeding the high end of guidance. The ACV team drove strong market share gains in our core dealer wholesale business. along with Record Performance for ACV Transport and Capital. Our growing suite of dealer solutions continue to gain market traction. and we progress on our tech roadmap to address the commercial wholesale market. ACE, and our strong Q3 performance.
George Simone: And with that let me turn the call over to George.
George Simone: Thanks, Tim Good afternoon, everyone and thank you for joining us.
George Simone: We are very pleased with our third quarter performance we.
George Simone: We delivered another quarter of record revenue and adjusted EBITDA.
George Simone: It's exceeding the high end of guidance.
George Simone: The C V team drove strong market share gains in our core dealer wholesale business.
George Simone: Along with a record performance for ACB transport and capital.
George Simone: Our growing suite of dealer solutions continue to gain market traction.
George Simone: We progressed, our tech roadmap to address the commercial wholesale market.
George Simone: Based on our strong Q3 performance, we are raising full year guidance.
George Chamoun: We are raising full year guidance. reflecting our commitment to drive top line growth. Span Margin. and deliver our first year of adjusted EBITDA profitability. We're confident that executing on this profitable growth strategy will create significant long-term shareholder value.
George Simone: Reflecting our commitment to drive topline growth.
George Simone: Expand margins.
George Simone: And deliver our first year of adjusted EBITDA profitability.
George Simone: We're confident that executing on this profitable growth strategy will create significant long term shareholder value.
George Chamoun: With that, let's turn to our recap of third quarter results on slide. Revenue of $171 million grew 44% year over year. We sold 198,000 vehicles. a year over year increase of 32%, reflecting strong listings growth and conversion rates, as well as solid execution across our remarketing. GMV increased 17% year-over-year. driven by strong unit growth, which more than offset a 12% decline in GMV per capita.
George Simone: With that let's turn to a recap of third quarter results on slide four.
George Simone: Revenue of $171 million grew 44% year over year.
George Simone: We sold our hydrogen 98000 vehicles.
George Simone: Our year over year increase of 32%, reflecting strong listings growth and conversion rates as well as solid execution across our remarketing centers.
George Simone: <unk> increased 17% year over year.
George Simone: Driven by strong unit growth, which more than offset a 12% decline in <unk> per unit.
George Chamoun: Next on slide five. 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 growth.
George Simone: Next on slide five.
George Simone: Today's discussion will focus on the three pillars of our strategy to maximize long term shareholder value.
George Simone: With innovation and scale.
Speaker Change: I will begin to grow.
George Chamoun: Turning to slide 7. I'll start with observations about the automotive market as context for Giller Wholesale Auctions. On the retail front, sales were fairly muted in Q3. New retail sales increased 1% year over year, while used retail sales were flat. Importantly, new vehicle inventories have recovered to historical levels. and OEMs are increasing incentives, which should support retail sales returning to more normalized levels in the near future. In terms of used vehicles, inventories have started to recover from the 2023 historical low. However, they remain 25% below normal exiting the court. used vehicle shortages continue to be a material headwind for the dealer wholesale.
Speaker Change: Turning to slide seven.
Speaker Change: I'll start with the observation about the automotive market as context regular wholesale volumes.
Speaker Change: On the retail front sales were fairly muted in Q3.
Speaker Change: New retail sales increased 1% year over year, while used retail sales were flat.
Speaker Change: Importantly, new vehicle inventories have recovered to historical levels and Oems are increasing incentives, which should support retail salad returning to more normalized levels in the near future.
Speaker Change: In terms of used vehicles inventories have started to recover from the 2023 historical lows. However.
Speaker Change: However, the remaining 25% below normal exiting the quarter.
Speaker Change: Used vehicle shortages continued to be a material headwind or the dealer wholesale market.
George Chamoun: and dealers retain a higher percentage of trades for retail. However, we did see another modest uptick in the trade-to-wholesale mix in Q3, and we expect the mix to normalize over the next few years as used vehicle inventory As expected, wholesale price depreciation returned to more normalized patterns in Q3. conversion rates were strong and above historical Q3 average. Driven in part by favorable market conditions. and from our Innovative Marketplace Investments, Driving Dealer Engagement. On balance, we're encouraged to see pockets of improvement within the broader automotive market.
Dealers retain a higher percentage of trade for retail.
Speaker Change: However, we did see another modest uptick in the trade to wholesale mix in Q3.
Speaker Change: We expect the mix to normalize over the next few years as used vehicle inventory recovers.
Speaker Change: As expected wholesale price depreciation returned to more normalized pattern in Q3.
Speaker Change: Conversion rates were strong and above historical Q3 averages.
Speaker Change: And in part by favorable market conditions.
Speaker Change: And from our innovative marketplace investments driving dealer engagement.
Speaker Change: On balance we're in.
Speaker Change: Courage to see pockets of improvement within the broader automotive market.
George Chamoun: Moving to slide 8, let's cover highlights on our value-added services, beginning with AC transcript. transportation team delivered record revenue in Q3 with 108,000 deliveries in the quarter. AI optimized pricing achieved 95% lane coverage again last quarter. By leveraging AI, our team delivered 27% volume growth while driving operating efficiency. Revenue margin of 20% was also erected. expanding 170 basis points year over year. and exceeding our midterm target of high teen margin. Lastly, our off-platform transportation service is gaining traction with our dealer. We're in early stages, but excited to deliver new value added services that create long term growth.
Speaker Change: Moving to slide eight let's.
Speaker Change: Let's cover highlights on our value added services, beginning with AC transportation.
Speaker Change: The transportation team delivered record revenue in Q3 with 108000 deliveries in the quarter.
Speaker Change: AI optimized pricing achieved 95% lane coverage again last quarter.
Speaker Change: By leveraging AI, our team delivered 27% volume growth, while driving operating efficiency.
Speaker Change: Revenue margin of 20% was also a record expanding 170 basis points year over year.
Speaker Change: And exceeding our mid term target of high teen margins.
Speaker Change: Lastly, our off platform transportation service is gaining traction with our dealer partners.
Speaker Change: We're in early stages, but excited to deliver a new value added services that create long term growth.
George Chamoun: Accelerate Network Density and Deepen Carrier Relations.
Speaker Change: Accelerate network density and deepen carrier relationships.
George Chamoun: Turning to slide 9. The ACV Capital team again delivered solid growth while managing risk in an environment that continues to be challenging for independent dealers. As we highlighted last quarter, the capital team is piloting a new offering that provides financing for consumer sourced vehicles and dealer trade-ins that are sold retail or wholesale on ACV's marketplace. We are uniquely positioned to bundle ClearCar with ACV Capital to support dealer sourcing strategies.
Speaker Change: Turning to slide nine.
Speaker Change: The ECB capital team again delivered solid growth, while managing risk in an environment that continues to be challenging for independent dealers.
Speaker Change: As we highlighted last quarter. The capital team is piloting a new offering that provides financing for consumers for our vehicles and dealer trade ins that are sold retail or wholesale and acd's marketplace, where.
Speaker Change: We are uniquely positioned to bundle Claire car with ACP capital to support dealer sourcing strategies.
George Chamoun: We look forward to updating you on this new offering in the coming quarter.
Speaker Change: Look forward to updating you on this new offering in the coming quarters.
George Chamoun: Next, I'll address the second element of our strategy to drive long-term shareholder value, innovation. for Unified 11. Our investments in marketplace engagement continue to pay dividends. As I mentioned earlier, Q3 conversion rates were strong. Along with favorable market conditions, conversion rates benefited from features like advanced search. Vehicle Merchandising, AI Enabled Pricing, and Flexible Auction Formats, which deliver a best-in-class buying experience on our marketplace. Our commercial tech investments are progressing well. Recall that our initial focus is integrating with auto IMS and delivering marketplace enhancements to support commercial consignment. Furthermore, these key initiatives will support platform standardization across our remarketing.
Speaker Change: Next I will address the second element of our strategy to drive long term shareholder value innovation.
Speaker Change: Turning to slide 11, our.
Speaker Change: Our investments in marketplace engagement continue to pay dividends.
Speaker Change: As I mentioned earlier Q3 conversion rates were strong.
Speaker Change: Along with favorable market conditions conversion rates benefited from features like advanced search.
Speaker Change: Co merchandising AI enabled pricing and flexible auction format, which deliver a best in class buying experience on our marketplace.
Speaker Change: Our commercial tech investments are progressing well.
Call that our initial focus is integrating with auto Oems and delivering marketplace enhancements to support commercial containers.
Speaker Change: Furthermore, these key initiatives will support platform standardization across our remarketing centers.
George Chamoun: The new ACV Max suite continues to gain traction in the market, including a recent win of a regional Texas dealer. and a growing pipeline of new products. MAX is proving to be a valuable solution to create cross-sell opportunities for ACV's core wholesale auctions. We're excited to roll out new bundled offerings that focus on both expanding the ACV Max footprint while driving additional wholesale market share. Our objective is to align the interests of our dealer partners and ACV.
The new ACD Mac suite continues to gain traction in the market, including a recent win of a regional Texas dealer groups.
Speaker Change: And a growing pipeline of new prospects.
Speaker Change: Max is proving to be a valuable solution to create cross sell opportunities for Acd's car wholesale offering.
Speaker Change: We're excited to rollout new bundled offerings that focus on both expanding the ECB Max footprint, while driving additional wholesale market share.
Speaker Change: Our objective is to align the interest of our dealer partners and ACB.
George Chamoun: Finally, in the dealer self-infection category, demand for ACV's vehicle appraisal technology is growing across a number of uses. dealers are praising trade vehicles sourced through digital channels and making offers to consumers in their service. Across these use cases, accurate pricing is the critical success. Our appraisal solutions incorporate AI imaging for damage detection and real-time localized pricing that is conditioned and based on millions of inspections in our data. It's still early days in this category.
Speaker Change: Finally in the dealer self infection category demand for Acd's vehicle appraisal technology is growing across a number of use cases.
