Live Earnings Conference Call: ACV Auctions will host a live Q1 2025 earnings call on May 7, 2025 at 5:00PM ET. Follow this link to get details and listen to ACV Auctions' Q1 2025 earnings call when it goes live. Get details. NASDAQ:ACVA ACV Auctions Q3 2023 Earnings Report $15.75 +0.31 (+2.01%) Closing price 03:59 PM EasternExtended Trading$15.67 -0.08 (-0.51%) As of 04:02 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast ACV Auctions EPS ResultsActual EPS-$0.10Consensus EPS -$0.14Beat/MissBeat by +$0.04One Year Ago EPSN/AACV Auctions Revenue ResultsActual Revenue$119.01 millionExpected Revenue$119.13 millionBeat/MissMissed by -$120.00 thousandYoY Revenue GrowthN/AACV Auctions Announcement DetailsQuarterQ3 2023Date11/6/2023TimeN/AConference Call DateMonday, November 6, 2023Conference Call Time5:00PM ETUpcoming EarningsACV Auctions' Q1 2025 earnings is scheduled for Wednesday, May 7, 2025, with a conference call scheduled at 5:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by ACV Auctions Q3 2023 Earnings Call TranscriptProvided by QuartrNovember 6, 2023 ShareLink copied to clipboard.There are 13 speakers on the call. Operator00:00:00Good day, and thank you for standing by. Welcome to the ACV Auctions Third Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tim Fox, Vice President of Investor Relations. Operator00:00:42Please go ahead. Speaker 100:00:49Thank you, operator. Good afternoon and thank you for joining ACV's conference call to discuss our Q3 2023 financial results. With me on the call today are George Shimon, Chief Executive Officer and Bill Zarrella, 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. Speaker 100:01:22A discussion of the risks and uncertainties related to our business can be found in our SEC filings and in today's press release, both of which can be found on our Investor Relations website. During this call, we will discuss both GAAP and non GAAP financial measures. 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. And with that, let me turn the call over to George. Speaker 200:01:50Thanks, Tim. Good afternoon, everyone, and thank you for joining us. ACV's momentum continued in the 3rd quarter with revenue at the high end of guidance and adjusted EBITDA once again exceeding our guidance. Our performance reflects another quarter of strong execution by the ECB team as we gained market share and launched new innovations that expand our TAM and drive operating efficiencies. Strong demand for ACV Transport and ACV Capital contributed to revenue growth and revenue margin expansion and a continued focus on driving profitable growth resulted in our adjusted EBITDA margin expanding 800 basis points year over year. Speaker 200:02:42With that, let's turn to a brief recap of Q3 on Slide 4. 3rd quarter revenue of $119,000,000 increased 13% year over year with growth accelerating sequentially. We sold 150,000 vehicles in the quarter, resulting in 13% year over year growth, reflecting further adoption of our marketplace solutions targeting dealer engagement. GMV of $2,100,000,000 was flat year over year, reflecting continued moderation of wholesale market prices. Despite this price moderation, ARPU once again increased year over year, reflecting the strength of ACV's core value proposition. Speaker 200:03:36On Slide 5, I will again frame the rest of today's discussion around the 3 pillars of our strategy to maximize long term shareholder value, growth, innovation and scale. I'll begin with growth. On Slide 7, I'll share our observations about the broader automotive market as context for factors impacting the dealer wholesale market. In Q3, new vehicle retail units declined sequentially, increased approximately 10% year over year from depressed levels. While volumes continue to lag pre pandemic levels, inventories improved, which is key to supporting a sustained recovery in retail sales, trade and dealer wholesale supply. Speaker 200:04:29Used vehicle retail units modestly increased sequentially and year over year, but also remained well below historical levels as affordability issues continued to pressure consumer demand. In terms of vehicle sourcing, our data indicates that dealers retain a higher than normal percentage of trades for retail inventory, creating a near term headwind for wholesale supply. We believe the retail wholesale mix will begin to normalize as inventory levels for both new and used vehicles recover. While supply remains muted, Price depreciation and conversion rates across the industry have generally been following normal seasonal patterns and have marginally improved in recent months. This is in stark contrast to industry trends in the back half of twenty twenty two, which resulted in challenging operating conditions in the wholesale market. Speaker 200:05:28On balance, we believe that end markets are showing early signs of improvement, giving us confidence to again raise guidance for the year. Turning now to Slide 8. We estimate that the U. S. Dealer wholesale market remained well below normalized volumes in Q3, but grew modestly quarter over quarter. Speaker 200:05:49Relative to Q3 2022, the market only declined about 2%, which was a significant improvement from the 14% year over year decline in Q2. As the market begins to recover, our growth will benefit both from market expansion and from market share gains. In Q3, our 13% year over year unit growth and an estimated market contraction of 2% implies 15% market share growth for ACV. Next, I would like to wrap up the growth section with highlights on our value added services. 1st on Slide 9, the ACV Transportation team delivered another strong quarter and continues to scale ahead of schedule. Speaker 200:06:36Our strong carrier network and improving cycle times resulted in attach rate in the mid-fifty percent range, again this quarter. Our technology investments and expanded carrier coverage of AI optimized pricing are driving both growth and operating efficiencies. This combination yielded record revenue margins in the high teens, an increase of approximately 500 basis points year over year. As a reminder, our 2026 financial targets assume transport revenue margin in the high teens. While margins may fluctuate modestly over time, the fact that we achieved our target last quarter speaks to the value we're delivering to our dealer partners and to the strong execution of our Transport team. Speaker 200:07:25Turning to Slide 10. Our ACV Capital team once again delivered strong results in Q3. Attach rates in the low double digits resulted in 40% loan volume growth year over year and combined with strong ARPU expansion delivered about 80% revenue growth year over year. In addition to our floor plan offerings, we are investing in new ACV Capital capabilities that will help our sellers source consumer vehicles leveraging ClearCar. We remain confident that ACV Capital will be an important long term growth and profit drive. Speaker 200:08:02Turning to the 2nd element of our strategy, innovation. On Slide 12, I'd like to touch on the formal launch of ClearCar, ACV's consumer sourcing solution that leverages AI and real time market data to deliver highly accurate condition based pricing. As a reminder, consumers looking to sell their vehicle is a very large market opportunity, including 10,000,000 transactions that historically are sold period of year and therefore do not end up at a dealership. As I discussed earlier, the below normal supply of new and used inventory in especially late model used vehicles is a challenge for our dealer partners. ACV is addressing this challenge with Clearpark, which has experienced strong early adoption with hundreds of dealer rooftops. Speaker 200:08:52And based on dealer feedback, consumer conversion rates are significantly higher and competitive sourcing tools. It speaks to both the power of the offering and its effectiveness in driving qualified leads. At its core, ClearFire helps decode how vehicle conditioning influences vehicle value, allowing ACV dealers and commercial clients to have more transparent conversations with consumers and consumers benefit from having greater visibility into how their vehicle value is determined. The solution consists of ClearCar Price and ClearCar Capture. ClearCar Price is an estimation tool that resides in the dealer's website provides consumers a precise value estimate for their vehicle. Speaker 200:09:39Farecar Capture allows consumers to submit photos of their vehicles for further documentation of conditions through our AI imaging and self inspection tool, which we acquired from Monk. 3rd Park Capture digitally detects exterior damage during the photo capture process, enabling dealers to update their condition enhanced pricing without an on-site inspection. We are very pleased with the early market momentum for this value added solution and the opportunity to both expand our TAM and add another growth lever to our business. To wrap up on growth, We are also pleased with the early stages of our commercial market strategy. We are operating in a few markets where we have the services required by these customers. Speaker 200:10:29And even though it's early, we're very encouraged with our progress and believe we can scale and capture the market share outlined in our 2026 financial targets. On Slide 13, we highlight examples of tech investments that extend into our operations, Delivering customer success while reducing costs. As we discussed last quarter, reducing arbitration remains key focus for both customer satisfaction and optimizing margins. 1 of the key drivers is inspection accuracy. Our field team is equipped with CoPilot, ArGuard, Apex and our AI powered imaging apps to deliver high quality inspections. Speaker 200:11:14Copalla and ArvGuard leverage machine learning, predictive analytics and sensor data to inform our VCI on vehicle specific issues before and after conducting an inspection. Apex delivered significant transparency into vehicle operating position, while also increasing the inspection productivity of our VCI teammates. We continue to expand our imaging AI capability to identify specific important conditions is the presence of damage and rust. Together, these innovations have contributed to a low double digit reduction in arbitration unit cost this year, which is a great performance in the current market. Our technology investments are also driving efficiency in our model with OpEx leverage increasing by over 200 basis points in Q3. Speaker 200:12:09To wrap up on innovation, ACV remains committed to delivering industry leading technology to our dealer partners and to our own operations, driving both growth and scale, we look forward to sharing more details with you next quarter. With that, let me hand it over to Bill to take you through our financial results and how we're driving growth at scale. Speaker 300:12:31Thanks, George, and thank you everyone for joining us today. We are very pleased with our Q3 financial performance with strong revenue growth and upside to adjusted EBITDA. We also continue to demonstrate the strength of our business model with meaningful revenue margin and adjusted EBITDA margin expansion versus Q3 2022. Turning to Slide 15, I'll begin with a recap of our 3rd quarter results. Revenue of $119,000,000 was at the high end of our guidance range and grew 13% year over year. Speaker 300:13:05Adjusted EBITDA loss of $4,000,000 beat our guidance range and adjusted EBITDA margin improved approximately 800 basis points versus Q3 2022. This demonstrates both the inherent operating leverage in our model and continued strong OpEx management. Next on Slide 16, I will cover additional revenue details. Auction and assurance revenue, which was 55% of total revenue, increased 17% year over year. This revenue performance reflects 13% year over year unit growth and auction and assurance ARPU of $4.39 which grew 4% year over year. Speaker 300:13:48Note that ARPU grew year over year despite a 10% decline in GMV per unit, reflecting our price increases from last fall and this September and we believe we still have pricing headroom going forward. Marketplace services revenue, which was 38% of total revenue, grew 11% year over year. Results were driven by strong ACV transport performance and another record revenue quarter for ACV Capital. Our SaaS and Data Services products comprised 7% of total revenue and declined 6% year over year. The decline was primarily related to our standalone inspection offerings, which continue to be impacted by the weak off lease market. Speaker 300:14:32While Max Digital revenue grew modestly year over year, recall that we continue to take a measured approach to customer acquisition, while making significant improvements to the MAX digital platform. We're confident these improvements position MAX for long term growth. Turning now to Slide 17, I will cover costs in the quarter. Q3 cost of revenue as a percentage of revenue decreased approximately 500 basis points year over year. The improvement was driven by both strong auction insurance results and by ACV Transport. Speaker 300:15:05As George mentioned, we delivered high teens transport revenue margins in Q3, which is in line with our 2026 target. We continue to focus on expense discipline as we optimize and scale our business. Non GAAP operating expense excluding cost of revenue increased 9% year over year in Q3 versus 