Q1 2025 ACV Auctions Inc Earnings Call
Speaker Change: Good day and welcome to the ACV Q1 2025 earnings conference call. All participants will be in listen only mode.
The question and answer session was part of the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference, please press the star key and then zero on each telephone keypad.
Please note that this event is being recorded.
Speaker Change: I would now like to turn the conference over to Tim Fox on investor relations. Please go ahead.
Speaker Change: Good afternoon and thank you for joining ACV conference call to discuss our first quarter 2025 financial result.
Speaker Change: With me on the call today, our George Chamoun, Chief Executive Officer, and Bill Zerella, Chief Financial Officer.
Speaker Change: Before we get started, please note that today's comments include forward-looking statements including statements regarding future financial guidance.
Speaker Change: These four-looking statements are subject to risks and uncertainties and involve factors that could cause actual results to differ materially from those expressed or implied by such statements.
Speaker Change: A discussion of the risks and uncertainties related to our business can be found in our SEC and in today's press release, both of which can be found on our Investor Relations website.
Speaker Change: During this call, we will discuss both Gap and non-GAAP financial measures.
Speaker Change: A reconciliation of gap-to- non-GAAP financial measures is provided in today's earnings materials, which can also be found on our Investor Relations website.
George Chamoun: Thanks Tim, good afternoon everyone, and thank you for joining us.
George Chamoun: We are very pleased with our first quarter performance, which again demonstrate a strong execution by the ACV team.
John Colantuoni, David
We delivered Record Revenue
with strong margin expansion.
Resulting in Adjusted EBITDA, exceeding the high end of guidance
Our results were driven by three key factors.
First.
Strong Execution in our dealer wholesale business [inaudible]
George Chamoun: We continue to gain market share and expand our dealer partner network with our highly differentiated marketplace experience.
Jacket
George Chamoun: We had a record performance in ACV transport and capital. The strong adoption of our value-added dealer solutions.
George Chamoun: And third, we continue to execute at an exciting product roadmap for our dealer and commercial partners.
expanding our town and growing our competitive mode.
George Chamoun: While there are evolving cross-currents in the broader macro environment, ACV remains focused on delivering strong top-line growth and meaningful increased adjusted EBITDA while continuing to invest in our long-term growth objectives.
George Chamoun: 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 a recap of our results on slide 4.
Q1 revenue was $183 million in grew 25% year-over-year
We sold 208,000 vehicles which was 19% year-over-year growth.
despite various off-market conditions in February . [inaudible]
Unigrow was driven by continued market share gains
and Solid Execution at our Remarketing Centers.
George Chamoun: and a dealer wholesale market they grew in the low single digits.
George Chamoun: Next, Sense Life 5. Today's discussion will focus on the three pillars of our strategy to maximize long-term shareholder value.
Growth, Innovation and Scal
I'll begin with rope
George Chamoun: Turning to slide seven. I'll frame our growth discussion around ACV's core product offerings.
Holthell Marketplace
Marketplace Services, and Data Services.
Let's begin with our hotel marketplace and slide eight.
George Chamoun: At our March analyst day, we highlighted how ACV is leveraging AI across our entire suite of solutions.
George Chamoun: On our marketplace, AI is enabling us to provide our dealer partners highly accurate wholesale and retail pricing guidance.
This guidance is based on condition-enhanced pricing.
George Chamoun: We are enhancing the cellar experience by offering flexible auction durations and auction schedule [inaudible]
George Chamoun: We also launched our first seller in auction tool, allowing sellers to remove reserve prices mid-oction, driving buyer engagement and conversion.
George Chamoun: On the demand side, the buying experience is now tailored across buying personas.
from smaller independent dealers to large volume franchisers.
George Chamoun: We've improved discoverability in search refinement through advanced saved searches and notifications.
George Chamoun: and we're taking friction out of the buying experience by making AI-enabled recommendations informed, ideal preferences and current market factors.
George Chamoun: Turning to Slide 9. Let's review our Marketplace service offering, beginning with ACV transportation.
George Chamoun: The transportation team continued its strong execution in Q1, setting records for both quarterly revenue and transport delivered.
AI Optimized Price Thing is driving both strong growth and operating efficiency.
George Chamoun: Revenue margin expanded 460 basis points year-over-year in Q1, and was in line with our mid-term targets in the low 20s.
George Chamoun: Lastly, our off-platform transportation service continues to gain the early traction from our
George Chamoun: These new value-edited services accelerate our transport network densities and create additional long-term growth factors.
Kearney Desai, Pat
George Chamoun: The A3 Capitol team also delivered strong results, with over 30% revenue growth in Q1.
George Chamoun: This was the second quarter in a row of accelerated growth, which supports our confidence that we can continue to accelerate ACV capital growth while managing risks.
George Chamoun: The ACV capital team is expanding its time by delivering new value-edited offering store dealers, including off-platform transactions, such as buying vehicles from consumers.
Creating additional growth lovers for our business.
George Chamoun: Lastly, I'll wrap up the growth section on slide 11 with data service highlights.