Speaker Change: Dealers are appraising trade in vehicles sourced through digital channels, and making offers to consumers and their service trials.
Speaker Change: These use cases accurate pricing is a critical success factor <unk>.
Speaker Change: Our appraisal solutions incorporate AI imaging for damage detection and real time localized pricing that is condition enhance based on millions of inspections and our data now.
Speaker Change: It's still early days in this category, but we believe self inspection can unlock a number of long term growth opportunities, including Tam expansion.
George Chamoun: But we believe self inspection can unlock a number of long term growth including Tammy.
George Chamoun: Let's turn to slide 12 to highlight one of our fastest growing consumer self-inspection solutions, ClearCard. market traction of clear car remains strong. And our team is targeting to have over 1000 dealers live by year end. ClearCar provides us with another avenue to grow wholesale wallet share and deepen our strategic partnership across their retail and wholesale operations. And like ACV Max, ClearCar is also driving new customer acquisition, including some of the largest dealer groups in the country. Our teams will be working to grow wholesale wallet share with these new dealer partners.
Speaker Change: Let's turn to slide 12 highlights one of our fastest growing consumer self inspection solutions clear car.
Speaker Change: Market traction of <unk> remains strong and our team is targeting to have over 1000 dealers life by year end.
Speaker Change: Clarifier provides us with another avenue to grow wholesale wallet share and deepen our strategic partnerships across our retail and wholesale operations.
Speaker Change: And like ACD, Max Clarifier is also driving new customer acquisition, including some of the largest dealer groups in the country.
Speaker Change: Our teams will be working to grow wholesale wallet share with these new dealer partners over time.
George Chamoun: Again, this quarter, we're excited to share feedback from one of our dealer partners. Ernie Mesa, the number one Volkswagen dealership in San Diego. which is using Claire Carr and RMR. We posted a video on our IR website featuring their team describing the significant value they're deriving from ACV solutions. It's another great opportunity to hear directly from a dealer.
Speaker Change: Again this quarter, we're excited to share feedback from one of our dealer partners.
Speaker Change: Kearny Mesa the number one Volkswagen dealership in San Diego.
Speaker Change: Which is using CLARCOR and our marketplace.
Speaker Change: We posted a video on our IR website, featuring <unk>, describing the significant value they are deriving from ACB solutions.
Speaker Change: It's another great opportunity to hear directly from a dealer partner.
George Chamoun: To wrap up on innovation. ACV is delivering industry-leading technology to our dealer partners and to our own operations. driving both growth and scale. We look forward to sharing more progress with you next quarter.
Speaker Change: To wrap up on innovation.
Speaker Change: <unk> delivering industry, leading technology to our dealer partners and to our own operations driving both growth and scale when.
Speaker Change: We look forward to sharing more progress with you next quarter with that let me hand, you over to Bill to take you through our financial results and how we're driving growth and scale.
William Zerella: With that, let me hand it over to Bill to take you through our financial results and how we're driving growth and scale. Thanks, George, and thank you for joining us today. We are very pleased with our Q3 financial performance. Along with accelerated revenue growth, we delivered meaningful margin expansion and strong asset EBITDA growth, demonstrating the strength of our business model. On slide 14, let's begin with a recap of our third quarter results. Revenue of $171 million was well above the height of our guidance rate. Approximately 10% of revenue in the quarter came from acquisitions, which was in line with our expectations.
Bill: Thanks, George and thank you for joining us today.
Bill: We are very pleased with our Q3 financial performance.
Bill: Along with accelerated revenue growth meaningful margin expansion and strong adjusted EBITDA growth.
Bill: Demonstrating the strength of our business model.
Bill: On slide 14, let's begin with a recap of our third quarter results.
Bill: Revenue of $171 million was well above the high end of our guidance range.
Bill: Approximately 10% of revenue in the quarter came from acquisitions.
Bill: Which was in line with our expectations.
William Zerella: So the overperformance was driven by strong organic growth. Adjusted EBITDA of $11 million was $3 million or 38% above the high end of our guidance rate. and Adjusted Evita Margin improved nearly 1,000 basis points versus Q3 23. The FSI was driven by strong, high-margin auction and insurance revenues, and by operating leverage. Finally, non-GAAP net income was also meaningfully above the high end of guidance, with margin increasing approximately 800 basis points year over year. Next on slide 15, let's review additional revenue details. Auction and Assurance revenue was 59% of total revenue and grew 52% year over year.
So the over performance was driven by strong organic growth.
Bill: Adjusted EBITDA of $11 million was $3 million or 38% above the high end of our guidance range and.
Bill: And adjusted EBITDA margin improved nearly 1000 basis points versus Q3 23.
Bill: The upside was driven by strong high margin auction in insurance revenues and by operating leverage.
Bill: Finally, non-GAAP net income was also meaningfully above the high end of guidance with margin, increasing approximately 800 basis points year over year.
Bill: Next on slide 15.
Bill: Let's review additional revenue details.
Bill: Auction and assurance revenue was 59% of total revenue and grew 52% year over year.
William Zerella: This performance reflects 32% year-over-year unit growth and auction assurance ARPU of $506, which grew 15% year-over-year. Note that approximately 10% of third-quarter units came from acquisitions. So we've delivered strong organic unit growth, underscoring our share gains in a market that grew in the low single digit. Marketplace services revenue is 37% of total revenue and grew 39% year over year, reflecting record revenue for both ACV transport and capital. Our SAS and Data Services products comprise 5% of total revenue with growth once again in positive territory.
Bill: This performance reflects 32% year over year unit growth in auction assurance, <unk>, $506, which grew 15% year over year.
Bill: Note that approximately 10% of third quarter units came from acquisitions.
Bill: We delivered strong organic unit growth.
Bill: Scoring our share gains in a market that grew in the low single digits.
Bill: Marketplace services revenue was 37% of total revenue and grew 39% year over year, reflecting record revenue for both ACB transport and capital.
Bill: Our SaaS and data services products comprised 5% of total revenue with growth once again in positive territory.
William Zerella: Next on slide 16, I'll review costs in the quarter. Q3 cost of revenue as a percentage of revenue decreased approximately 400 basis points year-over-year. The improvement was driven by auction assurance results and by ACV transparency. Non-GAAP operating expenses, excluding costs of revenue, as a percentage of revenue, decreased 700 basis points year-over-year. These results reflect our focus on expense discipline as we optimize and scale our business.
Bill: Next on Slide 16, I'll review costs in the quarter.
Bill: Q3 cost of revenue as a percentage of revenue decreased approximately 400 basis points year over year.
Bill: The improvement was driven by auction assurance results and by ACB transport.
Bill: non-GAAP operating expenses, excluding cost of revenue as a percentage of revenue decreased 700 basis points year over year.
Bill: These results reflect our focus on expense discipline, as we optimize and scale our business.
William Zerella: Moving to slide 17, I'll frame our investment strategy as we drive 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. In 2024, we continue to expect OPEX growth to increase year over year, 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.
Bill: Moving to slide 17, I'll frame, our investment strategy as we drive profitable growth.
Bill: Our focus on spending discipline and operating efficiency resulted in a decrease in opex growth in 2023, yielding a significant improvement in adjusted EBITDA.
Bill: In 2024, we continue to expect Opex growth to increase year over year as we execute on our remarketing center strategy and commercial platform investments.
Bill: Even with these investments adjusted EBITDA margin is expected to increase by approximately 800 basis points year over year.
William Zerella: Next, I will highlight our strong capital structure on slide 18. We ended Q3 with $288 million in cash and cash equivalents and marketable securities. and $115 million of debt. Our Q3 cash balance includes $177 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. In the figure on the right, we highlight our strong year-to-date operating cash flow of $69 million. Note that even when excluding the change in marketplace flow, year-to-date operating cash flow increased $34 million year over year.
Speaker Change: Next I will highlight our strong capital structure on slide 18.
Speaker Change: We ended Q3 with $288 million in cash and cash equivalents and marketable securities.
Speaker Change: At $115 million of debt.
Speaker Change: Our Q3 cash balance includes $177 million of flow at all.
Speaker Change: 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.
Speaker Change: In the figure on the right we highlight our strong year to date operating cash flow of $69 million.
Speaker Change: Note that even when excluding the change in marketplace float.
Speaker Change: Year to date operating cash flow increased $34 million year over year.
William Zerella: The significant improvement reflects our transition to positive adjusted EBITDA and strong margin expansion.
Speaker Change: This significant improvement reflects our transition to positive adjusted EBITDA and strong margin expansion.
William Zerella: Now turning to guidance on slide 19. For the fourth quarter, we're expecting revenue in the range of $152 to $156 million, growth of 28 to 32 percent year-over-year. Adjusted EBITDA is expected to be in the range of $2 million to $4 million, consistent with our commitment to achieving positive adjusted EBITDA each quarter going forward. Note that our fourth quarter guidance reflects the impact of the recent hurricanes in our southeastern region. We estimate a negative impact of approximately $2 million in revenue and $1 million in adjusted EBITDA.
Now turning to guidance on slide 19.
Speaker Change: For the fourth quarter, we are expecting revenue in the range of $152 million to $156 million.
Speaker Change: Of 28% to 32% year over year.
Speaker Change: Adjusted EBITDA is expected to be in the range of $2 million to $4 million consistent with our commitment to achieving positive adjusted EBITDA each quarter going forward.
Speaker Change: Note that our fourth quarter guidance reflects the impact of the recent hurricanes in our south eastern regions.
Speaker Change: We estimate the negative impact of approximately $2 million in revenue and $1 million and adjusted EBITDA.
William Zerella: For the full year, we are raising our revenue and adjusted EBITDA guidance. Revenue is now expected to be in the range of $630 to $634 million, growth of 31 to 32% year over year. Note that we expect acquisitions to account for approximately a high single-digit percentage of full-year revenue. Adjusted EBIT is now expected to be in the range of $25 to $27 million. As it relates to guidance, we are assuming that dealer wholesale volumes will be approximately flat year-over-year for 2024. We expect conversion rates and wholesale price depreciation to follow normal seasonal patterns. We also continue to expect revenue growth to exceed non-GAAP OPEX growth, excluding cost of revenue and depreciation and amortization by approximately 10 percentage points.