18% year over year growth the prior year. This reflects a more metered approach to growing OpEx relative to our revenue and margin growth to deliver higher operating margins as we march towards profitability. Moving to Slide 18, let me frame our investment strategy and path to profitability. Speaker 300:15:45Our focus on spending discipline and operating efficiency is expected to result in a material decrease in OpEx growth this year, resulting in our adjusted EBITDA loss declining by over 60% year over year. And as you've seen reflected in our Q3 results, we have delivered margin expansion while preserving our go to market and technology investments to ensure ACV is in a strong position as market conditions improve. Next, I will highlight our strong capital structure on Slide 19. We ended Q3 with $450,000,000 in cash and equivalents and marketable securities and $105,000,000 of debt on our revolver. Note that our cash balance includes $162,000,000 of float in our auction business. Speaker 300:16:32The amount of float on our balance sheet will continue to fluctuate meaningfully based on business trends in the final 2 weeks of each quarter, which has a corresponding impact on operating cash flow. Year to date cash flow from operations was $9,000,000 a significant improvement from the $75,000,000 outflow in the same period of 2022. Now I'll turn to guidance on Slide 20. For the Q4 of 2023, we are expecting revenue in the range of 100 and to $120,000,000 Adjusted EBITDA is expected to be a loss in the range of $7,000,000 to $9,000,000 The sequential increase in adjusted EBITDA loss in Q4 reflects targeted investments to drive continued revenue growth in 2024. For the full year 2023, we are raising our expected revenue to a range of $479,000,000 to $483,000,000 representing growth of 14% to 15% year over year. Speaker 300:17:28We are also reducing our expected adjusted EBITDA loss to a range of $20,000,000 to $22,000,000 and remain committed to achieving adjusted EBITDA breakeven exiting to Europe, setting us up to deliver full quarter profitability in Q1, 2024. As it relates to our guidance, we're assuming that new and used vehicle supplies remain lower than historical levels in the near term that improve as production and inventory continue to recover. We're also assuming that conversion rates and wholesale price depreciation follow normal seasonal patterns for the balance of the year. Let me wrap up on Slide 21 by reviewing our 2026 financial targets. Speaker 200:18:08We are very pleased with Speaker 300:18:09our continued execution in challenging macro environment and we made it committed to achieving $1,300,000,000 of revenue $325,000,000 of adjusted EBITDA in 2026 with 25% adjusted EBITDA margins. Our targets are underpinned by a number of factors including Sustained market share gains, dealer wholesale market recovery to historical volumes, TAM expansion into adjacent markets, technology innovation to drive growth and operating efficiency and a commitment to balancing growth and investment as our business scales. And with that, let me turn it back to George. Speaker 200:18:48Thanks, Bill. Before we take your questions, I will summarize. We are very pleased with our strong execution in the Q3. 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 marketplace and by gaining wallet share, which positions ACV for attractive growth as market conditions improve. Speaker 200:19:16We are executing on our territory penetration plans and gaining traction with our expanding suite of offerings. We are delivering on an exciting product roadmap to further differentiate ACV and expand our addressable market. We are on track to achieve our near term adjusted EBITDA target and over the medium term generate over $1,000,000,000 in revenue with attractive margin that we believe will drive significant shareholder value. We are committed to achieving these results, while building a world class team to deliver on our goals. With that, I'll turn the call over to the operator to begin the Q and A. Operator00:19:59Thank you. Please standby while we compile the Q and A roster. And our first question comes from Chris Pierce of Needham and Company. Speaker 400:20:32Hey, good afternoon, everybody. Speaker 300:20:34Hey, Chris. Hey, Chris. Speaker 400:20:37Just talk about your unit growth versus the used units we see year over year at the publicly traded dealer groups. I know you don't probably have that handy, but they averaged about down 5% year over year in their Q3, but you guys are up 13%. I think it's because of your leverage to independent dealers, but I'd love to kind of hear why you're able to grow versus them kind of shrinking or just kind of Just in general, how are you able to kind of differentiate yourself? Speaker 200:21:04Yes, Chris, thanks. So there's a couple of factors of why our units grew Even though to your point the used car retail market shrunk. So one is that we did see new car sales, Which is where our supplies comes from. So one is we are starting to see some of the health of the market come back, which is positive. 2, We are continually not only growing sellers, but getting more wallet share. Speaker 200:21:32So we're expanding Our capabilities and growth within our footprint. So look at the two main reasons why being both Customer wins, customer wallet share and also the fact that new car sales is starting to come back and new car sales coming back is helping us have trades coming into 2 dealerships, Which then creates the wholesale opportunity. Now granted, we didn't see dealer wholesale grow Year over year, but we are seeing the market, at least incrementally get healthy, especially compared to last quarter. Speaker 400:22:20Okay, perfect. And then just talking about normal seasonal depreciation at year end, Can you just speak to what gives you the confidence to say that given what we saw last year? Is it just the dealer inventories were bloated last year and they're tighter this year? Or is there something else to it? Speaker 200:22:36Yes. Chris, the normalcy we're referring to in the call was both Regarding thus far, I would say listings and sell through rate or conversion rate, I should say, we're seeing a sense of normalcy as it relates to both. So far, We're feeling good. We're both seeing the and then actually last but not least, I think to your point though is The value of used cars, we do have in our plan used car values going down. So it is part of the plan. Speaker 200:23:18We do expect moderate a moderation on GMV happening sort of month over month throughout the quarter. So when you look at all the trends, listings, conversion rate and also our expectations on GMV going down, It gets us comfortable for the plan we've outlined. Speaker 300:23:40Okay. Thank you. Operator00:23:43Thank you. One moment for our next question. And our next question comes from Eric Sheridan of Goldman Sachs. Speaker 500:23:59Thanks so much for taking the questions. Hope everyone on the team is well. Maybe 2 if I could. 1st, longer term question about pricing. When you think about your long term plan and where you are relative to competitors today, How should we be thinking as pricing as a lever to either gain more market share versus gather more unit economics compound more revenue growth. Speaker 500:24:21So that would be number 1, just a refresh on pricing versus competition. And then second, just in terms of the adjusted EBITDA guide for Q4. Just want to make sure that is maybe year end one timer type technology investments as opposed to maybe a new run rate or thought we should be taking in on incremental margins going into next year. I know it's a little early to talk about 2024, but just want to understand the context around those investments that have some of the margin reversal in Q4? Thanks. Speaker 200:24:53Yes, certainly, Eric. Thanks. This is George. I'll go first And then I'll let Bill chime in on your second question. So on your first question, Our long term targets at least in 2026 model is about $500 and combined buy sell fees, we've been averaging around $4.50 this year. Speaker 200:25:18So when you look at the fact that That's only about $50 more. Now assuming GMV does decline a bit from time to time, we feel very comfortable That we've got the room. So instead of just giving you the gap, there is the gap is larger than that $50 Between us and some of our competitors, I think the way we look at at least for now is we feel very good about where We've got our we've gotten the model between now and 2026, knowing that the buying sell fees at the majority of Traditional auction is pretty significantly higher than that. I think definitely well over $100 in room today and that's not where the competitors may go in the future. So that goes to your first question. Speaker 200:26:09Bill, do you want to take the second one? Speaker 300:26:10Yes. Hey, Eric. So in terms of your second question, the short answer is There's really no change in terms of our operating model going forward. But to give you a little bit of context, so even Even with the Q4 guidance, we're reducing our OpEx guidance for the year by about $2,000,000 So if anything, we're actually in a better position in terms of heading into next year to achieve our EBITDA breakeven, if not EBITDA profitability in Q1. But there is an opportunity for us to make some targeted investments to drive growth next year And we're taking an opportunity to bake that into our Q4 OpEx. Speaker 300:26:55So again, these are pretty targeted. We still have a lot of growth opportunities ahead of us, not just in dealer wholesale, but commercial peer to peer. And our focus is basically setting our as best we can for next year's targets, while still again lowering our total OpEx For the year by about $2,000,000 So hopefully that gives you a little bit of context, but there certainly isn't anything beyond that or anything you should adjust your models to reflect. Speaker 500:27:25Helpful on both fronts. Thanks. Speaker 200:27:28Yes. Thank you, Eric. Operator00:27:29Thank you. One moment for our next question. And our next question comes from Nick Jones of JMP Securities. Speaker 600:27:46Great. Thanks for taking the questions. I guess just maybe back on the normalization or time line of normalization, I think back in the Analyst Day you said in 2025, give or take, you expect kind of the industry to normalize. How are you guys monitoring what can kind of dislocate or change that timeline as we see various data points come out, whether it specific or maybe more specifically kind of a 4th bill your consumer challenges maybe causing an over correction and And supply starts to build as consumers struggle to afford auto. So any color on kind of any I guess to boil it down, are there any changes in your timeline to normalization from here? Speaker 600:28:24And then kind of the second question is, how are you thinking about consumer challenges, auto affordability playing into that? Thanks. Speaker 200:28:34Yes. Thanks, Nick. So a way to think about this is we have in our planning that the market returns by 2026, Okay. And that's really how we've been thinking about it. And so we yes, it's 2023 Late in the year here, but we do have some time, right, for us to kind of for the world to keep evolving. Speaker 200:29:00If you look at like dealer wholesale units, even over the last Few years, just in 2021 alone it was over 10, 2022 is likely over 8. This year it might end up being under 8. So we've seen these changes. We're pretty comfortable in the fact that we will see improvements over the next couple of years, the rate of improvement we should all see. Let me walk you through why I feel good saying we should see improvements. Speaker 200:29:34So one is new car sales are getting incentives. And these new car sales incentives are important. They help drive affordability. We're starting to see incentives even for across almost all OEMs right now. That's a great bang for us, okay? Speaker 200:29:54So we're starting to see interest rate incentives, lease incentives. So as we're as you think about our primary source of supply today being Franchise dealers is where the primary source of supply comes from. As they drive more new sales, we get more trades. So that's 1. 