George Chamoun: Mark attraction for clear car remains strong with over 200 rooftops launched in Q1. We're also seeing growing interest in clear car service. This offer enables our dealer partners to acquire vehicles from consumers by leveraging their service lanes for instant appraisals and offers. This offer enables our dealer partners to acquire cars and offers. This offer enables our dealer partners to acquire cars and offers.
George Chamoun: The AC Max team delivered very strong results in Q1, reflecting the investments made in the host of new features and platform scalability.
George Chamoun: Bookings for the highest level in five quarters, driven by a number of large dealer groups, it was like ACV to displace the incumbent IMS providers.
George Chamoun: Our strategy to begin bundling data services with ACV wholesale is starting to pay dividends.
George Chamoun: And we believe this new strategy is another exciting long-term growth level for ACV.
George Chamoun: Again this quarter, we're excited to share feedback from one of our dealer partners
George Chamoun: The Neal Oak Company, a dealership group based in Sacramento which is using ACV's full suite of offerings.
George Chamoun: We posted a video on our IR website featuring their team describing the significant value of their deriving from ACV solutions.
George Chamoun: It's another great opportunity to hear it directly from a dealer apart. [inaudible]
George Chamoun: Next on slide 12, I'll address the second element of our strategy to drive long-term,
Prairie to Slide 13
George Chamoun: I'll go a bit deeper in how we're leveraging ACDI across our products, services and operations.
George Chamoun: As we discussed at our annual stage, technologies like machine learning and large language models are advancing at a rapid pace in ACV's uniquely positioned to transform how decisions are made and automotive.
It all starts with consistent data capture.
George Chamoun: which is underpinned by our BCIs in the field creating a large mode of curated data.
George Chamoun: We're now also putting our hardware, diagnostic tools, and damage detection algorithms into the hands of our customers.
George Chamoun: and with clear cars, AI guided image capture, we're putting self-inspection into the hands of dealer customers.
George Chamoun: Using machine learning, we're taking data fusion and processing to the next level.
George Chamoun: Providing pricing for every vehicle in real time within ACV's pricing platform.
George Chamoun: We are consolidating data into structured AI-powered guidance to provide context-driven dealer decisions.
Take, for example, ACV guarantees.
George Chamoun: which is one of the fastest growing channels in our marketplace. [inaudible]
George Chamoun: Guaranteed vehicles are launched in a no reserve auction format, which typically generates a five-fold increase in bitter engagement.
George Chamoun: Guarantees also remove market risk and pass the upside to our sellers with a hundred percent conversion rate.
Finally!
George Chamoun: With Virtualist 2.0 and Project Bipers, we are expanding our competitive edge in AI-driven products by putting the powerful combination of ACV hardware and software technology into the operational workflow of every vehicle.
George Chamoun: Stay tuned for more details in coming quarters as we ramp our dealer pilots through 2025.
George Chamoun: And slide 14, we highlight another growth lever powered by ACV AI.
George Chamoun: Our AI Back Platform is capable of processing trade-ins at scale with repeatable guaranteed pricing in under a second.
George Chamoun: We are taking the guaranteed capabilities from our marketplace and extending that same power for e-commerce partners.
George Chamoun: and piloting these capabilities with OEMs looking for a scalable upstream trade-in platform.
Rapping up on innovation. [inaudible]
Ella Touch and our commercial investments
George Chamoun: It all starts with integrations that feed into our digital first marketplace.
George Chamoun: We have established an extensible ingestion architecture that enables us to work with a host of service providers in a standardized way.
George Chamoun: The next major capability is damage estimation at the panel and part level, which is powered by observations from our inspection platform.
George Chamoun: This gives us a robust tool that can be used for recon estimates, which is a critical part of the commercial workflow.
George Chamoun: Finally, we are in the later stages of our commercial platform development, and we are slated to power our first Greenfield Remarketing Center in the second half of 2025.
George Chamoun: The commercial platform will include capabilities from inspection, to work order creation, repair estimation, consign or approval reporting and more.
George Chamoun: We're excited to begin leveraging these technologies to address the large commercial tan.
providing another long-term growth lever for ACV.
George Chamoun: With that, let me hand it over to Bill to take you through our financial results and how we're driving growth at scale.
Thanks George, and thank you for joining us today.
We are very pleased with our Q1 financial performance.
George Chamoun: Along with strong revenue growth, we delivered meaningful margin expansion and adjusted even the growth demonstrating the strength of our business model.
George Chamoun: On slide 17, let's begin with a recap of our first quarter results.
George Chamoun: Revenue of 183 million crew 25% year-over-year, and was at the midpoint of our guidance despite very soft market conditions in February .
Note that organic revenue growth was approximately 20% year-over-year. [inaudible]
George Chamoun: Adjusted EBITDA of $14 million exceeded the high end of guidance, with margin improving 500 basis points over year.
The upside was driven primarily by continued op-x discipline.
George Chamoun: Finally, non-gaffinate income was also about the high end of guidance, with margin increasing approximately 300 basis points year over year.
Next on slide 18, let's review additional revenue details.
George Chamoun: Insurance Revenue was 58% of total revenue and grew 28% year-over-year [inaudible]
George Chamoun: This performance reflects 19% unit growth and auction and assurance are true of $500, which grew 8%.
