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

Well, good afternoon, everybody. Thanks for joining us today for our 2025 Analyst Day. I wish we could be meeting under better circumstances, given our little market dislocation here, but it's an opportunity as someone just told me a little bit earlier. For those of you don't know me, my name is Tim Fox, I'm the Vice President of Investor Relations and Strategic Finance here at ACV. And on behalf of the entire team, I would like to welcome you to our Analyst Day for the day. For the agenda. We've got about 2.5 hours. George will take us through addressable market, what we're doing for winning in the market, review a little bit about our expanding product portfolio. Again, this year, Mike Waterman will walk through our dealer wholesale strategies and how we're expanding into other parts of the market. Then Vikas will bring his team up to talk about some of the things we're doing on the tech front, some new innovations, some of which I'm standing next to right now, and then we'll take a 15-minute break, then Bill is going to walk through the updated targets that we just laid out on our Q4 call, the path to how we achieve those. We'll dig in deeper into both the revenue margin and the OpEx to really paint a picture of how we can actually achieve those targets over the midterm. And then we'll end with a Q&A session. And then a reception for those of you here in New York. So please note today that we are including forward-looking statements, which are subject to risks and uncertainties. We'll also be presenting GAAP and non-GAAP financial measures. You can find information on our risks and GAAP reconciliations in our SEC filings and in today's presentation. With that, I'd like to turn it over to George.

Well, good afternoon, everyone, and thank you for joining us. I was just given some really good advice as it was coming up here, which is we're not going to look at the stock market today, all right? We're all going to be focused and excited about how we're driving this massive digital transformation of the automotive market. And we really appreciate with everything going on in the world, you all taking the time to spend some time with us for the next few hours. Again, this year, I'm most excited about you all hearing from my team, like we did about 1.5 years ago, I'll do a little bit of the talking. And you're going to see these incredible teammates of mine and how we're building this incredible moat around ACV. So as you all know, we operate in a massive industry. It's complex. It's fragmented, it's inefficient. And the same thing I've explained to you all in the past, each and every vehicle has its own story, its own imperfections and ultimately, its own value. Our mission is to build the most trusted and efficient digital marketplaces and data solutions that make it easy for our dealers, our commercial partners and their end consumers to understand and realize the actual cash value of their vehicles. Today, you're going to hear about our progress to build the technology and the scaled teams that are required for us to accomplish our mission. It's fun to look at the swoosh, right? But let's talk about the extraordinary and eventful journey. After generating $1 million in revenue in 2016, probably not many really believed we would accomplish, and we would deliver $630 million in revenue in 2024. Now we didn't just accomplish this revenue objective, we also were profitable from an adjusted EBITDA perspective for the first time. And we did that with now selling 3 million vehicles on our platform since inception. While accomplishing those objectives, we also innovated and created new growth opportunities, new business models, delivered more insights and value to our dealer partners. And we've laid out the foundation to expand our TAM, including a very large commercial market opportunity. With nearly $13 billion spent on fees and services alone, we've -- we're going after this very [indiscernible] as many of you know. Dealer wholesale has a TAM of over 10 million wholesale units. This is at least pre-COVID. And the vast majority of which are sold through legacy wholesale channels. Commercial historically represents a TAM of over 6 million wholesale units. We're really talking about our TAM And today, you're going to hear about how we're executing on this opportunity. SaaS and data services has a TAM of over 50,000 dealers in the U.S. alone, and we're in the early days of launching our AI-enabled offerings. We've also dipped our toes in a very large international market opportunity, and we'll see that opportunity develop over many years to come. So with that as a backdrop, let's now turn to what's enabling ACV to win. At our IPO, many of you have seen this slide in the past. We explained how self-reinforcing network effects creates a competitive advantage for ACV. Today, you'll see several proof points that this is happening. Growing the number of buyers and sellers on our platform has led to greater liquidity and a better experience, which in turn has driven proven scale to our business model. And Bill is going to walk you through that. Our scale has also created a tremendous amount of vehicle data and insights that has helped us gain greater efficiency. But that is not all. Our data moat has also fueled new products. driving more dealer engagement and additional shared ACV. And today, our team will illustrate how our product expansion is driving both growth and scale. This includes innovation to acquire more dealers and expand wallet share, enhancing the marketplace experience, driving higher attach rate for our marketplace services. expanding our TAM with these new business models, all while continuing to improve and expand our industry-leading inspection platform. I'm doubling down on this for a reason. As many of you know, our data moat is unique. Our inspection platform is unique, and this curation of data we've built is unique. Well, as previously discussed, we believe AI will transform the automotive industry. ACV is uniquely positioned to lead this transformation. Later my teammates will demonstrate how ACV AI will further differentiate ACV, optimize engagement and create new growth opportunities. The simplest way to look at this, ACV AI will strengthen and self -- be self-reinforcing network effects that are unique to ACV. As our flywheels turn and our offerings expand, ACV continues to gain share in a market that has faced significant supply headwinds. Despite the supply headwinds, demand in ACV has remained strong, and we continue to expand our dealer partner network. We estimate that dealer wholesale was about 7.5 million units in 2024. Or 30% below historic volumes. In essence, you've already seen recession-type numbers hit dealer wholesale. And we've executed extremely well. We remain confident that the wholesale market is structurally strong and supply headwinds will ease. In the meantime, we'll remain focused on gaining share of the dealer wholesale while executing on this commercial opportunity. Our plan is to deliver long-term shareholder value that's based on three pillars that you all heard me talk about since I've met many of you. The same three pillars: growth, which Mike Waterman will walk you through how we've executed; innovation. Vikas and our very incredibly talented team are going to show you how and why our innovation is unique to ACV, leading to this growth; and scale. Bill Zerella, will walk you through that there's proven right, you'll see it right in our numbers that our business model is becoming loud and clear on how we're going to achieve our midterm objectives. Before I turn over to my team, let's hear from our dealer partners, what they have to say about ACV, enjoy the session. And at the end, I'll be back up to wrap this up, and we can jump into the Q&A. [Presentation]