2, the other part of what you mentioned is dealers are going to be careful what's on their lots. Speaker 200:30:27And up until recently, you've heard us say dealer wholesale contracted for two reasons. Sales went down, new car sales went down and also dealers kept a higher percentage of cars. You've heard us talk about that. I mentioned it earlier on the call. The later part of that becomes really important. Speaker 200:30:48As used car inventory is starting to add up, we believe dealers will start to wholesale a slightly higher percentage throughout the next few years and return back to normal levels. Dealers are still keeping an elevated number of these trades even today. So when you look at those two factors, we feel pretty good that over the next few years, We should see improvements. How much of an improvement? I've got till February to give you an opinion on next year at I'll use those couple of months to wait on our exact thoughts. Speaker 200:31:26But I'm feeling pretty good on some of the signs we're seeing. We even saw a slight quarter over quarter improvement in the market of dealer wholesale, although really, really small. Any type of improvement is a good thing. It feels like we're in that trough and even if interest rates stay high and consumer affordability for used cars It's a challenge for next year. I think new cars we're going to see incentives coming out. Speaker 200:31:53OEMs are going to move that inventory. That's going to be more trade. And I think franchise dealers should be careful on the cars they keep. Long winded answer, I thought it was an important question, so I leaned in a little bit more. Great. Speaker 200:32:05Thanks, George. Certainly. Operator00:32:08Thank you. One moment for our next question. And our next question comes from Ron Josey of Citi. Speaker 700:32:27George, I want to ask about conversion rates. I think you said we're seeing a sense of normalcy here. And I'm wondering if conversion rates are getting back to call to 21 levels or before. And if that's the case, maybe talk to us on what are the drivers here in the past. We talked about newer auction formats, a 2 hour auctions, etcetera. Speaker 700:32:45And I have a quick follow-up. Speaker 200:32:48Yes, certainly. There's we think we did a little bit better than the market on conversion rates. I would say a couple of parties out there provide data on conversion rates. I would say we were marginally better than the market. Being better is always a good thing. Speaker 200:33:07Probably two reasons. 1 is we are Benefiting to your point from some of these innovations that we've been doing, whether it be product enhancements, timed auctions, Enhancements we're making to our condition report, all of those things are also helping us sort of incrementally, I would say, manage seasonality well. We always plan to go into Q4 conversion rates are going to go down a little bit. That's always the plan. That's the case every year. Speaker 200:33:41I would say we're doing a good job and Q3 represented also a good job. The second is We went out we went to market this year being a little bit more careful on pressing our sales team and our inspectors for listings and customers. And we pressed for a little a better conversion as part of the overall success story. And so think about that being a little bit more selective. And typical, I would say growing up, right, as you're getting bigger, as we're dealing with more and more sellers, More and more listings. Speaker 200:34:22You just really want to make sure being prudent if we got certain sellers that have a very low conversion. We're more careful on that. So those would be the two reasons That we are doing well from a conversion rate perspective, both as product and tech and also from a Operating policy perspective, we're definitely more careful on sellers who remain low with their conversion rate. Speaker 700:34:48Got it. That's very helpful in conversion rates. I just wanted to clarify maybe something you said on the call now that we're seeing The units reaccelerate growth and I understand your point on incentives and supply. Can you repeat or talk just a little bit more on pricing? We've seen high singles, low doubles down this year and do you expect that to continue as supply improves? Speaker 700:35:09Thank you. Speaker 200:35:12Yes. When you speak to this pricing, you're really saying the GMV, meaning what's selling on our platform, right? So Yes. We're we have in our plan Low single digits, things like 2019 like 1 ish to 2 ish percent based on the month depreciation rate as part of the plan. So we go into the quarter Planning for that to be the case, which is which we're finding prudent, right, because you So one is expected. Speaker 200:35:57So, so far I feel really good about the team's ability here to predict What we think is going to happen and the plan we've outlined seems we're confident with that, Glenn. Speaker 300:36:10Yes, I think hey, Ron, it's Bill. So just maybe a little more context here. So last quarter, our GMV per unit was down year on year 10%, down quarter on quarter 11%, except we managed to drive year on year actually a 4% increase in our ARPU. Quarter on quarter was down a few points, down about 3%. One of the strategies and we've talked about this in the past is with the pricing power that we have as prices do decline because that's what we're assuming and that's what we've baked into our Forward looking models. Speaker 300:36:48We believe over time we can offset any of that downside In terms of our buy fees, we've been able to do that thus far. And then maybe one more level of clarity. So if you look at in our example, our GMV per unit, about half of that is due to a modest shift in mix to less expensive vehicles in response to consumer affordability issues. And the rest of that is just the overall market decline in prices. So you've got a few kind of dynamics driving it, but at the end of the day, We're able to at least so far we've been able to protect our financial model from any of that volatility. Speaker 700:37:36Very helpful. Thank you, guys. Speaker 300:37:38Thanks. Operator00:37:40Thank you. One moment for our next question. And our next question comes from John Colin Toni of Jefferies. Speaker 300:37:57Hey, thanks for taking my questions. 2 for me. Speaker 800:38:00Starting with the September price increase, can you help size how it contributed to 3Q and 4Q revenue and how or how it will contributed to 4Q revenue? And second, turning to your 2026 revenue target, I think your outlook assumes 17% outperformance relative to the market and that's a bit above the 15% you Saw this past quarter, which was down somewhat from recent quarters despite the conversion tailwind from longer auction formats. So just talk about what drives helps drive the improvement in market share trends over time? Thanks. Speaker 200:38:44Yes. Hey, John, it's George. I'll go with your second question first and Bill can go to your first question. So yes, we've been if you look at our last six We've been between 16% 17% average. So 15% is pretty consistent with that range. Speaker 200:39:04And keep in mind how you even do this math is math where It's not perfect, right, talking about this. So number 2, if you do a little homework on our on the competitive environment, I think you're going to see that 15% was really good. So one, I'd say compared to our competitors, we really did a great job. And 2, I would say I would call that rather consistent with the 16% to 17% for the last 16 last 6 quarters. So I feel great on the fact that when you look at what we've been putting up there in any given quarter, let's just generally say between 15% to 17 Percent, I feel really good about that. Speaker 200:39:45There's no change. Bill, do you want to go to the first question? Speaker 300:39:48Yes. Yes. So John, in terms of Q3 and the price increase, it was roughly about $25 in terms of sizing. So also relatively small similar to the price adjustment we passed through last year. And that was only for 1 month in the quarter. Speaker 300:40:09So roughly 1 third of that or about $8 worth of impact on our auction ARPU. And then obviously we will get the full quarter benefit of that in Q4. That's all other things being equal. Obviously what ultimately impacts ARPU are the factors including average car prices, right. So that's The biggest variable, but if you just want to isolate the price increase by itself, those would be the numbers that would be the math. Speaker 800:40:42Very helpful. Thank you so much. Speaker 300:40:44Yes. Thank you. Operator00:40:46Thank you. One moment for our next question. And our next Question comes from Bob Labick of CJS Securities. Speaker 900:41:02Good afternoon. Thanks for taking our questions. Speaker 300:41:06Sure, Pat. Sure. Speaker 1000:41:07Yes. No, I wanted to start with the exciting discussion earlier on ClearCar and self inspection And maybe tell us expand a little bit on the uses. Is it right now just for dealers for consumer sourcing? Or is there an opportunity to use this self inspection for perhaps some more remote dealerships that a VCI can't get out to efficiently and therefore just have a dealer inspecting their own cars and not loading them on The network as well or how is it being used now and what are the opportunities for the self inspection that you're pioneering? Speaker 200:41:48Yes, certainly Bob. We I would say so far what you heard us Talking about is the 1st category you opened up, which is dealer sourcing more consumer cars. We've been Pressing that is a problem we want to solve. Number 1, because it's the biggest complaint we hear from dealers is they need more inventory, especially late model inventory, the cars that they would normally keep and they need help, right? So they're keeping cars that they typically would wholesale Primarily because they still need the right inventory. Speaker 200:42:24So we think by them sourcing more consumer cars, we'll actually wholesale more, Right. So you're seeing us focus there. On the second part of your question, even today dealers do self inspect some cars. It's low today, low Single digit percentage of our cars today, dealers are inspecting and selling first ACV is expecting. These new tools we're doing will make it easier. Speaker 200:42:58Probably not ready to talk about that until somewhere around Q2 or Q3 of next year. Somewhere in that timing, we'll probably start talking about that a little bit more. But already something we support. So if a dealer does want to inspect a car, launch it, that's already something we support. But the Category would be dealers asking if we could make that a little bit more efficient and easier for them to do. Speaker 200:43:26So that would be the category that you're Opening up here for the call, which is a good one. But something we would be probably I'd be more comfortable to talk about Sometime in the maybe the first half of next year. Speaker 1000:43:40Okay, very fair. Please remind me to ask you how much that will increase your TAM at some point in the first half of next year. Speaker 400:43:48Sorry, Eli. Speaker 1000:43:51And so just for my other question And then if you could give us an update on your penetration into the large dealer groups. Obviously, that's another driver of your units and your opportunity and your growth and just kind of where you stand now and where you want to be? Yes. Speaker 200:44:08No, it's a great question. I don't think we've been giving any data about our growth rate there. But I will say this is, Our growth rate with the major dealer groups has been materially higher when you compare that compared to the growth rate we share with you all. The growth rate with the major railroad groups is a higher percentage. So it's going well. Speaker 200:44:33We continue to focus on adding more value whether it be AC Private Marketplace, whether it be products like ClearCar. 1 of the large dealer groups out there, one of the top 3 or 4, I would say, at least the only top 5 is using us raised to private marketplace, they're using us for Max Digital, now using us for ClearCar. So this is the top 5 dealer group using us literally all of our value added services. We're starting to have a material piece of their overall wholesale share. So feeling really good, Bob. Speaker 200:45:05The strategy we're doing is working, where our value added service strategy is working and we're able to build a relationship with several of these dealer groups. Speaker 1000:45:19Super. Thanks so much. Speaker 200:45:21Yes. Thank you. Operator00:45:23Thank you. One moment for our next question. And our next Question comes from Michael Graham of Canaccord. Speaker 1100:45:39Hey, thank you. I just wanted to ask 2. The first one was on the transport attach rate in margin, which is going great. Do you have any Updated thoughts on like terminally where that transport margin can get to. And I just wanted to ask, as we inch a little closer to The new year here, when you think about achieving your 2026 targets, any updated thoughts on whether over the course of like 2024, 2025 and 2026, any updated thoughts on whether you think that expansion on the margin side is expected to be linear or back end loaded or just any high level thoughts Speaker 300:46:24you could share would be great. Speaker 200:46:28Yes. Certainly, Michael. We obviously, we're ecstatic about how well ACV Transport has been going, Both from take rate and margin, it's going really, really well. We'd really rather Keep everyone's expectations about what we've been doing for a couple of reasons. One is look at the addressable market as 70%, right? Speaker 200:46:58So when you look at the addressable market at 70, Hitting the take rates we've been hitting is really incredible, right, because there's always been a portion of your dealers who are local and who can just go and pick up the car. So one is, when I look at the overall We've got take rate for Transport. We'd rather not create higher expectations we've created. And even if we do in any one quarter be a little higher than that, I'd rather you all keep the expectations where we've had it, okay? So that's one is I think It's good to keep our expectations reasonable there. Speaker 200:47:41On margin, again, we're doing a really great job. I rather until we're significantly higher on units, We still at the end of the day, we still deliver a margin profile in transport that's blended with both mature markets and less mature. So instead