Note that units grew approximately in the mid-chains organically. [inaudible]
George Chamoun: Marketplace Services revenue was 37% of total revenue and grew 24% year over year, reflecting record revenue for ACV transport and ACV capital.
George Chamoun: Our SAS and Data Services products comprise 5% total revenue with growth of 5% year-over-year.
Next, I'll review two one costs on flight 19.
George Chamoun: Non-Gaap-Coffee Revenue as a percentage of revenue decreased approximately 200 basis points year over year.
The improvement was driven by auction and assurance results and by ACV transport.
George Chamoun: non-GAAP Operating Expense, excluding cost of revenue as a percentage of revenue decreased 400 basis points year over year.
George Chamoun: These results reflect our ongoing focus on expense discipline as we optimize and scale our business.
George Chamoun: Moving to slide 20, I'll frame our investment strategy as we drive profitable growth. In 2025, we expect off-ex growth of approximately 18% to support our remarketing center strategy and commercial platform
George Chamoun: Even with these growth investments, adjusted EBITDA margin is expected to increase by approximately 500 basis points year over year.
George Chamoun: Next, I will highlight our strong capital structure on slide 21.
George Chamoun: We ended Q-1 with 342 million and cash and cash equivalents and marketable securities and 167 million of debt.
George Chamoun: Note that our cash one balance includes 211 million of marketplace flow.
George Chamoun: In the figure on the right, we highlight our strong operating cash flow which reflects adjusted to equal growth and large in expansion.
Now turning to guidance on slide 22.
George Chamoun: For the second quarter, we are expecting revenue to the range of 193 to 198 million, growth of 20 to 23% year-over-year.
George Chamoun: Adjusted even as expected to be in the range of 18 to 20 million, reflect in growth of approximately 170% year-over-year [inaudible]
George Chamoun: We are iterating our full-year guidance, including revving in the range of 765 to 785 million, growth of 20 to 23 percent year over year.
George Chamoun: Adjusted EBITDA is expected to be in the range of 65 to 75 million, reflecting growth of approximately 150% year over year at the midpoint of guidance.
George Chamoun: Our guidance continues to assume that dealer, Pulsell Wimes will be approximately flat year over year for 2025.
George Chamoun: We expect conversion rates and wholesale price depreciation to follow normal seasonal patterns.
George Chamoun: We also continue to expect revenue growth to exceed non-GAAP , op-ex growth, excluding cost of revenue and appreciation and amortization by approximately 500 basis points.
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 and Q1. [inaudible]
George Chamoun: and especially proud of our ACV teammates that deliver these results.
George Chamoun: We continue the game market share by attracting new dealer commercial partners to our market place.
George Chamoun: Wall expanding our dressable market, which positions ACV for attractive growth as market conditions improve.
George Chamoun: We are delivering on an exciting product roadmap powered by ACV AI to further differentiate ACV and drive operating efficiencies.
John Colantu, John Colantuoni,
George Chamoun: We are focused on achieving substantial adjusted EBITDA growth in 2025 and delivering on our mid-term targets 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 goals, with that I'll turn the call over to the operator to begin the Q&A.
George Chamoun: Thank you sir. Ladies and gentlemen, we will not be conducting the question in all the session.
George Chamoun: If you would like to ask a question, please press star and then one on your telephone keypad.
George Chamoun: A confirmation turn will indicate that your line is in the question queue. Thank you.
George Chamoun: In my press stall, I'm in two to lead the question, Q. . . . .
George Chamoun: For participants making use of speak equipment, it may be necessary to pick up your handset before pressing the star keys with your hands.
George Chamoun: We will pause the moment while we assemble the question queue. Thank you.
Rajat Gupta: Office question comes from Rajat Gupta of JP Morgan. Please go ahead.
Speaker Change: Great, thanks for taking the question. You had raised fees in early March and during some fast conversation, it seems like there was no real pushback from customers, but as wholesale prices have increased, you know, just due to pre-by ahead of tariffs.
Speaker Change: Are you seeing any signs of customer pushback or perhaps needing to incentivize more with answering services? Any color on that will be helpful and have a quick follow-up. Thanks.
Yeah, hey, we're shot. Um, we, uh,
Speaker Change: We've been very fair in our pricing, as you know, with our dealer partners.
And we've, we've always historically have a balanced
Speaker Change: Both are price increases and the interest of our customers. So, you know, we do make these price increases they're very small [inaudible]
Speaker Change: Very incremental. And so to your point, it sounds like you've done some homework on this. We got very little pushback.
Speaker Change: So yeah, our goal is objective. The price thing is-
Speaker Change: is really leaning and we've got a great business model, great value at a proposition, really at the right price for our dealer partners. So I would say for your first question, really no pushback on our value proposition to our pricing.
Speaker Change: And as it relates to the other macro things going on, I don't think any of that. I've heard, I don't think I've heard any comments from any of my teammates about any of the macro elements.
Speaker Change: Whether it be terror, whether it be any of this stuff, resulting us having any pressure on pricing. So I think in the end of the day, we deliver a great service to our dealer partners and our pricing aspire.