Speaker Change: For the full year, we are raising our revenue and adjusted EBITDA guidance.
Speaker Change: Revenue is now expected to be in the range of 630 to 634 million growth of 31% to 32% year over year.
Speaker Change: Note that we expect the acquisitions to account for approximately a high single digit percentage of our full year revenue.
Speaker Change: Adjusted EBITDA is now expected to be in the range of 25 to 27 million.
Speaker Change: As it relates to guidance, we are assuming that dealer wholesale volumes will be approximately flat year over year for 2024.
Speaker Change: We expect conversion rates on wholesale price depreciation to follow normal seasonal patterns.
Speaker Change: We also continue to expect revenue growth to exceed non-GAAP opex growth, excluding cost of revenue and depreciation and amortization by approximately 10 percentage points.
William Zerella: And finally, moving to slide 20, we remain committed to achieving our midterm target model. Our targets are 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. Our mid-term targets are primarily predicated on the 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 finally moving to slide 20, we remain committed to achieving our mid term target model.
Speaker Change: Our targets are 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: Our midterm targets are primarily predicated on the dealer wholesale market recovering to historical volumes over time.
Speaker Change: But in addition, we are expanding our Tam and consistently taking share which will drive long term growth.
George Chamoun: And with that, let me turn it back to George. Thanks, Bill. Before we take your questions, I will summarize. We are very pleased with our strong execution. 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 target and deliver on our midterm target that we believe will drive significant shareholder value.
Speaker Change: And with that let me turn it back to George.
George Simone: Thanks, Bill before we take your questions I will summarize.
George Simone: We are very pleased with our strong execution in Q3.
George Simone: We are especially proud of our <unk> teammates that delivered these results.
George Simone: We continue to gain market share by attracting new dealer and commercial partners for our marketplace, while expanding our addressable market.
George Simone: Which positions HCV for attractive growth as market conditions improve.
George Simone: We are delivering on an exciting product road map to further differentiate ACB and drive operating efficiencies.
George Simone: We are on track to achieve our 2024, adjusted EBIT targets and deliver on our midterm target that we believe will drive significant shareholder value.
George Chamoun: We are committed to achieving these results while building a world-class team to deliver on our goal.
George Simone: We are committed to achieving these results.
George Simone: Building, a world class team to deliver on our goals.
Operator: With that, I'll turn the call over to the operator to begin the Q&A. Thank you. And at this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. And we'll pause for a moment to allow questions to queue.
George Simone: With that I'll turn the call over to the operator to begin the Q&A.
Speaker Change: Thank you and at this time, if you would like to ask a question. Please press the star and one on your telephone keypad you may remove yourself from the queue at any time by pressing star T M and we will pause for a moment to allow questions to queue.
Speaker Change: Okay.
Christopher Pierce: And we will take our first question from Chris Pierce with Needham. Please go ahead. Hey, good evening, guys.
Speaker Change: And we will take our first question from Chris <unk> with Needham. Please go ahead.
Speaker Change: Hey, good evening guys.
William Zerella: Hey, Chris. I had a question on the, if I look at the metrics, and Bill, you sort of reiterated on the call, the $506 in auction and assurance RPU. Over time, more of it seems to be coming from auction versus the assurance side on a per vehicle basis. I just want to know the right way to think about that. If that's something intentional, or if that's not something we should read into, I just want to kind of better understand.
Speaker Change: Hey, Chris.
Chris: I had a question on the if I look at the metrics and Bill you sort of reiterated on the call. The $506. Your question or an assurance ERP you overtime more of a it seems to be coming from auction versus the assurance side on a per vehicle basis I just want to know the right way to think about that if that's something intentional work that's not something we should read into I, just wanted to kind of better.
Chris: Beyond that.
Chris: Thank you.
William Zerella: Hey Chris, it's Bill.
Chris: Hey, Chris It's bill.
William Zerella: So I wouldn't really read anything into that. Again, think of auction and assurance revenue combined, not segregated, because again, the gap accounting can distort some of the trends. Okay, perfect.
Chris: So I wouldnt really read anything into that again.
Chris: Think of auction and assurance revenue.
Chris: Combined.
Chris: That segregated because again, the GAAP accounting, Ken distort some of the trends.
George Chamoun: And then on the if we think about some of the larger players like the Carvana or you know, other, what is your business look like as someone that has their own wholesale side of the world? You know, wholesale runs their own wholesale auctions, grows retail share, just thinking longer term.
Speaker Change: Okay, perfect and then on the if we think about some of the larger players like carvana or others.
Speaker Change: What is your business looked like as someone that has their own wholesale side of the world wholesale wholesale auctions grows retail share just thinking longer term here.
Speaker Change: Yes.
George Chamoun: So, Chris, can you repeat that question, George? I just want to understand what? Yeah, yeah, like what happens if you know, we talked about independent dealers and consolidation within dealers? What happens if larger players like a Carvana as they grow share? What happens? Because at that point, you have these larger players that run their own wholesale options, I just kind of want to think about, you know, what's the right way to think about your business, if that kind of possibility plays out? Yeah, no, certainly. So yeah, I believe today, Carvana has around 1% market share, if I remember correctly.
Speaker Change: So.
Speaker Change: Chris can you repeat that question George I, just want to understand what yeah, yeah like what happened with you know, we talk about independent dealers and consolidation within dealers what happens if larger players like carvana as they grow share what happens because it definitely had these larger players that run their own wholesale auction I guess.
Speaker Change: Well I think but you know what's the right way to think about your business is that kind of possibility plays out.
Speaker Change: Yes, I'm, sorry, so yes, I believe today.
Speaker Change: Brian I has around 1% market share if I remember correctly and when you think about the 16500 franchise dealer rooftops.
George Chamoun: And when you think about the 16,500 franchise dealer rooftops, in an incredible locations across the country, and then the, you know, 30,000 plus independent dealers across the country, all those dealers need to compete. And they need solutions. They need solutions to buy cars from consumers. They need appraisal solutions. They will all need machine learning and artificial intelligence to help them drive their businesses. So, look at, we are building the technology that empowers all these dealers to really compete against the Carbondas and the other big box players. So, I think that's the way to think about this, it's a really important category.
Speaker Change: Incredible locations across the country.
Speaker Change: Yes, 30000, plus independent dealers across the country all of those dealers need to compete.
Speaker Change: They need solutions that need solutions to buy cars from consumers need appraisal solution. They will all need machine learning and artificial intelligence to help them drive their businesses.
Speaker Change: Look at where we're building the technology.
Speaker Change: Powers all of these dealers.
Speaker Change: It really compete against the car behind us and the other big box players. So I think thats the way to think about this is it is a really important category and our dealers have some of the most incredible real estate and incredible brands.
George Chamoun: And our dealers have some of the most incredible real estate, an incredible brand. across the U.S. and we think they could be buying a lot more cars from consumers and selling more used cars and we're going to help them get that inventory.
Speaker Change: Across the U S and we think they can be buying a lot more cars from consumers and selling more used cars, we're going to help them get that inventory.
Christopher Pierce: Okay, thank you.
Speaker Change: Okay. Thank you.
Speaker Change: Alright, thank you.
Nick Jones: And we will take our next question from Nick Jones of Citizens J&P. Please go ahead. Hey, Nick. Great. Thanks for... Hey, George. Hey, Bill. Hey, guys.
Speaker Change: Thank you and we will take our next question from Nick Jones of citizens JMP. Please go ahead.
Speaker Change: Great. Thanks, Kurt Hey.
Speaker Change: Hey, George Hey, guys.
Speaker Change: Could you kind of remind us how youre thinking about just pricing.
Nick Jones: Could you kind of remind us how you're thinking about just pricing? Broadly, I know there's some levers if depreciation picks up, you have some room to take price up. But as we kind of look at the industry and we can kind of see competitors seem to be taking price up each year, maybe a little bit ahead of inflation. Philosophically, how do you think about tracking that? Are you at a level that kind of makes sense for you around $500, give or take? Or how should we think about how you may kind of track competitors from a pricing perspective?
Speaker Change: Broadly I know there are some levers if if depreciation picks up you have some room to take price up but as we kind of look at the industry and we can kind of see competitors seem.
Speaker Change: Seem to be taking price up each year, maybe a little bit ahead of inflation philosophically. How do you think about tracking that are you at a level that kind of makes sense for year on $500 give or take or.
Speaker Change: How should we think about how you may just kind of track competitors from a pricing perspective.
George Chamoun: And then I have a follow up. Yeah, certainly. So first, we've made great progress on closing the gap on our buy fees. As you know, we were significantly under market and we did that. from without really any impact on our ability to continue to gain share. So very pleased with how we've done it a little at a time each year. We were very careful on doing the right things for our dealer partners, but but really getting our pricing to more of a competitive level. So really ecstatic with the way our team prepared to make those changes.
Speaker Change: And then I have a follow up.
Speaker Change: Yes, certainly so.
Speaker Change: Firstly, we've made great progress on closing the gap on our buy fees as you know we were significantly under market and we did that.
Speaker Change: From without really any impact on our ability to continue to gain share. So very pleased with how we've done it.
A little of time each year.
Speaker Change: We're very careful on doing the right things for argue with your partners.
Speaker Change: Really getting our pricing to more of a competitive level, so really ecstatic with the way our team prepared to make those changes.
Nick Jones: We probably have a little bit more room on that sort of headroom, but we'd rather keep you all thinking around that $500. I'm sorry, $500. $500, we're going the wrong way. $500, as we set out for the midterm target. And just to remind you, our sellers on the sell side do get price discounts with volume. So as we continue to grow volume, some of our sellers, and that's already part of our MEC. But we'd like for you all to be thinking still in that $500 for now and until we guide you all otherwise. Got it.
Speaker Change: We probably have some more a little bit more room.