of getting into a tangent here, I'd rather just say that for at least the next few years, I'd like to keep our expectations where they are. And I think that gives us the opportunity to invest in the lanes that we want to invest in and still take the revenue and margin we want in other lanes. So That's giving you a little bit behind the scenes of why. Speaker 200:48:30I didn't speak that post 2026 in that dialogue, at least from now to 2026, I'd rather keep the expectations where they are and then and kind of go from there. Speaker 300:48:42Yes. I think I would add Just one of your questions was, will growth in EBITDA margins be linear? The answer to that question is no. I would not expect them to be linear. Obviously, we haven't provided 2024 guidance yet. Speaker 300:49:00We'll do that on our next call. But think in terms of the leverage of our model, which is very significant. And as we start to accelerate our growth Due to continued share gains, market recovery over time over the next several years, penetrating commercial, continuing to expand our ARPU, there'll be a lot of leverage that will flow through to the bottom line in the out years, right. So think Kind of acceleration through 2025 and potentially significant acceleration through 2026 as we get the benefit of that leverage. So Again, we didn't at our Analyst Day breakdown what it would look like each year obviously, but that's the overall concept and the reason why we're confident And we can execute on that path assuming we can drive the top line revenue growth that we articulated a few months ago at the Analyst Day. Speaker 1100:49:57Okay. Thanks. Those are helpful answers. Thank you both. Speaker 200:50:00Thank Operator00:50:01you. One moment for our next question. And our next question comes from Rajat Gupta of JPMorgan Chase. Speaker 900:50:19Great. Thanks for taking the question and congrats on the execution in the quarter. I just had one on just first one on you talked about The supply challenges getting a little better. You talked about dealers maybe releasing More trades than what we're doing right now into next year. We're going to see some challenges like from the off lease supply challenges hitting Starting middle of next year, from the low penetration in 2021 and then after that. Speaker 900:50:51How do you overcome that in context of Your market expectations or maybe another way to ask is, what is your expectation of just used car retail industry volumes improving next year that gives you comfort around the recovery in your market next year? And I have a follow-up. Thanks. Speaker 200:51:13Yes, certainly Rajat. I mentioned some of this earlier and not to be repetitive too much, but when you think about our Primary supply today coming from franchise dealers granted we have new channels that we're also building that we talked about at Investor Day. But just to focus first, your first question on our primary channel. We've I would at least today, I would predict new car sales should at least marginally improve, if not improve more better than marginally year over year. That would be like Sitting here predicting next year, right, just like the rest of us trying to predict all these macro things going on. Speaker 200:51:56We've got better the actual OEMs aren't having the challenges Building vehicles, so most of that's behind us. We have incentives starting to come out. I would say better expectations from OEMs. I mean, We're not hearing you all ask questions like maybe OEMs will never do incentives again. I mean, all those questions are all done, right? Speaker 200:52:18We all know we're going to go back to incentives. So You kind of go into next year saying, okay, consumers are going to be incented to buy a new car. Meanwhile, Cars are aging. We have cars consumers are driving at least from an age perspective, The oldest cars we've seen on record and it's getting worse. And for the everyday consumer out there, that's not a good thing. Speaker 200:52:48It's getting more and more expensive Fix these cars. If any of you have friends or family that have gone through this, you're probably all hearing the stories every day right now. It's challenging. When you go in there and you're getting a repair that's $1500 $2,500 for a repair, it's tough. I'd much rather get in there through a $400 or $500 payment or a lease or something like that. Speaker 200:53:11You've seen most recently in the TV commercials, I noticed Even yesterday watching television, Chevy was promoting their cars that are brand new vehicles between $25,000 $30,000 There was a reason why they were showcasing, right, that specific commercial right now. They're trying to tell consumers there are cars. There are new cars they can buy. It might not be the one they wanted, but there are cars. So, anyways, when I think about next year, I think we'll see new cars come back in favor. Speaker 200:53:46I think we're going to have consumers that can afford And have the credit and means to buy those new cars. I think what that's going to mean for the used cars that we are trading in, Dealers are only going to keep the ones they know they're going to make money on. I think it's going to dealers are going to go into the year, not saying we need to keep everything Like they have been in the last couple of years, because they know interest rates might stay high. They're not going to think they could Not every single one of these used cars is going to be the champion they thought the last couple of years. It's going to be a much more realistic mindset, Which I think will press these trades that end up at a dealer, an independent dealer or someone else who's got a much lower cost of labor. Speaker 200:54:28They could fix these things cheaper than some of the franchise dealers. I think some of the old trends will come back again. So again long winded answer, I think important question, But I feel good that at least sitting here right now, how much whether or not next year is just marginally better than this year Or materially better, I'm not ready to say. But it feels like we should at least improve year over year. That's at least my current professional guess. Speaker 900:55:02Got it. That's helpful. And then maybe just quick one on the price increases. The September price increase is a little faster than we had expected. Last year it was December. Speaker 900:55:11Should we expect you to continue to do these other higher frequency or was it just one of a timing shift this year and then you go back to like once a year next year? Just maybe any color on that would be helpful. And that's all I had. Thanks. Speaker 200:55:25Yes. I mean, our main goal is to hit the objectives we've shown you all in ourselves. That's Get up to about $500 in buy and sell fees between now and $26,000,000 The rate will always be determining how fast we do that, But our look at it as same goal, same goal we've been outlining, dollars 500 in 26 again, will be lower than our typical traditional competitors are today. So there's room here for us to increase fees incrementally, And we'll decide when the right time is between now and then. But as Bill told you, this last one was about $25 ish. Speaker 200:56:10We'll just keep incrementally getting there until we have our pricing be competitive because today it's really a little bit lower than it should be. Speaker 900:56:23Got it. Thank you so much. Speaker 200:56:25Yes, certainly. Thank you. Operator00:56:26Thank you. One moment for our next question. And our next question comes from Daniel Imbro of Stephens Incorporated. Speaker 1200:56:44Yes. Hey, good evening everybody. Thanks for taking our questions. Certainly, Dan. Maybe one On the volume backdrop, hey guys. Speaker 1200:56:53I'm just curious with floor plan rates this high for your dealer customers, Are you seeing dealers be more disciplined about moving aged inventory off the lot? And I think some of your peers maybe have tools to help with this. But do you have specific tools that we help dealers not only source cars, but determine, okay, like this is how long to hold this car for, this car should be wholesaled now. How is that adoption going just as floor plan rates are 7%, 8% now, not the 1% to Speaker 200:57:193% we saw a few years ago? Yes, Daniel, great question. Dealers are getting more and more disciplined. So we're seeing it definitely with the larger groups, we're seeing dealers, you're all hearing You're seeing disciplined return in the ecosystem. Over the last couple of years, dealers really in a way paused all their aging policies. Speaker 200:57:45And for those of you that are new to this concept that Daniel is bringing up, Historically, if a car was on a dealer's lot for over 90 days, the owners of the dealership or the operators Push the dealer to then wholesale the vehicle and they would deem it 8. That's the category Daniel's bringing up. So those policies are starting to be come back in place. Some of them have been iterative, like I said, hey, we'll give you 120 for now, but we're going to push to 90 by the end of this year. And some dealer groups have gone right back at it and gone right back to discipline. Speaker 200:58:20And your second part of your question, yes, we have tools. We have a product within our MAX digital offering that helps dealers both know their sweet spot and also helps dealers manage What dealers they're what cars they're doing well, what cars they should really just be wholesaling right now. So that intelligence is currently in our MAX offering and we're always brainstorming how we can get some of this out to all of our dealers Sort of iteratively, but yes, part of what you're asking, we provide those services for somewhere around 1,000 rooftops out there today. So, but yes, I think both great questions. We are starting to see the discipline come up. Speaker 1200:59:06Great. And then maybe just one follow-up on Rajat's question on pricing. Curious how did your competitors I think over the last 18 months, I think your large peers have raised fees, but you each time fees have come up, how have you seen the market respond so far Speaker 200:59:22to your fee increases? Thanks. Yes. As far as I can tell, we've been very fair to our end customers in our fee increases. I don't know if we're keeping up with everybody or not, honestly. Speaker 200:59:36If you went around and definitely looked at like the traditional physical auctions, These fees have gotten really high across the country. So we've been fair where our buyers think we're fair. We got really very little negative reaction and just as much positive reaction to the high fee increase that we had negative. So our objective right now is to not be a pig. Yes, our fees are low. Speaker 201:00:08We're trying to increase these incrementally over a long period of time and just do this well to fair to our buyers. I mean these guys are all trying to And gals are trying to build a business. They're all trying they got their own struggles going on. And yes, our fees are low. But we're trying to incrementally to also be fair to our buyers. Speaker 201:00:27And so far the team's recommendation to me and others, the team's recommendations have been spot on. The planning has been spot on. I'm just really, really proud of how we just keep doing the market intelligence, where are we, compare them to market. And you just know when you do these things, if you're doing it well, because your end customers even tell you, you're really handling this well. So I'm really proud of how the team has done this so far. Speaker 1201:00:55Great. I appreciate all the color. Best of luck. Speaker 201:00:58Thank you. Thanks. Operator01:01:00Thank you. This concludes the question and answer session. I would now like to turn it back to Tim Fox for closing remarks. Speaker 101:01:08Thanks, TD. I'd like to thank everyone for joining us on the call today. Please note that we will be In several investor conferences in November here, you can find all the details on our IR website. We look forward to seeing you on the conference circuit hopefully this quarter. And again, thank you for interest in ACV and have a great evening.