Speaker Change: Anderson, that's helpful color. And then maybe, you know, to the outline, you know, different growth.
You know avenues
Speaker Change: You know, that ACV or maybe just a broader wholesale industry, you know, might experience an under a tariff backdrop.
Speaker Change: You know, obviously there's uncertainty around, you know, manufacturer pricing, production.
Speaker Change: You know, if supply does get hurt, I mean, obviously you're coming off a depressed base already, you know, back in 21, 22, you know, obviously ACV was a much younger company, but you have a lot more solution right now. [inaudible]
Speaker Change: Can you help, you know, the detail for us investors, you know, what kind of levers you could pull as a company with your portfolio today, you know, if the industry were to take a step back, you know, in the next couple of years before starting to grow again.
Thanks.
Speaker Change: Yeah, certainly, Rajat. So, first and foremost, as you noted, we continue to grow. We're still in a really significant growth mode.
Speaker Change: We still continue to take share. And it also to your point, we're growing in a broader way. Our value added solutions like clear car, like ACV Max, and other upcoming solutions.
Speaker Change: are helping us differentiate broader than just our initial value proposition of ACV Auctions.
Speaker Change: That coupled with other value-added services like ACV Transport and ACV Capital are helping us have really tremendous demand on the ACV platform.
Speaker Change: So when you look at it both from a supply and a demand, we've got a great product mix, we continue to take share.
Speaker Change: And we look at our results of Q1, we are really in line with our own expectations.
Speaker Change: Obviously delivered better on the even aside and so when you look at with all these puts and takes [inaudible]
Speaker Change: from a macro perspective of what happened, at least so far with tariffs.
Speaker Change: and so far with a lack of generally used car supply, but you and here are going to talk about for a while and we you've noted this and so your own research that used car supply, late miles car supply will likely be a trough year. All of that was in our expectations.
Speaker Change: So we gave you all an expectation. There's really got flat-ish hotel here. We knew there was going to be some ups, we knew there was going to be some downs. I feel really good about where we're at because we were able to just continue to execute. I think we had the right expectations for the year. [inaudible]
Speaker Change: Got it. Got it. Great. Thanks for the color and good luck.
Thank you, Rex.
Speaker Change: An excursion comes from Bob Labick. Our CJ is Securities. Please cover here.
Hi, good afternoon. Thanks for taking our questions.
Thank you, Bob.
Speaker Change: Sure, yeah, so a quick question then a quick follow up and it's more kind of timely. Have dealers needs or has their focus shifted? Any with the onset of the you know the tariff? So are they acting differently? Are they asking you for different things or you know what's been the feedback as you're as you're talking to your dealer customers? [inaudible]
Speaker Change: Yes, if I take a step back, I would say it's less related to the tariff.
Speaker Change: Situation as it is generally our franchise dealers wanting more and more inventory.
So we're seeing tremendous interest in our new products [inaudible]
Speaker Change: Products like Clearcar, like our updated AC Max, our other tools that are sort of coming soon, we've seen the interest continues to rise, but they need to buy more parts.
They need, they need additional use cars. [inaudible]
Speaker Change: So, I've seen more and more of a focus. I've seen more and more of a willingness to change. I'm seeing...
Speaker Change: I'm hearing dealers say AI more often. Hey, how can we leverage AI to do things more seamlessly? I'm seeing some really some openness and we work with some large dealer groups. I'm seeing them actually
Speaker Change: Really up their game. I don't say names here, but I'm thinking a couple in particular right now that I'm really watching them get more and more efficient, put more and more offers.
Speaker Change: on Consumer Cars. I'm seeing the service drive increase still low. I think the industry can feel there's a lot there's a lot more opportunity out there for franchise dealers I had. I think it's a great category. I think they could buy a lot more cars.
Speaker Change: So I'm seeing a little bit of momentum and the adoption of new tools.
Speaker Change: and the willingness to adopt new processes, which will ultimately help them buy more cars. The more they buy, the more they'll retail, and the more they will hold sale.
Speaker Change: So we're early on that mission as you know Bob, but I would say great, great traction thus far and I love the conversations we're having with our regular partners.
Bob Lubbock: Okay, that's great. You just named Clear Car and then the updated ACV Max. And my follow-up was going to be about inventory. Obviously, you know dealers have been wanting it. They're embracing your tools, those two that you just named. You also mentioned in the prepared remarks, the price guarantee tool and Viper briefly. Can you give us a sense of
Bob Lubbock: kind of penetration and potential impact on the model of those, you know, other two that, you know, you know, you only briefly mentioned before the price here in T-Toolware area and penetration rollout and Viper, you know, what to take for that to get used and out in the field.
Yeah, certainly about so we're our guarantee offering is growing. It's...
Bob Lubbock: It's where the team is doing a great job of introducing why this is such a special product. It's got two significant points of interest.
Bob Lubbock: On the supply side, it allows our sellers to have access to a marketplace where we are averaging 10 bidders per car. It's just incredible. So from a supply perspective, it's not just a guarantee.