Good afternoon, everybody. It's a great video to follow. My name is Mike Waterman. I am the Chief Sales Officer here at ACV and have the privilege of leading our sales and our field teams into battle on a daily basis. We're going to talk a little bit about our teammates in the mix. And what we're looking to do while we're out there fighting the good fight every day. We have over 1,300 teammates, targeting those 50,000 dealers that George mentioned. And when you look at the makeup of those dealerships, in the U.S. They fall into really three categories that we focus on. One being, major dealer groups, which you've all heard of, those are the group ones, the Lithias in the world. Regional franchise dealers could be a single-point store, it could be a 6, 8, 10 store group, family-owned type of stuff, and then our independent dealers. That's where our direct sales team focuses on that supply through that dealer acquisition. Then growing the wallet share, but leveraging many of the products that we have today, some new ones coming that you'll hear about. And really what that does is it helps our dealers increase their ability to sell more cars for higher gross profits, minimize or eliminate any wholesale risk and really increase, and this is really becoming super valuable, increase their daily opportunity, both in their service departments and in their showrooms to acquire more consumer cars. So our nationwide vehicle inspection team that we have out there now, close to 800 strong. They serve kind of an extension of that. They're the front line. They're out there every day providing a multitude of inspection services for our dealer partners every single day. And then our inside team, they really drive the demand side. They're laser-focused on making sure they're assisting our dealers and buying the right inventory as quickly and as efficiently as possible to meet all of their retail needs. And then as we look at -- we're going to get into our territory expansion, that land and expand some of you heard about what you would say, 1.5 years ago, it's hard to believe it's been that long. But what's really amazing about this is our -- this model -- as we look at territory expansion, for those of you who were here the first time, we're now -- we're there, we're coast to coast. We started in the Northeast, as many of you know. Since then, we've invested heavily in expanding South and West. Today, we cover every major market in the country with over 150 territories that actually roll up to 20 regions. What I'd really like to do now is kind of give you some update, show you some examples of some of our territories across the country. And we're going to do it a little bit different this year. We're actually going to start out west. Yes, we are a Buffalo company, but we are in Fresno, California, and we have been not very long. Fresno's kind of a toddler for us, 3 years old. But we're very excited about it, hit first major milestone in 2024, gaining 10% of market share and did that by 37% penetration in franchise rooftops. And it's really just getting started. It's one of those areas. It's kind of a hot bed for major dealer groups, but we're able to offer, implement these additional products and services that we're going to talk about more and more today to really drive that additional wallet share and market share for us in wholesale. As we start to stay out west a little bit, another interesting one, Las Vegas. Many of you know, I've been in the industry a long time. I'm not going to date myself, but a long time. Vegas has always been traditionally a destination sale. And what I mean by that is you fly in, spend some time doing nonautomotive things, you buy some cars, you sell some cars and then you fly out. So -- and it's always been kind of run by the major group, the [ Findlays ], big names out there. We've been able to gain 16% market share, 35% of the rooftops out there in just 4 years. So we're very optimistic, very excited about that land-and-expand model, taking it from the Northeast years ago and now doing that rinse and repeat all across the country. And some of our more Chicago South, a huge market, up to 19% market share, close to 60% rooftop penetration. Again, another area where we've been able to go in with additional products and really gain both rooftop and market share by having additional products that lead to more wholesale. And you'll see as we go across Houston South, another very, very competitive market. When you think about a battleground area, Houston definitely is. You have all the major players from the physical perspective, a lot of major groups, a lot of long-standing relationships that go back generations. We're up to 20% market share, we're in three out of four rooftops and continuing to grow that market as well. Even with that kind of penetration, we're excited about, again, these additional products you'll hear about today, what that will lead to additional wallet share and additional market share for us. As we continue to get back towards our home base, Boston South or I like to say it "Boston South", New England was definitely a natural move for us, right, back in 2018. After setting up shop late 2018, I believe, we've consistently added market share every single year, hitting 22% this past year. And beyond that 22%, again, we still have ample ramp-up with wallet share in existing accounts as well as additional rooftops to add as we continue to grow. Another Mid-Atlantic, I just wanted to cover here because these are really special to me. If you remember back, we'd start one area with one territory. Baltimore South really started out of the Metro D.C. market. We went down there with one territory. It's now expanded to five throughout Baltimore and D.C. Just in this one area alone, we have 23% market share now and 46% of rooftop penetration. Another year, solid year-over-year growth year. And still, again, massive upside in these markets. I'm going to go a little further south, another very, very competitive area, Florida, a lot of physical auction facilities, a lot of competition. Jacksonville may be one of the most competitive when you look at what we deal with down there also with just traditional wholesalers. But this is one area where it's just a really strong ground game. We've got some great people down there, the products. We've been able to gain 24% of that market share, and we're in 36% of the rooftops. And again, this is an area that's pretty heavy with national groups. And as we continue to grow that area within our company, it's opening up more and more opportunity at these nationwide large dealer groups. One of ours Connecticut South, another one kind of close to Buffalo, one of the early ones we went into. This one, if you guys remember, I told the story about 1.5 years ago, all of my colleagues in automotive thought we were absolutely crazy to go into this market. It's the area where there's the largest independent auction house in the country lives here. There's a lot of competition here. We were stubborn, figured let's give it a shot. We now have 28% of the market share in this location. We're in 2/3 of the rooftops. And not only that, it's also the home of our original remarketing center -- central auto auction that since we have added in the digital volume, they have doubled in size. So we're very, very excited about that. And we did it in a backyard of a major competitor. So this one is kind of special because it took a lot of hard work, but we did it. New Jersey, the shore. This is another one. We now have five territories in New Jersey. We started with one territory manager. And all of these territories in New Jersey are performing right around this level. which is about 46% of the market share in eight out of 10 rooftops currently in that market. Now when you start to look at, okay, 63, 56, 81, seems like a lot. There's still a lot of room to grow. And as my colleagues get up later and talk about these products and innovations, that's where we get really excited because we're already here and now we just add more. So let's talk about how those roll up into a region, right? I mentioned 20 regions supporting, rolling up those 150-ish territories. Now keep in mind, our goal here was to expand quickly, but we didn't want to drop a lot of balls out of the back of the wagon as we went, right? It's very important. You want to keep retention, but you want to grow. Our strategy was move adjacent. But then we did a long cast down south. We did a long cast out west, and we just kind of filled in between and pulled it together. We shared franchise penetration at our last Analyst Day. So I just want to take a look at this at a regional level. And remember, these regions all have roughly about 7 to 8 territories in each of them that roll up. So when we go back to 2020, we were operating in all 20 regions. I mentioned we had one area that expanded to 5, expanded to 3. So we weren't fully in these areas, but we had dipped our toe in 20 regions back in 2020. And at this point, we had 5 regions with 25% penetration and about 15 regions with about 15% penetration. And then as we get into '21, we really started to get some traction out on the West Coast as we built that out. We've really started to hit those Texas markets, Ohio Valley, Southeast Tennessee Valley. All in a while, as you can see, is our penetration and our growth continued in the Northeast where we started. So as we moved on to '22, we started to see the same consistency as far as growth. At the same time, we had 5 of our regions up in the Northeast reach 35% penetration. And again, all hitting these milestones while the industry was still recovering from the pandemic and supply constraints. 2023, despite a very tough market in 2023, we made significant progress across the country. You can see significant growth, major markets, again, across the Southeast Florida, Texas, the Midwest and California, which is very important. We get to '24. Again, it was a flattish year. I think depending on who you talk to, it's just a matter how flat it was in 2024. But we were able to maintain growth in several key areas that I just mentioned, and it continued into the Carolinas, the Mid-Atlantic that I just mentioned with Baltimore and that whole D.C. Metro area, that Mid-Atlantic and Mid-America and others. And you can see that every region in the country has at least 15% franchise penetration now, which is a very exciting milestone for us. One of the key drivers to this, and I mentioned it a couple of times was this major accounts team. And what we mean by that is you talk about these national groups, right? They now account for well over 40% of the rooftops in the country, and they're continuing to grow. A lot of you probably heard about Asbury purchasing Herb Chambers and anchor up in the Northeast. The Herb Chambers auto group has been around for a very long time. That's only going to continue. And what's really important here is being able to service these accounts, being able to get into these accounts and be able to give them top-down, bottoms-up type of service and support. In 2021, we launched private marketplace. We had to find a way to break through to get these large groups attention. This is always -- this allows dealers to move that inventory within their group. So they're preserving retail growth opportunities and they're minimizing any potential wholesale losses, plus saving an enormous amount of cost of acquisition by recycling that inventory within their group and retailing it at the appropriate store. That got our foot in the door. We relaunched ACV MAX, early success with consumers sourcing with ClearCar that you're going to see more of today, along with some other things. But it enabled us to sell at a much higher level into these major accounts. Both of these offerings are in over 1,000 stores today, including some of the top 50 dealer groups in the country. And really, the proof is in the growth. Since 2020 in this segment of major account franchise sellers, we've increased 85%. So -- and we expect that to continue to be a big part of our growth as we go forward because these groups are only going to get bigger. Now let's move on to our final stage here, wallet share. And this is a very interesting slide. I think you will all enjoy. But across the U.S., we have more than tripled our wallet share since 2016. In the middle graph, you can see our regions broken into four groups. Regions in the top group typically have been here a little bit longer. They are earlier territories and have over 50% wallet share on average. Great progress. But again, still 50% left to be had. So great opportunity for continued growth. And at the territory level, we now have 10 territories with over 65% wallet share. So in those stores, anything going out that door is 2/3 ACV. That's a huge accomplishment for us. And I'd tell you, I tell my team on a regular basis, you look at these slides, you can't help but get excited because everywhere we're talking about today started at zero. So no matter where we are in this progression, you can and you will get there. And it's just a matter of calm persistence and stay true to the plan. Now let's talk about market share, right? How does this all -- and it's a very simple formula for us. It's you look at penetration times wallet share equals market share. So one thing I want to touch on, and George had one slide that touched on it, showing us getting up near that 10%. But let's look at where we stood at the end of 2024. And as you can see by this map, again, we love colors. So I hope you guys enjoy this, too. But we've gained significant market share across the country, even though, again, another flattish market, right? But if you look at the wholesale industry, right, flat, but we were able to break through that double-digit milestone, which is very, very exciting for us. The three regions in the darkest color have over 15% of the franchise market share. Again, that's at that regional level, but that's 15% of that market share. Now when you look at our ability to offer multiple products, expand the ACV relationship within each store or a major group, we're confident that our initial -- that land-and-expand model with good acquisitions, great integrations and top R&D, we will continue our growth and our success to achieve those midterm goals that we talked about. So with that, you also need a buyer base, right? It's great to go out and get a whole bunch of cars to sell, but you got to have some way to put them. So one of the things when we look at the demand side, right, that's been a key focus for us all along. So when you look at in 2024, we had 21,000 buyers transacting with ACV. So that's about 40% of all franchise and independent rooftops in the United States. And these are not just local buyers. Our average -- you'll hear more about transport later, but our average transport distance was over 400 miles from seller to buyer. So that's a big net, that's a great network, right? So -- well, that's great. That penetration is great. We're also excited about the growth of our franchise buyers on this marketplace. If you guys remember way back when ACV started, it was franchise trades, to local independents and wholesalers. We now have 30% of our mix from a buyer side as franchise dealers buying cars. So this is important for a few reasons. It's proof that we have the kind of frontline vehicles, that franchise dealers need, more expensive vehicles to drive higher ARPU. This trend will continue to grow as we add more commercial that you'll hear more about today. As we add more of these major groups, as you'll hear more about today. But the key is to have what buyers need, whether they need that $500 car or they're shopping that $100,000 high line and everything in between. And the ability to inspect those accordingly and accurately, all price points, it's giving our buyers, providing our buyers a more transparent and efficient marketplace. And that's why we're focused on this, but really enjoying and seeing the growth on this side of our platform as well. So just to recap, world-class team. I couldn't be more proud of my team, again, over 1,300 teammates. First came we had five territory managers when I walked through the door at the incubator. So this is exciting for us. And couldn't be done without the people, hire great people, right, give them great products and support them. We've executed in gaining market share is what -- it's been a very tough market in recent years. Again, I'm 30 years plus in this industry. It's been a strange few years. There's no other way to say it. But we've become more than just a strong wholesale partner to our dealers. We have become a strategic partner in helping them solve bigger problems and just not about buying and selling cars, all across the dealership operations, adding new products and technologies, gaining efficiencies in all areas of their operation. So you're going to hear more about that, right? I'm just the sales guy. So now I get the pleasure to tell you more about that. I'm going to turn it over to my esteemed partner and good friend, Mr. Vikas Mehta.

Good afternoon, everyone. I'm Vikas Mehta, the Chief Operating Officer for ACV Auctions. I've spent most of my career in marketplace businesses. Prior to ACV, I was at eBay for a decade, and I've been at ACV for a little bit more than 6 years. At ACV I oversee operations, product and tech, and I'm thrilled to be kicking off the innovation section. So first, I'll share my thoughts around our customers and their evolving needs. We'll talk about how our product suite is adapting to meet these needs. We'll give you a deep dive on some of our capabilities, and we'll give you a glimpse on some of the innovations that are coming up next. I'll then hand off to my brilliant teammates, who will go deeper in some of these topics. So first, let's start with our customers. So more than ever, our dealer and commercial partners are looking for next-gen solutions to stay ahead in an increasingly competitive market. They're looking for solutions that enhance customer experiences provide real-time insights, offer seamless transactions and help improve operational excellence. Our disruptive products today are doing just that. Innovations in marketplace and inspections are driving success for both ACV and our customers. Our industry-leading transport and capital businesses are now offered off platform. Additionally, after a decade of collecting structured vehicle data. We are uniquely positioned to provide insights that our customers are looking for. These insights are powering some of our ClearCar and MAX capabilities, unlocking a level of intelligence this industry has not seen before. Now let's dive into ACV Auctions, our core marketplace and inspection products. As you know, ACV has been growing consistently market share since 2016 to now, thanks to our innovative products. Our mission since day 1 has been to create a level of trust and transparency through best-in-class product, tech and data. Over the past few years, improvements in auction format, auction duration, merchandising and search have made it easier for people to discover and engage with relevant inventory. Our vehicle pricing has gotten more accurate, driving both sellers and buyers to rely on our price guidance. And on the supply side, we're leveraging our powerful inspection platform to drive seller success. Our improvements in tailoring inspections down to specific vehicles and leveraging our growing vehicle data set, has driven down inspection time while improving our inspection accuracy. In aggregate, we've improved vehicle conversion while increasing supply. Greg will talk more about this impactful area. Moving on to two exciting businesses that are seeing strong traction. ACV Transport and ACV Capital. Let's first talk about transport. A top five tech-enabled brokerage ACV Transport seamlessly matches vehicle loads to third-party carriers. It does that by leveraging an intelligent and automated platform. It all starts with pricing. Leveraging AI-driven algos. We price over 1.6 billion zip to zip combinations. We then layer on rules, specific to the vehicle and the customer preferences. Our prices update frequently and react to market opportunities. Our dispatching, assignment and back-office capabilities are powered by custom and automated workflows. We measure everything. And use this data to manage our carrier network in real time. This year, by popular demand, we've started offering ACV Transport for customers to move all vehicles, not just the ones bought on ACV. While early, it's going well. Let's now move to ACV Capital. A key customer ask and opportunity for ACV has been to broaden our product suite and offer our products at new channels. To achieve this, we built our loan management platform, or LMS. Our LMS is now live, and full migration has been completed. What has this LMS enabled us to do? Well, a few things. So one, it's enabled us to offer our floor plan product with more flexible terms. This includes the ability to charge interest versus fees to allow for terms, curtailment and other key features, basically tailoring the product to dealer needs. In terms of new channels, we can now fund any non-auction purchases. A key funding use case that we're very excited about is supporting dealers acquiring consumer or trade-in vehicles. This enables us to get more vehicles through wholesale, and it fits very nicely with our ClearCar value proposition. Overall, feedback on transport and capital has been great. We're seeing strong momentum in both of these channels, and we feel very good about being able to be scaling this in '25 and beyond. So you're all familiar with ClearCar which is a vehicle valuation tool based on condition. Today, as Mike was saying, it's helping thousands of dealers acquire vehicles more efficiently. Dealers are using ACV MAX a leading inventory management tool to appraise, price and merchandise and syndicate vehicles. We're seeing strong feedback and traction across both these products. We're changing the game with condition-based offers, real-time insights and recommendations on a vehicle level. We're also seeing increased cross-platform usage. With a growing number of our customers leveraging multiple ACV products. That was a quick glimpse of some of our existing products. Now let's shift to some of our newer products. Let's speak about ACV AI, a powerful set of capabilities that is already disrupting this industry. So for context, we've been focused on machine learning and artificial intelligence since our inception. We started collecting vehicle and transaction level data in structured fashion even before we knew exactly how we were going to use them. And we are so glad we did. Today, this data set has been crucial in training our AI. It's powering our inspection and pricing and marketplace while also opening up new opportunities for us. So it all starts with our data moat. George talked about it earlier. So just for reference, here's the volume of data we got in 2024. We saw 1.5 million listings through our family of products, whether it's ACV MAX, our open or private marketplace or our remarketing centers. We supported over 700,000 transactions, leveraging personalizations, inventory specific lanes, offers and advanced searches. We helped over 3 million vehicles getting appraised through ClearCar, through ACV MAX, through Live Appraisal and our wholesale platform. And all of this resulted in over 5 billion unique data points that were generated, captured and are being used to train our AI. This massive and growing data set feeds into our AI models, generating insights and recommendations for our existing products. These insights make our inspections and marketplace more efficient. They also create and power new products. John and Phil will speak more to these insights, the impact and the potential we see in their sections. So how are we using ACV today across the company? Let's have a look. So today, we're using machine learning and AI in three broad areas. The first is on developer productivity, using some of the best available tools to aid our product and tech teams, we're seeing a double-digit percentage increase in productivity across the entire product development life cycle. From gathering product requirements to design to code creation to testing. We're deploying some of the industry's best AI platforms to make our development teams more productive. Next, we're using AI in improving customer service. Some examples, we're using it to improve the accuracy of our title scanning algorithms and generating summaries of our cases that come in for customer support calls. Overall, we're obsessed with trying to drive operational leverage while also improving customer support. And finally, we're using AI broadly to support customer experience. Some examples we already spoke about. Pricing, recommendations, supporting inspector dispatching, inspection, tailoring. We're also starting to move upstream and guide dealers' purchases, giving them insights on vehicle management. But that's not all. We're also leveraging AI to power new products. An example is the trade-in flow product that can enable retail, automotive, e-commerce sites. So shown here is an example of the Amazon retail checkout experience, which is a great example of these capabilities in action. I'll walk you through the experience. So once a customer finds a retail car he or she likes, he's asked if they have a trade-in. Then through a simple, tailored questionnaire, we present a guaranteed price for that vehicle. Now the price has to be highly accurate to the vehicle and condition, attractive enough to drive the customer to transact but not too high to lead to a wholesale loss. And this has to be done through a low friction flow within seconds and at scale. Now that is exactly what we excel at and is opening up opportunities for us outside the marketplace. So all of this is made possible with a world-class team. Today, we have offices across three continents. Global footprint is enabling us to find talent wherever they might be. In addition to our centers of excellence in Buffalo and Toronto, we have an AI center in Paris. We have a small but innovative full stack team in Dublin. Our fastest-growing team is in Chennai, India, where we have over 100 teammates. Core to all of our development teams is a culture of innovation, collaboration and learning. So in summary, we're at a very exciting time in this industry. And I believe, as ACV, we have the right platform and team to bring our mission to life. So now I'm going to hand off to my team, Greg, John and Phil, who will go deeper in our product offerings. So Greg is going to come in next. But first, let's hear from some of our customers. [Presentation]