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallACV Auctions Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) ACV Auctions Earnings HeadlinesACV Auctions (ACVA) To Report Earnings Tomorrow: Here Is What To ExpectMay 6 at 5:21 AM | msn.comBrokerages Set ACV Auctions Inc. (NASDAQ:ACVA) PT at $22.50May 6 at 2:07 AM | americanbankingnews.comGold Hits New Highs as Global Markets SpiralWhen Trump took office in 2017, gold was just $1,100 an ounce. By the time he left, it had soared to $1,839. Now… as new tariffs take effect, gold is breaking records again. You've hopefully already seen this in action… but gold is surpassing $3,000 per ounce for the first time EVER.May 7, 2025 | Premier Gold Co (Ad)ACV to Participate in Upcoming Investor ConferencesMay 5 at 4:05 PM | globenewswire.com1 Cash-Producing Stock to Keep an Eye On and 2 to IgnoreMay 2, 2025 | finance.yahoo.comACV to Report First Quarter 2025 Financial Results on May 7, 2025April 23, 2025 | globenewswire.comSee More ACV Auctions Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like ACV Auctions? Sign up for Earnings360's daily newsletter to receive timely earnings updates on ACV Auctions and other key companies, straight to your email. Email Address About ACV AuctionsACV Auctions (NASDAQ:ACVA) operates a digital marketplace that connects buyers and sellers for the online auction of wholesale vehicles. The company's marketplace platform includes digital marketplace, which connects buyers and sellers by providing online auction, which facilitates real-time transactions of wholesale vehicles; Run List for pre-filtering and pre-screening of vehicles up to 24 hours prior to an auction taking place; ACV transportation service to enable the buyers to see real-time transportation quotes and status reports of the vehicle; ACV capital, a short-term inventory financing services for buyers to purchase vehicles; and Go Green's seller assurance service for against claims related to defects in the vehicle. It also provides remarketing centers, which offers value-added services, such as vehicle reconditioning and storage for dealers and commercial partners. In addition, the company offers data services, including True360 report, which provides cosmetic and structural vehicle assessments integrated into vehicle history reports for dealer to make wholesale and retail transaction decisions on and off the marketplace; ACV market report provides transaction data and condition reports for comparable used vehicles, including pricing data from third-party sources and allows dealers to determine pricing and valuation strategies for used vehicles; and ACV MAX inventory management software enables dealers to manage their inventory and set pricing while turning vehicles. Further, it provides data and technology through inspection, such as condition reports, virtual lift solutions, apex device, and vehicle intelligence platform; and marketplace enablement, comprising MyACV application, private marketplaces, operations automation, live appraisals, and programmatic buying service. ACV Auctions Inc. was incorporated in 2014 and is headquartered in Buffalo, New York.View ACV Auctions ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Disney Stock Jumps on Earnings—Is the Magic Sustainable?Archer Stock Eyes Q1 Earnings After UAE UpdatesFord Motor Stock Rises After Earnings, But Momentum May Not Last Broadcom Stock Gets a Lift on Hyperscaler Earnings & CapEx BoostPalantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release? 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There are 13 speakers on the call. Operator00:00:00Good day, and thank you for standing by. Welcome to the ACV Auctions Third Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tim Fox, Vice President of Investor Relations. Operator00:00:42Please go ahead. Speaker 100:00:49Thank you, operator. Good afternoon and thank you for joining ACV's conference call to discuss our Q3 2023 financial results. With me on the call today are George Shimon, Chief Executive Officer and Bill Zarrella, 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. Speaker 100:01:22A discussion of the risks and uncertainties related to our business can be found in our SEC filings and in today's press release, both of which can be found on our Investor Relations website. During this call, we will discuss both GAAP and non GAAP financial measures. 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. And with that, let me turn the call over to George. Speaker 200:01:50Thanks, Tim. Good afternoon, everyone, and thank you for joining us. ACV's momentum continued in the 3rd quarter with revenue at the high end of guidance and adjusted EBITDA once again exceeding our guidance. Our performance reflects another quarter of strong execution by the ECB team as we gained market share and launched new innovations that expand our TAM and drive operating efficiencies. Strong demand for ACV Transport and ACV Capital contributed to revenue growth and revenue margin expansion and a continued focus on driving profitable growth resulted in our adjusted EBITDA margin expanding 800 basis points year over year. Speaker 200:02:42With that, let's turn to a brief recap of Q3 on Slide 4. 3rd quarter revenue of $119,000,000 increased 13% year over year with growth accelerating sequentially. We sold 150,000 vehicles in the quarter, resulting in 13% year over year growth, reflecting further adoption of our marketplace solutions targeting dealer engagement. GMV of $2,100,000,000 was flat year over year, reflecting continued moderation of wholesale market prices. Despite this price moderation, ARPU once again increased year over year, reflecting the strength of ACV's core value proposition. Speaker 200:03:36On Slide 5, I will again frame the rest of today's discussion around the 3 pillars of our strategy to maximize long term shareholder value, growth, innovation and scale. I'll begin with growth. On Slide 7, I'll share our observations about the broader automotive market as context for factors impacting the dealer wholesale market. In Q3, new vehicle retail units declined sequentially, increased approximately 10% year over year from depressed levels. While volumes continue to lag pre pandemic levels, inventories improved, which is key to supporting a sustained recovery in retail sales, trade and dealer wholesale supply. Speaker 200:04:29Used vehicle retail units modestly increased sequentially and year over year, but also remained well below historical levels as affordability issues continued to pressure consumer demand. In terms of vehicle sourcing, our data indicates that dealers retain a higher than normal percentage of trades for retail inventory, creating a near term headwind for wholesale supply. We believe the retail wholesale mix will begin to normalize as inventory levels for both new and used vehicles recover. While supply remains muted, Price depreciation and conversion rates across the industry have generally been following normal seasonal patterns and have marginally improved in recent months. This is in stark contrast to industry trends in the back half of twenty twenty two, which resulted in challenging operating conditions in the wholesale market. Speaker 200:05:28On balance, we believe that end markets are showing early signs of improvement, giving us confidence to again raise guidance for the year. Turning now to Slide 8. We estimate that the U. S. Dealer wholesale market remained well below normalized volumes in Q3, but grew modestly quarter over quarter. Speaker 200:05:49Relative to Q3 2022, the market only declined about 2%, which was a significant improvement from the 14% year over year decline in Q2. As the market begins to recover, our growth will benefit both from market expansion and from market share gains. In Q3, our 13% year over year unit growth and an estimated market contraction of 2% implies 15% market share growth for ACV. Next, I would like to wrap up the growth section with highlights on our value added services. 1st on Slide 9, the ACV Transportation team delivered another strong quarter and continues to scale ahead of schedule. Speaker 200:06:36Our strong carrier network and improving cycle times resulted in attach rate in the mid-fifty percent range, again this quarter. Our technology investments and expanded carrier coverage of AI optimized pricing are driving both growth and operating efficiencies. This combination yielded record revenue margins in the high teens, an increase of approximately 500 basis points year over year. As a reminder, our 2026 financial targets assume transport revenue margin in the high teens. While margins may fluctuate modestly over time, the fact that we achieved our target last quarter speaks to the value we're delivering to our dealer partners and to the strong execution of our Transport team. Speaker 200:07:25Turning to Slide 10. Our ACV Capital team once again delivered strong results in Q3. Attach rates in the low double digits resulted in 40% loan volume growth year over year and combined with strong ARPU expansion delivered about 80% revenue growth year over year. In addition to our floor plan offerings, we are investing in new ACV Capital capabilities that will help our sellers source consumer vehicles leveraging ClearCar. We remain confident that ACV Capital will be an important long term growth and profit drive. Speaker 200:08:02Turning to the 2nd element of our strategy, innovation. On Slide 12, I'd like to touch on the formal launch of ClearCar, ACV's consumer sourcing solution that leverages AI and real time market data to deliver highly accurate condition based pricing. As a reminder, consumers looking to sell their vehicle is a very large market opportunity, including 10,000,000 transactions that historically are sold period of year and therefore do not end up at a dealership. As I discussed earlier, the below normal supply of new and used inventory in especially late model used vehicles is a challenge for our dealer partners. ACV is addressing this challenge with Clearpark, which has experienced strong early adoption with hundreds of dealer rooftops. Speaker 200:08:52And based on dealer feedback, consumer conversion rates are significantly higher and competitive sourcing tools. It speaks to both the power of the offering and its effectiveness in driving qualified leads. At its core, ClearFire helps decode how vehicle conditioning influences vehicle value, allowing ACV dealers and commercial clients to have more transparent conversations with consumers and consumers benefit from having greater visibility into how their vehicle value is determined. The solution consists of ClearCar Price and ClearCar Capture. ClearCar Price is an estimation tool that resides in the dealer's website provides consumers a precise value estimate for their vehicle. Speaker 200:09:39Farecar Capture allows consumers to submit photos of their vehicles for further documentation of conditions through our AI imaging and self inspection tool, which we acquired from Monk. 3rd Park Capture digitally detects exterior damage during the photo capture process, enabling dealers to update their condition enhanced pricing without an on-site inspection. We are very pleased with the early market momentum for this value added solution and the opportunity to both expand our TAM and add another growth lever to our business. To wrap up on growth, We are also pleased with the early stages of our commercial market strategy. We are operating in a few markets where we have the services required by these customers. Speaker 200:10:29And even though it's early, we're very encouraged with our progress and believe we can scale and capture the market share outlined in our 2026 financial targets. On Slide 13, we highlight examples of tech investments that extend into our operations, Delivering customer success while reducing costs. As we discussed last quarter, reducing arbitration remains key focus for both customer satisfaction and optimizing margins. 1 of the key drivers is inspection accuracy. Our field team is equipped with CoPilot, ArGuard, Apex and our AI powered imaging apps to deliver high quality inspections. Speaker 200:11:14Copalla and ArvGuard leverage machine learning, predictive analytics and sensor data to inform our VCI on vehicle specific issues before and after conducting an inspection. Apex delivered significant transparency into vehicle operating position, while also increasing the inspection productivity of our VCI teammates. We continue to expand our imaging AI capability to identify specific important conditions is the presence of damage and rust. Together, these innovations have contributed to a low double digit reduction in arbitration unit cost this year, which is a great performance in the current market. Our technology investments are also driving efficiency in our model with OpEx leverage increasing by over 200 basis points in Q3. Speaker 200:12:09To wrap up on innovation, ACV remains committed to delivering industry leading technology to our dealer partners and to our own operations, driving both growth and scale, we look forward to sharing more details with you next quarter. With that, let me hand it over to Bill to take you through our financial results and how we're driving growth at scale. Speaker 300:12:31Thanks, George, and thank you everyone for joining us today. We are very pleased with our Q3 financial performance with strong revenue growth and upside to adjusted EBITDA. We also continue to demonstrate the strength of our business model with meaningful revenue margin and adjusted EBITDA margin expansion versus Q3 2022. Turning to Slide 15, I'll begin with a recap of our 3rd quarter results. Revenue of $119,000,000 was at the high end of our guidance range and grew 13% year over year. Speaker 300:13:05Adjusted EBITDA loss of $4,000,000 beat our guidance range and adjusted EBITDA margin improved approximately 800 basis points versus Q3 2022. This demonstrates both the inherent operating leverage in our model and continued strong OpEx management. Next on Slide 16, I will cover additional revenue details. Auction and assurance revenue, which was 55% of total revenue, increased 17% year over year. This revenue performance reflects 13% year over year unit growth and auction and assurance ARPU of $4.39 which grew 4% year over year. Speaker 300:13:48Note that ARPU grew year over year despite a 10% decline in GMV per unit, reflecting our price increases from last fall and this September and we believe we still have pricing headroom going forward. Marketplace services revenue, which was 38% of