It's access to its exclusive link. [inaudible]
Bob Lubbock: Think about as almost like a private club or like you're getting access to something that's really special [inaudible]
Bob Lubbock: There's nowhere else, no other marketplace where you're going to average ten bidders a car. So we've created this like vibrant marketplace. So from the supply side, the officers are guaranteeing but they get the upside and the far majority of the time there's upside. [inaudible]
Bob Lubbock: And on the demand side, it's just as important. When you're watching these auctions, you know...
Somebody's going to win.
Bob Lubbock: And so, from a buyer's perspective, there's zero waste of time. So, if you're willing to step up.
Bob Lubbock: and Pays for the Car, you're going to win. So we're seeing great interest. We still have a lot of growth ahead of us. We're still in the early days.
Bob Lubbock: But it's fun that we're sniffing on the near, near double digits of our, you know, around a double digits, I can say, of our overall marketplace. So we're really happy with where we are with, um,
The products that we've released recently in beta.
Bob Lubbock: are getting tremendous interest. The interest is because we're not only predicting the wholesale value, we're also predicting a retail price of the car within the next 30 days of what it's going to sell for.
Bob Lubbock: And as far as I know, I don't think anyone else is close to us. I'm being able to do this. So now a car comes through the service drive with a dealer.
Bob Lubbock: and we're going to be able to run it through our system. The consumer might be there just to change.
Bob Lubbock: You know, change the oil or rotate their tires, and if dealer is going to be able to know, here's the wholesale value, and here's the retail price, they have to figure out what the recon is going to be.
Bob Lubbock: of course we're working on that next but anyways so there's a retail price of the wholesale price and we're making these predictions our predictions are within.
And and where where we've signed up some I would call regional groups that I'm happy with them and where the team is doing a great job.
Speaker Change: Oh and the Viper awesome.
Bob Lubbock: I forgot off hyper how can I forgot on paper.
Bob Lubbock: So, which I think takes times in their room to remind me I know why I forgot so oh.
Speaker Change: No I thought you would have a favorite child that it's never a good thing that my favorite child, especially my kids are listening right now so.
Bob Lubbock: The Viper I've never.
Bob Lubbock: Never ever in my entire career has had a product where I've had this much demand.
Bob Lubbock: So it's exciting and a little bit nerve racking right now because we're gonna have to we've got a lot to do here, but we are getting tremendous demand for.
Bob Lubbock: And it's.
Bob Lubbock: Where are where as I mentioned in analyst day, our team and churn are this summer as our beta so we're going I just with you know a few dozen dealers a summer where its early stages I never want to oversell, where we're at we'd loved to we're hoping to come out of beta.
Bob Lubbock: Before Q4, if our objective right now so we'll kind of go through the summer we'll learn.
Bob Lubbock: And hopefully it will start getting into production by early next year, hopefully earlier, we'll see but we're so far so good. The team is is in line with what I said last and I would say if anything.
Bob Lubbock: The line is growing we've got dealers literally getting in line.
Bob Lubbock: Right now asking for what unit number they're going to get a project biocryst. So yeah, it's tremendous excitement, but having said that we're very early and we got to get through a beta and then actually manufacture these and get going so but thanks for asking.
Speaker Change: Super No that all sounds terrific. Thank you very much.
Bob Lubbock: Thank you Bob.
Bob Lubbock: Our next question comes from David Kang of B Riley Securities. Please go ahead.
David Kang: Okay. Thanks, a lot.
Speaker Change: Two questions from me one on K C V catheter are growing a bit.
Speaker Change: Any more than 30% I'm curious what kind of attach rates, you're seeing here and.
Speaker Change: And in terms of just.
Speaker Change: Expanding this offering.
Speaker Change: How do you.
Speaker Change: How do you plan to mine is that a risk as you as you make these Catherine Mcmeans to partners and the second question. I have is are you just sit on the.
Speaker Change: You know it.
Speaker Change: Maybe on the on the commercial side.
Speaker Change: Is it possible given.
Speaker Change: Given the prospect for price increases on vehicles.
Speaker Change: Due to tariffs.
Speaker Change: Could see a downdraft in wholesale listings from Pete owners.
Speaker Change: They might be.
Speaker Change: Wanting to get more and more.
Speaker Change: And sort of their existing vehicles.
Speaker Change: Yeah.
Speaker Change: It is still I'll handle the first question then I'll toss it over to George So so first of all on ACD capital. So a few things to consider yeah. Obviously, one of the one of the many ways that we minimize risk.
Speaker Change: Is R V C is across the country, you know call it roughly 800 <unk>.
Speaker Change: Visit dealer lots every months and can validate you know where the car is right since we get paid as sooner rather maturity of the loan or when the car is sold to a consumer. So that's number one number two over the last year or so we've significantly improved our risk management capabilities internally.
Speaker Change: And in fact, if we look at Q1 so.
Speaker Change: So we grew revenue, it's actually 33% year on year.
Speaker Change: Our bad debt expense actually was down 50% year on year. So we dramatically reduced our bad debt expense, while really driving really strong growth. So that's that's the model that we have in place and now you know with some of the other enhancements we've made to that business in terms of.