Speaker Change: Headroom, but we'd rather keep you all thinking around that $5 I'm, sorry, $500 $5, we've gone the wrong way.
Speaker Change: Larry.
Speaker Change: As we set out for the for the midterm target and just to remind you our south side.
Speaker Change: On the sell side, you get discounts with volume so as we continue to grow volume some of our salaries, that's already part of our mix.
Speaker Change: Well, we'd like for you all to be thinking still in that $500 for now until we until we guide you all otherwise.
Nick Jones: $5 would be a pretty good deal.
Speaker Change: Got it $5 or they're a pretty good deal.
Nick Jones: AMAZINGhem If, um Um As we think about kind of the midterm targets, I guess, can you speak to, I guess, kind of maybe some debate as to what's going to happen with interest rates post the election? I mean... Any challenges in kind of getting to a more normalized market if rates stay higher? Do you think we're kind of on a path to a normalized market kind of one way or the other over the next few years? Just any thoughts on kind of the industry post-election and maybe the debate around the rate environment? Thanks. Yeah, so we're You know, obviously, what we've seen is we've seen new cars, we're starting to see incentives, we're starting to see interest rates playing to the way new car dealers are pricing their vehicles.
Speaker Change: Yeah.
Speaker Change:
Speaker Change:
Speaker Change: Do you think about kind of the mid term targets I guess could you speak to I guess kind of maybe some debate as to what's going to happen with interest rates post election.
Speaker Change: Any challenges in kind of getting to a more normalized market if rates stay higher do you think are kind of on a path to it.
<unk> market kind of one way or the other over the next few years.
Speaker Change: Any thoughts on kind of the industry.
Speaker Change: Post election, maybe the debate around the rate environment. Thanks.
Speaker Change: Yes surely.
Speaker Change: Sure.
Speaker Change: Obviously, what we've seen is we've seen new cars, we're sorry.
Speaker Change: You're going to see incentives, we're starting to see it.
Speaker Change: Interest rate.
It's plain to see.
Speaker Change: New car dealers are pricing their vehicles.
George Chamoun: And the more incentive on the new will help, you know, I think I think we will, we will consistently, between now and the end of next year, see new cars have more and more incentives. So if you kind of look at that as one area that I could, there's different folks who are thinking about next year, from a new perspective, you're seeing a few different folks report that new could be off a little bit next year, we think about how that relates to dealer wholesale. Really one way to think about next year is that the Some of the industry folks like NAAA and AuctionNet think that dealer wholesale could be sort of, I would read into what they're saying as sort of flat-ish.
And the more incentive.
Speaker Change: On the new.
Speaker Change: Well I think I think we will we will consistently between now and the end of next year.
Speaker Change: New cars.
Speaker Change: Have more more incentive so if you kind of look at that as one area.
Speaker Change: There is different.
Speaker Change: Alright thinking about next year from a new perspective, you're seeing a few different folks report.
Speaker Change: New could be off a little bit next year.
Speaker Change: When you think about how that relates to dealer wholesale.
Speaker Change: Really one way to think about next year is that.
Speaker Change: Hey.
Some of the industry folks and AAA and auction that thinks that dealer wholesale could be sure that I would read into what they are saying, it's sort of flattish.
George Chamoun: And why do I say that is you're still going to have a lack of used cars. So, you know, if I had to, you know, at least from now, it's okay, when will we have a true. You know, Talwind, I think a true Talwind may be going into 26. But I feel like next year, I'm at least thinking about next year sort of flattish from a market perspective. But hopefully with all the other things you just mentioned, lower interest rates, other things, we could all have a little bit more enthusiasm than that. More to come between now and we talk more about next year.
Speaker Change: And why do I say that is you are still going to have a lack of used Cox.
Speaker Change: So.
If I could.
Speaker Change: At least for now okay. When we have a true.
Speaker Change: Tailwind.
Speaker Change: A true tailwind maybe going into 'twenty six.
Speaker Change: It feels like next year at least thinking about next year sort of flattish from a market perspective, but hopefully with all the other things you just mentioned lower interest rates on and think we can all have a little bit more enthusiasm than that.
More to come to me now we talk more about next year.
Speaker Change: Okay.
Nick Jones: Thanks, George.
George Simone: Thanks George.
Bob Labick: Thank you and we will take our next question from Bob Labick with CGS Securities. Please go ahead. Good afternoon. Thanks for taking the question. Hey, great job on the quarter. Nice upside on the volume and So if I look at it, it seems like, and I know this is my rough math, but it seems like quarterly volume, the organic growth accelerated versus the first half. You know, if that is true, what are the key drivers, what's like kind of the incremental So that's a great story. It's a reasonable story. from the quarter versus an already strong first.
George Simone: Thank you.
Speaker Change: We will take our next question from Bob <unk> with CGS Securities. Please go ahead.
Speaker Change: Good afternoon, Bob for taking my questions, Hey, great job on the quarter.
Speaker Change: Nice upside on the volume in particular.
Speaker Change: So as I look at it it seems like an Iot vision. This is my rough math, but it seems like quarterly volume.
Speaker Change: The organic growth accelerated versus the first half.
Speaker Change: And you know if that is true what are the key drivers, what's the kind of incremental organic growth.
Speaker Change: You know from the quarter versus <unk>.
Speaker Change: An already strong first half.
William Zerella: Hey, Bob, it's Bill.
Speaker Change: Okay Alright.
William Zerella: So, um. Yeah, so the upside was certainly driven by the organic growth of our business. Our remarketing centers were pretty much on track based on what we forecasted. And that was really driven by several factors. So number one, just continued share gains. Number two, we had better than expected conversion rates for the quarter, and we had really great performance in terms of our marketplace services offering. So those combined really drove the highest organic growth that we've seen, frankly, in several years. So we're really, really pleased with that performance, and we've seen that continue so far, you know, early into Q4, however, we're obviously baking in kind of seasonality for the rest of the quarter in our guide.
Speaker Change: Hey, Bob It's bill so.
Speaker Change: Yes, so the upside was certainly driven by the organic growth of our business. Our remarketing centers are pretty much on track based on what we forecasted.
Speaker Change: And that was really driven by several factors. So number one just continued share gains.
Speaker Change: Number two we had better than expected conversion rates for the quarter and.
Speaker Change: And we had really great performance in terms of our marketplace services offering so those.
Those combined.
Speaker Change: Really draw the highest organic growth that we've seen frankly in several years.
Speaker Change: So we're really really pleased.
Speaker Change: With that performance and we've seen that continue so far.
Speaker Change: Early into into Q4, however, we're obviously baking in kind of seasonality for the rest of the quarter and our guidance.
William Zerella: Right. No, it makes sense the seasonality.
Speaker Change: Right no. It makes sense of seasonality in Q4 versus three if you just look back for the every year.
William Zerella: Great. And then just one other for me. Obviously, we just talked about the accelerating organic, which is great, but you also have made these acquisitions. What have you learned so far? I know you guys are kind of like, do, learn, observe. and then move on. So what have you learned so far and how does it affect your future acquisitions into... How should we think about... 2025. Yeah, thanks.
Speaker Change: Great and then just one other for me.
Speaker Change: Obviously, we just talked about the accelerating organic which is great. But you also have made these acquisitions to advance in commercial.
Speaker Change: What have you learned so far I know you guys are kind of like do learn observe tweak it and then move on so what have you learned so far and how does it affect your future acquisitions into commercial or conditioning centers, how should we think about.
Speaker Change: 2025 and beyond.
William Zerella: So we're so to your point, first, we're learning a lot. We've got some great locations for our commercial consignors, where it's really enabling us to both work with the consignors, learn the technology they'd like to see in place. You'll see us talk more about how we're going to implement our inspection technologies at these locations early next year. You'll hear us talk about that more. You'll hear us talk about how we're combining some of our back-end office systems and other capabilities. And so when you really think about the technology that we're building to help these commercial consignors, it's going to help them make the right decision.
Speaker Change: Yes, thanks, guys.
Speaker Change: So to your 0.1st.
Speaker Change: First we're learning a lot.
Speaker Change: We've got some great locations for our commercial consignor.
Speaker Change: It's really enabling us to both.
Speaker Change: Work with the containers learn the technology that you'd like to see in place.
Speaker Change: Youll see us talk.
Speaker Change: Talk more about how we're going to implement our <unk>.
Speaker Change: <unk> technologies at these locations early next year I'll talk about that more you hear us talk about how we're combining our some of our backend office systems and other capabilities.
Speaker Change: And so when you really think about the technology.
Speaker Change: <unk> that we're building to help these commercial designers, it's going to help them make the right decisions.
William Zerella: So when a car shows up, should they be reconditioning that vehicle or not? How much should they be spending on reconditioning? And I think we're really going to have some breakthroughs over the next year or two. Now, having said that, we're still early stages, a little over 5% of our current volume right now is commercial. So I don't want to get ahead of ourselves just yet. Next year, we'll still be investing in that product in technology required. But when I think about this in out years, commercial could become a very meaningful part of our overall volume.
Speaker Change: When a car shows that should they be reconditioning that vehicle or not how much should they be spending on reconditioning.
Speaker Change: And I think we're really going to have some breakthroughs over the next year or two now having said that we're still early stages, a little over 5% of our current volume right now.
Speaker Change: Commercial so I don't want get ahead of ourselves just yet next year will still be us.
Speaker Change: That thing in that product and technology required.
Speaker Change: Think about this in out years.
Speaker Change: Marshall.
Marshall: Could become a very meaningful part of our overall volume.
Bob Labick: Okay, super. Thanks so much.
Speaker Change: Okay.
Speaker Change: Okay Super Thanks, so much.
Speaker Change: Thank you Anthony.
Operator: Thank you.
Rajat Gupta: And we will take our next question from Rajat Gupta with J.P. Morgan. Please go ahead. I just wanted to, you know, ask around the framework around incremental margins. We know you're going through the commercial initiatives this year, you know, some acquisitions are coming through. You have a lot of other product initiatives. Um, you know, how long would you expect to be in this kind of, you know, incremental EBITDA range, you know, 20, 29, 30%? You know, once you're through with the integration phase, should we expect this to inflect next year? You know, are there more areas we're working on in the pipeline that should depress that?