total revenue, grew 11% year over year. Results were driven by strong ACV transport performance and another record revenue quarter for ACV Capital. Our SaaS and Data Services products comprised 7% of total revenue and declined 6% year over year. The decline was primarily related to our standalone inspection offerings, which continue to be impacted by the weak off lease market. Speaker 300:14:32While Max Digital revenue grew modestly year over year, recall that we continue to take a measured approach to customer acquisition, while making significant improvements to the MAX digital platform. We're confident these improvements position MAX for long term growth. Turning now to Slide 17, I will cover costs in the quarter. Q3 cost of revenue as a percentage of revenue decreased approximately 500 basis points year over year. The improvement was driven by both strong auction insurance results and by ACV Transport. Speaker 300:15:05As George mentioned, we delivered high teens transport revenue margins in Q3, which is in line with our 2026 target. We continue to focus on expense discipline as we optimize and scale our business. Non GAAP operating expense excluding cost of revenue increased 9% year over year in Q3 versus 18% year over year growth the prior year. This reflects a more metered approach to growing OpEx relative to our revenue and margin growth to deliver higher operating margins as we march towards profitability. Moving to Slide 18, let me frame our investment strategy and path to profitability. Speaker 300:15:45Our focus on spending discipline and operating efficiency is expected to result in a material decrease in OpEx growth this year, resulting in our adjusted EBITDA loss declining by over 60% year over year. And as you've seen reflected in our Q3 results, we have delivered margin expansion while preserving our go to market and technology investments to ensure ACV is in a strong position as market conditions improve. Next, I will highlight our strong capital structure on Slide 19. We ended Q3 with $450,000,000 in cash and equivalents and marketable securities and $105,000,000 of debt on our revolver. Note that our cash balance includes $162,000,000 of float in our auction business. Speaker 300:16:32The amount of float on our balance sheet will continue to fluctuate meaningfully based on business trends in the final 2 weeks of each quarter, which has a corresponding impact on operating cash flow. Year to date cash flow from operations was $9,000,000 a significant improvement from the $75,000,000 outflow in the same period of 2022. Now I'll turn to guidance on Slide 20. For the Q4 of 2023, we are expecting revenue in the range of 100 and to $120,000,000 Adjusted EBITDA is expected to be a loss in the range of $7,000,000 to $9,000,000 The sequential increase in adjusted EBITDA loss in Q4 reflects targeted investments to drive continued revenue growth in 2024. For the full year 2023, we are raising our expected revenue to a range of $479,000,000 to $483,000,000 representing growth of 14% to 15% year over year. Speaker 300:17:28We are also reducing our expected adjusted EBITDA loss to a range of $20,000,000 to $22,000,000 and remain committed to achieving adjusted EBITDA breakeven exiting to Europe, setting us up to deliver full quarter profitability in Q1, 2024. As it relates to our guidance, we're assuming that new and used vehicle supplies remain lower than historical levels in the near term that improve as production and inventory continue to recover. We're also assuming that conversion rates and wholesale price depreciation follow normal seasonal patterns for the balance of the year. Let me wrap up on Slide 21 by reviewing our 2026 financial targets. Speaker 200:18:08We are very pleased with Speaker 300:18:09our continued execution in challenging macro environment and we made it committed to achieving $1,300,000,000 of revenue $325,000,000 of adjusted EBITDA in 2026 with 25% adjusted EBITDA margins. Our targets are underpinned by a number of factors including Sustained market share gains, dealer wholesale market recovery to historical volumes, TAM expansion into adjacent markets, technology innovation to drive growth and operating efficiency and a commitment to balancing growth and investment as our business scales. And with that, let me turn it back to George. Speaker 200:18:48Thanks, Bill. Before we take your questions, I will summarize. We are very pleased with our strong execution in the Q3. 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 marketplace and by gaining wallet share, which positions ACV for attractive growth as market conditions improve. Speaker 200:19:16We are executing on our territory penetration plans and gaining traction with our expanding suite of offerings. We are delivering on an exciting product roadmap to further differentiate ACV and expand our addressable market. We are on track to achieve our near term adjusted EBITDA target and over the medium term generate over $1,000,000,000 in revenue with attractive margin that we believe will drive significant shareholder value. We are committed to achieving these results, while building a world class team to deliver on our goals. With that, I'll turn the call over to the operator to begin the Q and A. Operator00:19:59Thank you. Please standby while we compile the Q and A roster. And our first question comes from Chris Pierce of Needham and Company. Speaker 400:20:32Hey, good afternoon, everybody. Speaker 300:20:34Hey, Chris. Hey, Chris. Speaker 400:20:37Just talk about your unit growth versus the used units we see year over year at the publicly traded dealer groups. I know you don't probably have that handy, but they averaged about down 5% year over year in their Q3, but you guys are up 13%. I think it's because of your leverage to independent dealers, but I'd love to kind of hear why you're able to grow versus them kind of shrinking or just kind of Just in general, how are you able to kind of differentiate yourself? Speaker 200:21:04Yes, Chris, thanks. So there's a couple of factors of why our units grew Even though to your point the used car retail market shrunk. So one is that we did see new car sales, Which is where our supplies comes from. So one is we are starting to see some of the health of the market come back, which is positive. 2, We are continually not only growing sellers, but getting more wallet share. Speaker 200:21:32So we're expanding Our capabilities and growth within our footprint. So look at the two main reasons why being both Customer wins, customer wallet share and also the fact that new car sales is starting to come back and new car sales coming back is helping us have trades coming into 2 dealerships, Which then creates the wholesale opportunity. Now granted, we didn't see dealer wholesale grow Year over year, but we are seeing the market, at least incrementally get healthy, especially compared to last quarter. Speaker 400:22:20Okay, perfect. And then just talking about normal seasonal depreciation at year end, Can you just speak to what gives you the confidence to say that given what we saw last year? Is it just the dealer inventories were bloated last year and they're tighter this year? Or is there something else to it? Speaker 200:22:36Yes. Chris, the normalcy we're referring to in the call was both Regarding thus far, I would say listings and sell through rate or conversion rate, I should say, we're seeing a sense of normalcy as it relates to both. So far, We're feeling good. We're both seeing the and then actually last but not least, I think to your point though is The value of used cars, we do have in our plan used car values going down. So it is part of the plan. Speaker 200:23:18We do expect moderate a moderation on GMV happening sort of month over month throughout the quarter. So when you look at all the trends, listings, conversion rate and also our expectations on GMV going down, It gets us comfortable for the plan we've outlined. Speaker 300:23:40Okay. Thank you. Operator00:23:43Thank you. One moment for our next question. And our next question comes from Eric Sheridan of Goldman Sachs. Speaker 500:23:59Thanks so much for taking the questions. Hope everyone on the team is well. Maybe 2 if I could. 1st, longer term question about pricing. When you think about your long term plan and where you are relative to competitors today, How should we be thinking as pricing as a lever to either gain more market share versus gather more unit economics compound more revenue growth. Speaker 500:24:21So that would be number 1, just a refresh on pricing versus competition. And then second, just in terms of the adjusted EBITDA guide for Q4. Just want to make sure that is maybe year end one timer type technology investments as opposed to maybe a new run rate or thought we should be taking in on incremental margins going into next year. I know it's a little early to talk about 2024, but just want to understand the context around those investments that have some of the margin reversal in Q4? Thanks. Speaker 200:24:53Yes, certainly, Eric. Thanks. This is George. I'll go first And then I'll let Bill chime in on your second question. So on your first question, Our long term targets at least in 2026 model is about $500 and combined buy sell fees, we've been averaging around $4.50 this year. Speaker 200:25:18So when you look at the fact that That's only about $50 more. Now assuming GMV does decline a bit from time to time, we feel very comfortable That we've got the room. So instead of just giving you the gap, there is the gap is larger than that $50 Between us and some of our competitors, I think the way we look at at least for now is we feel very good about where We've got our we've gotten the model between now and 2026, knowing that the buying sell fees at the majority of Traditional auction is pretty significantly higher than that. I think definitely well over $100 in room today and that's not where the competitors may go in the future. So that goes to your first question. Speaker 200:26:09Bill, do you want to take the second one? Speaker 300:26:10Yes. Hey, Eric. So in terms of your second question, the short answer is There's really no change in terms of our operating model going forward. But to give you a little bit of context, so even Even with the Q4 guidance, we're reducing our OpEx guidance for the year by about $2,000,000 So if anything, we're actually in a better position in terms of heading into next year to achieve our EBITDA breakeven, if not EBITDA profitability in Q1. But there is an opportunity for us to make some targeted investments to drive growth next year And we're taking an opportunity to bake that into our Q4 OpEx. Speaker 300:26:55So again, these are pretty targeted. We still have a lot of growth opportunities ahead of us, not just in dealer wholesale, but commercial peer to peer. And our focus is basically setting our as best we can for next year's targets, while still again lowering our total OpEx For the year by about $2,000,000 So hopefully that gives you a little bit of context, but there certainly isn't anything beyond that or anything you should adjust your models to reflect. Speaker 500:27:25Helpful on both fronts. Thanks. Speaker 200:27:28Yes. Thank you, Eric. Operator00:27:29Thank you. One moment for our next question. And our next question comes from Nick Jones of JMP Securities. Speaker 600:27:46Great. Thanks for taking the questions. I guess just maybe back on the normalization or time line of normalization, I think back in the Analyst Day you said in 2025, give or take, you expect kind of the industry to normalize. How are you guys monitoring what can kind of dislocate or change that timeline as we see various data points come out, whether it specific or maybe more specifically kind of a 4th bill your consumer challenges maybe causing an over correction and And supply starts to build as consumers struggle to afford auto. So any color on kind of any I guess to boil it down, are there any changes in your timeline to normalization from here? Speaker 600:28:24And then kind of the second question is, how are you thinking about consumer challenges, auto affordability playing into that? Thanks. Speaker 200:28:34Yes. Thanks, Nick. So a way to think about this is we have in our planning that the market returns by 2026, Okay. And that's really how we've been thinking about it. And so we yes, it's 2023 Late in the year here, but we do have some time, right, for us to kind of for the world to keep evolving. Speaker 200:29:00If you look at like dealer wholesale units, even over the last Few years, just in 2021 alone it was over 10, 2022 is likely over 8. This year it might end up being under 8. So we've seen these changes. We're pretty comfortable in the fact that we will see improvements over the next couple of years, the rate of improvement we should all see. Let me walk you through why I feel good saying we should see improvements. Speaker 200:29:34So one is new car sales are getting incentives. And these new car sales incentives are important. They help drive affordability. We're starting to see incentives even for across almost all OEMs right now. That's a great bang for us, okay? Speaker 200:29:54So we're starting to see interest rate incentives, lease incentives. So as we're as you think about our primary source of supply today being Franchise dealers is where the primary source of supply comes from. As they drive more new sales, we get more trades. So that's 1. 