Great. Well, as you just heard from our dealer partners, ACV is bringing value beyond just wholesale. And we're including a range of services, and I'm excited to tell you more about those today. My name is Greg Borowski, and I'm Vice President of Product Solutions at ACV. I joined the company in 2018, and I lead product for our core business, which really comprises of our inspections technology, our marketplaces, and the platform to support our ACV teammates in sales, operations and the field. Today, I want to talk to you about our primary investments on our core that are helping us to unlock marketplace growth, establish a foothold with commercial consignors, all while evolving our platform for future growth in new automotive channels and geographies. Today, the journey starts with our industry-leading inspection platform that we continue to invest in to increase the depth and quality of our data capture. It allows us to integrate new hardware and software. And that allows us to bring new capabilities to drive inspector efficiency as well as dealer insights with a focus on user experience, optimizing the experience and inspections through a differentiated approach based on the type of asset. For example, in 2024, we rolled out several new templates so that we could capture data based on the asset, balancing the time spend and the disclosures that are created. Our red light template is enabling us to save time while still collecting the most relevant data on cars that are being sold as is in the marketplace. In the use of our inspection products, as both Vikas and George had previously mentioned, is at massive scale for the industry and is allowing us to collect the data to feed our moat, to drive AI capabilities around condition and pricing. First, at the car level and soon at the component or part level. More on that in a minute. When dealers come to ACV Auctions, it's clear to see we're more than just a wholesale marketplace. We talk to our dealer partners and ask them to think of ACV as a hub of valuable services, all in one place and behind one convenient login from appraising cars to managing leads to transporting cars from dealer to dealership to financing purchases and of course, buying and selling wholesale. Dealers are finding services to help them run their business all with the power of ACV's data and AI. A good example of this is the ACV Market Report. It's a handy tool that allows dealers to get a condition adjusted value on any car in their inventory. In the marketplace, dealers can see what the market value of the vehicle is based on the actual condition and auction results, not averages. All powered by ACV AI. Plus dealers can view and filter the comparables to see exact matches as well as view the past condition reports for a better and deeper understanding of how condition impacts price. When we talk about fueling wholesale growth, we're talking about innovation in the entire end-to-end system. Over the last 18 months, we have brought new capabilities to market and are now optimizing their use. A popular example is auction duration. Gone are the days when it's only a 20-minute auction and a one-size-fits-all approach to digital wholesale. Next, we recently rolled out auction scheduling, which has been a big ask for sellers. Now once the vehicle is inspected, the dealer doesn't have to remember to come back to the app and launch the vehicle at their preferred time. And this additional time in the marketplace is helping us to produce more vehicle engagement and a reduction in funnel churn. Finally, we're transacting more cars through our first in auction seller tool, which we call Remove Reserve. Now a seller, just like one of our remarketing centers, can adjust or remove their reserve price mid auction based on the engagement they are observing to know that the market has spoken on a clearing price. On the demand side, we've created an elevated experience that is more tailored to buyer needs across a number of different buyer personas, from small independent dealers to large, high-volume franchise buyers. We've made significant improvements in discoverability and search refinement through advanced save searches and notification. Now dealers can get as specific as they need to for their inventory needs and get notified based on the buying plans that they create. Years of marketplace data have enabled us to start making intelligent recommendations based on dealer preferences and current market factors, and this is allowing us to take friction out of the buying journey. Additionally, ACV AI is enabling us to secure more supply through guaranteed offers that are sold no reserve in the marketplace. Which opens up a feeding frenzy by buyers and it's taking friction out of the reserve price. By leveraging AI, we've been able to increase the speed of processing titles. So that the buyer's title arrives faster, which is the green light that allows that buyer to then retail that vehicle. We're also up-leveling the tools our teammates and dealers leverage to get support after the sale. We're making AI investments to boost teammate productivity so that we can get dealers' answers as fast as possible. Additionally, we're investing in a more powerful service platform to be able to reach and respond to dealers via the channel they prefer, like chat and SMS. That omnichannel platform, coupled with ACV AI will enable us to automatically solve dealer problems digitally and enable dealers to self-serve on a growing number of support use cases over time. We're also making progress in our marketplace service offerings, transportation and capital. ACV Transportation is one of the largest logistics networks in the country, now moving north of 30,000 vehicles every month, whether it's across town or across the country. ACV Transportation is the exclusive integrated transportation provider on ACV, and we're seeing continued growth rates in attachment. But in addition, we've gone off-platform. And now dealers can log in, get a quote and track vehicle moves even if those cars aren't purchased on ACV. Based on our AI-based pricing and technology-first approach to moving cars, we can often move cars faster and cheaper than traditional solutions, all while doing so in a more modern and secure fashion. For example, thanks to our completely digital pickup app that prevents fraudsters from showing up at a dealership and stealing cars, something the industry saw a lot of this year. Also enabling our marketplace is our dealer floor plan product, ACV Capital. In 2024, we completed a major investment in key capabilities around loan management, audit and customer self-service tooling that are enabling us to reach new channels, launch new lending products and responsibly manage risk. These investments are enabling us to grow healthy attach rates on the marketplace. And in terms of new channels, ACV Capital is now actively funding purchases made outside of ACV at scale. New products are giving us the agility to meet dealer needs with new and innovative funding products. And while doing this with a robust risk and portfolio management solution that's based on our internal data and analytics to ensure we stay in compliance and avoid potential losses. Okay. We spent the last few minutes talking about the technology that is fueling growth in our core dealer business. And now I want to transition to focus on the commercial capabilities, we are executing on to unlock a new frontier of growth in the form of commercial supply. These capabilities fall into four primary categories. Integrations with platforms like AutoIMS, advanced inspection capabilities, data and decisioning tools and, of course, platform. It all starts with the integrations. These feed nicely into our digital-first mindset. Over the past year, we've established an extensible ingestion architecture that allows us to work with a multitude of service providers in a standardized way. The inventory now accessible to ACV may or may not require our inspection or even the full inspection. It may or may not require our land or our services. And although we are just getting started, we've already gone live with one of the leading rental car companies in the country through these new capabilities. The next major capability is damage estimation at the panel and part level, something I mentioned earlier. The ability to get this specific is a critical capability, not only for commercial consignors, but also any dealer who is trying to answer the question, how much is it going to cost me to recondition this car to a certain standard. Whether that's selling a car wholesale from a commercial consignor or selling that car retail to a consumer. These capabilities, which are built upon the observations powered by our inspection platform that we discussed earlier are giving us a powerful tool that can help us continue to unlock commercial TAM and support our dealer businesses. Finally, let's spend a minute on our platform to manage our land and services. The ACV Auctions management system is currently evolving to power our first greenfield remarketing center targeted for Q3. And this will include capabilities from the aforementioned commercial inspections as well as work order creation, repair estimation, consignor approvals, reporting, lot operations and more. Our digital-first approach gives us the flexibility and the nimbleness to meet consignor requirements, both today and in the future, so that we may continue to unlock and scale this valuable segment of supply for ACV buyers. So what's next? The investments we're making in our platform now are giving us new capabilities to not only grow our U.S. dealer-to-dealer business but also unlock adjacent channels in the U.S. and beyond in 2026. And here are some examples of what the future holds. Our ability to grow supply without ACV necessarily having to inspect every car in the same way or at the same depth. Putting our technology into the hands of dealers and partner marketplaces that serve either adjacent channels or other geographies like in Canada, the U.K. and Europe. Continuous improvement in matching supply and demand to boost the vibrancy and conversion of our marketplaces. Regardless if a car is sitting in a consumer's driveway, at a dealership and a marshaling yard or at one of our remarketing centers. And the same goes for demand. We're enabling buyers to discover and engage with cars regardless of where they are, where the car is and how it's listed. It's a truly exciting future for ACV. Now for more on the ACV AI story, I'd like to welcome my colleague, Dr. John Coles of the podium. But first, another word from our dealer partners. [Presentation]