Speaker Change: Thank you and we will take our next question from Rohit <unk> with J P. Morgan. Please go ahead.
Speaker Change: Got it.
Speaker Change: Hey, Thanks, Georgia Bolton.
Speaker Change: Congrats on a good quarter here.
Speaker Change: I just wanted to ask.
Speaker Change: Asked around the framework around incremental margins.
Speaker Change: We know you're going through the commercial initiatives. This year. So the acquisitions are coming through you have a lot of other product initiatives.
Speaker Change: No.
Speaker Change: How long would you expect to be in this kind of.
Speaker Change: Incrementals EBITDA range.
Speaker Change: 29%, 30%.
Speaker Change: Once you're through with its integration fee should we expect this to inflect next year.
Speaker Change: There are more areas, we're working on in the pipeline that should depress that.
Rajat Gupta: You know, just curious if you could.
Speaker Change: Curious if you could.
Rajat Gupta: Help us understand the NEOGEM framework around that and have a quick follow-up.
Speaker Change: Help us understand the near term framework around that.
Speaker Change: Follow up.
William Zerella: Yeah, here is Rajat, it's Phil. Yeah, so what we've talked about in the past is kind of a normalized organic target in terms of incremental EBITDA of 40%. So our guidance this year applies approximately 30% taking into account the investments that we're making as part of building out our platform to support commercial business. So, you know, right now the thinking in terms of next year is we'll continue to make progress in terms of, you know, improving that incremental EBITDA margin, you know, but we'll continue our planned platform expansion to support the commercial rollout similar to what we've done this year while expanding our EBITDA margin.
Speaker Change: Yes.
Speaker Change: No.
Speaker Change: Yes, so what we've talked about in the past as kind of a normalized organic.
Speaker Change: Target in terms of incremental EBITDA of 40%.
Speaker Change: So our guidance this year implies approximately 30%.
Speaker Change: Taking into account the investments that we're making.
Speaker Change: As part of building out our platform to support commercial.
Speaker Change: Yes.
Speaker Change: So right now the thinking in terms of next year is we will continue to make progress in terms of improving that incremental EBITDA margin.
Speaker Change: But we will continue our planned platform expansion to support the commercial rollout similar to what we've done this year, while expanding our EBITDA margin. So.
George Chamoun: So, you know, we'll continue to move the ball forward, but we wouldn't expect that next year we would get to, you know, fully hit the 40% incremental EBITDA on marginal revenue. Yeah, Rajat, the only thing I'll add to that is, you know, we, it's really this sort of ramp of making sure we're showing gains and progress in our EBITDA, obviously, we're going to stay committed to that. But we'll also be committed, as Bill said, to execute on, you know, expanding our TAM, both in the commercial and helping dealers source more cars from consumers, which is the self inspection capability.
Speaker Change: We'll continue to move the ball forward.
Speaker Change: But we wouldn't expect that next year, we would get.
Speaker Change: Fully hit the 40% incremental.
Speaker Change: EBITDA on an on marginal revenue growth.
Speaker Change: Yes, the one thing I'll add to that as well.
Speaker Change: Hi, it's really.
Speaker Change: This sort of ramp, but making sure we're showing.
Speaker Change: Gains and progress in our EBIT, obviously, we're going to stay committed to that but we'll also be committed as bill said to execute on it.
Speaker Change: Expanding our Tam both on the commercial and helping dealers source more cars from consumers, which is the self inspection capability. So we're very excited the fact that next year. We believe we can do both.
George Chamoun: So we're very excited, the fact that next year, we believe we can do both, both in improve, you know, year over year, what we've done from an EBITDA perspective, but also invest not only in the core dealer wholesale, but also in expanding our TAM.
Speaker Change: Improved year over year, what we've done from an EBIT perspective, but also in vas.
Speaker Change: Not only in the core dealer wholesale but also in expanding our Tam.
Rajat Gupta: Got it. Makes sense.
Speaker Change: Got it that makes sense.
Rajat Gupta: And this is a follow up. I mean, if I if I heard you correctly, Bill, you mentioned that you're not expecting the same kind of market share acceleration that you saw in 3Q in the fourth quarter. Is that correct? And, and why would that be the case? If you could just give us more color there? Yeah, I don't think we said March. I think what we said is there's typically in November and December, conversion rates typically go down. That's at least what it's done almost every year. So when you look about look at the seasonality of of this business, and you heard Bob mentioned earlier, every year, conversion rates in November and December to tend to come down.
And just as a follow up on me if I if I heard you correctly Bill you mentioned.
Speaker Change: Yes, youre not expecting the same kind of market share acceleration that you saw in <unk> in the fourth quarter is that correct.
Speaker Change: And why would that be the case.
Speaker Change: Give us more color there thanks.
Speaker Change: Yes, I don't think we said.
Mark: Mark I think what we said.
Speaker Change: Typically in November and December.
Speaker Change: Conversion rates typically go down that's at least what it's been almost every year.
Speaker Change: So when you look about look at the seasonality of this business.
Speaker Change: And you heard Bob mentioned earlier.
Speaker Change: Three year conversion rates.
Speaker Change: In November and December tend to come down.
William Zerella: Yeah, I would also I didn't mention, by the way, Rajat, the other impact in the quarter, you know, that we discussed in our prepared remarks that we're estimating the impact from the hurricanes on our southeastern regions is about 2 million in revenue and about a million in EBITDA. So we baked that into our guide for Q4 as well. I think maybe like, I think I meant to ask it, you know, in a different way, the 22% organic growth in the third quarter, it seems like it's 20 points, 22 points. above what the market did. That's an acceleration from what you saw in 1Q2Q.
Speaker Change: I would also I Didnt mentioned by the way were shot.
Speaker Change: The other impact in the quarter.
Speaker Change: We discussed in our prepared remarks that we're estimating the impact from the Hurricanes.
Speaker Change: On our southeastern regions, it's about $2 million in revenue and about $1 million in EBITDA. So we think that into our guide for Q4 as well.
Speaker Change: I think maybe like I think I'm going to ask it.
Speaker Change: In a different way.
Speaker Change: 2% organic growth.
Speaker Change: In the third quarter. It seems like it's 20 point 22 points.
Speaker Change: Above what the market did that's an acceleration from what you saw in <unk>.
William Zerella: So are you assuming that similar kind of market share? I think that is what I was trying to get at, but I think it is similar. It's actually a good question. I'm gonna I would say our thoughts on market share was pretty much continuation Q3, although I will say we don't have the exact prepared answer that way. But I will say, you know, we didn't really back it in based on market share. I don't see any difference on market share between Q3, Q4 at this point, meaning the data in front of us. We're purely looking at this as seasonality, you know, seasonality plus a little bit of this hurricane stuff.
Speaker Change: Assuming that similar kind of market share.
Speaker Change: Delta in the fourth quarter as well or.
Speaker Change: I think that was what I was trying to go ahead, but.
Speaker Change: Yes.
Speaker Change: Okay. Thanks.
Speaker Change: It's actually a good question.
Speaker Change: <unk>.
Speaker Change: I would say our thoughts on market share with pretty much continuation of Q3, although I will say, we don't have that exact prepared answer that way, but I will say, we didn't really back it and based on market share. We I don't see any difference on market share between Q3 Q4 at this point you need a data.
Speaker Change: In front of US we are purely looking at the seasonality.
Speaker Change: Seasonality plus a little bit of a hurricane Scott, but basically.
William Zerella: But basically, when I look at listers, when I look at listings, I don't see any difference on market share gains right now from Q3, Q4. Yeah. And again, Rajat, I mean, we've seen a really strong start to the quarter, kind of a continuation of the same kind of growth rates we saw in Q3 through October. But, you know, we're always trying to be, you know, prudent in terms of our guidance and taking into account, again, the seasonality factors that George mentioned. So, we'll see how things go, obviously, but that was the basis for us to guide what we did.
Speaker Change: When I look at Misters, when I look at listings I don't see any difference on market share gains right now from Q3 Q4, yes.
Speaker Change: Again, John I mean, we've seen a really strong start to the quarter.
Speaker Change: Continuation of the same kind of growth rates, we saw in Q3.
Speaker Change: October but.
Speaker Change: We're always trying to be prudent in terms of our guidance and taking into account again the seasonality factors.
Speaker Change: That George mentioned, so we'll see how things go obviously, but thats that was the basis for us to guide what we did.
Rajat Gupta: Understood. Great.
Rajat Gupta: Thanks for all the color and good luck.
Speaker Change: Understood great. Thanks for all the color and good luck.
Speaker Change: Okay. Thank you.
Michael Graham: Thank you. And we will take our next question from Michael Graham with Canaccord. Please go ahead. Hey, thanks a lot. Hey, how are you? Um, I don't think you mentioned this yet on this on the q&a. If you did, I apologize.
Speaker Change: Thank you and we will take our next question from Michael Graham with Canaccord. Please go ahead.
Speaker Change: Yes.
Michael Graham: Hey, Thanks, a lot.
Hey, how are you I don't think you mentioned this yet on this on the Q&A. If you did I apologize, but just on the commercial wholesale market you talked a little bit about your efforts there in the prepared remarks, but just was hoping to get another layer of depth around like how that's going.
Michael Graham: But just on the commercial wholesale market, you talked a little bit about your efforts there and the prepared remarks, but just was hoping to get another layer of depth around like, you know, how that's going. And, you know, how quickly you think that can become a more significant part of your Yeah, certainly. One of the things I mentioned, and I'll try to go a little bit deeper, is our volume in commercial today is a little over 5% of our overall business. So going well, investing in some key areas. So the areas that will help us really differentiate in this commercial business will be, no surprise to you all, will be inspection, right?
Michael Graham: How quickly you think that can become a more significant part of your business.
Speaker Change: Yeah, certainly Michael one of the things you mentioned and I'll talk a little bit deeper.