Speaker Change: Implementing our loan management system.
Speaker Change: Some of the new capabilities, we have in terms of new offerings, we could offer to our customers on the financing front we.
Speaker Change: Kind of see this as a as a really nice growth engine.
Speaker Change: That will accelerate through this year and beyond so.
Speaker Change: It's a great business model I think the team is doing a phenomenal job.
Speaker Change: Obviously as you know, it's very accretive to our EBITDA margins.
Speaker Change: Yeah, I mean could you it's George could you go back and ask a repeat your question regarding commercial and pricing just again, just so I make sure I answer it appropriately.
Speaker Change: Yeah, So you know what.
Speaker Change: If people are going to expect that.
Speaker Change: Paris cause pricing to go up on average on new vehicles.
Speaker Change: And is it possible therefore their fleet.
Speaker Change: Fleet owners, who.
Speaker Change: Generally you know Perscription, Oh, and the commercial wholesale.
Speaker Change: May look too.
Speaker Change: <unk> on the <unk>.
Cause for longer just getting more miles out of the existing cars versus buying new.
Speaker Change: So that could you know affect volumes.
Speaker Change: <unk>.
Speaker Change: And curious to know how youre thinking about those.
Speaker Change: Those kind of ships.
Speaker Change: Yeah, I think it makes for repeating that that's helpful. Yeah. So if you frame, where we get our supply from today.
Speaker Change: Does it cause you cause you and our other investors here I'll know, we we were were fairly early stage in commercial we're very early stage on off lease where we're early stages on me.
Speaker Change: Most of our supply still today comes from dealer. So when you think about your question.
Speaker Change: As it relates to this year, while our supply mainly comes from dealers it would be about it.
Speaker Change: It would be really about SAR, new car sales trade ins and used car sales and how many of those customers to your point, we'll go back to the dealership and yet by another car.
Speaker Change:
Speaker Change: So those are off those cars would not have naturally been leases that would have been brought to a C. V. Anyway. So when you kind of look at the ecosystem. They would've first went to that local dealer if they buy it they typically retail at and they don't buy it.
Speaker Change: Then there then it would go through the captives private marketplace et cetera. So if there is pressure on that category. So that specific category you are alluding to which is off lease.
Speaker Change: And in consumers coming in a little bit slower it could potentially impact new and used but I think specifically with us it would impact how our supply is coming in a little bit less so than probably others.
Speaker Change: Marketplace, if we had more exposure to off lease, which I wish we did.
Speaker Change: Come in time, as we get bigger, but that's right now where we're still early on that segment I would say more broadly on tariffs. If that's also where you kind of go with US look at it is look as long as new cars and used cars are being sold.
Speaker Change: Then we will still have trades I think what we saw generally speaking.
Speaker Change: In Q1 was a new car volume.
Speaker Change: It was up a little was off which is nice and used car volume wasn't that was used was not up as much and we could see the universe and one of the quarters. This year, we could see where new car you know year over year compares look harder, but used car sales will be up higher so look at it.
Speaker Change: Why we feel pretty good about the air.
Speaker Change: Is whether we see new cars up a little bit for.
Speaker Change: Or used cars upload that we might see the universe of the other and that kind of from our perspective keeps us pretty level think down them at all so we're feeling pretty good about the year.
Speaker Change: Great and then maybe bill just on the going back to the capital question.
Speaker Change: And so but.
Speaker Change: How should we be thinking about the attach rates for catheter has that gone up or.
Speaker Change: Are there other factors driving this growth.
Speaker Change: I'm sorry, the question was I missed the last let's say.
Scott: Yes, Hi, Scott.
Speaker Change: Oh I see yeah, no the attach rate actually continued to rise it's in the it's well into the double digits now so.
Speaker Change: Keep in mind, our target is based on our mid term model is 25% attach rates.
Speaker Change: We're we're we're expecting to make a lot of progress this year in terms of moving closer to that target. So.
Speaker Change: Really good progress.
Speaker Change: And there's also a fault that is not only is the attach rate salad on the auctions platform, but the team. We're in the early stages of off platform, which includes helping dealers buy cars from consumers.
Speaker Change: So we feel good about this mid term growth rate, where we're doing a really a really solid job about.
Speaker Change: Achieving our mid term objectives.
Speaker Change: But we feel good because both will get this as bill mentioned continue attach rate on our marketplace and we're in the very early stages of the off platform and helping dealers.
Speaker Change: I buy more so yeah, we feel generally good about our the team's done a great job, thus far and we feel good about our our medium term goals that we have.
Speaker Change: I articulated.
Speaker Change: Interesting. Thank you guys.
Speaker Change: Thank you okay.
Speaker Change: Our next question comes from Chris piece of Needham and company. Please go ahead.
Chris: Hey, good afternoon, everyone has everyone doing.
Speaker Change: Go ahead Craig.
Speaker Change: Yeah.
Speaker Change: Oh, sorry, pizza repeats, but I missed a little of the call I guess two questions can you just kind of talk about competitive dynamics in the market, we've seen carmax and carvana with a desk a clear sort of upgrade their biopsy. She checks to play a little catch up and then we've seen physical auction M&A as well.
