ACV Auctions Inc. (ACVA) Earnings Call Transcript & Summary

Good afternoon, everybody. Welcome to ACV's Analyst Day for 2023. Really excited to have everybody back in town. My name is Tim Fox. I'm happy to be the leader of the IR team here at ACV. And on behalf of the entire team, welcome. Glad you could join us today. We've got a great agenda teed up. It's going to be a little tighter than last year, time-wise. So we're going to leave a little extra room at the end for Bill to do a real deep dive and then be able to do a little bit more Q&A. But George is going to kick it off, talk about our addressable market, how we're winning in the market today, a little bit of a high-level view of our product portfolio. And then Mike and Craig are going to dive into how we're continuing to gain share in dealer wholesale but also expand our TAM. Vikas this year is again going to do a little tech panel, a little bit of a smaller team, but dive into some of the cool stuff we're doing, of course, talk a little bit about AI, we'll take a break and then Bill is actually going to spend about half an hour, 35 minutes or so talking about the business model, path to profitability and our 2026 targets. And then we'll end the day with Q&A. So with that, I'd like to -- not hand it over to George yet. We will be making forward-looking statements, which are subject to risks and uncertainties and also discussing both GAAP and non-GAAP financial measures. You can find all this information on our website. And with that, let me turn it over to George.

All right. Good afternoon, everyone. Thanks for joining us. Those of you have flew in from Denver, California, all over spending the day with us. We really appreciate it. We've been really excited about today. And again, what I'm most excited about is you're going to get to see from my team. You're going to get see my team here and talk about growth. We're going to talk about all the things, really excited about over here. So I'll be back on at the end about Q&A. But just to set the day, you're going to hear some from great leaders. You're going to see why I believe in them and why they're executing on our vision. So just a refresher. We operate in a massive industry. It's complex, it's fragmented and it's inefficient. Every used vehicle has its own story, it's own imperfection. And ultimately, its own value. Our mission is to build the most trusted and efficient digital marketplaces and data solutions that makes it easy for dealers, commercial partners and their end consumers to realize the actual cash value of vehicle. Today, you're going to hear about our progress both on technology and our team and how we're going to accomplish our mission. It's been an extraordinary and eventful journey over the past 8 years, right? When you think about the IPO and I was standing in front of most -- many of you, we didn't know everything that was going to hit us, but we've done an incredible job navigating. We actually sold our first car 8 years ago today. So cool day to have this event, right, a little anniversary. And we generated our first $1 million in revenue in 2016, $400 million in revenue in 2022. So obviously, just extraordinary growth. There was a this thing called COVID that happened in the middle of all that. The world changed a little bit on us but I'm just so proud of our team. We inspected 1 million cars last year alone. We had over 24,000 dealers transact $9 billion of GMV last year despite a nearly 30% contraction for the dealer wholesale market. We delivered innovations to drive customer acquisition, enhance our marketplace experience, improve operations and expand our TAM. With nearly $14 billion spent on fees and services in the U.S. alone, we have a large and untapped market opportunity. The majority of our revenue, as you all know, comes from dealer wholesale. I'm going to put that into 2 segments now, and we'll start -- you'll hear us moving forward more carefully, break dealer wholesale into 2 segments, just so we can think about the TAM and how it could change over the next few years. The first segment, where our primary growth has been, is retail-oriented dealers. Dealers that tend to retail cars, they have trades coming in as well as aged inventory that then lead their way into dealer wholesale. So think about that as 1 of the 2 segments within dealer wholesale. The second is the emerging segment. Emerging segment as dealers acquiring cars from consumers who are strictly looking to sell their car. There will be a lot of different types of dealers who are just buying. We think that segment taps into the peer-to-peer TAM. We're starting to see this today. You'll hear about -- hear us talk about this a little bit more. We'll start to separate it as we try to go between now and 2026. Commercial historically represented a TAM of 8 million units a year. You'll hear about our team talk about is, of course, has a lot lower today but it's very strategic. That market will also come back, and you're going to hear about our strategy and execution for commercial. SaaS and data services is an adjacent opportunity with over $1 billion spent a year to date, just in our category, where we did this math was just on data services, pricing, tools, not all software, not all services. Just the things related to the things ACV is doing. And we think AI totally disrupts this category. International expansion and broadening our marketplace to all things that move will remain as long-term opportunities. Won't about those things today, but they remain great opportunities. As we go out and we address the things I just talked about. Hopefully, you'll be hearing us talk about these other areas next year and the years moving forward. Next, we'll spend a few minutes discussing the wholesale automotive market within the context of the broader automotive market. I'll provide a recap of the past few years and why we believe the market is starting to turn the corner. New vehicle sales and trades are a critical input into the wholesale market. Pandemic-related challenges created supply impacts and production, which obviously led to less new vehicle sales. Less new vehicle sales led to less trades. So that was the challenge. But over the past 4 months, we've seen year-over-year SAAR growth. So now the positive signs are here. And even though new inventory remains low across the country, these trends show it heading in the right direction. The used vehicle retail market has been under pressure. Elevated prices and high interest rates are creating affordability issues. Also an ongoing challenge, and this is an area you see us talking a little bit more about both last -- in our last earnings call and today is there's about 30% less cars on dealers' lots, used vehicles than there was in 2019. So when you think about the broad industry of -- between the de-fleeting that typically would take place, the off-lease coming, all the great inventory, there's about 30% less used cars in dealer's lots. So when you take that as a high level, that lack of inventory force dealers to keep and try to retail types of vehicles that they would typically wholesale. That created, at least in the short term, really a retraction and a size to the dealer wholesale market. But recently, this used vehicle inventory is starting to edge up. And even though it will take time to normalize, over the past 2 months, when we studied the data -- inventory data, dealers are starting to wholesale versus retail, a slightly higher percentage of cars being traded in. So we haven't seen that from COVID to now. All we kept seeing was dealers keeping more, keeping more, keeping more. Over the last 2 months, we look at the trends. We're just starting to see as this inventory is coming up, dealers are more willing to wholesale. So for us, we look at that as a very positive sign. So what does this mean for the dealer wholesale market? Looking back at 2022, we estimate that the dealer wholesale market contracted from 9 million annualized units in Q1 to just over 7 million units in Q4. So that being a big hold they we got off, even though we have seen some positive momentum expected later this year, we believe in total, this year will be about 5% lower than last year. But we remain confident that between now and then 2024, we'll just continue to see the market improve. It's a strong market. It's a resilient market, and we're already seeing the positive signs that the dealer wholesale market will go back to what it was prior. You'll hear us talk about that throughout the day. And as the supply improves, we will continue to gain share. And one of the things you're going to hear us talk about and Bill will go into a little bit more detail, is in our 2026 plan, we will have 12% share of the dealer wholesale market. So with that as a backdrop, let's now turn to what's enabling ACV to win in the market. Self-reinforcing network effects creates an ACV competitive advantage. Growing the number of buyers and sellers in our platform has led to greater liquidity and ultimately a better experience, which in turn has driven greater scale for our business model. Our scale has also created a tremendous amount of vehicle data that's helping us, one, have greater efficiency, but that's not all. This data moat has also fueled new products. We'll talk about these new products today. It's driving both a broader dealer engagement and creating an even better experience. Our team will illustrate how our product expansion is driving both growth and scale, including innovation that's helping us acquire more dealers and expanding wallet share, enhancing the marketplace experience leading to higher conversions, driving higher attach rates, expanding our TAM, continuing to improve our inspection accuracy, all while improving our internal efficiencies as we drive towards profitability. So probably the slide that you're all most interested in, and we will have a lot of content at the end as Bill will detail later today that we remain on track to achieve $1.3 billion in revenue, strong margins, $325 million of adjusted EBITDA in 2026. Why are we confident? Our continued innovation and strong execution will yield market share gains in dealer wholesale compounded by growth from the market improving and returning back to normal, as well as this growth and this new growth in these adjacent opportunities. So our plan to deliver on these targets, as always, is on our 3 pillars: growth, which Mike Waterman and Craig will walk you through; innovation, which we're excited to have the cost in some of our leading talent within ACV, leading some of our areas of product and tech; and scale. Again, Bill will share both our progress on our proven model and why we feel very confident between now and '26 executing these objectives. But before I turn it over to my team, let's hear from our dealer partners and what they have to say about ACV. I look forward to be back up here, a little Q&A shortly. [Presentation]

Mike?