Thank you, Greg. My name is John Coles, and I have the privilege of leading our data science, engineering and analytics group for ACV. At ACV, we transform data into the value that you're seeing across the entire ecosystem, powering the products and solutions you're hearing about today, but at scale, with effective and revenue-focused technology. Data has always been at the core of our business. Vikas shared how we're leveraging data and AI to disrupt the automotive industry. While, Greg highlighted key applications where ACV is using generative AI to provide operational leverage both for our teammates and for our customers. At our core, we put each customer and each teammate at the center of AI innovation using the next generation of technology to solve real-world challenges. Our latest innovations aren't just driving efficiency and scale. They are transforming how vehicles are appraised, priced and sold in the automotive marketplace. I'm excited to go deeper into the four parts of our AI strategy. We've built AI-powered tools for every stage of the vehicle life cycle, enabling dealers and teammates to turn AI hype into real profit. Starting with consistent data capture, We're turning the phones in our hands into a lens for profit. using machine learning. We take data fusion and processing to the next level, providing future-ready pricing for each vehicle in real time. We're consolidating the information overload into structured, AI-powered guidance, combining machine learning with large language models to provide context-driven dealer decisions. Finally, with our next-gen products, we're expanding our competitive edge in AI-driven products by putting ACV's fusion of hardware and software into the operational workflow of every car. Our approach begins and ends with the data moat, built on a uniquely configurable vehicle ecosystem that captures, integrates and guides dealers with data at scale. We've always focused on building tools and technology that capture information not yet available in the automotive industry. Our high-quality, consistent and longitudinal data on every vehicle are the key building blocks for value-add AI. The quality of our teammate inspections and cutting-edge technology combined with third-party data integrations, fill ACV's data moat. We're now putting the tools that powered our growth into the hands of our dealers so that they can inspect a car anytime in any place. We're putting our hardware diagnostic tooling, damage detection algorithms into the hands of our customers backed by the full power of ACV's team and technology. Dealer self-inspect not only allows ACV to capture more opportunities. It also provides feedback on damage detection and on our damage detection algorithm, expanding our training data sets for free, while generating profit. With our ClearCar and AI-guided image capture process, we put self-inspection capabilities into the hands of dealer customers to eliminate friction between a consumer and the dealer. We've adapted [ VIN ] level visual guidance and wire frames into the image capture process so that a consumer can walk around the car, capture the vehicle assessment and connect dealer needs to the consumer context. But what if we can't get pictures? Using data trends from dealers and consumers. We've now gone further upstream to help our dealers put self-appraisal into the hands of their consumers in any environment. Our tiered approach to data capture and analysis is eliminating friction at every turn by putting a price on every car for more uses, situations and customers. Our AI-driven pricing isn't just an enhancement. It's a core driver of our business. Using our machine learning algorithms, we keep our dealers ahead of each day's market changes. Don't look today. We built our tools to guide dealers through each change in the market at a vehicle level by factoring in bidder behavior, seasonality and localized market dynamics. We started with a 20-minute auction. But now we're able to put prices on hundreds of cars per second, helping dealers capture more inventory, upstream from the consumer and guiding automated demand for ACV MAX customers. We've designed our own market basket index for vehicles, similar to CPI or PCE, but it accounts for real-time inflation in the market and trends in the automotive marketplace, so that when we price a vehicle, it's accounting for all of that information. We've now put the power of that pricing into the hands of our dealers to capture consumer vehicles upstream using ClearCar products. Over the last year, we've seen a 100% growth in our ClearCar products. And that is with our dealers experiencing over $400 more per car in profit than competing tools. With ClearCar, we put the power of condition adjusted AI into the hands of each vehicle owner on behalf of our dealers. ACV's pricing power is now deployed inside of ACV MAX products and puts a number on each car that a dealer touches. We started with ACV wholesale, and we were accurate within $100 of a dealer's vehicle inventory. So we expanded our approach and put those industry-leading prices to work with a guaranteed wholesale number on a dealer's inventory, but we saw more opportunity. And I'm excited to announce today that we're rolling out a retail pricing engine, which predicts the actual sale amount of each vehicle on a dealer's lot within a few hundred dollars. We're putting our dealers back into the driver's seat on how to manage their inventory by giving a forward-looking number for what they will actually sell a retail car for in the next 30 days. With every product we build, we are -- we keep customer needs at the center using AI to reduce friction in the automotive marketplace while maximizing dealer profitability. Our unique approach of blending vehicle condition, vehicle trends and real-time market factors makes ACV the intelligence engine that powers our dealers. Our computer vision models are more accurate than ever and now combine part and panel modeling, reconditioning insights and vehicle level risk to provide damage and recommendation algorithms on each car. We're using AI to turn damage into margin by helping dealers make smarter and more profitable decisions in acquisition and resale. We've taken our marketplace to the next level by incorporating each dealers viewing, bidding and buying habits with our market data to provide AI-targeted recommendation models tuned for that dealer. We're using that to guide each customer to the next vehicle they need to purchase. Even accounting for condition and valuation trends that best match a dealer's profile. In just the past few weeks, we've rolled this new feature out to 100% of our dealer networks, and we're already seeing extremely positive results. We've reduced the time our dealers are spending to find the right car, making ACV the fastest way to purchase a vehicle. But we know that wholesale isn't the only thing that a dealer is doing in their business. To fully empower our dealers, we're deploying rooftop level inventory modeling. These models turn vehicle inventory history, profit history and consumer patterns into guidance for each dealer on which cars to buy and sell in their local market. And that's not even the most exciting part. At ACV, we're taking the best elements of AI to provide dealers with daily guidance for each vehicle. We're deploying large language models to give dealers fine-tuned guidance backed by ACV's full AI ecosystem. Think ChatGPT, but deployed inside of ACV's environment with the ability to deliver tailored consistent guidance to each dealership each day, each car and for each decision. One of ACV AI's most impactful applications today is the ACV guarantees, one of the fastest-growing channel in our marketplace with over 4,000 vehicles sold a month. ACV guarantees takes the risk out of the market for us and our sellers by passing the upside to our customers with a 100% conversion rate for that car. And our buyers love it. Our guaranteed auctions turn data into liquidity for us and for our dealer partners by driving 5x the buyer engagement to these auctions. This fee-based service is accretive to our business model while passing the upside to our customers. Our AI strategy is not hype. We have already built and delivered value with the data technologies directly to the bottom line. But we're just getting started. The technology that powers our e-commerce delivery with Amazon Autos was built to provide trade-in valuations for hundreds of vehicles each second. Our AI-backed system processes trade-ins at scale and is capable of handling consumer scale at any moment with repeatable guarantee supported pricing in under a second. The e-commerce workflow that Vikas showed is now powered with AI-driven price guarantees and assurance products at scale. We are taking accretive guarantees in putting that same power into e-commerce experience that drives traffic to every dealership. We're now beginning pilots with OEMs, moving upstream to help our franchise dealers take friction out of the consumer sourcing funnel in a way that generates volume and liquidity. We've taken pricing and operational AI, and we've turned that into a guaranteed transaction. With ACV AI at our core, we're taking every customer interaction and turning it into a revenue-generating opportunity for ACV. So what's next? With real-time market data, market guidance, instant guarantees, how do we go further. We're now automatically buying cars for ACV MAX dealers based on their inventory needs and our forecasting. But imagine if we put ACV AI directly into more parts of a dealer's operational workflow. With Virtual Lift 2.0 and Project Viper, the next generation of ACV technology takes the guesswork out of each car while taking less time for our teammates, our consumers and dealer customers. By putting the power of data and ACV AI into the hands of our teammates, our marketing centers, our dealers, our consumers, our goal is to put ACV into the critical operational workflow of every car. I will now hand it over to my colleague, Dr. Phil Schneider, who is developing the next generation of hardware to take dealers and our solutions to the next level with ACV technology.

Thanks, John, and good afternoon all. My name is Phil Schneider, and I have the privilege of leading our research and development team here at ACV. This section primarily covers what we're calling the next generation of ACV. We'll dive into some of our industry-leading technologies like APEX and how we're leveraging the data from that to fuel our artificial intelligence engines. We'll then talk about some of the major innovations that we're seeing in our new undercarriage imaging system. We're calling Virtual Lift 2.0. And lastly, and what I believe to be most exciting, we're going to introduce Project Viper to you guys, which we believe will be a game changer in the world of inspections for our dealership partners. But first, allow me to set the stage here, right? Reflect on what we've been doing as a company over the last 5 years here at ACV, both from a tech standpoint as well as a data standpoint with APEX. We hear every car we inspect, and we build an audio database to then compare that car to every other car we've inspected. We feel the vibrations of the car through APEX to detect things like frame damage or if the car is not running properly. We smell the particulates in the air that can be related back to things like burning oil. APEX gives us a lot of data, but Virtual Lift provides a new perspective. With every Virtual Lift scan, we see a beautiful undercarriage image that we can decipher information for and make educated assessments about that vehicle. And maybe it's something like OBD2 where we're leveraging code data and large language models, to gain even more insights on vehicles. The point of all this and what that actually translates to for us, our inspectors have been collecting a lot of data over the last decade. And we've now reached this interesting intersection point where our product maturity has developed so far, we're literally building a digital replica of these vehicles that we inspect. That digital replicate and data powers all of our AI-driven diagnostic capabilities. When you think about things like automatic rust detection of a vehicle or saying whether it's a cracked windshield or not, or even if the tires have damage to it, we have a lot of power behind that. So all of the data that powers our artificial intelligence tools are things that our inspectors use every single day. And so I wanted to showcase two core product features that our inspectors are using. On the left, you have our pre-inspection tool. This allows you to take any vehicle, scan them in, enter the mileage. And in seconds, you are alerted of all the recalls, common issues and risks associated with that specific type of vehicle. On the right, we see a post inspection tool. This takes a condition report that you may write maybe that's photos, maybe that's text. And that compares us to every single one of the condition reports that we've done as ACV to find any type of anomalies. Think of that as like spell check for a condition report. At the end of the day, though, these tools are very powerful, and both our inspectors and now our dealer partners will be able to leverage these tools to inspect and appraise vehicles like a pro. But transitioning back to hardware. I'd like to introduce you to the Virtual Lift 2.0, the newest undercarriage imaging system we have. When you think about Virtual Lift 2.0, think of the sleek form factor, right? 10 pounds, has a handle and slide under any type of car. But it's powered by a suite of strong sensing capabilities that will unlock new vehicle insights for us going forward. Let's dive deeper. On each Virtual Lift, you will see a multi-camera array that enables us to see every part, every repair, every damage issue underneath the vehicle while capturing a photo. Microphones strategically positioned allow you to listen to the car as it drives through. As you hear that vehicle drive over the Virtual Lift then relating that audio profile back to what APEX is saying and back to our condition report. Similar to APEX, smell, whether it's exhaust tailpipe, smoke, smog, we can detect it. We even actually create a magnetic field profile of every vehicle we scan. When you start to think about electric vehicles, we have some very cool insights there. But envision this reality for a second, you drive up to your local service bay to get your oil changed. And in the process, you just drive over an ACV Virtual Lift. Almost instantly, a report and image, whatever that could look like is generated showcasing the underside of your specific vehicle and calling out any issues we might see, damages, rust, dirt, grime, missing parts and pieces like catalytic converters or whatever is happening underneath, Virtual Lift will let you know instantly. But arguably, one of the most exciting features lies within the Virtual Lift's capability to create a 3-dimensional undercarriage image. Here, you'll be able to see what's happening underneath your vehicle in 3D and rotate it, look behind key components. Maximize the data Virtual Lift is capturing and then leverage it to use -- make new artificial intelligence decisions based on that vehicle and that image. But we're just getting started here. It's my great pleasure to unveil the latest in vehicle inspection technology, what we are calling internally, Project Viper. Project Viper is the future of drive-through service centers directly powered by all of ACV's tech, data and artificial intelligence. Each car driven through Viper leverages a camera array to capture key appraisals and retail photos. Microphones listen to the car as it drives through and then compares that back to all of our sensor data that we're collecting, whether it's through Virtual Lift or APEX. Paired with Virtual Lift, our Viper system will leave no stone unturned, creating a 3-dimensional model of both the exterior and underneath the vehicle. We can use Viper really as this foundational building block here though. With every photo Viper captures, it gives us the opportunity to leverage our scratch and dent AI. Here on the left, we're seeing one of the 15,000 cars Viper has already imaged. Note how it classified the exterior to components. It picked out the panels, the parts, the pieces. And then on the right, applied our AI model to detect any scratches or dents. This is a near real-time team. The multiple cameras means multiple viewpoints, multiple perspectives. And ample data for our models to train off of. Whether it be 100 different angles of that car driving through these two pillars or even a video, Viper has the ability to leverage all of that. When you pair it with ACV MAX, we can start to showcase the power of ACV's technology ecosystem. I think this was the fourth vehicle we ran through Viper, by the way. So let me walk you through that 3-second drive-through of what happened with this vehicle. In 3 seconds, the key photos were extracted and the entire exterior of the vehicle was inspected for any type of damages. In 3 seconds, the background was removed, and the driver driving that vehicle can be removed. We then leveraged ACV MAX's intelligence on pricing and bill data to provide a whole report on that vehicle we're looking at. And then we package all of that content up and instantly put it in a digital showroom. That is the power of Viper. That is the power of our ACV technology ecosystem. We believe Viper is going to be a critical tool for our dealer partners to insist with inspections, appraisals and photo capture capabilities. With over 15,000 vehicles ran through Viper to date, it's safe to say we are currently still in the beta phase. However, things are going really well. We are confident in our solution and look forward to scaling this vision more and more in the back half of this year and throughout 2026. But realistically, my hope is that from everything that you've seen here today, you're starting to see how we're connecting the dots. And just the level of magnitude of breadth and depth we have at ACV and all of that ACV AI encompasses. This type of strategy pulls together all of our hardware, our software, our data, our products, our designs, all in one place to once again disrupt an industry. So with that, I thank you, and I believe we're moving into a 15-minute break now. [Break]