Speaker Change: Our volume in commercial today, Miss a little over 5% of our overall business.
Speaker Change: No.
Speaker Change: Going well.
Speaker Change: Investing in some key areas. So the areas that will help us.
Speaker Change: Really differentiate in this commercial business.
Speaker Change: No surprise, you all will be inspection right.
George Chamoun: It's an area where we've always innovated on the dealer side. Bringing that to the commercial side, you'll hear us talk about that some more in Q1. So that'll be one area that I'm really pleased with the team is innovating around how we're going to really sort of enhance the way we inspect these cars at the auctions, how we're leveraging auto IMS, which is how we get the consignments, how we're then integrating with sort of the back office system. Not to get in the weeds here, but all going well so far. I mean, we'll be making this investment throughout next year.
Speaker Change: That's an area, where we've always innovated on the dealer side, bringing that to the commercial side, you'll hear us talk about that.
Speaker Change: Some more in Q1.
Speaker Change: So that would be one area.
Speaker Change: I'm really pleased with the team is innovating around how we're going to.
Speaker Change: Really.
Speaker Change: Sorry to enhance the way we inspect these cars at the auction, how we're leveraging Ottawa, Matt which is how do we get the consignment. However, then integrating with.
Speaker Change: Sort of the back office systems that they get in the weeds here, but all going well, so far and we will be making this investment throughout next year.
George Chamoun: But at the end of the day, we feel good that the experience we're building will be differentiated, will be both great for our commercial consignors, the sellers and buyers.
Speaker Change: But at the end of the day, we feel good that.
Speaker Change: The experience, where we're building will be differentiated will be both great for our commercial containers of sellers and buyers. So I think.
George Chamoun: So I think, without the sake of repeating what I said earlier, sort of more to come probably in Q1 on this topic, but happy with the build out we've done so far.
Speaker Change: Yeah.
Speaker Change: Thank you for repeating what I said earlier, so more to come probably in Q1 on this topic, but happy with the build out we've done so far.
George Chamoun: And then just last quick one related to that is maybe a comment on the profitability of those units, you know, relative to dealer wholesale. Yeah, at the end of the day, if I looked at this as EBITDA dollars per unit, EBITDA dollars per unit are basically the same, slightly higher revenue per unit, slightly higher cost per unit. But if you kind of look at what matters, you're basically getting to the same EBITDA dollar per unit. Perfect. Okay. Thank you.
Speaker Change: And then just last quick one related to that is.
Speaker Change: Maybe a comment on the profitability of those units relative to dealer wholesale.
Speaker Change: At the end of the day, if I looked at this is.
Speaker Change: EBIT dollars per unit.
Speaker Change: EBIT dollars per unit are basically the same slightly higher revenue per unit.
Speaker Change: Slightly higher cost per unit, but if you kind of look at what matters you basically get into the same EBIT dollar per unit.
George Simone: Perfect. Okay. Thank you. Thank you George.
George Chamoun: Thank you, George. Thank you.
Speaker Change: Thank you.
Naved Khan: And we will take our next question from Naved Khan with the Riley Securities. Thank you very much, you guys.
Speaker Change: Thank you.
Speaker Change: We will take our next question from Nevada, Ken with B Riley Securities.
Speaker Change: Thank you. Thank you very much hi, guys.
Naved Khan: On the conversion rate, which you saw did pretty well in the third quarter, I'm curious if the improvement that you saw is a function of the macro and the market, or are these Unknown Attendee Result of the changes that you are making to the platform or just give us your thoughts there. Yeah, great question. And it was definitely both. So the market conditions helped Q3 helped us definitely, you know, there was definitely a lot of demand for used cars. So that was definitely a factor, but also very proud of the technology and product enhancements we continually continue to add.
Speaker Change: On the on the conversion rate.
Speaker Change: But you saw.
You did pretty well in the third quarter I'm curious if the improvement.
Speaker Change: You saw as a function of the macro in the market are these.
Speaker Change: The result of the changes that you're making the platform or just give us your thoughts there.
Speaker Change: Yes, great question and it was definitely both so the market conditions helped Q3.
Helped us definitely there was definitely a lot of demand for used cars. So that was definitely a factor, but also very proud of the technology and product enhancements, we continually continue add.
George Chamoun: We're, we've gone through this, we showed you some of it in the slides here that some of the enhancements we've made on conversion. It's constant here, as you know, our engineering team and product team are constantly making sure we're merchandising the cars the right way. So our sellers get, you know, really get the full amount of money for these cars. Buyers know what they're buying. We keep making a bunch of enhancements there. We're making enhancements on how and when to sell these cars enhancements, even if the car doesn't sell the first time around how it could be sold, sold the second time around.
Speaker Change: We've gone through this we showed you some of it in the slides here that some of the enhancements we've made on conversion.
Speaker Change: It's constant here as you know our engineering team and product team are constantly making sure we're merchandising the cars the right way.
Speaker Change: So our salaries get really get the full amount of money for these cars buyers know what they are buying we keep making.
Speaker Change: A bunch of enhancements there, we're making enhancements.
Speaker Change: How and when to sell these cars enhancement.
Speaker Change: So the first time around how it can be solid sold the second time around so yes, we keep.
George Chamoun: So, you know, we're, we keep investing in the area of conversion. And it's definitely helped.
Speaker Change: Keep investing in the area of conversion.
George Chamoun: And so the simple answer is both, both some market benefit and also enhancements we've made from a technology perspective.
Speaker Change: And it's definitely happened so the simple answer is both both some market benefit and also it has to be made from a technology perspective.
George Chamoun: And then on transportation, you know, the margin improvement, the revenue margin improved year on year. Was there any change in this on a sequential basis? Kevin, the transport team here is just it's they're making incredible strides on leveraging artificial intelligence on pricing lanes. So when you choose lane by lane, how how to price the vehicle coupled with we're just starting to do some bundling. Bundling would mean there's already a car, let's say, going from Long Island to Virginia. So let's get the same truck to take the same vehicle. So bundling will, it's only a small portion of our cars today, that will also keep growing.
Speaker Change: Got it and then on transportation.
Speaker Change: The margin improvement revenue margin improved year on year, but is there any change in this.
Speaker Change: Actual basis.
Speaker Change: Kevin the transport team here.
Speaker Change: They're making incredible strides in leveraging artificial intelligence on pricing lanes. So when you choose lane by lane, how how to price it vehicles, coupled with we're just starting to do some bundling.
Speaker Change: Bundling with mean Theres already a car, let's say.
Speaker Change: <unk> from long Island, Virginia.
Speaker Change: So let's get the same truck to take the same vehicles so bundling.
Only a small portion of our cars today that that will also keep growing.
George Chamoun: So yeah, we're very happy with how we're leveraging technology to make sure we're giving the right price for our dealers, because, you know, that price is important for our dealer partners, but also using the tech to help us make sure we're hitting our margin objectives. Thanks, guys.
Speaker Change: Yes, we're very happy with how we're leveraging technology to make sure we're giving the right price for our dealers.
Speaker Change: Price is important for our dealer partners, but also have you seen the tax to help us make sure we're hitting our margin objectives.
Speaker Change: Thanks, guys.
Steven McDermott: Thank you. And we will take our next question from Steven McDermott with Bank of America. Please go ahead. Hi, this is Steven McDermott on for Curtis Nagel. So just want to talk about kind of market share gains versus wallet share. How are you thinking about the mix in terms of growth there? And then I have a follow-up as well. Thank you.
Speaker Change: Thank you and we will take our next question from Steven Mcdiarmid with Bank of America. Please go ahead.
Speaker Change: Hi, This is Steven on for Curtis Nagle.
Speaker Change: So just wanted to talk about kind of market share gains versus wallet share.
Speaker Change: How are you thinking about the mix in terms of the growth there and then I have a follow up as well. Thank you.
George Chamoun: Yeah, no, it's a great question. And look at this as more of like, it's a regional story. It's a local story. And then there's like a national kind of overlay to the whole thing. But there, there's only a few markets in the country where we have, you know, 70, 80 plus percent wallet share from a lot of dealers in one territory, right? And we have a few of those, and we're happy about that. But there's many markets where we can still grow in multiple ways. There's national dealer groups that we study their wallet share consistently, and when I see 20 or 30 percent wallet share, I see a lot of great opportunity to help those dealers, show them why our pricing's right, show them why our conversion on our marketplace keeps getting better.
Yes, no. It's a great question and look at this as more of like it's a regional story. It's a local story and then there's like a national kind of overlay to the whole thing but.
Speaker Change: There are there's only a few markets in the country, where we have you know.
Speaker Change: 70, 80 plus percent wallet share.
Speaker Change: From a lot of dealers in one territory and there we have a few of those and we're happy about that.
Speaker Change: But there's many markets where we.
Speaker Change: We can we can still grow in multiple ways.
Speaker Change: There is national dealer groups that we study their wallet share.
Speaker Change: <unk>, when I say, 20%, 30% wallet share I feel a lot of great opportunity to help those dealers show them why our pricing is right show them why our conversion.
Speaker Change: On our marketplace keeps getting better.
George Chamoun: So it's both. You know, we will continue to grow the business, and there's some markets where we're still relatively new, and we only have a few sellers, and we don't have a lot of wallet share yet. So we got a long ways to go. And, you know, I think that's the great thing about the ACV model is we're still in the early days here. We're very happy with the overall market share. We're ecstatic with all the hard work the team has done. But there's a lot of headroom here for us to keep growing.
Speaker Change: So it's both.
Speaker Change: We'll continue to grow the business and there are some markets, where we're still relatively new and we only have a few sellers and we don't have a lot of wallet share yet. So we've got a lot long ways to go and I think thats. The great thing about the ACB model is we're still in the early days here, we're very happy with the overall market share.
Speaker Change: We're ecstatic with that all the hard work the team has done.
Speaker Change: But there's a lot of headroom here for us to keep Brian.
Speaker Change: Okay.
Steven McDermott: Awesome.