Speaker Change: Shifting underneath the surface in terms of the market because of what you guys are doing the market clothing I just wanted to see if there's you know he is.
Speaker Change: Feedback you're getting from dealers on options that are out there that are maybe better than they were say a year ago.
Speaker Change: Yeah of course, I always say no no significant changes we've had is as you know since you got notice we've always had hundreds of competitors regional competitors national competitors. So there's there's been competition since day, one of the business and.
Speaker Change: We continue to execute we continue to take share there.
Speaker Change: A couple of the companies you mentioned you know are also on the dealer wholesale space, but they're also retailers and from our perspective dealer should be very careful about wholesaling vehicles for them and so we're out there spreading the word of hey, where you know if you're a dealer.
Speaker Change: We're we're a neutral partner.
Speaker Change: And I think listen well, we should continue to win share.
Speaker Change: To your point, they've done well, but I think we're positioned to do better in the medium to long term for all the reasons you've heard earlier in this call. We're not there just to help them with wholesale we're here to help them buy more cars from consumers that actually competes against those other guys. You mentioned, we're helping them do better pricing. So look at it is our role.
Speaker Change: <unk> is a truly a long term partner I think when you do your homework about us you're going to hear more and more dealer groups say that which is we're really proud of I think some of the parties you mentioned or I would say near term wholesale vendors and that's really the positioning we're trying to.
Speaker Change: To be in the market.
Speaker Change: Okay and then just lastly can you talk about data and data vote and volatility in the end market with prices going up whether it's tariffs driving demand, but you know manheim is out today and they're talking about April and that data is probably already has an element of stay on this to it.
Speaker Change: One of the smartest dealers doing in holiday leveraging the real time data that you guys are able to provide them, whether it's out of the service lane or putting a bid on a car when to cut bait at lead count removed. The wholesale like what are the best deal is doing now and how are they leveraging data and how is that it makes you did manage.
Speaker Change: Yeah.
Speaker Change: Yeah, It's a great question, so I'll I'll illustrate some examples.
Speaker Change: It came back from a major dealer groups.
Last week I think let's just last week and I really got to stay with their manager team and how they're using our tools. So it was it was really fascinating I'll give you. Some examples so one to your point, they're they know that there's actually a percentage of cars that are buying from the service right won't I won't say what the percentage here is.
Speaker Change: It's actually like a real number like okay. We're starting to buy some cars from the service side, it's starting to show up as a supply source, which really really proud about that number two how theyre pricing more and more automation our pricing. Historically this is an industry, where they always went to this sort of traditional.
Speaker Change: Competitors.
Speaker Change: Inventory management appraisal tool every single car that to sit there and look at and click all these box at the bottom of Blah Blah Blah now you're just more and more we're leveraging AI to help them do some of that so you're seeing streamline which means youre putting more offers now predicting the retail price also helps you protect should your retail or <unk>.
Speaker Change: Sell the car and gives you an expectation of how much room you have for reconditioning.
Speaker Change: Now, we don't give them that number yet we just show them. This is you're basically you're going to sell it for they know what they are buying four and they they kind of figure out at least for now how much they want to.
Speaker Change: For recon, but even though we already have today and our current version of our tools. None of this is possible and sort of the legacy tools that are out there. So think okay. You could buy more cars you can predict the retail price than when you think about.
Speaker Change: Even though we're in a market, where there's really sat subs and solid demand.
Speaker Change: For a new I think good demand for us it depends on the price of these used cars. So if a car is sitting there for two weeks or four weeks or six weeks.
Speaker Change: We're starting to give updates for every single than what they should do the uptake could be raised the price by $243.
Speaker Change: Because we're seeing a lot of demand.
Speaker Change: Or the uptake could be we recommend you reduce the price by $350. So think it's not just when they're buying the car. It's this on going you.
Speaker Change: Constant learning that's going on and were feeding it it's not just coming from a pricing engine, it's coming from what's going on from their CRM. It's coming from you know how much interest or some of the car where where what's happening generally on the internet. So the team's doing a great job.
Speaker Change: I've seen what's happened I got it from a national market perspective in.
Speaker Change: In addition to what's going on at their store and their groups. So hopefully that's what you're looking for but that's what the great groups are doing and I think you'll see it in their numbers.
Speaker Change: Some of our dealer partners had a great quarter, I believe and I'm happy to help.
Speaker Change: Okay and then just lastly for me I know the end market can be sort of a peak sometimes so on your first bullet around guidance, where the dealer wholesale markets you'd like to be approximately flat year over year I apologize. If you gave this on the main call, but what has the deal the wholesale market gone year to date in terms of up down you know year to date.
Speaker Change: Yeah, I think right now.
Speaker Change: Chris He was it was up low single digits. So up you know and I think.
Speaker Change: The why would be was new was off use was not up as much. So we some one report has used retail down a little bit was one report in one report was so that was from one of the leading providers of Veda to category and one had used retail up a tiny tiny bit.
Speaker Change: So all in all I would say retail was.
Speaker Change: It was solid for Q1 and and.