Okay. All right, guys. Everybody ready for the financials? So I'll spend about a half hour or so going through our financial model. And then we'll open it up for Q&A, and George will join me up here along with some others, and we'll go from there. So hopefully, on the advancing of size. Okay. Here we go, just making sure we're in sync here. So any of you who were here a couple of years ago, my slides will follow a similar format in terms of walking through the financial model. So when we look at our financials, it's really looking at 4 pillars. So first, we'll look at the midterm targets, which we updated on our last earnings call, okay? I'll talk about what we call growth at scale, which is how do we hit these revenue targets. Next, I'll walk through margin improvements and OpEx leverage. And then I'll just finish up with our capital position. So first, let's go through the midterm targets, again, which we updated on our last call. So revenue target is $1.4 billion, $350 million of EBITDA, so 25% EBITDA margins. And really -- and we talked about this on our last call, we've locked in the model based on a unit volume assumption, which was 1.5 million units. Same assumption as we discussed a couple of years ago when we had our last Analyst Day. We've made some changes to the model, though, that I'll walk through in a few minutes. Still have the same adjusted EBITDA margins, but we did adjust our revenue actually up from $1.3 billion to $1.4 billion, saying 25% EBITDA margins, which took EBITDA to $350 million from $325 million. Those EBITDA margins are 25%. So that's 16% higher than what we're expected to generate this year at 9%, and we'll walk through how we actually get there. Okay. So we'll start with growth at scale, which is walking through our revenue streams. So again, no different than what we've talked about in the past. We have 3 major revenue buckets. Auction & Assurance is our largest revenue stream, just a little bit under 60%, and this is based on all the unit volume flowing through our market place. That, in turn, drives our marketplace revenue streams, which is basically Transport and Capital. So those very closely aligned, they attach into the market place, and those revenue streams account for 95% of our revenue and the last 5% is our SaaS and data offerings, which we'll talk about in a little bit. Okay. So Auction & Assurance revenue grew at a 20% CAGR in the last 4 years. And just kind of keep in mind, our market has been under a lot of stress. So this was during a time that actually the TAM for dealers, wholesale actually declined. We were able to grow 20% through that in the last 4 years, okay? And as I mentioned, 1.5 million unit target for what we call our midterm target. What we did also a change from the last time around, we increased the percentage of commercial business, which our previous model had a 10% assumption for commercial, we've increased that to 15%, okay? So that's a 500 bps increase in our commercial assumption. And the last piece, which won't be a surprise to most of you, we've actually increased the RPU assumption. So a couple of years ago, we had modeled a $500 RPU for auction and insurance revenue. And we said we would hit that in our midterm target. We actually hit it in the second half of last year. So we've updated that to a $560 RPU target. We've pretty much got in here through increasing our buy fees. And we still expect to have some room to continue to increase our buy fees. However, there are some other value-added services that we're looking at delivering as well that ultimately can drive some RPU expansion. So $560 is the new basis in the model that we're going to walk through here in a few minutes. Okay. So let's start with marketplace services revenue now, which again is directly correlated to the unit volume following through our marketplace. So these lines of business attach into the marketplace, our Transport business has been attaching at roughly a mid-50% attach rate, and that's pretty consistent the last few years. And that's what we've assumed in our modeling going forward. ACV Capital which we exited last year at low double-digit attach rate, has the same assumption as previously with a 25% attach rate assumption, okay? So basically, roughly doubling that attach over time as we hit these midterm targets. And as we discussed in our last earnings call, we have been investing in accelerating our growth of ACV Capital for this year. So last year, we were very risk averse looking at kind of dealer financial health and has been really sensitive to that and turned away a lot of business. We now see a path to kind of ratchet up that growth rate. And we actually did increase our growth rate in Q4. I believe it was at 28% versus 20% the last couple of quarters before that. So we did start seeing some acceleration, and we're looking to continue that this year. Okay. SaaS and data services. So this is a bit of a change since the last time we spoke. We've adjusted our outlook here and are much more conservative based on our focus strategically to drive wholesale transactions through our marketplace. So for example, if you think about ClearCar, which is focused more on driving dealer wholesale, really our focus is driving those transactions versus necessarily just driving subscription revenues. And the economics here are actually pretty compelling. If we sell even 2.5 -- call it 2.5 -- it wouldn't be 2.5 but 2.5 to 3 cars additionally through the wholesale trading, we basically pay for that subscription. So our focus is obviously to do better than that. But as a result of that, we've kind of reduced our expectation for the growth in terms of SaaS and data services to take into account this kind of strategic shift to really drive more and more wholesale business because it's much more accretive to our financial model. Okay. On the ACV MAX side, just a point here. So the last few years, we've been investing to kind of rebuild this platform, and we paused our go-to-market activities for a while, while we were doing that, we're now reaching the tail end of that. We're still investing but at a much lower rate. And we're at a point now where we've reengaged on the go-to-market side, and we're starting to get a lot more interest, especially when we package ACV MAX with ClearCar. So the opportunity is for us to kind of leverage the thousands of dealer relationships that we have to drive, again, either subscriptions but really focused on driving wholesale transactions. Okay. So let's go to the business model. So in terms of revenue margins, so last year, our revenue margins were 52%. That's an 800 basis point improvement in 2 years. We have another 800 basis point target in terms of growth of revenue margin to hit the target in this model. So the last 2 years, we made tremendous progress on the margin side. When we think about our cost of revenue targets, okay, there's basically 3 different categories, basically by line of business. But if you think about the drivers to how we continue to improve margin. By far, the most important driver is maturing and scaling our territories, increasing the quality of our inspections. You guys got a little bit of a taste of some of the things that we're doing here with Viper. Continued optimization of our business model. And mix, which primarily affects our marketplace services because our ACV Capital business flows through our P&L at 90% plus EBITDA margins. So very compelling. And as we grow ACV Capital faster, it's going to drive the blended margin for that part of our business higher. Okay. So if we look at Auction & Assurance just by itself, and margin improvement. Roughly 80% of the uplift in our model is due to RPU increases, that $500 to $560. And the other 20% is just further optimization in terms of managing arbitration costs. So a lot of the investments that we're making on the tech side kind of relate to the arbitration side. And then RPU, I've already talked about. So marketplace services. So first, we've generated a significant improvement in our marketplace services margins over the last few years, and that's been driven by Transport. Only a few years ago, we were actually generating negative margins on Transport. We had a high-teen target margin a couple of years ago that we talked about for our midterm model. Last year, we got to 20% margins on Transport. And keep in mind, this may not sound like a very high margin percentage, but it's on gross revenue. So if you think about margin dollars that we're delivering to the business, it's actually quite impactful. So that's been kind of what's driven our improvement in margin for this line of business for us over the last few years. And now as we kind of think about going forward, as I mentioned, as we drive product mix towards ACV capital flowing through at very, very high margins, that will be kind of the next stage of growth to drive the blended margin for our marketplace services business, okay? SaaS and services, frankly, this is not a high-margin part of our business, okay? The main driver here, and again, we've kind of muted the expectation here for growth, is really a view that most of this growth will be on the SaaS side, which has attractive margins, okay? The rest of this business is stand-alone inspections, which frankly do not have high margins. So whatever growth we do generate, it will be accretive to the blended margin for this part of our business, albeit it's a relatively small part of our total revenue assurance. Okay. So now we'll move to OpEx. And we've done a lot of work on the OpEx side and worked at how do we kind of continue to optimize and get leverage from OpEx So basically, there's 4 categories: Operations and inspections and then basically product and tech and SG&A. So let's go to inspections and ops. And this is most closely correlated to the growth of our business. Right now, we've modeled a 60% fixed, 40% variable component to these costs. And what's embedded in these costs are inspection, the inspection team that we have. So that is fairly variable with volume, all right? But even that said, we still believe we have a fair amount of fixed cost because we have a nationwide footprint of inspectors around the country. We have about 800 inspectors. A lot of them are not fully utilized because we're not mature in a lot of these territories, all right? And that's the primary driver of operating efficiency for this part of our P&L is inspector efficiency, okay? There are some other variables in terms of the costs associated with processing transactions through our marketplace. Conversion rates, by the way, also play a pretty big role here in operating efficiency because the higher the conversion rate, the more of those inspection costs you're basically absorbing because if we inspect a car and it doesn't transact, we get no revenue and we have the cost, right? The higher the conversion rate, the more flow through there is down to EBITDA, okay? And you guys obviously got a taste of some of the capabilities that we're -- we've been investing in with Viper, which we're actually pretty excited about in terms of looking down the road, the opportunity that exists to kind of leverage this technology. Now by the way, we're not modeling into the financial model today the potential benefit from Viper mostly because we haven't seen it yet, and we can make some assumptions, but the way we model our business is really just looking at what we have deployed today. We do apply an efficiency improvement for inspection costs based on continuing to mature the territories. So what's embedded in this model is roughly about 50% efficiency improvement in terms of inspections per day from roughly 6-and-change to about 9-and-change, okay? So that is baked in but that's completely based on more and more scale, and you'll see when I get to the end of my presentation here, some of the EBITDA margin that we're generating in our more mature territories, which are outstanding, frankly. So we'll get to that a little bit here. But the bottom line for this is based on that fixed/variable mix, we get about a 25% efficiency improvement and take these costs from 16% to 12%, okay. That percent of revenue is about a 200 bps improvement from last time we met based on, frankly, refined modeling and a lot of the things that we've learned more about how do we scale this business. Okay, product and tech. We're a tech company. Everything we do is based on how do we leverage technology to gain competitive advantage to basically add operating efficiency. So we've made a lot of investments okay? And we've been continuing to make those investments while obviously dramatically expanding and improving our adjusted EBITDA margins, okay? So here, we see about a 70% fixed versus variable ratio, okay? And if we look at, therefore, how do we get to our target, okay? We're assuming a 30% efficiency improvement in order to get to 5% of revenue, that's about 100 bps improvement since the last time we spoke a couple of years ago. So there are 2 new variables here since the last time we spoke. Number one, we have now an offshore engineering center that's fully operational in India. Those costs are about 1/3 of the cost of our domestic engineering teams in Buffalo and Toronto. We're now staffed, I believe, just north of 100 people there. And we're continuing to expand that team this year. So that's a different variable last time we spoke. The other is obviously leveraging a lot of new AI tools not just across the business, but also within product and tech itself. So we feel really good about kind of driving to the targets in terms of product and tech spend. All right. Sales and marketing. Also, we see kind of a 70-30 fixed versus variable component here. And we've been growing our investment there, but also driving down our cost of revenue. So we're assuming again another 30% efficiency improvement here, which will get sales and marketing spend down to 10% of revenue. And there's really, in this model kind of baked in the capacity to ensure that we can continue to invest while gaining efficiencies at the same time as a percent of revenue and where would the investments be. Continuing to invest in the dealer wholesale, especially major accounts as these big franchise players continue to kind of add rooftops and expand their presence. Number two, building out our commercial team to support our commercial targets and last building out our ACV Capital go-to-market team to support the scaling there as well. So we've made provision in this model to ensure that we have the right level of investment to support the revenue targets that we've identified. Okay, in G&A. So actually 2 weeks from yesterday, March 24 is when we went public 4 years ago. So we're a couple of weeks away from celebrating our 4-year anniversary. So obviously, since we've gone public, we've invested a lot kind of in building out the team, being able to operate as a public company, kind of back office infrastructure and systems, getting SOX compliant, all the kind of investments that you would expect. So we've made those investments over the last several years. But now we're at a place where we believe that there's more like an 80-20 fixed versus variable component to G&A, okay, which would take our revenue percentage down to 8% from where it is today at 12%, we feel pretty comfortable about that. This is a change from the last time we spoke. So last time we spoke, we were modeling getting G&A costs down to 6% of revenue versus now 8%. So what's changed is the remarketing center strategy is driving more administrative costs, okay? And even though we're going to be optimizing those costs over time, we want to make sure that our model kind of takes that into account, and that's reflected in the current model, where we're getting it down to 8% of revenue instead of 6%. The good news is the optimizations in the other parts of the business that I just spoke about from an OpEx standpoint, offset -- these basically offset each other and get us back to the same place. But we are assuming there's more administrative costs just by nature of the fact that you're running these locations and the rent expense flows into G&A. So that's the way the model works. And again, we'll continue to optimize in every way we can, but we want to make sure our model is being realistic in terms of how we think about scaling administrative costs. Okay. So basically, obviously, the focus is to continue to steadily improve our EBITDA margins, okay? We're expecting to more than double our adjusted EBITDA margin this year from 4% last year at 9%. So it's a 150% improvement in adjusted EBITDA dollars on a 22% increase in revenue, okay? So the kind of incremental margins at the high end of our guidance this year will be about 32% versus 30% last year. So we are looking to make progress if we can hit the high end of our guidance. But in order to hit our model, we will have to drive incremental margins north of 40%. And in simple math, some of you pointed that out to us, and we understand that. And we think based on the leverage that I just talked about in terms of across OpEx and improving revenue margins, we feel good that we can get there, okay? And why do we feel good just based on some of the hard numbers that I'm going to go over with you right now in terms of the EBITDA margins that we're currently generating across the territories and regions last year, which is another step forward from where we were a couple of years ago. Okay. So Mike Waterman took you through kind of our land and expand strategy, same principles apply to profitability. After we land and we expand, we move up the profitability curve, right? So last year -- and before maybe I get to that, first, if you look at all those fixed versus variable components that I just took you to and you average it in total, for all of our OpEx, it's a 70-30 mix, 70% fixed, 30% variable, okay? So that's kind of the backdrop. So if we look at last year, our 3 largest regions, and we have 20 regions around the country, and each region has 7 to 8 territories, okay? Our 3 largest regions generated, on average, 20% adjusted EBITDA margins last year. And again, keep in mind that our overall corporate EBITDA margins were 4%. So that's 3 of our largest regions. Ten of our regions, which is basically half of our total regions, okay, generated, on average, 10% adjusted EBITDA margins, again, in the context of 4% overall margins, okay? At the territory level, 30% of our territories achieved double-digit margins, okay? And we had 3 territories, some of our most mature territories that generated over 30% EBITDA margins. So keep in mind the context here is this is with our prior year OpEx structure, right? So it doesn't include any of the leverage that I just took you through in terms of OpEx leverage and revenue margin improvement, right? So when you do that overlay and you look at our most mature territories, you can do some of that math. It says that at full-scale maturity this can be an incredibly profitable business on adjusted EBITDA. Right now, we're focused on how do we get to 25%, which is all volume and scale based when we get to 1.5 million units. But frankly, the company is not going to stop there, right? We're going to keep on focusing on taking share and growing. Hopefully, at some point, we get a little bit of a tailwind in terms of the dealer-to-dealer market versus kind of being against these headwinds. But this business is all about scale. And we can see it very, very clearly in the numbers and we built this financial infrastructure a couple of years ago where we wanted to understand how do we take territory and regional profitability down to adjusted EBITDA, which the finance team and accounting team did a great job in terms of building out this infrastructure in terms of figuring out how do we realistically allocate costs to go from revenue to revenue margin down to adjusted EBITDA right? And that's what, in essence, is what we're showing you here today, which a couple of years ago, we couldn't do this, right? We could look at revenue, sort of had an idea of margin, didn't really understand necessarily relative EBITDA if we look at each territory. So the territory financial analysis, it is what gives us the basis to feel really confident about achieving these targets. Even though a lot of investors look at this and say, this is a hockey stick, how are you really going to achieve this? And again, this year, we're looking at a 150% increase in adjusted EBITDA on 22% increase in revenue. And when you start to overlay these operating efficiencies that I just walked through, it's not that hard actually to get to these numbers, it's all about scale. Okay. So I'll wrap up with our capital position. So we ended last year with $270 million in cash and cash equivalents. We had $123 million in debt, which essentially offsets our ACV capital receivables. In terms of our liquidity and looking at our debt capacity, we have $160 million revolving credit facility with a consortium of banks led by JPMorgan. We're actually looking to see if we can expand that. Now that we're profitable, we've got some other banks that are interested in talking to us. So we're going to see if we can get a little more liquidity there. That's a project for this year. And that revolver comes up for renewal next year. And in this past year, we put $125 million warehouse facility in place with Citi to finance ACV Capital. And there's opportunity with the Citi team to expand that as ACV Capital receivables grow. And then once we get to a certain level of scale, call it $200 million-plus there's an opportunity to go to their collateralized debt markets and lower our cost of capital. So kind of that's the game plan. Last point that I'll make here is that -- so we've talked about in the past, we've said adjusted EBITDA is a good proxy for free cash flow. And that's because the growth -- as we grow our marketplace, the float in our marketplace grows as well and essentially offsets capitalized software costs. There is another variable here that we're baking into our model, which is with these remarketing centers, and some of the greenfield locations that we're actually taking into this model to support our commercial expansion. We will need to allocate some money for CapEx, okay? So that is the only variable that kind of deviates a bit from the last time I talked about this. As we get bigger and generate more and more EBITDA dollars, that CapEx becomes more of a rounding error. When you're looking at relatively smaller EBITDA levels, it's going to be more pronounced. But as we look out a couple of years, frankly, it's really not a variable that's of any importance, right? But for the next year or 2, it's going to deviate a little bit depending upon how much CapEx we have to bake into supporting our commercial rollout for this year and going forward. So with that, I'll take it back to George and then we can open it up for Q&A.