George Chamoun: And then I know this is pretty early, but autonomous vehicles definitely dominated the discussion last quarter for some rideshare names and some OEMs. So, you know, still many years away, but just philosophically, you know, what do AVs mean for you guys in the long term? And have you really put much thought behind the strategy there?
Speaker Change: Awesome and then I know this is pretty early but autonomous vehicles will definitely dominated the discussion last quarter for some rideshare name from some Oems. So yes, it's still many years away, but just philosophically where do you.
Speaker Change: Are you guys going long term.
Speaker Change: I Havent really put much thought behind the strategy there.
George Chamoun: I'm Evie. AVs, Autonomous Vehicles. Autonomous vehicles. You know, I think one, the good thing about autonomous vehicles is they will become used too. They'll go from new to used. They will, you know, they will need to be purchased by someone else in the U.S. or someone else overseas or somewhere else somewhere. So, I really, I think the simple way to look at it is whoever the initial user was, whether the user was Uber or the user was whoever, that asset will then, you know, get sold eventually. I would look at, you know, generation one of this, is look at that as just a fleet category.
Speaker Change: On Evs.
Speaker Change: Eva autonomous vehicles.
Speaker Change: Our commentary.
Speaker Change: Yes, I think one.
Speaker Change: The good thing about class vehicles as they will become used to the Gulf of annuities.
Speaker Change: They will they will need to be purchased by someone else in the U S or somewhere else overseas or somewhere else somewhere so I really I think the simple way to look at it is whoever the initial user was whether the user was Uber or would you use your words.
Ever.
Speaker Change: That that asset will then.
Speaker Change: <unk> sold eventually.
Speaker Change: Look our generation one of this is look at that as just a fleet category and our world almost like commercial and Oh, Okay.
George Chamoun: In our world, almost like commercial. And okay, those vehicles, once that Signers believe they don't want to keep it on their balance sheet. It's a great car to go through an auction and go to some, whether it be a franchise or independent dealer that will go in, recondition it to what it needs. So quick answer would be, it's probably no different than the rest of the commercial Awesome.
Speaker Change: Vehicles.
Speaker Change: That.
Speaker Change: Consignor believes they don't want to keep it on their balance sheet, great car to go through an auction and.
Tom: And go to that Tom.
Tom: Whether it be a franchise or independent dealer that will go in reconditioning.
Tom: <unk>.
Tom: So quick answer would be it's probably no different than the rest of the commercial world.
Speaker Change: Awesome I appreciate the answer and a great job this quarter. Thank you.
Steven McDermott: Appreciate the answer and great job this quarter.
Steven McDermott: Thank you.
Operator: Thanks so much. Thank you.
Speaker Change: Thanks, so much.
John Healy: And we will take our next question from John Healy with North Coast Research. Please go ahead. I wanted to ask a little bit about the commercial side of things. When I think about that business, I think about rental, I think about repo, and I think about off lease. I was just wondering if you could give us some thoughts on like, which of those buckets do you think the solution may are out of the gates. And, you know, now that you have auto IMS and maybe we're six months into learning and practicing and system work, is there one of those buckets that you think might be kind of first to move and, you know, first to really embrace you guys?
Speaker Change: Thank you and we will take our next question from John Healy with Northcoast Research. Please go ahead.
John Healy: I think John wanted to ask Hey, guys I wanted to ask a little bit about the commercial side of the business I think about that business I think about rental I think about repo I think about off lease I was just wondering if you could give us some thoughts on like which of those buckets do you think that solution.
John Healy: So our out of the gates and now that you have auto eye on that and maybe we're six months into learning and practicing in system work.
John Healy: Is there one of those buckets that you think might be kind of first and move in first to really embrace you guys and would just love to hear your thoughts on that thanks.
George Chamoun: And we'd just love to hear your thoughts on that. Thanks. Yeah, certainly a great question. We're, we're definitely making some from a volume perspective. Most of the volume I mentioned on commercial today is from repos and rental. So those two are have been are the first areas we've been able to take some share, grow those relationships. A lot of them where we are doing business with one city, and now we might be doing business in two or three cities. And we'll try to keep keep growing our relationships with each one of them. So wherever ACV is, we can take we can become one of their sort of auction partners of choice.
Speaker Change: Yes, certainly a great question.
Speaker Change: Definitely making.
Speaker Change: From a volume perspective, most of the volume I mentioned on commercial today is from repos and rental so those two are have been there.
Speaker Change: The first areas, where being able to.
Speaker Change: Take some share grow those relationships.
Speaker Change: Lot of them, where we are doing business with one city and how we might be doing business in two or three cities and we'll try to keep it.
Speaker Change: Growing our relationships with each one of them so wherever a cvs we could take we can become one of their sort of auction partners of choice. So definitely those are the first to off lease.
George Chamoun: So definitely those are the first two off lease. We're just getting started. Hopefully I'll be able to be able to talk a little bit more about that next year. So we're in discussions, we're working on some things, but not not much to share just yet.
Speaker Change: We're just getting started hopefully our ability to be able to talk a little bit more about that next year.
Speaker Change: So we're in discussions we're working on some things, but not that much to share just yet.
George Chamoun: Gotcha. And then just kind of want to pick apart kind of a phrase you just mentioned on the last question regarding AV, you talked about cars being used here or, you know, overseas. Just let me hear your thoughts just about international. Now that you're kind of making money here and growth is, we're talking about incremental margins that are sizable, where are you at? Yeah, I'll give you two perspectives on sort of the global front. So one, we're still early in our strategy creation. But we first and foremost, think about and I'll separate demand from sort of supply and demand.
Speaker Change: Got you and then just kind of wanted to pick up kind of a phrase you just mentioned on the last question regarding <unk> talked about cars being used here are.
Speaker Change: <unk> just let me get your thoughts just about international expansion.
Speaker Change: Now that you're kind of making money here and growth as we're talking about incremental margins that are sizable.
Speaker Change: Why are you asking.
Speaker Change: Solution.
Speaker Change: Globally. Thanks.
Speaker Change: Yes, I'll give you two perspectives.
Speaker Change: The global frame. So one we're still early in our strategy creation.
Speaker Change: But we first and foremost think about separate demand from sort of the <unk>.
George Chamoun: So as it relates to supply, we think about taking the ACV model in a very sort of technology first mentality. Think self-inspection by the consumer. self-inspection by the dealer. Appraisal type solutions that then the vehicle then goes into a marketplace and it's sold and so the model we we go Globally will not necessarily be the same model we do here in And it'll be, you know, very much asset like model, it'll be our technology helping OEMs, who let's say OEMs are trying to sell a car, a new car to a consumer will be that trade in model module, and then the car will go into our market.
Speaker Change: Supply and demand.
Speaker Change: As it relates to.
Speaker Change: Sure.
Speaker Change: Supply.
Speaker Change: We think about taking the <unk> model.
Speaker Change: In a very sort of technology first mentality.
Speaker Change: Self inspection by the consumer.
Speaker Change: Self inspection by the dealer.
Speaker Change: Appraisal type solutions.
Speaker Change: Vehicles, then goes into a marketplace and is solved and so the model. We go globally will not necessarily be the same model. We do here in the U S.
Speaker Change: And it'll be.
Speaker Change: Very much asset light model and it'll be our technology, helping.
Speaker Change: Oems.
Speaker Change: Who let's say Oems are trying to sell a car or a new car to consumer will be that train the model module and then the car will go into our marketplace.
George Chamoun: or if it's a dealer, they'll go around, they'll use our artificial intelligence on their lot and they'll upload the car to our marketplace. That's the direction you'll hear us start to talk about over the next year. We're still in the very, very early stages of that model, but great question.
Speaker Change: Or if it's a dealer they'll go round I'll use our artificial intelligence.
Speaker Change: They're under a lot and a lot below the car to a marketplace. That's the direction Youll hear us start to talk about over the next year, we're still in the very very early stages of that model.
Speaker Change: Great question.
George Chamoun: Great. Thank you guys. And again, congrats. Thank you.
Speaker Change: Great. Thank you guys and again congrats.
Speaker Change: Thank you Scott.
Glenn Schell: And we will take our next question from Glenn Schell with Raymond James. Please go ahead. Thanks. First on the first on the Mannheim market report, showing 11% year over year new and used car sales growth in October. Have you seen any of those trends within your own data? I know you said that wholesale should be flattish, but getting some volumes in for that trade to wholesale mix. So then off of that, where is the trade to wholesale mix now on like a more specific number, and then versus normalized levels? I know it's a bit layered.
Speaker Change: Thank you and we will take our next question from Glenn <unk> with Raymond James. Please go ahead.
Speaker Change: Thanks first on the high.
Speaker Change: First one the Manhattan market report.
Speaker Change: Showing 11% year over year, new and used car sales growth in October have you seen any of those trends within your own data I know you said that wholesale shouldnt be flattish, but.
Speaker Change: Getting some volumes and for the trade to wholesale mix. So then off of that.
Speaker Change: Whereas the trade to wholesale mix now.
Speaker Change: A more specific number and then versus normalized levels and I was a bit later.
George Chamoun: And I can break that down again, if you did. I think one, but Bill mentioned October got off to a good start, right. So, so, you know, there, I'm sure one of the reasons why October got off to a good start was, to your point, market was healthy. You know, conversion rates were healthy. That probably that, you know, that wholesale to retail mix was likely healthy, although I haven't seen the recent on that specific month. But I would generally say, the quarter, you know, for fourth quarter started out well. The only, as we mentioned, when we thought about fourth quarter, we don't assume conversion rates will start, will stay as high.
Speaker Change #100: Break that down again.
Speaker Change #100: Sure.
Speaker Change #100: Okay.
Speaker Change #100: I think one Bill mentioned October got off to a good start right. So so.
Speaker Change #101: I'm sure one of the reasons why October after a good start with to your point market is healthy.
Speaker Change #101: On conversion.
Speaker Change #101: Conversion rates are healthy.
Speaker Change #101: That's probably that that wholesale retail mix will likely help you out I haven't seen the recent on that specific month.