Speaker Change: And also the compares were a little bit easier.
Speaker Change: You know so we had a better compare.
Speaker Change: When you look at the back half of the year, it's gonna be a little bit tougher compare because new.
Speaker Change: <unk> started to go up throughout the year and also our wholesale started to go up a little bit throughout the year. So so Chris all in all our guidance, we said flattish inventing our own word because a reason for event I think bell Harry should should get it.
Speaker Change: A trademark or patent or whatever I miss that.
Speaker Change: Because the whole intention of flattish as you you're going to see it up a little bit you're going to see it down a little bit we were trying to in a way again to get everyone to not be so scientific so as I say so far so good it's what we expected I feel good about the rest of the year.
Speaker Change: Okay perfect. That's all for me. Thanks for your time. Thank you.
Stephen Mckenna: Our next question comes from Stephen Mckenna.
Speaker Change: Bank of America. Please go ahead.
Speaker Change: Hi, Thank you for taking the question. This one is more of a modern related follow up right.
Speaker Change: We approach kind of tougher compares in Q2 and for the rest of the year for pricing.
Speaker Change: Should we think about that dynamic in and just price increases from here. Thank you.
Speaker Change: So I.
Speaker Change: I think I'd, just comment a minute ago that from a market perspective.
Speaker Change: <unk>.
Speaker Change: The tougher compare would be on the fact that new was up a little bit you used was up over last year wholesale was up a little bit and so the.
Speaker Change: The expectations of a flattish wholesale we'd be a little bit more on that'd be out market not about us.
Speaker Change: Pricing.
Speaker Change: I don't think I really I think at the end of the day we're.
Speaker Change: Within our expectations I think bill in the call mentioned, where we were with our pool.
Speaker Change: Yeah.
Speaker Change: It was yes.
Speaker Change: Yes, a week five yeah. So our.
Speaker Change: Our auction or assurance ARPA was $513 for the quarter in Q1 and that reflected up by fee increase.
Speaker Change: At the very beginning of March right. So, we'll see some improvement in our Peru, all other things being equal through the rest of the year, although our our our guidance does assume that G N V per unit.
Speaker Change: Tips, a little bit in the second half.
Speaker Change: Which would be more seasonal in nature.
Speaker Change: So we think that in as well.
Speaker Change: Is that helpful.
Speaker Change: Okay. So I just wanted to make sure that that was helpful. In terms of the ARPA in the the pricing that was definitely helpful. Thank you right and then.
Speaker Change: [laughter] this on the call you keep talking about.
Speaker Change: How strong demand is but.
Speaker Change: Unit pricing did decelerate quite a bit on you know stable comps.
Speaker Change: From 27% to 19. So I was just wondering is there perhaps any other dynamic I know you touched on competitive competitors a little bit earlier.
Speaker Change: Question, but.
Speaker Change: I don't know are you seeing anything more underlying or is it just.
Speaker Change: Yeah, Yeah take wherever you want.
Speaker Change: Yeah, I mean listen we're we're a bigger company we continue to grow.
Speaker Change: Very I think most investors would say these are very healthy growth.
Speaker Change: <unk> on big numbers.
Speaker Change: So no I think there's really no comment there only because we were within our expectations, we delivered and.
Speaker Change: And we did all that while exceeding their EBIT number which means we didn't give away the farm.
Speaker Change: It really easy to show a bunch of VI unit numbers, you could give them all for free I'm going to ask when you guys do that.
Speaker Change: So I think if anything got continued strong execution continuing to take share.
Speaker Change: I think what we're trying to you know.
Speaker Change: Our brand.
Speaker Change: Whether whether you want us thinking about this as the golf analogy I just want you guys to keep thinking like right down the middle of and I'm not trying to win the longest drive competition on every single Oh here. We are just you're going to see us be right down the middle keep executing keep delivering so really proud of the team that sound right.
Speaker Change: I'll have to answer that but I'm really proud of the results.
Speaker Change: I mean, I would just add you know our revenue growth rate was just over 25% for the quarter were just under 22% last year Q1, right. So.
Speaker Change: All in all I would say, we felt pretty good [laughter] again is as George mentioned, we had.
Speaker Change: <unk> had a really nice beat on EBITDA.
Speaker Change: Which just you know continued financial discipline discipline in terms of running the business. So.
Speaker Change: Last thing I'll mention is our operating cash flow actually in Q1 was equivalent to or our operating cash flow for all of last year.
Speaker Change: So and obviously cashless pretty important element of our financial model as well. So we feel really good about the results.
Speaker Change: Awesome. Thank you yeah, I'm looking at the free cash flow and its ramping quite nicely. So thank you.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen that concludes today's Q&A.
Speaker Change: And I'll hand over to Tim Fox, Okay remarks.
Tim Fox: Great. Thank you put into joining the call today, we look forward to see you on what's going to be a pretty busy conference circuit this quarter.
Again, thank you for your interest in the C V and I Hope you all have a great evening.
Tim Fox: Thanks.
Tim Fox: Thank you.
Speaker Change: Ladies and gentlemen that concludes this evening's event. Thank you for attending and you may now disconnect your lines.
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