Well, thank you, George. Good afternoon, everybody. Great to be here again. Hard to believe it was been, what, 14, 15 months since we did this last time and we all survived, good to see everybody back. So for those of you that don't know, my name is Mike Waterman, I'm the CSO here at ACV, and I have the honor of leading our field team which now consists of over 1,200 teammates all across the U.S. servicing those or building those relationships with the 50,000 dealers that we have across the U.S. that really fall into 3 categories for us. We have our major dealer groups. We have our regional franchise dealers and of course, our independent dealers. Our direct sales team, which is our territory managers that are out in the field there every day, they really focus on supply and dealer acquisition and really focus on taking that relationship and growing that wallet share with our existing dealers over time. And then our nationwide vehicle inspection team, our vehicle condition inspectors, they really serve as -- they're an extension of that. They're in the stores more often on a daily, weekly basis, and they really serve as an extension of that sales team in a really, really big part of our success. And then our inside sales team partners with our marketing team to really ensure that we have that demand side covered with our buyers so that it's a nice even platform in the supply and demand. Our land and expand model. Our proven growth strategy has been exactly that. And I think I said it before last year and I don't think it's going to change anytime soon, it's a ground game. It really is. You have to be out there interacting daily with dealers. And our goal, when we go into a new territory, it starts with a territory manager. We hire a few vehicle inspectors to open those relationships get a few cars and really get the opportunity to show what that ACV success can be, how our model works and take that success to focus on attracting more sellers and buyers in those markets, expanding our vehicle condition inspector coverage to meet that demand. And then really the biggest part is taking that and growing the wallet share in each one of those stores, start with a few cars, very quickly can add to 10, 20, 30 cars out of that one single rooftop. And as we do that, continue to add more and more rooftops around in that market space. Now when we look at that model, right, the territory expansion, some of you have been around for most of it, some of you have only seen a couple of years of it, but let's look at that coverage today. As many of you know, we started in the Northeast. Over the past 7 years, we've invested heavily in expanding South and West. And today, we cover every major market in the country with over 150 territories that roll up into 20 regions. The next part of that land and expand kind of model is penetration, right? We want to get into as many franchise dealers as we possibly can to sell cars, buy cars, we want to get into as many independents as we can to buy cars, sell cars. And the goal here is to expand quickly, but don't lose that momentum in those territories that we've already opened, right? So it's a two-pronged approach, right? Our strategy is we move adjacent, then we cast a long line. Think of a fishing, cast out and then reel it in and then fill in, in between. And it's really proven to be a successful strategy for us. Now last year, we shared, I think, franchise penetration. So let's take a look at our progress more at a regional level. And as a reminder, each of these regions that I'm going to talk about, they usually consist of about 7 to 8 territories, okay? So let's go back to Q1 of '20 when we were operating, we did have the 20 regions established at that point. But at that time, we had 5 regions with over 25% penetration in 15 regions with over 15% penetration. Now as we start to look ahead, right, and come into early '21, you can see that we gained significant traction on the West Coast. We had over 30% penetration in West Texas and then we drove further penetration in the Northeast. During '21, as you can see right up -- and this will show you the map for '22, but from that '21 to '22 time frame, we deepened our penetration in the Midwest, while at the same time, we reached over 35% penetration in 5 regions in the Northeast. So again, we were able to expand and defend and grow, and those are all very, very important areas for us to maintain this growth rate. But the best thing about that is we are hitting these milestones, while the industry was still recovering from the pandemic, as George mentioned, supply constraints and some of the highest prices we've ever seen in the used car marketplace. So despite those tough market conditions last year, we made significant progress through the country. By the end of last quarter, our penetration had grown significantly in major markets across the Southeast, Texas and Southern California. We're now partnering with about 30% of franchise dealers in the country. We have 6 regions, and 50 territories with over 35% penetration today. I'm very proud of our teams and these accomplishments during market trends and shifts never seen before. And again, as George mentioned, low supply, record high prices, all of which puts overall industry TAM to new -- to lows that we haven't seen, and we are able to maintain growth across many regions despite these additional hurdles. So let's move on to our final stage in this land and expand model, and then that's wallet share. And we have a -- I think, a very solid and proven track record when it comes to leveraging the ACV experience to deepen our relationship with dealers over time. Our value proposition is very simple. With every vehicle sold, eventually, we become the primary wholesale channel for these dealers. It's all about that rinse and repeat and that ground game that I mentioned earlier. So across the U.S., we've more than tripled, I'll say that again, we've more than tripled our wallet share since 2016. On the right, you can see the graph, our wallet share broken into 4 groups of regions. Regions in the top group typically have earlier territories and have 50% wallet share on average, which is great progress, but still plenty of room to grow. The other regions have newer territories that have a ton of wallet share to still go after. But you can see the potential in our top 10 territories that over 65% wallet share today. And as I tell my team on a regular basis, everyone started at 0. As George mentioned, it was 8 years ago today that we sold our first car. We started at 0. So no matter where you are in this progression, you can and will get to these numbers. And it's just a matter of our motto and our mantra every day, and that's calm persistence. Today, we're providing a deeper view of our continued market success. Rather than showing you cohort data, we're going to provide some franchise market share across the country. The formula is simple for us when we talk about wallet share and market share, it's penetration times wallet share that equals market share. So let's look at where we stood at the end of Q1, and we'll kind of come forward from there. So as you can see on this map, we've gained significant market share across the country. As of Q1, about half of our regions reached double-digit market share. The 3 regions in the darkest color have 18%, 25% and 40% franchise market share. Again, that's at a regional level when you look at these. We have 35 territories averaging 25% share, and it does an averaging 40%. Bottom line, very simple is that we're confident that our land and expand model that we're in today supports our market share targets that George mentioned for 2026. Most exciting, as this market continues to shift more towards a historical norm, we feel very confident that we'll benefit from these added markets, these regions and the rooftop growth that we're experiencing today. I'd like to take you through -- I don't think we did this last year, but I'd love to take you through some examples of territories across the country to show how our market share grows, which can take on different shapes. I'm going to start with -- we're going to go out West. We're going to start with Pasadena. And you can see after setting up shop in early 2019, we gained nice momentum and most recently hit an injection point -- an inflection point in that market with a double-digit share today. Beyond the current 10% market share, we still have ample ramp-up with wallet share in existing accounts to move that market share and a heavy amount of opportunity still available as we add new rooftops to that particular territory. As we come a little further east, we'll go into Texas, look at Austin South. This territory has really taken off the past year and over 20% market share today already. And what's kind of unique about this one is Austin South has a lot of larger dealer groups. That can lead to a longer sales cycle, but also you get business in chunks rather in crumbs, right? But that territory in particular, very different from Pasadena, they're at a 66% wallet share, but still a lot of rooftops to be had. I'm going to move a little further north, look at Cleveland. And again, this is a little different than the previous 2, but the end game still remains the same. Here, we have a higher rooftop penetration, as you can see, with more upside in each of those stores to increase wallet share which will move the market share. So it's a little bit different of a game plan, but the end result is the same. And with these relationships firmly in place, we're expecting strong market share gains as the wallet share grows in the coming years. So as we go a little further, we're going to come kind of next door here. We're going to look at Long Island West. And this team is just absolutely crushing it, absolutely crushing. They have grown their market share fivefold in just 4 years. And it's a very ballast formula you can see between half the rooftops and just under half of dealer wallet share. And this one, as we get right into our backyard, again, Central New York, you can see this territory. This is what it looks like when you tip the market. And it's been a story of the calm persistence with consistent market share gains every year. The same principles, same game plan have been applied here in one of our earlier markets, and it's still growing. You can see as it builds out, our penetration and wallet share increase. Our market share has hit the mid-40s. This is where all territories are heading. Albeit in different ways, but the model works. So looking at the supply side, obviously, you can't have a vibrant marketplace without demand. So let's take a look to the buy side of our marketplace now. We ended '22 with over 14,000 buyers. That's a CAGR of over 70% since 2016. While that growth is great, we're also excited about the growth of our franchise barriers on our marketplace that are now making it up 25% of that mix. And this is important for a few reasons. First, it's proof that we have the kind of frontline vehicles that franchise dealers need and more expensive vehicles drive higher ARPU. So it's a win-win. This trend also reflects our growing suite of solutions helping us acquire large dealer groups to our marketplace. Speaking of large dealer groups, now let's talk about major accounts. As I mentioned, this is 1 of those 3 categories. So let's look at the momentum we've had in our major accounts team. This is the top -- and keep in mind, this is the top 350 dealer groups across the country, which today own about 35% of all rooftops in the country. We launched private marketplace in 2021, and that was based on dealers' needs to keep -- needing to keep more supply in-house within the group as inventory became more difficult to acquire. What these private marketplaces allow dealers to do is they move inventory within the group, preserving retail grows, but also minimizing any wholesale loss. With the acquisition of MAX Digital, as George had on his one of his slides, we're able to expand into over 1,000 stores, including some of the top 50 dealer groups within the country. As a result, we were able to double the number of rooftops in the majors category over the past few years. In 2022, we made additional strategic acquisitions in the consumer sourcing. Arena with Drivably and Monk, and that's kind of led us to this next thing I'd like to kind of introduce you all to because this is the first time I think anybody's hearing about it. I mean, is that correct, George? I think so. So let me introduce you to ClearCar. We're very excited about it. It's our new brand of a growing suite of consumer sourcing tools for our dealers and our commercial partners. As George mentioned earlier, we believe consumer sourcing is an attractive source of inventory for dealers, in direct car buying companies. We are replacing the drivable brand and leveraging our pricing engine and Monk AI technologies. In our deep reservoir as he mentioned, 1 million inspections this year -- last year, that deep reservoir vehicle condition and pricing data. ClearCar enables our partners to build trusted and transparent relationships with consumers when selling or trading a used vehicle. Before I hand it over to Craig to discuss our emerging commercial strategy, and I think, okay, he was hiding I see you, I'd love to give you all a closer look, and let's do that and hear from a few of our customers about this ClearCar solution. [Presentation]

Good afternoon. I'm Craig Anderson. Since 2018, I've led strategic initiatives for ACV. Today, I'll update you on our plans to build our commercial business. So as George mentioned earlier, commercial wholesale is a large market. But today, commercial is only a very small part of our business. We're beginning to change that. Over time, we intend to make every segment of the commercial market a core part of our business. Commercial is a natural fit for ACV. You just heard Mike talk about our buyer mix. And one of the ways we've been able to grow franchise penetration there is because of the quality of vehicles in our marketplace, the quality that's improved over time and become more relevant for franchise dealers. We already have a deep nationwide buyer base that wants to acquire the full spectrum of commercial vehicles through ACV. We believe we will win in commercial by bringing our core strengths to these consignors. Better data and more vibrant marketplaces to deliver more value. So in normal periods, there are approximately 8 million commercial wholesale vehicles sold every year in the United States. Volumes contracted during the pandemic. But now the market is gradually coming back. We expect a full return to normal sometime after 2026. It will take a little while. For off-rental vehicles, we expect recovery over the next 2 to 3 years driven by re-fleeting as new vehicles become more readily available. A lot of these rental car companies sourced used vehicles for their fleets in the recent years. In off-lease, we expect a steady return to near pre-COVID levels over the next few years, a higher lease return rate driven by falling used vehicle values will be partly offset by fewer vehicles coming off lease. There are fewer lease originations in recent years. Fleet consists of company and government cars and trucks. We expect a steady recovery in fleet driven by re-fleeting similar to rental. And for repossessed vehicles, we'll see robust volumes over the next few years, along with elevated default rates. As Bill will cover later today, commercial will be a small but growing part of our business in 2026. The market recovery provides a favorable backdrop for our growth. Today, most commercial vehicles already sell on a digital marketplace, meaning the buyer uses digital to purchase the vehicle. And many commercial accounts leverage third-party land. Most off-rental vehicles are sold digitally today, and most do not require third-party land. These companies tend to have land to store these vehicles, pending remarketing. For off-lease, after being offered to the consumer and then the originating dealer, most vehicles are listed on digital marketplaces, only the vehicles that do not sell on these platforms are sold from third-party locations. Some fleet vehicles sell directly through digital marketplaces, while most are remarketed from third-party locations that offer storage and reconditioning. And finally, repos require land for storage and light reconditioning like getting keys made. That's why most repos sell at physical auctions today. While land will continue to play a role for commercial, where necessary, we believe our digital offerings will provide better outcomes for consignors in all segments. I'll share a couple of examples where we're building commercial volume today. First, we have a top 3 rental car company selling across the country with us. We inspect vehicles at their retail and their airport locations and sell these vehicles using 2 listing formats, buy it now and auction, and we'll be testing more formats. The average distance of the buyer for these vehicles is over 400 miles. It means the car is ending up with the right buyer wherever the buyer may be. We believe this demonstrates the benefit of our solution for rental car companies who today may sell cars locally with a more limited reach which is quite common. This particular example is only a few hundred vehicles per month currently, but we're demonstrating success and earning more confidence and the relationship is growing. The next example, and I mentioned on a prior slide that some commercial accounts benefit from land plus digital offerings. Now ACV is still in an early stage, but we already operate a handful of locations across the country. What you see on this slide is one of the first examples of ACV acquiring a very small business to pair land-based services with our digital solutions. There are dozens of commercial accounts already doing business here. And we're getting great feedback from our buyers who want as many commercial cars as we can deliver. What's also important here is that the unit economics are strong. In fact, the margin dollars per vehicle, fit with our target profile. We're looking at other small businesses. And if we were to bring on more, they would also be businesses that, like this one are profitable and accretive. So to wrap up, the commercial wholesale market will be a growth driver for ACV over many years, just like the dealer market. The pieces are coming together. We already have the core strengths in marketplaces and data services to add value for commercial consignors. And we've begun to operate, as I mentioned, a small footprint of leased locations to support commercial accounts. Additional enabling technology is planned and in development. Abou and Phil, who will be up here shortly, will speak to what we're doing with Toyota and others. And we recently welcomed new leaders to ACV, who will head commercial growth and operations. One of them is here today. So you should find Joe here in the room. And announcements will come on these hires. And with that, it's my pleasure to turn it over to Vikas and members of our innovation team.