But I would generally say the quarter.
Speaker Change #101: Fourth quarter has started out well the only as we mentioned when we thought about fourth quarter. We don't assume conversion rates will start will stay as high they don't have to some of this will stay as high over the next couple of months because it typically does.
George Chamoun: We don't assume some of this will stay as high over the next couple months, because it typically does, right. As you, as you start to look at the price depreciation, and the seller asking for one price, the buyer willing to pay another, you sit, you typically see conversion rates start to come down. We mentioned that earlier. So I'm not sure if there's any other way to kind of back into your question just yet more than we've shared. But if you want to try to ask the question another way, I'll try to answer it. Yeah, well, that's, that's super helpful.
Speaker Change #102: Brian as you as you start to look at the price depreciation and the seller asked me for one price the pirate willing to pay another you sit you typically see conversion rates start to come down.
Speaker Change #102: And we mentioned that earlier.
Speaker Change #102: So I'm not sure if there's any other way to kind of back into your question just yet more than we've shared but you want to try to ask the question another way I'll try to answer it.
Speaker Change #103: Yeah well.
George Chamoun: But then just on even just 3Q, do you have a more specific trade to wholesale mix number? And where is that versus normalized levels? Yeah, I mean, we Yeah, I think we'll, our trade to wholesale mix improved, you know, marginally in the quarter, we won't see trade to wholesale mix. move up materially until that used car supply comes back. Just to remind you, most dealers have 25% less used cars on their lot today than they did in 2019. And I was recently out with a dealer group in Texas, and the dealer principal looked at me and all his leadership team in the room and said, we have less, we have 30% less cars on our lots right now that we need.
Speaker Change #104: That's super helpful. But then just even just through two.
Speaker Change #105: Do you have a more specific trade to wholesale mix number.
Speaker Change #106: And where is that versus normalized levels.
Speaker Change #106: Yes.
Speaker Change #106:
Speaker Change #106: Yes, I think we will or.
Speaker Change #106: Trade wholesale mix improved.
Speaker Change #106: Marginally in the quarter, we won't see trade to wholesale mix move up materially and told us that used car supply comes back just to remind you.
Speaker Change #106: Most dealers have 25% last used cars.
Speaker Change #106: There are a lot today.
Speaker Change #106: Then they did.
Speaker Change #106: 2019, and I was recently at with a dealer group in Texas and the dealer principle looked at me and all of his leadership.
Speaker Change #106: <unk> team in the room is that we have less we have 30% less cars on our lots right now that we need and looked at us like a call of action like we need to go buy a mark hires from consumer and so just to kind of get you in the mentality dealership and I'm really pleased obviously with the ACB result, what it's going to take.
George Chamoun: And looked at us like a call of action, like we need to go buy more cars from consumers. And so just to kind of get you in the mentality dealership, and I'm really pleased, obviously, with the ACV results, what it's going to take, you know, several more months here, for, you know, the market to, you know, to kind of come back from these dealers having 25% less inventory. And so it will take some time. But having said that, your specific answer, we did see a marginal improvement. And it was nice to at least see a marginal Thank you.
Speaker Change #106: More months here for the market.
Speaker Change #106: To kind of come back from these dealers, having 25% less inventory.
Speaker Change #106: And so it will take some time, but having said that there are specific answer we did see a marginal improvement.
Speaker Change #106: And it was nice to see at least see a marginal improvement.
Speaker Change #107: Perfect. Thank you.
John Colantuoni: Yes, sir. Thank you. And we will take our next question from John Colantuoni with Jeffreys. Please go ahead. Hi, everyone. Thanks for taking my questions. Hi.
Speaker Change #107: Sure.
Speaker Change #107: Yes.
Speaker Change #108: Thank you Andrew we will take our next question from John <unk> with Jefferies. Please go ahead.
Speaker Change #109: Hi, everyone. Thanks for taking my questions Hi.
John Colantuoni: I wanted to ask a question on market expansion. You've historically been strongest in the Northeast. I'm curious if you could update us on your progress expanding into new markets, particularly those that you rolled out a few years ago. And as part of that, you know, talk a little bit about how long it'll take to start reaching a level of density in those newer markets, where you'll start getting to the levels of scale, where it'll start showing through into better profitability across the company. And second part of that, you know, right around the IPO, Canada, I think, was an aspiration for you.
John Healy: Wanted to ask a question on market expansion.
John Healy: Historically been strongest in the northeast I'm curious if you could update us on your progress expanding into new markets.
John Healy: Particularly those that you rolled out a few years ago and as part of that talked a little bit about how long it'll take to start reaching a level of density in those newer markets, where you'll start getting to a level of scale, where it will start showing through into better profitability Cross.
John Healy: The company.
And second part of that.
Speaker Change #110: Right around the IPO, Canada, I think was an aspiration for you where did those plans stand today I think you can just update us there. Thanks.
George Chamoun: Where do those plans stand today? If you could just update us there. Thanks. Yes, so yeah, we've, you know, to your point, we're very strong in the East Coast, we can we actually continue to gain more share in the East Coast, which has been great. You know, I say the pointing like towards Texas for a second, you know, we're we're doing extremely well in Texas, where as well as an example of a market that's pretty far from Buffalo. And, you know, we've, we've year over year gains, I think was some of the highest in the country for us in in Texas.
Speaker Change #111: Yes, sure John So yeah, we've had.
Speaker Change #111: To your point, we're very strong in the east coast.
Speaker Change #111: We've continued to gain more share in the east coast, which has been great.
I would say.
Speaker Change #111: Pointing towards Texas for a second.
Speaker Change #111: Where we're doing extremely well and taxes were as well as an example of a market that's pretty far from Buffalo.
Speaker Change #111: And.
Speaker Change #111: Year over year gains I think with some of the highest in the country for us in Texas. So.
George Chamoun: So.
George Chamoun: I think that's all I have from a prepared preparation to give you an example on the moment and maybe more to come on this topic, but I'm very pleased. The ACV brand is increasing. We're working with more and more dealer groups. You know, if you're working with more dealer groups. The dealer groups, as you know, are in many cities. So that kind of pulls us into some markets. Our new products are helping us break into new markets products like clear car helping dealers buy more cars from consumers. So, so far, so good. That was your first question.
Speaker Change #111: I think that's all I have from a prepares preparation. It gives you. An example on the bone marrow and maybe more to come on this topic, but.
But I'm very pleased with the HCV brand is increasing we're working with more and more dealer groups.
Speaker Change #111: You know as Youre working with more dealer groups.
Speaker Change #111: The dealer groups as you know are in many cities, so that kind of pulls us into some markets.
Speaker Change #111: Our new products are helping us break into new markets products like clarifier, helping dealers buy more cars.
Speaker Change #111: Consumers.
Speaker Change #111: So so far so good that was your first question trying to remember your second half, Ken Oh, Canada. So yeah.
George Chamoun: I remember your second. Oh, Canada. So Yeah, I think when you put together these plans, I think you always assume the first international market, you're going to be the one right next to you, like, like Canada. And, and that would have been my assumption during the IPO. The irony is, you sometimes go where you're getting pulled. And we've been pulled into some markets in Europe. So you'll probably hear us talk more about that next year. But think very small early stages. This is where OEMs and others are pulling us in. So yes, you will start to hear the the, you know, the ACV story beyond the US.
Speaker Change #111: Yes, I think when you put together the plan I think you always assume the first international market, you're going to be the one right next to you like like Canada.
Speaker Change #111: And and that would've been my assumption or any IPO.
Speaker Change #111: As you sometimes go where are you getting Paul and we've been pulled into some markets in Europe.
Speaker Change #111: You probably hear us talk more about that next year.
Speaker Change #111: I think very small early stages, this is where Oems and others are pulling us in.
Speaker Change #111: So yes, you will start to hear.
Speaker Change #111: The HCV story beyond the us it'll.
George Chamoun: It'll be very small numbers for next year. It won't be zero, but it will. And we start to think about 2026 and beyond, hopefully become more material. But we are starting to take the model and the way the model, as I mentioned earlier, the way we're doing the model, is it's a self inspection based model. So you're using artificial intelligence to have the consumer or the dealer walk around the car, do the condition report, and then it goes into our market. So, we're in early stages at this. Very pleased with the team's progress.
Speaker Change #111: It'll be very small numbers for next year.
Speaker Change #111: It wont be zero.
Speaker Change #112: It will.
Speaker Change #112: And we start to think about 2026 and beyond hopefully become more material.
Speaker Change #112: But we are starting to take the model and the way the model as I mentioned earlier the way we are doing the model.
Speaker Change #112: It's a self inspection based model, so youre using artificial intelligence to have the consumer or the dealer walk around the car due to the condition report and then it goes into our marketplace. So we are in early stages at this.
Speaker Change #112: Very pleased with the team's progress.
George Chamoun: More to come when we can report a little bit more about this topic. Thanks so much. Thank you.
Speaker Change #112: More to come when we can report a little bit more about this topic.
Speaker Change #113: Thanks, so much.
Speaker Change #113: Okay.
Speaker Change #113: Thank you.
Operator: And it appears that we have no further questions at this time. I will now turn the program back to our presenters for any additional or closing remarks. Thanks, Madison. 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. And again, thank you for your interest in ACV. Have a great evening. Thank you. This does conclude today's presentation. Thank you for your participation. You may disconnect at any time. aktion, ACV Auctions
Speaker Change #114: And it appears that we have no further questions. At this time I will now turn the program back to our presenters for any additional or closing remarks.
Speaker Change #115: Thanks, Madison 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 and again. Thank you for your interest in ACD have a great evening.
Speaker Change #116: Thank you. This does concludes today's presentation. Thank you for your participation you may disconnect at any time.
Speaker Change #116: [music].
Speaker Change #116: Mhm.
Speaker Change #116: [music].
Speaker Change #116: Hum.
Speaker Change #116: [music].
Speaker Change #116: Okay.
Speaker Change #116: Yeah.
Speaker Change #116: Yeah.
Speaker Change #116: Uh huh.