2, the other part of what you mentioned is dealers are going to be careful what's on their lots. Speaker 200:30:27And up until recently, you've heard us say dealer wholesale contracted for two reasons. Sales went down, new car sales went down and also dealers kept a higher percentage of cars. You've heard us talk about that. I mentioned it earlier on the call. The later part of that becomes really important. Speaker 200:30:48As used car inventory is starting to add up, we believe dealers will start to wholesale a slightly higher percentage throughout the next few years and return back to normal levels. Dealers are still keeping an elevated number of these trades even today. So when you look at those two factors, we feel pretty good that over the next few years, We should see improvements. How much of an improvement? I've got till February to give you an opinion on next year at I'll use those couple of months to wait on our exact thoughts. Speaker 200:31:26But I'm feeling pretty good on some of the signs we're seeing. We even saw a slight quarter over quarter improvement in the market of dealer wholesale, although really, really small. Any type of improvement is a good thing. It feels like we're in that trough and even if interest rates stay high and consumer affordability for used cars It's a challenge for next year. I think new cars we're going to see incentives coming out. Speaker 200:31:53OEMs are going to move that inventory. That's going to be more trade. And I think franchise dealers should be careful on the cars they keep. Long winded answer, I thought it was an important question, so I leaned in a little bit more. Great. Speaker 200:32:05Thanks, George. Certainly. Operator00:32:08Thank you. One moment for our next question. And our next question comes from Ron Josey of Citi. Speaker 700:32:27George, I want to ask about conversion rates. I think you said we're seeing a sense of normalcy here. And I'm wondering if conversion rates are getting back to call to 21 levels or before. And if that's the case, maybe talk to us on what are the drivers here in the past. We talked about newer auction formats, a 2 hour auctions, etcetera. Speaker 700:32:45And I have a quick follow-up. Speaker 200:32:48Yes, certainly. There's we think we did a little bit better than the market on conversion rates. I would say a couple of parties out there provide data on conversion rates. I would say we were marginally better than the market. Being better is always a good thing. Speaker 200:33:07Probably two reasons. 1 is we are Benefiting to your point from some of these innovations that we've been doing, whether it be product enhancements, timed auctions, Enhancements we're making to our condition report, all of those things are also helping us sort of incrementally, I would say, manage seasonality well. We always plan to go into Q4 conversion rates are going to go down a little bit. That's always the plan. That's the case every year. Speaker 200:33:41I would say we're doing a good job and Q3 represented also a good job. The second is We went out we went to market this year being a little bit more careful on pressing our sales team and our inspectors for listings and customers. And we pressed for a little a better conversion as part of the overall success story. And so think about that being a little bit more selective. And typical, I would say growing up, right, as you're getting bigger, as we're dealing with more and more sellers, More and more listings. Speaker 200:34:22You just really want to make sure being prudent if we got certain sellers that have a very low conversion. We're more careful on that. So those would be the two reasons That we are doing well from a conversion rate perspective, both as product and tech and also from a Operating policy perspective, we're definitely more careful on sellers who remain low with their conversion rate. Speaker 700:34:48Got it. That's very helpful in conversion rates. I just wanted to clarify maybe something you said on the call now that we're seeing The units reaccelerate growth and I understand your point on incentives and supply. Can you repeat or talk just a little bit more on pricing? We've seen high singles, low doubles down this year and do you expect that to continue as supply improves? Speaker 700:35:09Thank you. Speaker 200:35:12Yes. When you speak to this pricing, you're really saying the GMV, meaning what's selling on our platform, right? So Yes. We're we have in our plan Low single digits, things like 2019 like 1 ish to 2 ish percent based on the month depreciation rate as part of the plan. So we go into the quarter Planning for that to be the case, which is which we're finding prudent, right, because you So one is expected. Speaker 200:35:57So, so far I feel really good about the team's ability here to predict What we think is going to happen and the plan we've outlined seems we're confident with that, Glenn. Speaker 300:36:10Yes, I think hey, Ron, it's Bill. So just maybe a little more context here. So last quarter, our GMV per unit was down year on year 10%, down quarter on quarter 11%, except we managed to drive year on year actually a 4% increase in our ARPU. Quarter on quarter was down a few points, down about 3%. One of the strategies and we've talked about this in the past is with the pricing power that we have as prices do decline because that's what we're assuming and that's what we've baked into our Forward looking models. Speaker 300:36:48We believe over time we can offset any of that downside In terms of our buy fees, we've been able to do that thus far. And then maybe one more level of clarity. So if you look at in our example, our GMV per unit, about half of that is due to a modest shift in mix to less expensive vehicles in response to consumer affordability issues. And the rest of that is just the overall market decline in prices. So you've got a few kind of dynamics driving it, but at the end of the day, We're able to at least so far we've been able to protect our financial model from any of that volatility. Speaker 700:37:36Very helpful. Thank you, guys. Speaker 300:37:38Thanks. Operator00:37:40Thank you. One moment for our next question. And our next question comes from John Colin Toni of Jefferies. Speaker 300:37:57Hey, thanks for taking my questions. 2 for me. Speaker 800:38:00Starting with the September price increase, can you help size how it contributed to 3Q and 4Q revenue and how or how it will contributed to 4Q revenue? And second, turning to your 2026 revenue target, I think your outlook assumes 17% outperformance relative to the market and that's a bit above the 15% you Saw this past quarter, which was down somewhat from recent quarters despite the conversion tailwind from longer auction formats. So just talk about what drives helps drive the improvement in market share trends over time? Thanks. Speaker 200:38:44Yes. Hey, John, it's George. I'll go with your second question first and Bill can go to your first question. So yes, we've been if you look at our last six We've been between 16% 17% average. So 15% is pretty consistent with that range. Speaker 200:39:04And keep in mind how you even do this math is math where It's not perfect, right, talking about this. So number 2, if you do a little homework on our on the competitive environment, I think you're going to see that 15% was really good. So one, I'd say compared to our competitors, we really did a great job. And 2, I would say I would call that rather consistent with the 16% to 17% for the last 16 last 6 quarters. So I feel great on the fact that when you look at what we've been putting up there in any given quarter, let's just generally say between 15% to 17 Percent, I feel really good about that. Speaker 200:39:45There's no change. Bill, do you want to go to the first question? Speaker 300:39:48Yes. Yes. So John, in terms of Q3 and the price increase, it was roughly about $25 in terms of sizing. So also relatively small similar to the price adjustment we passed through last year. And that was only for 1 month in the quarter. Speaker 300:40:09So roughly 1 third of that or about $8 worth of impact on our auction ARPU. And then obviously we will get the full quarter benefit of that in Q4. That's all other things being equal. Obviously what ultimately impacts ARPU are the factors including average car prices, right. So that's The biggest variable, but if you just want to isolate the price increase by itself, those would be the numbers that would be the math. Speaker 800:40:42Very helpful. Thank you so much. Speaker 300:40:44Yes. Thank you. Operator00:40:46Thank you. One moment for our next question. And our next Question comes from Bob Labick of CJS Securities. Speaker 900:41:02Good afternoon. Thanks for taking our questions. Speaker 300:41:06Sure, Pat. Sure. Speaker 1000:41:07Yes. No, I wanted to start with the exciting discussion earlier on ClearCar and self inspection And maybe tell us expand a little bit on the uses. Is it right now just for dealers for consumer sourcing? Or is there an opportunity to use this self inspection for perhaps some more remote dealerships that a VCI can't get out to efficiently and therefore just have a dealer inspecting their own cars and not loading them on The network as well or how is it being used now and what are the opportunities for the self inspection that you're pioneering? Speaker 200:41:48Yes, certainly Bob. We I would say so far what you heard us Talking about is the 1st category you opened up, which is dealer sourcing more consumer cars. We've been Pressing that is a problem we want to solve. Number 1, because it's the biggest complaint we hear from dealers is they need more inventory, especially late model inventory, the cars that they would normally keep and they need help, right? So they're keeping cars that they typically would wholesale Primarily because they still need the right inventory. Speaker 200:42:24So we think by them sourcing more consumer cars, we'll actually wholesale more, Right. So you're seeing us focus there. On the second part of your question, even today dealers do self inspect some cars. It's low today, low Single digit percentage of our cars today, dealers are inspecting and selling first ACV is expecting. These new tools we're doing will make it easier. Speaker 200:42:58Probably not ready to talk about that until somewhere around Q2 or Q3 of next year. Somewhere in that timing, we'll probably start talking about that a little bit more. But already something we support. So if a dealer does want to inspect a car, launch it, that's already something we support. But the Category would be dealers asking if we could make that a little bit more efficient and easier for them to do. Speaker 200:43:26So that would be the category that you're Opening up here for the call, which is a good one. But something we would be probably I'd be more comfortable to talk about Sometime in the maybe the first half of next year. Speaker 1000:43:40Okay, very fair. Please remind me to ask you how much that will increase your TAM at some point in the first half of next year. Speaker 400:43:48Sorry, Eli. Speaker 1000:43:51And so just for my other question And then if you could give us an update on your penetration into the large dealer groups. Obviously, that's another driver of your units and your opportunity and your growth and just kind of where you stand now and where you want to be? Yes. Speaker 200:44:08No, it's a great question. I don't think we've been giving any data about our growth rate there. But I will say this is, Our growth rate with the major dealer groups has been materially higher when you compare that compared to the growth rate we share with you all. The growth rate with the major railroad groups is a higher percentage. So it's going well. Speaker 200:44:33We continue to focus on adding more value whether it be AC Private Marketplace, whether it be products like ClearCar. 