Thank you, Craig. Good afternoon, everyone. I'm Vikas Mehta, Chief Operating Officer at ACV Auctions. I've spent the majority of my career in marketplace businesses, 4.5 years at ACV and a decade prior to that at eBay. At ACV, I'm responsible for our product, technology and operations teams. And today, I'm delighted to walk you guys through the innovations update. So over the next 30 to 45 minutes, my team and I will share updates in 3 main areas. First, I'll walk you through the evolution of ACV's product and service offerings and describe how they're enabled by the platform we're building. Last year, we highlighted some of our key focus areas: inspections, marketplaces, transportation, capital and service offerings. In the second section, I'll share some of the latest developments in these areas. And finally, my esteemed colleagues will showcase where we're going as it relates to data and intelligence, what these capabilities mean for ACV and for the automotive industry as a whole. So let's get started. To better understand our product and tech strategy, it's important to have the context of the industry and the ecosystem we're serving. Let me walk you all through ACV's journey. So in 2015, we launched a marketplace that created a new standard of digital dealer-to-dealer transactions. This required a level of inspection capability and auctions capability this industry has never seen before. In 2018, we created ACV Transportation. This was done to support customer needs transacting on the wholesale marketplace. We initially leveraged third-party offerings, started investing in tech-enabled capabilities early in the journey. Our ambition from day 1 was to build a compelling and efficient end-to-end user experience. In 2019, we launched ACV Capital. It was done with the same ambition and a similar user need in mind. We also acquired True360 to expand our inspection capabilities to include retail transactions. Our customers loved our wholesale inspection, and we're looking for ways to leverage a similar offering to build trust in retail transactions. 2021, as Mike mentioned, to serve our larger dealer groups, we created private marketplaces. This allowed our dealerships to trade internally. We also acquired MAX Digital, a leading inventory management system. Both of these were strategic and deliberate moves upstream. And in this process, this helped us broaden and deepen our data moat. And that brings me to 2023. As Mike just mentioned, we're extremely excited to accelerate our consumer sourcing offering with the rebranding and launch of ClearCar. Our core platform enables us to offer this acquisition channel in a transparent and seamless way, both for our consumers and our dealers. So if we take a step back, over the past 8 years, we're building a platform that helps us deepen and broaden our value proposition. Core capabilities like our data-rich inspection platform, our trusted dynamic and intelligent marketplace, accurate valuation tools and the industry's best back office and service capabilities. With this vision in mind, let's go deeper in a few areas. Following the life cycle of an auction starting from inspections to marketplace to service offerings and post-auction fulfillment, let's look at some of the highlights from last year. So we believe we've had the industry's best inspection platform for some time. The focus of the last couple of years has really been about making it even better, looking at inspection quality and efficiency. A key unlocker for both of these areas is our Monk AI imaging platform. While today, we're early at fully realizing the potential, we have some strong progress to share. Monk today is fully integrated in our condition report or inspection platform. We're actively capturing and training on over 1.7 million images per month. Monk is also used in our inspection quality or pre-screen process to reduce cosmetic arbitrations. And very soon, Monk will help us boost VCI efficiency through auto disclosure of cosmetic damages. Another priority is to guide our inspectors and our pre-screeners on the riskiest and the most complex inspections. A number of initiatives underway, 2 that I want to highlight today. First, we're leveraging our cumulative inspection data on a per vehicle level during inspections. Phil is going to talk more about ArbGuard and how this gets rolled out. And second, we're actively deploying our next generation of Bluetooth integration with OBD2 scanners. Overall, we're seeing the impact of these investments, not only in inspection quality and inspector efficiency, but also in training the algorithms that will enable more long-term impact. Now that we talked about inspections, let's move to the marketplace. So our goal is to make ACV the most efficient destination for dealers to acquire inventory. We do this by making the buying experience personalized and relevant to individual buyer personas at a per vehicle level. Over the past year, we've taken big steps in breaking the one-size-fits-all paradigm. In addition to supporting multiple buying tools, including SAM or smart acquisition manager, including supporting buying APIs, much like you saw the Lithia buying [ TMUS ], we're also differentiating our marketplace experience to drive conversion. An example of that was over the past couple of quarters, we introduced multiple auction formats and durations. And in the last 2 quarters, we've been able to increase conversion of approximately 5% of listings over a 20-minute auction format for a number of vehicle types and geographies. Another area we've driven a lot of success in is our investments in our pricing algorithm. Grade pricing informs sellers and buyers a more accurate and relevant price. It helps build a common understanding of vehicle value. John is going to spend some time talking about the good progress we have on our pricing. Finally, leveraging our supply and demand data, we've grown our recommendations platform. Our recommendations platform allows us to surface relevant vehicles to buyers through both on-site and e-mail placements. In Q1 alone, we drove an incremental 80,000 bids with our recommendation platform, and we're only getting started. Moving on to operations. Last year, we introduced the complexity of wholesale operations. In our industry, operations are complex, fragmented and inefficient. We continue -- ACV continues to invest in and lead through tech solutions to power operational efficiency. Two highlights from this past year. First, around titles and second, around prescreening. So title's common industry pain point, hand written, messy, incomplete. And every state, every one of the 50 states have different requirements. So over the past few years, we've built tech-powered processes, tech-powered workflows and that have unlocked gains in efficiency and quality of title processing. Over the past year, continued investment in both the OCR software and hardware have led to meaningful improvements in title processing. Let me introduce to you what prescreening is. So prescreening or inspection quality is a team we set up in 2019. And it was basically established to run quality control on a certain percentage of CRs before they were launched to the marketplace. Over the past year, we've invested significantly to make this a tech-enabled offering. How did we do this? Two things. First, we made improvements in tooling that allowed us to make prescreening more automated and scalable. Second, we deployed intelligent queue prioritization, so we could deploy the team's time on the riskiest units being launched at any given point. Today, 100% of our units go through a virtual prescreen with 30% to 40% of them actually being reviewed by a teammate. So in summary, significant investment on the back office operations leading both to operational efficiency, but also to customer satisfaction. I'd like to spend a minute on transport. So this month, June, ACV Transport will move its millionth load. With our scale, data, technology and operational excellence, we continue gaining market share in the automotive transport industry. And this has been done primarily through 3 focus areas. First, we're obsessed about automating key processes while building operational excellence and exception driven workflows. Second, segmentation. We're moving beyond one size fits all to tailor our services to every type of move, every type of vehicle, every type of location, lane and pricing. And three, we're focused on user experience. So we're investing in technology to make ACV Transport the easiest and the most transparent automotive transport company to work with. Everything from quote request to status tracking to workflow management. The result is we are today an industry leader in several service delivery categories. This year alone, ACV Transport has delivered over 10,000 vehicles in under 24 hours. While automotive transport is way different from Amazon Prime, we love to pleasantly surprise our vehicle -- our customers with same-day deliveries. Overall, technology, network processes, but probably most importantly, the team we are putting in place are building ACV Transport for the future. Moving on to another very exciting business, ACV Capital. So ACV Capital today is our fastest-growing line of business. And much like in other areas, we're leveraging technology to support growth. We do this by bringing innovative solutions to dealers need for liquidity while managing risk. Aligned with ACV's core values of trust and transparency, our Floorplan offering was launched with some basic dealer needs in mind. Since then, we've evolved our offering to match complex and diversified needs in this area. Today, over 1,000 dealers are actively using ACV Capital. In 2021, we launched a new solution to bridge the short-term liquidity gap that exists in our industry with respect to title delays. Both buyers and sellers today are able to take advantage of short-term products tailored to solve this need. We also provide a solution to dealers acquiring cars directly from consumers and selling them on ACV. ACV Capital is able to fund the dealer at sale, allowing customers to grow this channel. Live today as a pilot, this offering will scale as we grow ClearCar. Our loan management system will enable us to support transactions while data and analytics advancements will ensure we accurately price and fund these units limiting our risk and exposure. So these were some of our recent highlights. As we continue to serve our customers, we capture data at an unprecedented scale, both about physical assets being transacted as well as about our dealers and their ecosystem. Our tech today has facilitated over 1.2 billion events, 64 million auction bids, over 2 million transactions, 2.3 million AMP recordings, 1.6 million virtual lifts and we've generated over 1.3 million pricing estimates. All this data is evolving not just ACV, but has the potential to evolve the automotive industry. Now I'm going to hand it off to Phil, and my colleagues are going to talk about how we're capturing and harnessing all this data to generate a tremendous amount of value for our customers.

Thanks Vikas. Perfect. Hello, everyone. My name is Dr. Phil Schneider, and I have the privilege of leading our research and development team here at ACV. I want to spend the majority of my time discussing how we're going to leverage the latest and greatest in AI and sensing technologies to really challenge what is possible in the automotive tech space. So ACV continues to deliver on innovative inspection hardware technologies, creating new data insights. Using ACV's proprietary hardware like Virtual Lift, AMP, Apex with all of our field inspectors every single day, we multiply our data proposition while harmoniously bridging this concept of a physical and digital world together. Apex. It continues to accelerate our data proposition as a company. Every single day, we realize more and more insights Apex is bringing to us, whether it be through sound, smell or touch. Virtual Lift, that aids in the detection of missing parts and pieces like catalytic converters, which is a major pain point for dealers in certain states. It can also do frame damage and rust quantification, telling you if there's a lot of rust, a little rust, surface rust or penetrating rust. And lastly, we have programs like ArbGuard and Copilot, 2 AI-based programs designed to up-level our inspection quality and efficiency. We're going to cover more of that on the next slide here. So AI continues to be a valuable asset for all of our inspections. With over 3 million inspections, our vehicle condition inspectors have helped ACV amass an impressive, curated database primed to unlock AI capabilities. ArbGuard encompasses the latest of that AI inspection technology, helping our inspectors inspect cars faster, more accurately and with a level of intelligence never before seen in this space. Simply put, ArbGuard puts AI in the hands of our inspectors, providing them near real-time feedback on the condition of the vehicle they are inspecting. Whether it's something simple like looking for a cracked windshield or a chip in the windshield or a little bit more complex listening to the engine sounds for a knock or a tick. ArbGuard is there to help. Think of this program like the AI-powered spellcheck for Microsoft, right? It reviews your CR, it checks for issues, and it helps you as an inspector, write the best, most accurate condition report possible. Some of you may have remembered, last year, we talked about this concept about building this data ecosystem and how we're fueling this AI engine. We called that Condition IQ. Since last year, we have fed this data engine tens of millions of data points and are working to develop the artificial intelligence model to boost overall accuracies and expand capabilities. Let's take a look at how we leverage this AI on an everyday basis with our inspector team. So our AI views the unique digital footprint of each vehicle. And we use this intelligence to power our inspections. With just the scan of a VIN, our AI will look back at our millions of inspections in the past and pick the highest risk aspects of that specific making model of that vehicle. What this does, it primes our inspectors where to spend a little extra time because we know the pain points of that type of car. From there, we filter through a suite of different models designed to help detect key issues with that car. So here, you're going to see on the bottom left, here's a structural announcement. This car is known to have that issue. We've seen them all before. So hey, inspector, spend a little bit extra time looking at the virtual lift image. But there's more to that. Using our Monk imaging capabilities, our AI scans the exterior of the vehicle and looks for any type of cosmetic issue, scratches, dents, paint chips. We also look at things like the suspension. Did people modify this vehicle? Did they change the exhaust? Did they alter the engine at all. Our AI can help you detect that. Looking inside the car. We analyze things like the dashboard and the odometer, and we look for things like check engine lights or codes that may set off indicating an issue with that vehicle. We'll also look at the general quality of the interior as well. Leveraging our virtual Lift photos, our AI will inspect for missing parts and pieces like catalytic converters, oil leaks as well as rust. Not only telling you how much rush there is, but what type of rust is it? Is it penetrating rust? Is it surface rust? How does that impact the value of that car. Cracked windshields. On newer cars, these can be massively expensive because of the technology in them as well as the paint of the vehicle. Both of those are taken into account with the AI. And finally, using Apex, we gain insights of how the engine sounds. Maybe there's a whining sound coming from the transmission or an engine knock or tick. Either way, ArbGuard can help. But we are really just scratching the surface of what's actually possible here. Our next phase of innovation is centered around fusing these model insights together, having them communicate with one another and really building off of each other's intelligence. I'll give you an example here because really, it's all about viewing the car holistically as one thing. When you take the AI, for example, look at a car's dip stick, it takes a picture of it, understand what's on that oil. Maybe there's some metal shaving, some particulates, indicating that there's a problem, okay? Well, that's one aspect. But now pair it with Apex. Now maybe that car sounds a little bit rough, like it's running with an issue. Okay. Well, maybe Apex also can detect some smoke out of the transmission. So now you start to add these things together, and you start to get these individual readings when now viewed holistically give you a much better representation of what that car is actually -- what condition that car is actually in. We actually call this the duck model, right? If it smells like a duck, if it sounds like a duck, if it walks like a duck, it's chances are, it's a duck. That's what we're doing with this holistic view here. We have a lot of plans for this AI, but one of the visions right here and now is putting the tech in AI we've developed in the hands of our dealers. This dealer in the loop concept will allow dealers to leverage our AI toolbox and our inspection hardware solutions like Apex and Virtual Lift in real time, turning any type of [ lay ] person into an inspector. Really what this does, it reinforces our concept that we are no longer reliant on their interpretation of just any one individual. Yet we're leveraging the millions and millions of previous inspections done and the intelligence gotten on that to make an informed decision. This increases our data proposition as well as opens up this concept of conditionally adjusted pricing for ML models. Every inspector, every dealer can now take advantage of our data at scale. So I'm excited to pass this over now to Abo, who's going to dive in a little bit deeper there with the next-gen inspections. Thank you.