Well, it's -- obviously, hopefully, you guys got to really enjoy what we were so excited to bring you all here for today. My teammates worked really, really hard to bring to our investors and analysts here. You guys put a lot of time, some of you before we went public, I mean as we went public, many of you spent a lot of time. Well, my teammates really wanted to share why we believe we're going to continue to gain market share. We continue to gain market share because we're innovative because we're delivering. We listen, right? You're not just seeing us at ACV inventing these ideas. We have a culture of listening and hopefully, you're seeing that through the eyes of my team. You're seeing that where we are in scale and expansion, these aren't -- we're not putting up these targets that we believe are -- there's really a hockey stick that we can't achieve. We're already achieving it in several markets across the country. That's a bit about our culture as well. So we feel good about the adjusted EBITDA growth. We've been evangelizing you guys, we feel good about just continuing to take share, but how I end every one of these conversations with all of you, at the end of the day it's really about our team. I mean you hear us talk about innovation, innovation, innovation. And innovation is at the core of our culture. But we couldn't have done that if it wasn't for our nearly 800 inspectors across the country who work so freaking hard in the cold, in the heat and those incredible teammates across the country are building that data moat for us. So we thank them for all of their work they're doing, for our titles team and our inside sales teams and our sales teams out there, our sales teams are out there trying to help dealers be a part of this modern world, where AI is going. It's not like dealers are raising their hands the last couple of years going, I want to participate in AI. They really had to go out there and actually explain where the road is going. But we've got the team and culture doing that. So when you see folks that you saw today, like Dr. John Coles, and Dr. Phil Schneider and their teams who are building this extraordinary technology. Well, they're working hand-in-hand with all these other teammates we have. I believe that's what's unique about ACV. A lot of people talk about culture, a lot of leaders talk about culture. This whole event is purposeful. I try to talk as little as I could because you're seeing we have a team who are organically built to be great listeners first and foremost, and when you're great listeners and you hear what the market wants, it's actually pretty easy to build. So thank you. We're going to put a couple of chairs up here and open it up to Q&A. If we could put a couple of chairs so I'm not like running this -- I will start -- all right. We're already going up.

You want to put them on here. Okay. right.

This is Naved Khan from B. Riley Securities. I guess maybe I'll start with the reiteration of guidance for '25 and the environment has changed in the last few weeks with tariffs and all that. So I just wanted to sort of go back to the guide you kind of gave back in February. And has anything changed with respect to your assumptions back then versus where we are today and maybe where things could be going forward? Just give us your high-level thoughts on how the market could evolve?

Yes, I'll start, Bill, and then why don't you chime in. First, I think for better or for worse, we were one of the first ones out there and say publicly, who knows what's going to happen this year. So let's expect sort of dealer wholesale to be flattish. We -- when we said flattish, we don't know if it's going to be up a little bit or it's down a little bit. But either way, we feel good about what we've said publicly. And you've also seen us execute in a recession-like market for a number of years. I mean you just look at the definition of recession and see how much dealer wholesale was behind. I think we've done really well as a company. So I'll start by saying we feel good. But Bill, more important, however you want to chime in?