1 of the large dealer groups out there, one of the top 3 or 4, I would say, at least the only top 5 is using us raised to private marketplace, they're using us for Max Digital, now using us for ClearCar. So this is the top 5 dealer group using us literally all of our value added services. We're starting to have a material piece of their overall wholesale share. So feeling really good, Bob. Speaker 200:45:05The strategy we're doing is working, where our value added service strategy is working and we're able to build a relationship with several of these dealer groups. Speaker 1000:45:19Super. Thanks so much. Speaker 200:45:21Yes. Thank you. Operator00:45:23Thank you. One moment for our next question. And our next Question comes from Michael Graham of Canaccord. Speaker 1100:45:39Hey, thank you. I just wanted to ask 2. The first one was on the transport attach rate in margin, which is going great. Do you have any Updated thoughts on like terminally where that transport margin can get to. And I just wanted to ask, as we inch a little closer to The new year here, when you think about achieving your 2026 targets, any updated thoughts on whether over the course of like 2024, 2025 and 2026, any updated thoughts on whether you think that expansion on the margin side is expected to be linear or back end loaded or just any high level thoughts Speaker 300:46:24you could share would be great. Speaker 200:46:28Yes. Certainly, Michael. We obviously, we're ecstatic about how well ACV Transport has been going, Both from take rate and margin, it's going really, really well. We'd really rather Keep everyone's expectations about what we've been doing for a couple of reasons. One is look at the addressable market as 70%, right? Speaker 200:46:58So when you look at the addressable market at 70, Hitting the take rates we've been hitting is really incredible, right, because there's always been a portion of your dealers who are local and who can just go and pick up the car. So one is, when I look at the overall We've got take rate for Transport. We'd rather not create higher expectations we've created. And even if we do in any one quarter be a little higher than that, I'd rather you all keep the expectations where we've had it, okay? So that's one is I think It's good to keep our expectations reasonable there. Speaker 200:47:41On margin, again, we're doing a really great job. I rather until we're significantly higher on units, We still at the end of the day, we still deliver a margin profile in transport that's blended with both mature markets and less mature. So instead of getting into a tangent here, I'd rather just say that for at least the next few years, I'd like to keep our expectations where they are. And I think that gives us the opportunity to invest in the lanes that we want to invest in and still take the revenue and margin we want in other lanes. So That's giving you a little bit behind the scenes of why. Speaker 200:48:30I didn't speak that post 2026 in that dialogue, at least from now to 2026, I'd rather keep the expectations where they are and then and kind of go from there. Speaker 300:48:42Yes. I think I would add Just one of your questions was, will growth in EBITDA margins be linear? The answer to that question is no. I would not expect them to be linear. Obviously, we haven't provided 2024 guidance yet. Speaker 300:49:00We'll do that on our next call. But think in terms of the leverage of our model, which is very significant. And as we start to accelerate our growth Due to continued share gains, market recovery over time over the next several years, penetrating commercial, continuing to expand our ARPU, there'll be a lot of leverage that will flow through to the bottom line in the out years, right. So think Kind of acceleration through 2025 and potentially significant acceleration through 2026 as we get the benefit of that leverage. So Again, we didn't at our Analyst Day breakdown what it would look like each year obviously, but that's the overall concept and the reason why we're confident And we can execute on that path assuming we can drive the top line revenue growth that we articulated a few months ago at the Analyst Day. Speaker 1100:49:57Okay. Thanks. Those are helpful answers. Thank you both. Speaker 200:50:00Thank Operator00:50:01you. One moment for our next question. And our next question comes from Rajat Gupta of JPMorgan Chase. Speaker 900:50:19Great. Thanks for taking the question and congrats on the execution in the quarter. I just had one on just first one on you talked about The supply challenges getting a little better. You talked about dealers maybe releasing More trades than what we're doing right now into next year. We're going to see some challenges like from the off lease supply challenges hitting Starting middle of next year, from the low penetration in 2021 and then after that. Speaker 900:50:51How do you overcome that in context of Your market expectations or maybe another way to ask is, what is your expectation of just used car retail industry volumes improving next year that gives you comfort around the recovery in your market next year? And I have a follow-up. Thanks. Speaker 200:51:13Yes, certainly Rajat. I mentioned some of this earlier and not to be repetitive too much, but when you think about our Primary supply today coming from franchise dealers granted we have new channels that we're also building that we talked about at Investor Day. But just to focus first, your first question on our primary channel. We've I would at least today, I would predict new car sales should at least marginally improve, if not improve more better than marginally year over year. That would be like Sitting here predicting next year, right, just like the rest of us trying to predict all these macro things going on. Speaker 200:51:56We've got better the actual OEMs aren't having the challenges Building vehicles, so most of that's behind us. We have incentives starting to come out. I would say better expectations from OEMs. I mean, We're not hearing you all ask questions like maybe OEMs will never do incentives again. I mean, all those questions are all done, right? Speaker 200:52:18We all know we're going to go back to incentives. So You kind of go into next year saying, okay, consumers are going to be incented to buy a new car. Meanwhile, Cars are aging. We have cars consumers are driving at least from an age perspective, The oldest cars we've seen on record and it's getting worse. And for the everyday consumer out there, that's not a good thing. Speaker 200:52:48It's getting more and more expensive Fix these cars. If any of you have friends or family that have gone through this, you're probably all hearing the stories every day right now. It's challenging. When you go in there and you're getting a repair that's $1500 $2,500 for a repair, it's tough. I'd much rather get in there through a $400 or $500 payment or a lease or something like that. Speaker 200:53:11You've seen most recently in the TV commercials, I noticed Even yesterday watching television, Chevy was promoting their cars that are brand new vehicles between $25,000 $30,000 There was a reason why they were showcasing, right, that specific commercial right now. They're trying to tell consumers there are cars. There are new cars they can buy. It might not be the one they wanted, but there are cars. So, anyways, when I think about next year, I think we'll see new cars come back in favor. Speaker 200:53:46I think we're going to have consumers that can afford And have the credit and means to buy those new cars. I think what that's going to mean for the used cars that we are trading in, Dealers are only going to keep the ones they know they're going to make money on. I think it's going to dealers are going to go into the year, not saying we need to keep everything Like they have been in the last couple of years, because they know interest rates might stay high. They're not going to think they could Not every single one of these used cars is going to be the champion they thought the last couple of years. It's going to be a much more realistic mindset, Which I think will press these trades that end up at a dealer, an independent dealer or someone else who's got a much lower cost of labor. Speaker 200:54:28They could fix these things cheaper than some of the franchise dealers. I think some of the old trends will come back again. So again long winded answer, I think important question, But I feel good that at least sitting here right now, how much whether or not next year is just marginally better than this year Or materially better, I'm not ready to say. But it feels like we should at least improve year over year. That's at least my current professional guess. Speaker 900:55:02Got it. That's helpful. And then maybe just quick one on the price increases. The September price increase is a little faster than we had expected. Last year it was December. Speaker 900:55:11Should we expect you to continue to do these other higher frequency or was it just one of a timing shift this year and then you go back to like once a year next year? Just maybe any color on that would be helpful. And that's all I had. Thanks. Speaker 200:55:25Yes. I mean, our main goal is to hit the objectives we've shown you all in ourselves. That's Get up to about $500 in buy and sell fees between now and $26,000,000 The rate will always be determining how fast we do that, But our look at it as same goal, same goal we've been outlining, dollars 500 in 26 again, will be lower than our typical traditional competitors are today. So there's room here for us to increase fees incrementally, And we'll decide when the right time is between now and then. But as Bill told you, this last one was about $25 ish. Speaker 200:56:10We'll just keep incrementally getting there until we have our pricing be competitive because today it's really a little bit lower than it should be. Speaker 900:56:23Got it. Thank you so much. Speaker 200:56:25Yes, certainly. Thank you. Operator00:56:26Thank you. One moment for our next question. And our next question comes from Daniel Imbro of Stephens Incorporated. Speaker 1200:56:44Yes. Hey, good evening everybody. Thanks for taking our questions. Certainly, Dan. Maybe one On the volume backdrop, hey guys. Speaker 1200:56:53I'm just curious with floor plan rates this high for your dealer customers, Are you seeing dealers be more disciplined about moving aged inventory off the lot? And I think some of your peers maybe have tools to help with this. But do you have specific tools that we help dealers not only source cars, but determine, okay, like this is how long to hold this car for, this car should be wholesaled now. How is that adoption going just as floor plan rates are 7%, 8% now, not the 1% to Speaker 200:57:193% we saw a few years ago? Yes, Daniel, great question. Dealers are getting more and more disciplined. So we're seeing it definitely with the larger groups, we're seeing dealers, you're all hearing You're seeing disciplined return in the ecosystem. Over the last couple of years, dealers really in a way paused all their aging policies. Speaker 200:57:45And for those of you that are new to this concept that Daniel is bringing up, Historically, if a car was on a dealer's lot for over 90 days, the owners of the dealership or the operators Push the dealer to then wholesale the vehicle and they would deem it 8. That's the category Daniel's bringing up. So those policies are starting to be come back in place. Some of them have been iterative, like I said, hey, we'll give you 120 for now, but we're going to push to 90 by the end of this year. And some dealer groups have gone right back at it and gone right back to discipline. Speaker 200:58:20And your second part of your question, yes, we have tools. We have a product within our MAX digital offering that helps dealers both know their sweet spot and also helps dealers manage What dealers they're what cars they're doing well, what cars they should really just be wholesaling right now. So that intelligence is currently in our MAX offering and we're always brainstorming how we can get some of this out to all of our dealers Sort of iteratively, but yes, part of what you're asking, we provide those services for somewhere around 1,000 rooftops out there today. So, but yes, I think both great questions. We are starting to see the discipline come up. Speaker 1200:59:06Great. And then maybe just one follow-up on Rajat's question on pricing. Curious how did your competitors I think over the last 18 months, I think your large peers have raised fees, but you each time fees have come up, how have you seen the market respond so far Speaker 200:59:22to your fee increases? Thanks. Yes. As far as I can tell, we've been very fair to our end customers in our fee increases. I don't know if we're keeping up with everybody or not, honestly. Speaker 200:59:36If you went around and definitely looked at like the traditional physical auctions, These fees have gotten really high across the country. So we've been fair where our buyers think we're fair. We got really very little negative reaction and just as much positive reaction to the high fee increase that we had negative. So our objective right now is to not be a pig. Yes, our fees are low. Speaker 201:00:08We're trying to increase these incrementally over a long period of time and just do this well to fair to our buyers. I mean these guys are all trying to And gals are trying to build a business. They're all trying they got their own struggles going on. And yes, our fees are low. But we're trying to incrementally to also be fair to our buyers. Speaker 201:00:27And so far the team's recommendation to me and others, the team's recommendations have been spot on. The planning has been spot on. I'm just really, really proud of how we just keep doing the market intelligence, where are we, compare them to market. And you just know when you do these things, if you're doing it well, because your end customers even tell you, you're really handling this well. So I'm really proud of how the team has done this so far. Speaker 1201:00:55Great. I appreciate all the color. Best of luck. Speaker 201:00:58Thank you. Thanks. Operator01:01:00Thank you. This concludes the question and answer session. I would now like to turn it back to Tim Fox for closing remarks. Speaker 101:01:08Thanks, TD. I'd like to thank everyone for joining us on the call today. Please note that we will be In several investor conferences in November here, you can find all the details on our IR website. We look forward to seeing you on the conference circuit hopefully this quarter. And again, thank you for interest in ACV and have a great evening.Read morePowered by