Thank you. Hi, everyone. I'm Abou Laraki. I'm the co-founder of Monk. I am a machine learning engineer from Ecole Polytechnique in France and from UC Berkeley in California. I had an experience as a machine learning professor at Polytechnique, had a few years experience in the venture capital industry as a [ deep tech ] investor. When I cofounded Monk about 3 years ago, had the simple aim to provide more trust and transparency whenever a car changed hands by leveraging the power of AI and computer vision. And this is where we found ACV Auction, the perfect partner to pursue this mission. Our world-class team of AI-focused engineers in Paris is pushing the boundaries of what's possible in the world of visual car inspections. Thanks to our unique and intuitive product, we allow everyone, inspectors, dealers or consumer to generate on any smartphone, a report on the visual condition of the vehicle. Companies like Stellantis, Toyota or HGreg have already placed their trust in Monk. And we continue delivering unparalleled value to them. I'm also very proud that a year ago with -- we joined forces with ACV Auction, marking a significant milestone in our journey. The integration of Monk and ACV Auction has been nothing sort of remarkable. This collaboration with ACV has significantly enhanced our competitive advantage. ACV's integration generates millions of highly structured vehicle data points. As I told you last year, to create an AI world leader in any category, you basically need 3 ingredients. First one, strong AI engineers. Second, a smart and state-of-the-art labeling system and of course, the data. This is where ACV's contribution is a game changer. ACV uniquely brings hundreds of trained and professional inspectors who feed our AI every day. This is phenomenal. To give you 2 simple illustrations, our database has grown from about 3 million image a year to 25 million image a year. Secondly, the data, it's not only about the quantity, it's a lot about the quality. Our latest test showed that with the same amount of data, the gain in accuracy is doubled with ACV data compared to what we had before. As you may understand now, this partnership position us more than ever as the leader in the field of next-generation inspection products and we will continue to push the state-of-the-art and ultimately bring more trust and transparency to the automotive market. Our AI satisfaction product will indeed have significant benefits for ACV first and on our partners. Allow me to share with you one emblematic partnership, our collaboration with Toyota. As Craig mentioned earlier, technology will have a strong role with commercial vehicles. This is with this in mind that Toyota contacted us to automate the return of lease end vehicles. As you can see on this video, dealer can generate easily a link on their dashboard, do a simple inspection using a browser and then in seconds, having access to report, in which, they will see all damage detected by Monk associated with the severity, which will create then a reconditioning price based on Toyota's pricing metrics. This new process has been overall very well received by all the dealers as it has considerably improved their productivity, the transparency for the user and ultimately improves conversion rates. We already have now successfully deployed our technology across more than 120 dealerships in France, and we are eager to expand our partnership both geographically in Europe and in North America as well as in different business units, retail or professional inspections. Of course, it doesn't stop here. Monk technology goes beyond commercial partners and dealerships. It's already powering [ Teleca ], as Mark mentioned earlier, and we are extending our product to other sectors, such as logistics or salvage. But it's just the beginning. As Phil mentioned earlier, ACV with Monk have everything to create a world leader in the next generation inspection products. Looking ahead, we are fully committed to advancing the inspection process. Our research and development efforts are focused on leveraging video and 3D technologies to improve productivity, secure data capture and maximize [indiscernible], as you can see on the first video on the left. And because every car and every inspection has its own unique story, we see a giant opportunity of combing Monk technology, ACV data with the latest technology like generative AI to guide the user efficiently, [entertain] us every bit of this story. We are also committed to entering a more comprehensive inspection process by adding, for example, in the near future, [ AI damage] detection capabilities, as you can see on the image here. Our mission is also to generalize our work with current partners on reconditioning pricing. And ultimately, to provide a damage estimation model that allows anyone to accurately price any car in the world. As my teammate, John Coles will apparently explain to you.

Thank you, Abou. My name is John Coles. I have a PhD in operations research. And I've led work for the last 9 years in turning data into value in health care, defense, disaster relief and automotive. At AVC, I have the privilege of leading our data science and analytics organization where we work with Phil, Abou and teammates across ACV to turn the data deluge into speed to value for every customer in our automotive ecosystem. Data is often called gold or oil, but unrefined, it can leave dealers and consumers confused by the volume of information available. ACV's investment in high-quality data capture and analysis has positioned us to lead the industry in providing personalized guidance at every stage of the remarketing life cycle. In the ever-evolving digital landscape, ACV's automotive intelligence platform helps our dealers cut through the noise and focus on time to value. At ACV, we're committed to turning data confusion into data clarity. As Abou and Phil showed you, we're building the next generation of data capture tools. But data ACV is about more than data capture and data tooling. We're turning that data into a data moat for clarity for our dealers to reduce that time to value. Using modern data science techniques, we're refining our data assets into a competitive advantage that positions ACV as the easiest decision that a dealer makes in their day. With our data moat, we are able to take just a few pieces of information with that scan of the VIN and turn it into over 120 value-related fields to assess the price and condition of that car. And that's just the beginning. As we see significant leaps in generative artificial intelligence and machine learning, like those demonstrated by many competitors in the ChatGPT space, we are building a data moat to give us immediate value in the business and build a large vehicle model in the automotive industry that gives us competitive advantage for years to come. In the ACV ecosystem, we fuse all the information you saw today and more to empower each dealer to quickly reduce customer acquisition costs, move wholesale faster, acquire inventory more quickly and get more turns on each asset. What this means is we are turning our data into industry-leading products that empower our customers to make faster decisions. When we started 8 years ago, we went to market with the best condition report in the industry. The quality in every part of our process has enabled us to build the best pricing engine in the industry. Our investment in data quality since the beginning has allowed us to have the right foundation to build and quickly deploy industry-leading capabilities and drive more customer value. Over the last 18 months alone, we've expanded our pricing coverage from $35,000 all the way up to $100,000 or over 99% of the vehicles transacted on our platform. We've been able to do so with 45% more accuracy than competitor price books with well in a volatile market. And that's helped our dealers see between $100 and $400 additional profit per car. Our accuracy in pricing is a competitive advantage for our customers. As we accelerate the next generation of trade-in tools for dealers by eliminating price friction for our partners working to acquire customers. In a changing market, our pricing tools are allowing our dealers to get 2.5x higher conversion when used as part of their journey. But pricing is just one part of the strategy as we are now guiding customer experiences using their historic preferences and current inventory needs. As Mike shared with you, we've grown tremendously across the country since we were founded. That growth in market listings has provided our dealers with more access and more options than ever before. But as Vikas mentioned, in Q1 alone, we were able to drive an additional 80,000 bids by putting the right pieces of information in front of our dealers. Additionally, over the last 12 months, we've been able to drive our view to bid time down by 20%, getting every dealer faster to the right car to purchase and put in their inventory. This progress is key to our strategy of combining data about vehicle condition, dealer needs, retail demand and consumer history into a value guided journey that's customized for each dealer. By fusing this data, we've been able to lead the industry in personalized market recommendations for every customer on our platform. The dealers lot of today is filled with decisions that need to be made. Each car has a story. And in a quickly changing market, making the right decision is quick to key -- is quick to profit. With our MAX Digital, Drivably and Monk acquisitions, we've expanded ACV's ability to drive speed to value with every decision on a dealer's lot. At ACV, we're combining the next generation of automotive tools into a single source of automotive intelligence to drive value for our customers. Let me give you a few examples. With ClearCar pricing, we are giving dealers the ability to access over $200 more additional profit per unit through retail trades than our competitors. With machine learning-enabled document processing, it takes us seconds instead of minutes to analyze the title at ACV. We are looking to take these optical character recognition or OCR technologies and put that benefit into the hands of our dealers so that they can benefit from those operational improvements locally as well. With our smart acquisition manager or SAM, we are now making it possible to put the right car into a dealer's view within seconds of entering the ACV ecosystem. I will wrap our innovation segment with this. We have built the next generation of automotive intelligence platform with vehicle condition and vehicle value as the foundation. By working with our dealer partners to understand and predict their needs, we are working to put every car in the right spot for faster profit than ever before. Now we'll take a 15-minute break before Bill comes back and walk us through the financials. Thank you. [Break]