Yes. All I would say is we're still comfortable with the guidance that we provided on the last earnings call for the quarter and for the year. I think that sort of says it all at this point for us, at least based on everything that we see.

Maybe just a follow-up on one of the things you talked about with respect to Capital and Transport. As these grow, how should we think about the off-platform opportunity there? Do you think that grows faster than on-platform? Or do you just think that attachment grows to a higher level?

I mean, great question about attach rates for Transport and Capital. We've got -- I think we've got a prudent mix built into our model. But we haven't really modeled yet. Like if Transport became a $1 billion revenue business separately, we haven't gone that far. And hopefully, you know the ACV culture, we tend to model things we've already seen. We're -- I think that's the prudent way to do everything, right? So could Transport as an example or Capital be much bigger than we're articulating? Yes. But we also don't want to get ahead of ourselves. So it is obvious that if we became #1 in transport in the U.S., it would be a much bigger business than Bill just had up there. So -- but let's wait and see. Let's go out and just keep doing what we do, building great tech, hiring great teammates, but we're not assuming a massive assumption for off-network for Transport or Capital.

Yes, I think -- maybe I failed to mention this. So the Transport attach rate that's implicit in this model is mid-50s, which is where we've historically been. So that's kind of consistent. We're not assuming any difference there. Really, the ramp is in the ACV Capital attach rate, as I mentioned, the 25%.

Bob Labick, CJS Securities. First of all, congratulations, terrific presentation, terrific day as always, very exciting. I'm curious how many 3D pictures of you 2 are being taken during this...

Yes, they scan.

It's actually a body scan as well.

Great stuff. I want to ask about that, but I won't because -- so you talked about market share as kind of name of the game here, and you have a beautiful slide at the beginning that's up into the right and continuing to be. And Mike Waterman had a bunch of nice stats out there with a really complex formula for rooftops times wallet share equals market share, if I could follow it quite enough, but good stuff. So one thing that struck me is Jacksonville's wallet share was off the charts. And so the question is what determines wallet share by territory? Where are you in that journey? Is it products? Is it competition there? Is it off-site versus on? How do you determine that? Where are you in that journey? And then as you've grown market share, how does your sales approach change?

Sure. So I think probably one of the hardest questions is we invent all the AI in the world. We still need to go out and convince human beings to do business with us, right? And you are seeing that throughout the country, there are some markets where we've been able to build relationships faster. In some markets, it could be because there's more dealer -- bigger dealer groups who we are able to get stores faster. In other markets, it's simply just an incredible teammate at ACV who is just doing a great job of telling the story. So there's not one reason why across the country, you're seeing us grow faster. The second part of your question, we are mature. And the first time, Bob, and we met before we went public, I would have said to you that all of our success was based on our teammate convincing that used car manager to put their cars on ACV. All of our success was based on that used car manager at that store, and that was our model. This software platform, data services and ultimately ACV AI is a broader way to think about why they're going to do business with ACV. We're in the early stages. I don't want to -- you never want to oversell where we're at. But there's now over 1,000 rooftops in this country that their reason why to work with ACV is broader. They're buying more cars from consumers. They're trading more cars. And if any of you get a chance, just ask a franchise dealer, if we bought 10 more cars a month in retail 5 and wholesale 5, they bought 10 more cars than they were prior. What could that do to their business? Not just the 22 cars a day that the big box are buying, like just 10 more. So some of my teammates are getting really comfortable telling that story because it's an important story. Go buy more cars. They're in your service drive. They're rotating their tires. They're changing their oil. I put an offer on every car. So look at it as the chapters of ACV are maturing. The first chapter was very Waterman branded as belly to belly in the trenches, just convincing the used car manager to try ACV. And now it's a broader value proposition of dealer partners, let us help you compete against those big box guys. Let us help you go out and win the consumer. And that's, we think, an important reason why we could not only continue to grow, but actually just build long-term partnerships.

You have one follow-up?

I mean the only follow-up really would be, do you -- in the midterm guidance, are all of the tools that you have contemplated? I know Viper is not in that. But do you need to introduce a lot more things? Or do you have enough out in the market today to reach that guidance, I guess, is...

It's based on what we have today. And look, typically, we're not going to model stuff that we haven't actually built and proven in terms of what the unit economics would look like in terms of baking it into our financial model. Peter...

A question for you. Baltimore South, I thought is interesting because it seems to be like some of these markets, you get this acceleration in share growth and then some of them are a little bit more linear. Is there -- so Baltimore South, Mike talked about the physical auction that was embedded there of scale. What -- I mean, one would expect that there's a tipping point to your -- to most markets where if the share digitally hits that point, one would think there could be an acceleration given the worsening economics of the physical -- the physical auction. Have you seen -- like if you think about Baltimore South, what is that physical auction -- what are they saying? What's the water cooler? Are they shrinking? Are they -- have they kind of just plateaued? Are they still making good money? Or do people there see like degradation in unit economics just given the decline in supply and demand?

We've been -- Eric, we've been asking ourselves the question for a while, like is there a numeric number, whether it's 10% or 15% market share where you start to see a tipping point. I'd rather say maybe there's a range, right? I think there's a range of somewhere between 10% and 20% market share, somewhere in that range, we do get stronger and stronger. And so I feel more comfortable saying that than a number. You could probably all see it, right, just by -- if you look at the slides, it's pretty apparent. So one, it's really just how each -- you're seeing each one gets to that market share at a different pace. But once we get there, it does seem like we end up being in a very, very strong position. And the second part of your question is we -- it's a mix. In some markets, the traditional companies are struggling, like there's markets in Upstate New York and in the Northeast where some of the competitors probably aren't doing very well. But there are some markets where if commercial is half of their business, right? If you still got half of your business from commercial until we go out and win that commercial piece, they're probably doing okay. So it's a mix market by market, just so I'm not generalizing. As you all know, I don't really like to talk about competition. I think we're -- our style, as you know, and our culture is talk about -- we feel good that we're going to keep helping our dealer partners win. And I feel good that the same formula of using data to make the right decisions will help our commercial partners. I mean you saw Browski, Greg showed you that we're going to be able to understand the dinks and dense of a car, should they recon the vehicle or not. I want to tell the commercial partners, you don't have to recon this car. I don't want to just take money for them for recon. I want to be the first remarketing center to say, don't bother. Just put it on the auction in like the next hour, like let it go. So if you can give them the right data, the right insights, I think we could do very well in that category, albeit we're early, right? -- where we feel really good that we could end up over the next few years winning in that category as well.

Okay. I have 2 questions. Maybe the first one, just on Viper, and I know it's not contemplated some of the efficiencies there. But can you maybe qualify like how much time savings there are? Like are inspectors going to be less needed with this technology? Does it take an inspection from 30 minutes to 15? Just any kind of directional early indication of what Viper is doing to operations?

So I'll start. And then -- so one, we -- as Bill mentioned, we have not modeled Viper into that. The efficiency that Bill talked about, even though it's a similar number as you mentioned, half was based on just getting more inspection. So if we win more supply, that formula Bill mentioned was just purely more supply for those inspectors delivered the efficiency that he had up in the slide. So Viper will be yet another level of efficiency that we have not yet modeled. Of course, internally, we're modeling it, but we haven't yet put it into the model you're all looking at. And it's a bit complicated because there would also be a revenue stream for Viper. There'd be a cost for the hardware, right, that we have to give you all the speed. So you're not just putting into your model the inspection results. But to really the core of your question is our inspectors are a tremendous asset to ACV. They put this go green stamp on a car, so you feel comfortable bidding. And we feel like that's a core part of what we do. But you're directionally probably right, it probably will cut about half of the time. So I won't put a new number. You said half, I'll just go with half, okay? And could it be better than half? Maybe. But until we do it, but that would be yet additional efficiencies beyond what Bill put up there. And then there would also be a revenue stream for these devices and then there would be a cost for the devices built into our model. So we shouldn't get ahead of ourselves yet. I think between now and early next year, we'll -- as we start to learn more, we'll update everybody. But obviously, in the spirit of ACV being transparent, we'll go into beta this summer with over a dozen dealer rooftops. We'll learn from those dozen-plus dealer rooftops. And then we'll also go in beta in our greenfields and our remarketing centers. So we'll go into next year with a pretty decent data profile that will allow us to go out and model out years.

Great. And then maybe I could ask looking past midterm targets, but maybe longer term, you've talked about international expansion over time. And then there's also the Amazon partnership that got a little focus today. I mean, is the market reacting to Amazon partnering? And has that opened up conversations to maybe some of the longer-term growth opportunities you highlighted, I think, on Slide 10 or something like that?

So I think the things you're all picking up on is you've got Dr. John Coles, who leads this incredible data science team at ACV saying, we can predict a wholesale value within $100. Go out and ask 10 dealer partners out there, 10 dealers say, if you could predict a trade-in or anything within $100, what word would they call you? Crazy, okay? So we are now getting at a level of science that's incredible. And we can predict the retail value within a few hundred dollars. So delivering on being the trade-in platform for partners like Amazon or others is the ability to be able to predict. As long as someone is being transparent on the condition of their vehicle and answering things transparently, we can predict with accuracy we don't believe anyone else in the world can do. So we're early. E-commerce is very small in automotive today. And being a trade-in platform for e-commerce partners is a very, very tiny piece of our overall revenue stream, both in the U.S. and Europe. These are small revenue streams. The main reason why to showcase you all is we've arrived. Our technology is here. What we're doing is looked at as world-class. Companies like Amazon and others could pick anybody in the world to provide these types of technologies are picking us. And hopefully, we'll win additional OEMs and other marketplace participants. Whoever wants to do e-commerce and needs to put a number on a car, we're here to partner with them. We've got great APIs, right in our APIs, they can deliver a trade and marketplace right into their own marketplace. So the only thing we had to update in our mission statement was we put a plural next to marketplaces. Many of you caught up on that. We only -- we changed one letter, right, in our mission statement, which is all this technology is powering all these marketplaces, not just ours.

Rajat Gupta from JPMorgan. Just one like a clarification question. Trying to understand the philosophy around these midterm targets. I mean, why is there a midterm target? Why is 1.5 million units the right number? Like is it to solve for -- is it to indicate that you want to get to 25% EBITDA margins by that 1.5 million units? I'm just curious because there's no time frame this time. So why is it stopping at 1.5 million? Why is that the right midterm number? Just trying to understand that philosophy. And then I have just a couple of quick follow-ups.

Yes. At the end of the day, we just like to be consistent. We had previously chose the number, 1.5 million because it was -- when we happened to hit 25% EBITDA margins. It was not based on, I would say, a ton of science. We try to be as consistent as we can with you all just so that we're not constantly moving everything around. But to your point, there's no magic in the number. There's no reason why we can't get the 2 million units. There's no reason why we can't get the 3. 4 plus is a magic number because then we will be the leader. So if you pick the number I really -- at least want to get to is 4 million plus would mean we're the market leader. But I'm not going to put 4 million -- I'm not going to put a new number in front of you all, right? Our style is pretty consistent. This is the number we put out in front of you. Whether it happens in 3 years, 4 years or 5 years, I don't want to predict at this point. You all will have different predictions based on how fast we grow. But whether it happens in any period of time, it's mainly just to allow you all to see how our model progresses because with that additional supply, and if you look at our -- on our regional and territory unit economics, it's just really intended to show you all how we glide into our unit economics. It's purely for that reason. It's not intended to solve any world hunger. It's just for that.