All right, guys. Let's get started. Maybe that was too loud. Is my mic on now? Okay. All right. So first, great to see everybody here today. This is like standing room only. I think -- where's Tim? You've never had a crowd this big for PTC. Have you? No. Okay. So next year, we got to get a bigger room then. All right. Well, look, so I've got a lot of material to cover today. So I'm going to take my time and go through it. What you're going to see is a lot of new information. I'm going to present data in a way to help you understand why we keep reiterating our long-term targets because, obviously, they're pretty aggressive in terms of the revenue ramp and the EBITDA ramp. Okay. So my section is really divided into 4 portions. So I'll quickly start with just, again, reiterating what the 2026 targets are revenue and EBITDA. And then we'll go into growth at scale, which is really looking at our revenue streams and dissecting those in terms of the major categories and how we're going to hit those target revenue streams. Then we'll get into the business model where I'll discuss margin expansion and OpEx leverage, that will be where I spend a lot of time, and then I'll finish up in terms of our capital position. Okay. So again, here are the 2026 targets, $1.3 billion in revenue, $325 million in adjusted EBITDA. That's a 33% revenue CAGR from last year and a 30-point improvement in adjusted EBITDA margins from the midpoint of our guidance this year, which is minus 6% to 25% by the -- by 2026, okay? So again, we recognize these are really steep curves. So the question is how are we going to hit these numbers? Okay. So let's start with revenue. So first, just a quick refresher. There are 3 major categories of revenue streams that we separate and present to you all. So the first and the most important our Auction & Assurance revenue streams. So these are the fees that we generate on our marketplace. And again, we've been directing you all to look at these together, even though we separate them on our financials, which we're required to do for GAAP purposes. But we absolutely look at these things together and we look at RPU, you look at margins on a combined basis for our auction fees and insurance revenue streams. And that last year was more than half of our revenue, 56%. That said, it's the key driver to our Marketplace Services, transport and capital, which is another 36% of revenue. And that, of course, those services attach into our marketplace that I think all of you are pretty familiar with that. And the last piece of our revenue streams are our SaaS and Data Services. Relatively small, pretty fast growing. We'll talk more about that in a few minutes. So now if we look at each of these pieces of revenue, starting with, again, the most important, right? This year, we're actually putting out a unit target to help you guys in terms of your modeling. And that's 1.5 million units by 2026. Of that 1.5 million, 10%, we're estimating to be commercial and consumer to dealer units, okay? Now a point of clarification, the consumer dealer units that we include in this bucket because you'll see there's 2 buckets of revenue associated with those with the offering that we took you through in terms of ClearCar, these are wholesale units that originate by us helping dealers source vehicles from consumers. So to the extent they use our tools, they source units and some of those, they trade in the wholesale market, those will be transacted in our marketplace, and that's included in this bucket, okay? So this is a pretty strong CAGR going forward. Again, the other major assumptions here are that we grow to 12% share and that our market fully recovers to 11 million units, right? And the last piece of this is RPU growth. So on this next slide here, this is to help all of you understand what's the path to achieve these targets when you look at each of the components, all right? So the first component and the biggest component is almost half of the revenue that we need to achieve, the 2026 target are for market share gains. And we're assuming that we basically continue to gain share at the same rate that we've been getting in the last couple of years, which averages to about 17% share gains per year. When you do that math, and we estimate our share last year was about 6.7%, and you extrapolate that to 2026, you get a bit over 12% share. So we're not assuming anything outside of what we've actually executed on the last couple of years, right? And that would generate $245 million in revenue without market expansion, without RPU expansion. So what we've done here is isolated each of these components to understand how do we achieve these targets. So that's the biggest piece of revenue growth. And again, it's just continuing those share gains that we've executed on the past. The second piece is RPU expansion. As you guys know, we've started increasing our buy fees. The first buy fee increase was in December of 2021, we did another smaller buy fee increase October of last year. And if we extrapolate that forward with modest assumptions, we're not being overly aggressive here in terms of RPU expansion, that's another $105 million tailwind based on our math, okay? Keep in mind, again, we are, in some cases, substantially below our competitors in terms of buy fees. And we're just looking at their buy fees today. It's not reasonable to suggest that over the next few years, they're going to continue to increase their buy fees as well, just solely due to inflation. So that's $105 million. Then the big question is market recovery. And there are different opinions as to whether or not our market is going to fully recover to 11 million units. And again, our estimate is pre-COVID, dealer-to-dealer wholesale [indiscernible] was 11 million units. Last year, we estimated we came into the year at 9 million, and we exited at 7 million. The average was 8.2 million, all right? So we're assuming that we see the market return to 11 million units. And that would be $100 million revenue tailwind. By example, though, let's say you have a different view. And let's say you think it's only going to recover to 10 million units. When you do the math, that would be about a $40 million headwind to that $100 million. In other words, if you think it's only going to grow to 10 million, we would have $60 million of tailwind instead of $100 million. Said another way, we could compensate for that if we grow share at 19% a year, which happened to be what we estimate our share gain was last quarter, right? So there's different ways to potentially overcome that or maybe our RPU expansion is a little more than we've currently modeled since we're trying to be very reasonable in terms of what we're baking into the financial model, okay? But that's market recovery. And then the last piece is Commercial and Consumer to Dealer, which we're estimating at 10%. And again, if we back that 10%, by the way, out of our unit target, the CAGR for unit growth for dealer-to-dealer is 28%, okay? And again, that's based on share gains and market recovery, all right? So that bucket, again, includes commercial revenues, which I think are self-explanatory and consumer dealer units that flow through our wholesale marketplace emanating from consumer acquisition, right? So that's how we get to the $750 million in terms of our Auction & Assurance revenues and 1.5 million units, okay? And this is obviously the major driver for our next bucket of revenue, which is also very substantial, which is Transporting Capital. So what are we assuming here? Okay? This works out to a 34% CAGR, all right? We're assuming that our transport business attaches into the marketplace at the same attach rates that it's been attaching to in the last 1.5 years or so. So 50% to 55%. We're not really changing any of our assumptions there. We're looking at our historical actuals, and we're just extrapolating that going forward. Okay? For our Capital business, last year, we set an attach rate target of 25%. We're maintaining that attach rate target. We're now into double digits. As Craig mentioned, it's the fastest-growing line of business for our business, for our company. Last year, our revenue growth for capital was over 100%. We're not assuming that's going to continue the rest of this year because we're trying to also manage and balance risk in light of the economy, right? But basically, if we continue to do what we've been doing for transport in terms of attach, and we hit our capital attach rate, we'll hit this target based on the unit number for our core marketplace, okay? And this gets us to about 90% of our revenue, by the way. And then the last piece are SaaS and Data Services. So here, we've actually adjusted our outlook to reflect a strategy to drive more dealer wholesale transactions through our marketplace by bundling with various SaaS offerings. So last year, this target was about $150 million. We've lowered it to $60 million, which is a much lower CAGR of about 16%, okay? An example of this would be ClearCar. So ClearCar, we will offer as a subscription type service. But there will be cases where we'll take that subscription, bundle it with wholesale transactions and discount it, maybe even offered for free if we generate enough wholesale transactions because that's where, frankly, where all the money is. There's such a big TAM here that's really, really where the opportunity is to drive our financial model. But there'll be cases where we're just driving SaaS revenues, which are okay, too, because it will be very high margin. It's software revenue essentially, right? So that's one piece of this revenue stream. A big piece today and what we think will be -- continue to be a pretty big piece going forward is MAX Digital. So with respect to MAX, we're pretty excited that by the end of this year, we're going to be at the tail end of all the upgrades to this platform, and then we can reactivate all of our go-to-market activities going into next year to drive more MAX Digital business, right? And this is, as you would expect, pretty high-margin business as a SaaS offering as well. It has an ancillary benefit that it gives us more and more insight into the dealer -- into dealer transactions for any dealers that are on our platform. So it's got a pure financial benefit in terms of SaaS revenue streams, but it also gives us a lot of insight that we can use to understand what's our market share in a particular dealer, right? How much wallet share are we getting? If we know what all their transactions are, all right? So this is how we basically hit our SaaS and Data Services revenue. The last piece of this, by the way, is a smaller piece or stand-alone inspection services. So this is where we provide True360 retail inspections and we provide off-lease inspections. Off-lease inspections have deteriorated pretty significantly with the rest of the market, as you would expect. So we are assuming a modest improvement as we get to 2026. It's a smaller number, but if we look beyond 2026, as off-lease kind of returns to normal, then that will be a little bit more of a booster to the revenue streams here. But the biggest number by far is certainly MAX followed by ClearCar and then the stand-alone inspection services. Okay. So now let's go to the business model. So what you see here are 3 different categories of revenue streams that I just took you through. The actual cost of revenue targets, which is the inverse of margin, since that's what we present in our financials, actuals from last year and then the target, which I'll walk you through category by category, okay? But basically, the drivers are very similar to last year. First and foremost, maturing and scaling of our territories. That's by far the biggest driver to leverage in our model. Second, are the increased quality of our inspections and the team has taken you through a lot of great content in terms of what we're doing on the technology side. Business model optimization, we've done that in spades last few quarters with transport, which is a great example, and then mix shifts. Okay. So let's start with Auction & Assurance cost of revenue. Again, this is our -- these are our biggest revenue streams. RPU expansion will account for 70% of the uplift to hit our target. And again, this is the inverse, right? So last quarter, we hit 30% cost of revenue, 70% margin for Auction & Assurance revenue streams, target is 20% to 25% cost of revenue, okay? So 70% from RPU expansion and 30% from arbitration -- lower arbitration costs. Again, a lot of what we continue to invest in is to provide more fidelity to our condition reports, which provides more transparency to the extent we disclose issues, we basically avoid arbitration costs because they've been disclosed to the buyer, all right? This is how we hit the target margins there. The only other point about arbitration costs, there is an ebb and flow. Last quarter, we had a great quarter in terms of lower arbitration costs. It's not a linear process by quarter or a linear progression where every quarter is going to get a little better. There'll be a little bit of an ebb and flow, okay, with that. Because part of it is impacted by seasonality. When dealers really need cars to satisfy demand, then they're pretty quick to then take those cars reconditioned and sell them. When things are tight and conditions are tougher, they're going to try to squeeze every dollar they can out of us in terms of arbitration costs. So again, there's an ebb and flow there. Okay. So now let's move to transport and capital in terms of margin expansion, right? So about half of the -- and there's 2 big variables here that will drive the improvement in margin or lower cost of revenue. The first is the improvement in the mix as we continue to grow our capital business. So to the extent we hit our target of 25% attach for capital, that will result in a 3x improvement in terms of mix. Capital will move from about 6% of these revenue streams to 18% of these revenue streams, all right? So that's number one. Number two, our transport margins. I think as you all know, we hit our 2026 target of 15% last quarter. So we are raising our expectation for transport targets. And we're raising it to the high teens, okay? And we look at these 2 pieces of expansion in terms of margins, they're roughly equally weighted between the 2, right? As a reminder, we record transport revenues on a gross basis. So even a few points of margin are material to adjusted EBITDA dollars, right, because these are recorded on a gross basis, okay? So that's how we hit our cost of revenue targets for this part of our revenue stream. And then that leaves our SaaS and Data Services. So first, and this is a pretty big leap here versus the other categories. The mix of our SaaS revenues is really the biggest driver here in terms of hitting our cost of revenue targets. And again, MAX is a very high-margin product offering ClearCar when we offer subscriptions will also be very high margin. That will dominate these revenue streams. And we expect to be able to hit their 35% to 40% cost of revenue target, right, which is a 60% to 65% margin, if you will, all right? The other piece of this, by the way, are greater efficiencies in our inspection costs. And the reason for this is for our stand-alone inspection services, the cost per inspection is impacted by the efficiency of all of our inspections for our marketplace. So most of our inspections are for our marketplace, right? We do these stand-alone inspections to the extent we get better leverage for the average cost of an inspection, which is the vast majority of what we do for our marketplace, that accretes to the unit cost or the inspection costs that flow into this part of our P&L, all right? to the extent we get better leverage for the average cost of an inspection, which is the vast majority of what we do for our marketplace that accretes to the unit cost or the inspection costs that flow into this part of our P&L, all right? So that will naturally uplift the margins here over time as well. All right. So now let's go to the OpEx side of the equation. This is just a summary of the major OpEx components. Tech and development, sales and marketing, G&A, those are self-explanatory. Inspection and ops that houses all of our inspection costs, personnel for payments, title processing, transport processing, all those costs are bundled into marketplace inspections and operations. So what we're going to take through the next few slides is looking at the fixed versus variable portion of our operating expenses to help you understand how we achieve the target model in terms of operating expenses as a percent of revenue, all right. And this is something that we did not provide any fidelity on before. But frankly, this is the way that we model these costs going forward to understand what's a realistic level of OpEx to support the various targets in terms of our revenue streams. Okay. So inspection and ops has a very high variable cost component to it. And that's because we're assuming all of our inspector costs are variable with volume, all right? That's somewhat of a simplification because it's not necessarily always the case. For example, when we start a new territory, we'll put an inspector in place, it's almost like a semi fixed cost, right? Because we can't have a territory without an inspector, right? And then over time, as we add volume and we gain market share, then we add more inspectors, right? But we're just assuming for simplicity that all of those costs or variable in this model. And that's the majority of the strength here are the costs for inspectors, okay? So what drives inspector efficiency? Again, this gets back to territory density. When we have higher density inspectors are doing less driving around, they're going to a dealer and they can knock off 2, 3, 4 inspections out a shot, okay? When they got to drive from one dealer to the other because we were just nascent in that market, they could be spending as much time or more time even driving than they are doing inspections, right? Conversion rates are another big variable here. So in fact, when we look at our mature territories, not only do we get better inspector efficiency because they're doing more inspections in any given period of time. But we also observed in some cases, significantly higher conversion rates, which is a huge lever for our model, right? Because basically, we're incurring all the costs to inspect a vehicle -- we put it up on our marketplace. If it doesn't transact, we generate no revenue, right? So to the extent we can increase conversion rates and some of the other folks who presented today actually talked a bit about driving conversion rates, things that we're doing on the technology side, data science side -- John talked about, Vikas talked about some of the things that we're doing in terms of adjusting the duration of auctions and how that's driving higher conversion rates. That is a huge lever to our financial model, okay? The benefit is that to the extent we're driving higher conversion rates. It actually drives incremental revenue, which drives this cost as a percentage of revenue down. In fact, it drives all our costs as a percentage of revenue down because we're generating incremental revenue at 0 in terms of incremental cost because all we have to do then is basically process the transaction. We already inspected the car. And the inspection is the most important or most costly part of our model, right, versus processing the transaction -- getting the title transferred, et cetera, okay? The last piece of this would be back office efficiency and operations. Again, Vikas talked a little bit about that, a lot of the automation that we're doing in terms of looking and scanning titles and what have you. So we continue to just infuse technology in everything that we do, frankly, across the entire business. But this is one area that we can really impact the cost curve as a result of those investments. Okay. So the rest of our operating expenses are much more fixed in nature. So let's start with our technology investment. So first, last few years since we went public we've dramatically increased our spend here by a factor of 2 over the last few years, right? And you can see on the top of each of these bars, you can see the dollars that are being spent. So we're assuming that roughly 75% of these costs are fixed in nature going forward versus 25% variable, okay? Even with that, we're assuming that -- in order to get to $1.3 billion revenue, we're going to double our spend on TAC from roughly $40 million to $80 million, okay? But that will drive roughly a 50% efficiency in terms of revenue percent of revenue from 16% -- from 10% rather -- I'm sorry, 40% efficiency improvement from 10% to 6% of revenue. So the other piece of this puzzle is we have launched into India in terms of a lower-cost engineering center to bring on additional capacity at a much lower cost to augment our teams in Buffalo and Toronto, okay? So we're looking at actually a significant increase in capacity here. It's double the dollars, but also we're taking our costs. Again, I think about unit cost, but it's cost per person, if you will. That will be call it, 1/4 of what our cost here is today between Toronto and Buffalo. So we'll be able to continue to add capability in terms of the engineering team to augment our existing resources at a very cost-effective rate. Sales and marketing, another area that we've made significant investments in the last few years. We've talked to a lot of you about building out our nationwide network in terms of -- I'll go-to-market engine, all the salespeople that we've got populated around the country, right? So we look at these costs today is 80% fixed roughly and 20% variable, right, which means as we grow, obviously, we're going to see a pretty significant reduction as a percent of revenue and a lot of leverage here. And even with that, we're doing about a 60% increase in spend. So from roughly $70 million to $115 million. Why is that important? Because we want to make sure we have enough dollars budgeted here to support continued expansion of go-to-market activities, moving into the commercial space, marketing our consumer-to-dealer offerings, and frankly, making sure we have enough resources to fund the next leg of growth as we think about how do we hit a 2030 target, that's going to be substantially higher than this, right? So we have to continue to invest. But again, we'll get a tremendous amount of leverage here over time as we grow the top line and start to leverage a lot of these fixed costs essentially that we've already put in place and we're paying for today. And G&A. I sound like a broken record, right? Another area that we've invested significantly, we basically doubled our spend in G&A the last few years kind of leading to our IPO. And since then, so we had to build, obviously, the team the systems, the processes, the IT infrastructure, all the back-office operations to support the scaling of the business. And while we continue to obviously increase our spend here as the business gets a lot bigger, this is another area that we should see a significant improvement in operating leverage from the 10% to 6% by 2026. Okay. All right. So what does all this mean, right? This means that we can dramatically improve the bottom line if we look at the combination of margin improvement, which is modeled at 10 points and OpEx leverage, which is modeled at 20 points, okay? So that's a 30-point improvement to the extent we hit these targets, right, which again, based on everything that I took you through in terms of revenue, we see a very clear path to get there. Okay. So this is actually my favorite slide in the deck, right? So let me give you a little background on this. So in the past, we've provided cohort data to you all, including -- before my time when George was pitching some of you as private investors through the IPO and ever since we've provided a lot of the unit economics in terms of cohort data. We spent the better part of the last year and kind of hats off to the finance and accounting team, they basically rebuilt our financial systems to allow us to look at revenue all the way down to EBITDA at the territory level and then rolled up to the regional level, okay? And this analysis doesn't just include our auction revenue streams. Here, we're basically accreting the revenue streams associated with all of our ancillary products and our SaaS and data services. So we're looking at total revenue generation and all the way down to adjusted EBITDA margins by territory. All right. So frankly, this has been a great process for us internally because it's provided us a tremendous amount of insight understanding our own business and our unit economics. And there's some pretty interesting takeaways. So the graphs on the right show at the regional level. And again, we have 20 regions. Each region has 7 to 8 territories, okay? If we look at the revenue levels to achieve certain adjusted EBITDA targets, what we observe is that at $25 million of revenue by region, we basically get to breakeven. At $50 million of revenue, we get to 15% EBITDA margins. And then a small leap from there to basically with 30% growth to $65 million, we get to 25% EBITDA margins. okay? So that's pretty insightful for us as we think about also how we hit the targets from that perspective when we really drill down to the territory level. Further, when we look at our modeling for this year, we're estimating that 50% of our regions this year will be EBITDA breakeven or positive EBITDA, okay? And again, when you think about a region, multiply it by 7 or 8 to think in terms of territories, right? So the other piece of this -- I'm just looking at my notes here and make sure I get all that information here, correct, all right? So 3 regions this year are expected to achieve 15% to 25% or greater adjusted EBITDA margins. That's this year, right? Again, these are regions, not territories. The last piece of this is we now zoom down to the territory level, okay? We're estimating that 25 territories -- not as [indiscernible], I stand corrected. Last quarter, 25 territories had double-digit adjusted EBITDA margins and 3 territories were over 25%. That was in Q1, right? So now why is this important? I'm going to just focus on this last bullet because it was very insightful for us because we never had financial information down to the adjusted EBITDA level by territory. Okay. So if you take a step back and think about what I just took you all through, we're looking at 30 points of leverage from today to 2026, 10 points of leverage on margins, 20 points of leverage on OpEx. In theory, those territories that are at 25% or better -- EBITDA margins already have some of those efficiencies factored in, right? They have higher conversion rates. They have better efficiency in terms of inspection costs, okay? So some of those efficiencies are baked in. So let's assume that half of those efficiency -- half of that OpEx and margin leverage is already baked into those territories. And the other half is going to be accretive over time. For example, they're not getting any benefit from G&A leverage. They're not getting any benefit from R&D leverage, okay? They're not getting any benefit from ARPU leverage, right? They're not getting any benefit from additional scale just because our market starts to recover. So let's assume for a second that we can generate 15 points of additional leverage for those territories. That's a 40% EBITDA model. And one of those territories is even higher than 25%. So let's just leave that on the side for a second, right? So that has helped us understand that over time with enough scale and enough maturity across our territories, we are actually looking at the potential for a much greater level of adjusted EBITDA than we put together with our long-term model, which we haven't changed, by the way, right? But that's the kind of margin profile that gets us pretty darn excited, right? Now again, we need to achieve the scaling over time. We need to achieve everything that I just took you through. But frankly, there's nothing in terms of our assumptions. That strikes us as being unrealistic, right? The only point of debate might be among you, does the market fully recover to 11 million units. There's a path that might actually be more than 11 million units. If there are 10 million units peer-to-peer today, and we help dealers, by the way, pull those units into the dealer ecosystem, we're standing the TAM, right? Again, we don't -- we're not going to stand here and say it's going to be more than that, but you might think it would be less than that. It could be less, it could be the same, it could be more. None of us really know. The point is that I think we all believe -- at least we do certainly that, the market will recover at some level, right? We could disagree on how much. But again, the point here is that this process that we've gone through has demonstrated to us internally that this business model really rocks. I mean, there's the potential for us to create an incredibly profitable business, right? And we don't have to be a $10 billion revenue company, by the way, to get there. Okay. All right. So this is just a summary of the target model. The long-term target out there, when we went public, we actually put out a 30% EBITDA target at maturity, which we're just modeling here at $1.7 billion to $2 billion. That would be about another 50% growth. We'll talk more about that some other time because that's when we think about what's our 2030 target, right? We're not changing the 30% EBITDA target. That's still a pretty good target. But what I just took you through gives us reason to think that what a year from now, we might be thinking that target actually is higher. So we'll see. We'll see. Okay. So I'm going to finish up here before we turn it back to George, and we'll get into Q&A here in a few minutes. All right, capital structure. A lot of cash, over $500 million at the end of last quarter. We were actually free cash flow positive last quarter. We had kind of the stars and the moon aligned. We had a great tailwind in terms of our marketplace float, which was $188 million. Last quarter, and again, I comment on every earnings call, there's volatility there. So don't assume that's a straight line either. But what you can assume and what we're assuming is that over time, directionally, our marketplace float will increase. It might have some volatility quarter-to-quarter, but the extent we hit these revenue targets, there should be a linear basically a linear progression in terms of our marketplace flow. And this is free cash that we get to use, right? It's not restricted. It's available to us. We tend to be really conservative inside the business and look at our net cash and net of the float, but the reality is this is kind of a feature of our business model, all right? ACV capital receivables reached $100 million last quarter. So if you do the math in terms of our capital business and scale it to the 2026 targets, our portfolio would grow to about $750 million, right? Once we get to about $200 million, then we start looking at financing this in the debt markets. So we're not quite there yet. You need at least $200 million of scale. In the meantime, we have a $160 million credit facility today that we can leverage that we have to leverage. And frankly, there's opportunities potentially to even increase that beyond that if we want a little more room, right? And again, that's short-term lending. Those receivables turn in basically 60 days. I think most recently, we've been turning them even lower. Anyway, so that -- and obviously, no other debt other than what we borrow money to finance those receivables. So last point here is cash flow. All right. Basically, the net is that our adjusted EBITDA is a very good proxy for free cash flow. The reason for that is because our float as it grows, can basically pay for CapEx and capitalized software. Goodwill of them, the way we think about it is we can equate not just operating cash flow, but free cash flow with adjusted EBITDA dollars, right? And that's the way we've been thinking about the business. All right. So that gets you guys through the financial model. We will get into Q&A now. And you have -- you want to wrap up for [ stack ], right?

It's jump right in. I'll wrap up while I'm walking over. I mean I think at the end of the day, we worked really hard from our -- the last time we all got together to now to really help provide some more insights, right? When you think about the maturation here, we've heard a lot over the last year, help us really understand the model. Hopefully, you've seen that. What I've heard a lot from a bunch of you all is help us really understand where are you this wins and repeat. And Mike Waterman and the team really showed you that our wins and repeat from a go-to-market perspective. We're just really, really proud of what we're doing. We're just going to keep doing that, not only for 2026 to 2030, just keep going, executing. You've heard us talk about what we're doing from an innovation perspective and how this truly is an intelligence platform for the automotive market that is unique to any other company in the category. Each and every year, you'll see a little glimpse of what we worked on the prior 6 to 12 months, right? And then hopefully, next year, you'll get to see what we're working on right now. So really, really proud of what we've been up to. Let's just jump right in and ask the questions. Tim, do you want to help facilitate, so I don't have to pick?

I got a question. The territory lower 25% adjusted EBITDA margins today, do they have a disproportionate amount of capital services and then relative to others? Or it's just apples-to-apples when I look at non-mature versus mature territories?

Yes. I don't -- that's not a big variable. Yes. It's more driven by the other variables in terms of territory density. Conversion, again is a really big factor as well.

Congratulations first on all the accomplishments you've had and then a wonderful day today. I mean give us so much information is really helpful. I want to take a step back and one of the things you talked about is getting to the 2026 goals, one of the bigger hurdles is market share gains, right? And just that volume growth of 30%, 28% ex the commercial and other. One of the big drivers that you've taken share with and growing your volume with is your work with your dealer groups in private marketplace. Tell us where you are there in penetration? I think you said 15-plus dealer groups with private marketplaces on the call. So on the most recent investor call. 15-plus now goes to what? Where are you on that maturation? And I think -- and I don't have enough time. But like almost 1/3 of your volume was from those groups or something like this give us more on the private marketplace maturation and how that's helping you gain share, where you are in more details?

Sure. So -- we continue to sign up additional dealers. I mentioned about 15 were either live or about to go live in the last call in contract phase and live. So making great progress signing up for additional dealer group. So that's one. Maybe a little bit more color is a great target for a dealer group because if they keep anywhere between 10% and 20% of these cars, just kind of give you an idea why we like them. I think we're around 20-ish right now model -- it's sort of a -- even though we charge a little bit here, it's sort of a freemium type of model. Because they're excited about keeping 10% to 20%, which means they're going to wholesale 80% right? Because just because it didn't work at one store, it might work at another store, that one given vehicle, the majority of the cars end up getting wholesale, which -- but they're static. Like we went live with one of the large dealer groups -- there -- I think they call it the Southwest division, and they were a little bit north of their 10% objective I think they were in the 15% to 18% of their objective, keeping the cars in the group. Their group President was ecstatic. We were ecstatic because we had first shot at a bunch of cars. And these were frontline cars are ready reconditioned, higher price and another dealer, whether it's 100 miles away or 300 miles away wants that car. So it's one of our features. If many of you have known me for a while, I said we've got a lot of features that we're building here. That's a great feature. These other features we've developed. They are also important features. At the end of the day, it's just about adding more value. right? If we add more value than the other traditional auction-oriented companies, we'll take our share.

John Elias with Guggenheim. It's great to see the ARPU opportunity and potential price peak per unit. Can that grow from now to 2026. I know we still have potential normalization in used vehicle pricing, but are there also appears to be opportunity to drive a higher mix of those higher-priced vehicles. So I'm just curious how you all expect that to shake out.

I'll start seeing power there -- but as we think about GMV -- And then Bill, so we have GMV in our model going down a little bit this year. That's at least high level what we're modeling, even though we've got all these benefit from a mix perspective, none of us really know. You've seen us be wrong the right way and GMV, but our current at least model assumes it going down throughout the year. But your -- I'll take your question further, which is continue mix -- continue -- private marketplace grows even further. Commercial customers start to come on board. Some of these consumer vehicles being sourced don't fit for that specific store. So it gets sold in the marketplace. All these things should help on mix. We're not assuming our GMV grows materially between now and 2026. So our model does not assume that. So it's more like all these things are kind of keeping it near where it is today, but we don't have in any of our assumptions that GMV grows. I mean who knows, we could be launching some high-end vehicle lane in the near future, right, of just helping dealers buy high-end cars. That would increase GMV. Until we launch that until we see what it does just assume it kind of goes down in some consistent manner and kind of go from there. Yes. And it is flat in the model after this year basically. I mean the other variable that none of us really know is the impact of inflation going forward, right? Unfortunately, I'm old enough to remember years ago when inflation was a real thing, right? I'm probably dating myself era. But listen, inflation is tough. I mean, the Fed realizes this. Inflation is tough to tank mean inflation may very well persist more than all of us would like. But even if it's 2% or 3%, by the way, you extrapolate that over a few years that is up, right? If you think it's 3%, do that math, right? Now I don't want to make it sound like it's a huge tailwind, but it could be somewhat accretive.

Just 2 quick clarifications. On the revenue uplift from revenue per unit growth. The reference was to buy-side fees. Is that all buy-side fees? Will it stay on that side?

Yes. We actually have in the model a tiny decrease in cell fees. Not because we're seeing it because our thought is the more bundling, the large dealer groups, just kind of plan for it be prudent. So yes, all of it's on the buy side. Our revenue per unit is still about $100 lighter than the physical auctions without adding in buyer assurance products, there's a product the physical auctions had it's called PSI without getting into all the weeds, which gives you a level of assurance. So we've got room here on the buy side. We don't have in the model between now and 26 is taking that full $100, right? We have only a portion of that we're taking back. And as Bill mentioned, they might increase. The industry will likely increase fees in general. Every time we've increased our fees, competitors have actually increased them some more. So I think we're being very reasonable. I think when you look about the model and how we're thinking about these being small-ish increases year-to-year between now and 26, which you've seen is our style. You heard us say, we don't want to be a pig. We just want to raise fees slightly each and every year, we feel good about it.

Okay. The other one I had was just to better understand the revenue and EBITDA by region slide. In terms of cost allocation for the corporate layers, is it just percentage of revenue based? Or how did you do that -- making an attempt to regionalize the cost? Or did you ...

It's for -- let's take G&A as an example. It's more ratable, right, because those costs typically get spread based on ratable relation to revenue, right? Because you can't specifically -- let's take my cost, how do you allocate that? It's got to be ratable. But there's a little more science that went into a lot of the allocation methodology. It's much more complex than you might think -- without getting into the bowels of our financials, especially when you get into the ancillary revenue streams and trying to figure out how to allocate those. But the hardest part is assigning attribution by territory in terms of those revenue streams. How much transport revenue did I earn -- did I generate in this particular territory? How much capital revenue, how much SaaS revenue, right? There's been a lot of effort to allocate those revenue streams and get it right.

Thanks for the presentation. I think we're very insightful. I had a question on just the commercial opportunity, the digital plus land. Is there -- I mean you mentioned that you're going to expand into more locations. I mean, within your 2026 target, the 10% commercial unit target, I mean, how should we be thinking about acquisition spend, CapEx spend do you acquire that land? Like how many locations are we thinking here? Any more clarity on the that.

So you shouldn't assume any difference in our business model. We're not buying land, okay? We're going to maintain an asset-light model, but we can rent line. It's just -- it's an operating cost. And all the work that we've done is to look at the unit economics and the margin profile. And if it hits our targets, okay? So as long as I'm hitting my target, I'm not investing in huge amounts of fixed assets, right? So it's not going to change our model in that regard, right? It's just an operating expense to run a particular operation. So we wouldn't know on an land.

And I'll give you a little bit more granularity. So obviously, any of the consignors that don't require land, we can offer to them a nationwide solution today. So rental car companies that are willing to work with us, want to work with us, we can go and work with them nationally. That's a category where we're ready when they are. When you think about repo banks and folks who are repo, we only have a few locations today in the whole country. Where we can offer our marketplace plus a full solution for repo, right? Those are 2 extremes. The model doesn't assume by 2026, we have a full nationwide coverage for repo as an example, if that's where you're going. It assumes we've got some locations. We started our journey. I don't have to give you an exact number. But it doesn't assume we've got the whole country covered. We're still kind of on our path, more to come on this topic. But I think like journeys started on the parts of commercial that need land. Another way to look at it is it would take about 30 to 35 locations to get to about 80% of the population -- approximately okay? We have a handful of locations now. I don't know if we'll have 30 to 35 locations between now and 26. We're not moving that fast. We're not trying to -- it will be sort of as we go along and as we see how fast this kind of pace up, but that kind of gives you like a proxy of today, we're just getting started. We're talking about it could we like what we say. We like the unit economics, we like the margin. We like what we say. And like a lot of things, we typically go out and experiment a little bit before we talk to you all about it. And then once we experiment, once we like the math, then we start to chat about it. So that's where we are today.

I'll just add one other point, though. If you remember, I was stressing conversion rates and how much of a lever they are in our financial model. The repo market is basically 100% conversion rate, right? So we think about that, we think about our model and figuring out how to get into that business. We need a place to put the cars, right, because of the statutory requirements, it's a very profitable line of business.

Got it. Just a follow-up on the financial model. I mean if I look at the 2023 guidance, the EBITDA guide versus the revenue guide implies something like a 60% incremental margin. Your long-term targets imply something like 40%, 45% incremental margins. I mean -- this year, in the last year, a lot of the EBITDA growth has gone from -- I mean the units haven't grown much. It's other drivers, including ARPU. Going forward, in your targets clearly require a significant amount of unit growth. I mean how should we think about like the incremental margin profile? I mean what gives you comfort around the 40% to 45% given majority of the growth is now going to come from actual units like more volume, more inspections, more people on the ground versus just more drop-through in ARPU the last couple of years?

Yes. I mean there should be -- and look, we're not putting out obviously 2024 guidance at this point, right? But you can expect there should be a natural progression, right? Because unit volume really is a great lever for our business. I mean we've managed to manage through last year, which was a really tough environment. But units just create tremendous goodness in terms of this business model, right? And you just get leverage up and down the P&L, right? So I'm not going to say it's perfectly linear, but you should expect there to be a natural flow in terms of up and down the P&L as we continue to gain more volume.

Yes. When you look at this past quarter, just as an example, the market shrunk on us by about 11% year-over-year. And we did really well against a market that was still going in the wrong direction from a market size perspective. So I think all these numbers are you take context of where the world is at that 1 point in time, and I think we actually did a great job of growing our share. So I think the key thing we're all believing in here is we will just keep winning share at the pace we've been winning it. We didn't say even faster. All these things we're talking about here, who knows? Who knows if we'll grow faster or not. But the whole model is based on -- you saw Long Island, you saw Austin, right? You saw a market in Southern California. Go do that, right? Go just keep going to that across the country, if it equals 12% share consistently, not in just those markets. And then you saw what that contributed from an EBITDA perspective. So -- it's really -- if you believe we're going to keep winning share, which we do believe then -- and you believe some market recovery is happening and Bill gave you guys a way to really digest each one of these assumptions, then it helps you get to our target.

Okay. So First of all, I 100% agree those revenue builds are super helpful. That's really nice. So the things that I wanted to drill into, there were 2 of them. First was following up on the commercial question. $65 million of incremental revenue is coming from consumer to dealer plus commercial. So that's comforting to know that you're not leaning too heavily on commercial, but commercial is a big opportunity for you guys it's been difficult to break into. So maybe just a competitive landscape review there. What are the things that, I guess, keep you up nights, wondering whether you can maybe do better than that in commercial? And then a similar question on transport, but I'll let you talk on commercial first.

Okay. So to give you a little color we're close to mid-single digits percentage of our current units today from consumer to dealer and commercial. So it's not like it's 1%, right? It's -- we're closer to mid-single digits. So we're really just saying of a percentage, we look at it from a percentage, let's say it's 4% to 5% today, somewhere in that range. We're going to 10% of our overall units. So what gives me comfort is, one, I can already taste this. I can already see rental car companies going, I'm getting more money for these cars. You heard what some of those dealers were saying about I'm buying great cars from consumers. So the 2 things we have in that category aren't 0, we're in market. I'm seeing the results. We debated to, should it be a bigger number. It was a convenient number because all I have to do is take the dealer growth of what we've been executing and going, just make it be 10%? Who knows what it will be. But we feel good. Yes, there's competitors in every category that we all go into. So take a step back its okay, what do we have to offer? We've got unbelievable self-inspection capabilities, that you saw [ Aboo ] and John and Bill and team walk you through earlier, where we have an array of ways to get our relationship started with these commercial consignors. We have a way to provide more data that our competitors can't provide. We have a way to provide more insights that they can't provide. So I feel really good about being about 10% between the 2, between how in 2026, I think that sets us up well to see in case some of the stuff takes a little longer, some of the stuff goes a little faster. I think we're creating the right expectations, and we'll go from there.

Okay. Great. So a very quick question on transport. I mean, the way that you were talking about it, you sort of frame it as -- on the one hand, you say it's sort of a function of how many transactions you're driving on the platform, which I understand there's an attach rate. But on the other hand, you talk about being a big automotive transport company. Does your phone sometimes ring from people who have nothing to do with your business saying, you guys ship a lot of cars. I need you to ship a car from point A to B why can't I just put a car on your truck. Like is that a call that you would entertain? So to what extent is that reflected in these number?

Yes. We've got a small amount of dealers that use us to move all their cars. Very small. It's a small portion of the overall units. We're learning. So that is a category that maybe once we learn some more and we understand the market opportunity. Maybe in the next couple of years, you'll hear us talk a little bit more about. But that one, I would say, is in experimentation right now. that's how a lot of these things started ACV. They started out as a little a little test, a little experiment before we're ready to talk about it. But at the end of the day, it all comes down to our key principles, which is trust and transparency, right? Transport is just another area that kind of just trust ACV to take care of it. It will be helpful that before the cars picked up, which we don't have this part done yet, you go around the car with Monk before it's picked up. And maybe I'll say -- clear car the next time I say that in a year, wherever we are in our branding strategies, when you go around the car, I know what the car is when it was picked up. I know what the car is when it was dropped off. So I think -- don't just think about the moving of the car, think about the whole process. The worst thing about logistics is potential damages. So great question, not ready to really talk about how big that could be for us. We're still in experimentation mode right now and just testing and learning. I think about 2 years from now, we'll be talking about it. And no, it's not baked into the model.

Yes. So I'm trying to reconcile your slide, Bill, on kind of territories EBITDA with George's slides early in the presentation, which showed your territories and regions market share. What I mean by it is, is there any risk that some of these recent games with these territories hitting pretty high EBITDA margins, we're where you have high density, which is the Northeast where things are closer together and there's less driving? Some of those regions you showed out West are huge. Is there any risk that some of these territories aren't ever going to get to these EBITDA margins you were discussing because of these distances?

When you think about where the population is across the country, most of the population is in more dense areas. So I think intuitively, I think very low risk. There's not a lot of population like Montana for South Dakota. And if we really look at the U.S. I think the simple way, like a lot of these 80/20 principles where most of the people are in higher -- densely higher population areas. Then if you take it a step further and say, okay, we showed you markets up there that were like in Austin. And Austin isn't really that different than Long Island in a way, right? Lots of people, growing population, cars are moving to Dallas, moving to San Antonio. They're even moving to Oklahoma City. So when you look at that whole area, not really now. I mean I don't yet see any material differences at this point.

So you will just -- I mean, you drew those regions across areas where there's just incredibly low density, but you're probably just not going to even service -- if some guy in Whitefish, Montana calls you and says, yes, I'd love to sell my cars on ACV, you're not going to have your inspector.

Mike, we have 1 or 2 people in , we have 2 people in Montana.

Okay.

Right?

So different the margin -- because they're going to have to drive forever, right?

So when you think about our planning, our planning looks a little bit more sophisticated at population where are the cars, how many trades are coming in. And yes, we sell some cars in Montana, right? But it's not going to be the most significant part of our growth.

Okay. And so you wouldn't call these early territories already showing 25% low-hanging fruit that's just the same as other territories.

Yes. I think Southern Florida, we're doing an incredible job. We'll just keep doing better. I think parts of Texas, we're doing an incredible job. Parts of California, we're doing a fantastic job Detroit, I think year-over-year was our fastest-growing parts of the country. So I feel good. Those are just different parts of the U.S.

I think we've got to get that microphone over to this gentleman over here.

Go ahead, Peter.

First question on wallet share. Can you talk about the differences in some of the wallet shares across different regions. You get the franchise -- ones they are 20 versus 70, is it -- are you the first one there? Is it the technology? And what you guys are talking about just in terms of what you're providing on the inspections of conversion. So kind of some of the drivers are and that driver in wallet share? And do the dealers -- how do they think about dual sourcing, sole-sourcing just kind of pure franchise basis? And second topic is just on the ARPU would be -- is there any ceiling thing -- as you think about the gross profit per unit, [ 20,000,000 ] and on the cars in some cases. If you're charging 10%, 15%, 20%, do they think about -- has been about that dollar price, not safe the dollar price. Are they rolling these forward to most of the [indiscernible] side? And as you think about the kind of return there on a basis?

Sure. So on wallet share -- I'll talk to wallet share in sort of 2 different typical cases. One is not a major dealer group, meaning just a regional store, a regional group, maybe they own 1 or 2 or 3 stores. There's a used car manager who's making almost all decisions. The dealer principal barely pays attention to wholesale. And that was really the -- many of you that have met me when you were still at Fidelity back in the day and we met a long time ago. That was our typical business, right? Like that was our business. It was about that us convincing just that used car manager. And it's mainly about they've been working with this local auction for 50 years. And just convincing them that they're going to get more money on ACV, start out with a little share, and you've seen us for the years to get more and more share in time. The other side that Waterman brought up in his slide, I think it was Austin was where we won with more dealer groups. And you saw all of a sudden to share in our growth grow. Well, that was a little bit more top down. That's a little bit recent. Hence, why Bob asked me these questions every time we talk. You're seeing it really consistent, how are these other products helping us win, win because it's a more dramatic win, right? Because you've got somebody at a COO level or some senior person in the org saying, we want to try to create discipline to our wholesale process. We don't want to just ship them all off to some local auction. We want to create discipline. We want to create process. That's still relatively new for us. We're a couple of years in on that being a part of us gaining more wallet share. And when you think about how that could compound, it's not only us getting more and more dealer groups, but those dealer groups that are acquiring other stores. So hopefully, that gives a little color to the 2. The second part of your question about like how far could this go? Nobody modeled this. Nobody take what I'm saying -- this is not coming from Bill. Okay. This is just -- but I think Copart does a good job of showing us a model. Their revenue per unit is something to be envy for, right? I mean, even this -- I don't know, whatever there's a 50 to 60 box we have extra ARPU between now and 2026, it's still like so small compared to the ARPU Copart has. And obviously, that's a demonstration of a high ARPU, tons of leverage in the model. So I would say aspirationally, someday. I'm not saying whether it be 2030 or 2040 or whatever that is, but someday, our ARPU should be close to Copart, right? And that's maybe one way to answer your question. But I don't want to hold us accountable to that. There's -- it's just a great thing for us to look at as we're all thinking about growing the category where we're going. So hopefully, that at least gives you an illustration, you all go do a little homework going. How high is the ARPU, probably I know it off hand, but it's a big number and that's the way to look at -- dealers are buying those cars. At the end of the day, let's say they're selling -- I don't know if they sell 3 million, 3.5 million cars or something like that. They're paying those fees -- only they're not buying them, right, without our condition report, and they're buying them. So that's just a fun way to think about at the end of the day, that shows dealers will still pay, right? And then almost all of their revenues coming from the buy side. Okay.

Just in your regions you talked about earlier that were doing over 25% EBITDA margin's. How do volumes compare between those regions that are doing those margins? And then if you look at volumes relative to those that are only doing 15% to 25% margins, how do those compare?

So if you look at the graph that I showed, right, with the EBITDA margin based on size of a region, right? Those regions would be in the $50 million to $65 million range, right? Because scale absolutely matters, right? At $25 million we were breakeven at $50 million, we're like a 15% EBITDA margins and at $65 million, we're 25% even larger. So there's a direct correlation because basically, that the data from the regions is what we extracted to come up with that graph.

And does that account for -- I guess, what you were getting at earlier, was the mix of other services in there. Should we just assume that's all similar?

Yes. It's I mean I don't think there's anything in there that's disproportionate -- that's material enough to really matter. There's a bit of a deviation in terms of transport, right? Because transport varies depending upon also density of a territory, right? I think for all intents and purposes at this point, the way we're looking at the data is to not necessarily differentiate between the 2. Maybe as we get more into it and try to fill away the layers of the onion, might give us more insight in terms of how we drive to a certain target. But I think for investors, you should assume it's not materially different between them.

I've got 2. But maybe, George, the focus on wholesale and I think the bundling of SaaS and data is sort of a little bit of a change, I guess, going forward given the focus on wholesale. So talk just a little bit more just about the retention rates maybe you're seeing when you're not necessarily giving away the data in SaaS, but when you're bundling it into retention rates on dealers with that. And then Bill, a follow-up on just inspection.

Okay. Yes. I mean when you just look at the core why, if the average dealer historically wholesaled about 26 to 28 cars a month, multiply that times $800 of ARPU per unit or whatever number you want to multiply it by versus us making $400 to $800 per month in subscription. There's just so much more benefit and leverage to use these products to win wholesale, right? So the -- we're going to try a couple of the models. But an example model is, yes, you need to give us at least 10 cars a month to wholesale or else -- and so don't quote me there, but that's an example model where -- just do the math, 10 cars, times $700,000 versus $400, $500 in subscription revenue. So at this point in the company's growth cycle, I look at it as a prioritization of what you want to accomplish. And you don't need to take every penny off the table, right, at every stage. Just go out there, be really, really disciplined. Be really, really focused -- what do you want to achieve. And we've got dealers just absolutely loving what we're doing with -- if you call them right now, they might say drivable, they might say monk. They won't all say Clear Car yet. We haven't really done that marketing. But if we're a few hundred dealers right now using drivable. They would say, I'm literally buying the best cars at a robotic. I have these huge problems. So they're wicked excited. It doesn't mean I can't later say, hey, for this new feature, it costs you $500 a month. Whether that's in 2025, 2026. But look at this as just you've seen ACV be discipline. You see us with these slight pivots where if it makes sense to accomplish our #1 objective, and that's all we're doing.

Right. And that's the understood on wholesale and data corp is getting larger, which sort of gets to Bill, I think you said inspection is the most costly part of the model. And when we heard Vikas and his team throughout the day just talking about improvements with AI and the inspection process getting better. Is there any way to you can the time savings or help us understand maybe the improvements because of the data that you have to the inspection process that's driving you to that 14%, I think, goal of inspections as a percentage of revenue?

So the biggest driver is actually territory density, the way we've modeled it. There's some factor of a smaller factor of improvement based on the technology investments that we're making. Over time, we'll refine that analysis, right? But the biggest driver and the best example is -- again, if we look at our most mature territories, inspectors are getting 12 inspections done in the day. Our average across the country is 6%, which says you we've got some that are doing 2 or 3 a day, right? So that's the biggest lever by far. So there's an overlay on top of that to the extent we can make every inspection more efficient through some of these advanced tools, right? But those tools are directed at first making I would say, first, creating more transparency as to issues with a car that we can bake into a condition report to drive our cost down. And then additionally, to the extent we could streamline inspection, so they could be faster right? That would be kind of another benefit. But I would say that's a smaller part of the modeling at this point.

Okay. Perfect segue to my question, too, as it relates to the operating leverage in the model. Talk about first -- I mean how much APEX is out in the field and where I'm going with and how much Arguard , like are DCI using -- does everyone have it? Is it like every inspection is now with APEX and Arguard? And talk about arbitration trends, where they've been, where they were 2 years ago before APEX before [indiscernible], all this stuff. And then where they have to get to, to get to your model at the end because that's a huge portion of that margin gain, right, because the auction doesn't cost any more, right? It's the assurance part, which is essentially lowering your ARPU costs over that time period.

So Apex is completely across the country. I'm looking at Phil to make sure I'm being accurate. So let's say, 99%, I think it's 100% of our inspectors are using APEX. All of them are using the other tools. Our guard type tools, the other one might have heard him talk about this copilot, which is like it tells the inspector what to expect from that specific vehicle. So those products are out there. I don't know if we gave the percentage in the last earnings call, but we did indicate I can't review if you gave the number or not, that the total number of arbitrations did go down on a percentage basis. But I can't remember if we gave the number out. I think I'm going to stay away from the number. I don't think we did I remember it was in our press. I don't think we were -- it's okay. But we -- so a number of arbitration claims has gone down. So it's helping us, as Bill mentioned, some of this might have a tiny bit of seasonality to it. That's why you don't see us like shouting from the rooftop just yet. Q1 in this business tends to be from AI perspective, you're lowest just because they're not going to hassle yet. They need the car so desperately. And Q4 is usually the biggest pain, okay? But year-over-year, our improvements are pretty significant, okay? So if you don't just like quarter-to-quarter, if you look at year-over-year, I'm really proud of what the team is doing. That was around your first question. What was your second?

So you've gone year-over-year better, right, without quantification. How much better again much you get in 2026? If -- and maybe -- I mean, you guess some number, 10% of cars have like an arbitration or whatever, you're down from 10 to 8 to 5 or I mean if you make a...

So first, as a reminder, 70% of the margin expansion is ARPU. 30% is from arbitration costs. I guess I could give you a sense for like percentage decline, probably be about a 25% decline thereabouts by 2026. So you think about all the technology investments that we're making, all the refinement over time. And there's a lot of other factors that kind of bake into this. But that would be maybe a range, 20% to 25%. I want to give you an exact number. That would be directionally if we think about our financial model, understanding that's over 1/3 of the -- but we're really giving you guys a clue that 70-30 mix of ARPU versus arbitration. Who's to say it couldn't be 80-20 or 60-40, right? So you've heard us say we've got multiple others. We don't even have in the model charging the buy fees that the majority of physical auction charge today. So said another way, if we decided to increase our ARPU a little higher if arbitration is that going on as much. It's -- that we just gave me the way we currently think about the world, the 70-30 today. That's how we're all looking at it. So yes, I do think arb and goodwill will go down about what we have in the model, somewhere in that range. And whether it was 10% better or 10% worse, then you just increased fees by $10 and it basically washes it out. So just think like that we've got the levers here, and that gives us confidence to give you the granularity of the data we gave you all. So I mean, a few of you have heard us say like, hey, you talked about all these levers? Where are they, right? I've heard a couple of you say on that. Now you see the levers, right? We can just kind of go see how we're doing, right? See how we're doing in [indiscernible] goodwill right now, we just had a phenomenal quarter on [indiscernible] will. I think you'll see us do a year-over-year improvement. And that will give you at least our benchmarks. And then between now and then, we'll decide exactly how we're going to land the plane.

Okay. And I promise last one. So -- just -- so when you get to that level down to 20 or whatever, where would that compare to industry standard or what Manheim is doing? I don't know their numbers, so I can't even like say?

It wouldn't be apples-to-apples because we're giving seller assurance, right? So the Manheim and others give a buyer insurance. So they're charging the buyer even more money than to buy fees to have assurance, okay, which we do very little of today. We'll come back to that another day. This -- the sell side assurance because this is digital, and the seller doesn't want to have to return a car that's 300 miles away -- was a unique differentiator that our competitors have tried to copy us, but none of them have the penetration of this sell-side assurance offering that we've launched.

All right. I have one question. So this is about kind of wallet share of dealer and I guess, how the inspection process drives that. So the Atlanta dealer, they do a few units. Is there a gating factor because your inspection is so rigorous and uses so much data that perhaps they have cars, they don't want to put through the inspection process because they may be made some bad purchases. And then this kind of informs how they like future purchases from competitors. I guess is that a gating factor as we think about wallet share kind of on a dealer-to-dealer basis?

There could be some dealers with that perception. There's going to be dealers who -- there could be the opposite. The more we show, the more money we get. So perception is a part of business. If any of you studied game theory, you can go back and forth and the more you show, do you get more buying or not? But yes, I think there could be some perception that because we're showing so much, I'm not going to give you I'm not going to give you -- I'm going to give you the cars I want you to have that inspection on. Having said that, that doesn't preclude us for launching different lanes. For example, we have Red light cars . Does anybody know the percentage of Red light cars that run in ACV? Of course, we cost exact number. 15%. I love that. So 15% of the cars, we might have a little less of an inspection today, which it's as is it's junk I told you it's junk. When you're buying it, it's junk. I tell you as junk. So think about the Red Light equivalent lanes, which is about 15% of our current lanes are the equivalent of what you're articulating which is I don't want you to say this is the greatest thing since life spread or rip it apart, just put it on the Internet, it's as is buy it as is. So to me, that's just a lane. And I think our lane optimization as we mature, I think we're going to have these different lanes, they do these different things. And then sellers and buyers will match what they want to buy and what they intend to have from an assurance perspective. Thank you all for all the time you spent with us. Really, really appreciate. Thanks so much, everyone.