Yes. I would say it is -- to your point, it is a way for investors to understand how will we scale and how will we -- not just scale in terms of revenue, but also profitability. Frankly, it also sets internal targets for us as well. And we try to be really transparent with investors. We focus our teams internally on how do we achieve all these targets, right? And you always want to have kind of a North Star and a guiding light in terms of what you're moving towards, recognizing we have to grow our unit volume roughly about 75% from where we're expected roughly to be in terms of unit volume this year to get to those targets. And then the question is once we get closer to those targets, what's the next set of targets, 2 million, 2.5 million, 3 million to George's point, right? So it's just constantly providing that guiding light both internally and externally for investors. And my expectation is as we get closer and look to scale beyond that, frankly, I think there's an opportunity for our EBITDA margin target to go up just based on some of the unit economics that I showed you today in terms of more mature territories in terms of already north of 30%. So I think it's good for us internally and for you guys to understand kind of what this business looks like financially over time as we grow and scale.

Got it. That's helpful. And just more broadly, we spent a lot of time in the presentation talking about ACV AI, just the efficiency it brings. It seems like half of the presentation today was not dialed into your midterm targets in terms of how much revenue could contribute, like how much efficiency could contribute. It looks like you're not just doing wholesale, you're getting more and more into the dealer. Trying to understand like how does that fit in or how will that eventually manifest in your like profile of the company? I mean you have a TAM slide, which is expanding beyond just basic wholesale marketplace, and you've shown a lot of product development around that. So how should we -- if you can give us some framework as to how we can start baking in some of just the contribution from all of this that you've laid out today?

So the first objective is to go out there and make sure we not only hit but someday exceed the 1.5 million wholesale units. Like that's our first driver of our innovation. And what you've seen us willing to do, to your point, was give away products like ClearCar, which is an incredible product if a dealer gives us a wholesale business, right? So that's where we are in the journey today. And we're using ACV AI and all these capabilities to make sure we win the wholesale business. I think we're being pretty modest right now about our objectives around SaaS and data services to your point. Until we go out and prove otherwise, right, then I don't want to go out and lean in and say, well, these could mean x thousand dollars a month or this other thing could mean -- we don't want to get there yet. Let's set expectations for what we feel like we're already doing. And to your point, sometime in the next -- whether it's a year from now or 2 years from now, we'll probably revisit our SaaS and data service goals. But as you know, our style, we probably won't revisit until I already had a quarter or 2 of showing I could do it, right? We tend to not -- we tend to do our best to keep everyone grounded on what we're showing you all are the things we're already doing. And then we'll update as we go. But the nice thing is the costs are already built in the model. So the innovation is built in the model, right? So that's the good thing. If we end up having a higher take rate for some of these other services, that would be very accretive.

Got it. Just one last one. On the commercial ramp-up, can you give us an update on where we are in the auto IMS integration and all the other back-end integration process? I mean you talked about like the large rental customer. Are you already using auto IMS there? Just where are we in that process? An update would be helpful.

Yes. And we have a first round of integration done with auto IMS, but it doesn't have the capabilities Greg Browski mentioned, where you could go through and get the recon estimates. So it's only with partners that are okay giving us wholesale that don't need Recon at this point. So there are some rental car companies, as you mentioned, who don't need Recon, so they can start working with us through that integration at this time. I believe what Greg said up on stage was he's targeting Q3 target date. for the software he was showing you all. And obviously, that means our internal dates a little before Q3, you give yourself a little buffer whenever you're building software. But that is what we're telling commercial partners as we expect some of the software to be done by Q3. And it's also the reason why we felt comfortable signing our first lease with a greenfield this year, hoping to be operational by Q4 because we knew we'd have the software stack done, and we're ready to start doing all this. So I would say from what I've been telling you all the last few months, last few quarters, we're on pace. we're delivering. We're still early, but hopefully, you got a little bit more color in Greg's area about some of the tech we had to build, and we're getting really, really close. You saw real screens up there of what they're building. And someone like Bob will tell you who's been studying this space, those are the things they're asking for. They want recon and things like that. We had to make sure we could go back and forth with the commercial lenders. That does go back through Auto IMS to your point. So they don't have to change what they're doing. Those requests all go through to AutoMS. So things like recon or transport, Auto IMS is how with most of these commercial consignors, how that communication goes through.

John Colantuoni, Jefferies. You highlighted a few products that are expanding beyond the platform. I know this was always part of the long-term plan. But I was hoping you could give some color into strategically why now is the right time to pursue those off-platform opportunities given your marketplace is still so early on in the market share journey.

Yes, it's a great question. I'll answer it by first giving you a story. I had a dealer group who's from the, I'll call it, the Midwest in Buffalo about a month ago. And they were there to talk about ACV Max. They were there to talk about ClearCar. We are giving them the early insights on Project Viper. We're in the meeting and don't you know what their biggest pain point was that month was transport. They had a bunch of soft issues and other issues. And it's really disrupting them. And within probably 1.5 months or so of them leaving Buffalo, we're now doing the majority of their transport for them. And why is that key? They're our partner. We don't get all their wholesale yet. We get a piece of it. But they had a pain point. And there's a lot of bad actors out there. There's people representing themselves as carriers that aren't carriers. It's actually a scary time. I think it's so dramatic. But you could steal an expensive car if you don't have the right tech and the right platform. So how important is it for you to solve problems for your partners? I'd say pretty important. And that's a way to look at where we are. We don't have a large team. We have one person outside of ACV Transport selling direct right now, one person. That's not a massive sales team selling direct. It mainly goes through Waterman's teammates who already have relationships. And so what are we doing at this time? Look at this year's strategy thus far is if you're a valuable dealer partner, and I'm here to help you, let us help you. They want the help, we're here to help them. And that's the way to really think about where we are in the journey. And maybe in the next few years, we'll be a little bit more ambitious on our go-to-market and to go off platform. But for right now, for this year, we're really leaning in with our partners.

Great. I'll ask one more. I think at the last Analyst Day, you sort of bridged where the market was at that time, where it would need to get to in order for you to hit your targets. Talk a little bit about where the industry is today and where it would need to be in order for you to be in a position to hit those intermediate targets.

I can answer the second question first. Sure, you can answer the first. So in terms of hitting these targets, the reason why we detached the year that we could hit those targets was because we realized a year plus ago that guess what, we're not smart enough to figure out how this market is going to recover over time. We firmly believe it will recover, and we believe that it will get back to what it was pre-COVID and the same dynamics will kind of govern dealer behavior. But we're not smart enough, and I don't think anybody else is to understand what is the pace of that recovery. And the last few weeks have kind of demonstrated, obviously, we're all dealing with tremendous volatility now on a macro level. So if you assume basically that we just continue to gain share at mid-teens and assume the market doesn't change from where it is right now, it would take on average 4 years to get there. Then the overlay is, okay, so what do you think is going to happen to this market in terms of its recovery to something like 10 million-plus units from, call it, a little under 8 million. I guess, Tim, it was a little under 8 million last year.

7.5 million, yes.

7.5 million. So that's, call it, a 25% improvement. What does that look like? And then that's the overlay to get you there faster. We don't know how fast it's going to be. All we can do, frankly, is what we can control, which is continue to gain share, continue to drive our unit economics, continue to get the leverage in the model that I walked through. And how long it's going to take to get there? Hopefully, it's not lower than 4 years. Hopefully, the market doesn't go down. We don't think it will, right, albeit there's kind of short-term volatility that none of us can predict right now. But that's kind of the time line that you can think of. It's just a math equation, right? How do you get to those unit volumes based on share gains and then subject to whatever the market is doing. So that's the math you guys should all think about in terms of how we get there.

And I think just to double down on this, if you could probably hear our tone on our most recent earnings call, we weren't expecting this year to be as glamorous as some of the folks were thinking. We gave you all another growth year expectation even with the volatility. That's really what we're trying to say is we're going to keep growing. The market is going to be the market. We're going to keep growing. We're going to keep taking share. We're going to keep innovating. And -- whether it's 2, 3, 4 or 5 years for the market to go back to where it was, so be it. We're going to hit these numbers. We're going to go and accomplish these objectives.

On the Baltimore question, what do [indiscernible].

At the end of the day, we have someone on the other end who's got a relationship with somebody else. It's really that simple, right? Whether it happens in the traditional auctions, there's -- some of these relationships go back 20, 30, 40-plus years. And so what we're -- what we face and you're seeing with incredible results that our team has done is in some markets, we've been able to get to 75% participants, some are 50% participants, right? You saw a mix territory by territory that Mike went through. There wasn't like one story there. It was really a story of that territory. So there were a couple of territories that we did have 75% participation. It's just a matter of in that markup of who are the dealers in that community. Are they willing to try our digital solution? And are they going to try it purely because of ACV Auctions? Are they going to try it because of ACV Transport? Are they going to try it because of ClearCar? Are they going to try it because of our newest innovation? But there's more and more reasons why they should try ACV. And that's really our objective is to deliver more value than the other guys. And by can deliver more value, I think we can keep exceeding those numbers.

Okay. And then just lastly for me. Can you talk about the pricing change on the website last week? And do you still think you're underpriced versus your peers? And how should we think about pricing on the buy and the sell side?

Yes. I mean, at the end of the day, we've always had our prices a little bit lower than our competition. I don't think our pricing should be a lot lower than our competition. We have a great inspection report. We have incredible teammates that deliver extraordinary value. But we've been very transparent to our investors, our customers, everyone that our fees should be somewhat competitive. And I think our fees now are getting competitive. But our revenue mix is a little bit more complicated than just to buy fees. You also heard Dr. John Coles talked about how we're doing several thousand guarantees a month right now. We charge a small fee for that. And we take a risk/reward factor. The dealer, we don't buy the asset, right? We charge a fee, think similar to like what we do with Go Green and Assurance. And these services add value. If you were to ask a dealer, hey, for the nominal fee, is charging for a guarantee, what do you think about it? And we got to 4x to 5x the number of bidders for c. we're paying a nominal fee. I think they would tell us. So our revenue model is starting to build into it in early stages, sort of success-based models. And I'm really proud of that. Couldn't do that without our talented team behind the wheels building this risk reward into the model.

Okay. And then just lastly, since you brought it up, how should we think about the risk you're taking on the guaranteed pricing model?

Thank God, we were doing it for a year before we told you. And like a lot of things, we tend to keep quiet. We don't really like the broadcast things until we actually get really, really, really good at it. Again, we're not buying the assets. The number we're giving is slightly under the wholesale value. We're not actually guaranteeing the wholesale value. It's a number slightly under the wholesale value. But dealers' biggest issues are they're not buying enough cars. And if you do your homework, they'll tell you the used car manager will go in there, they'll look at our -- use our competitors' tool, they'll say, they don't always put the right number in a car. So all we're doing is giving them a reasonable backstop. 9 out of 10 times, they make more than we're offering in the guarantee. And so they're there to take the upside. All this does is it removes friction. Don't think about this as, again, not solving world hunger. It's just removing friction. So removing friction is a big deal because at the end of the day, we have human beings, we have to put a number on a car using our competitors' legacy tools. So if we can reduce the friction, they'll buy more cars. And that's why we're doing it.

I would just add, so the finance team has been very focused on any risk associated with this. And to George's point, we've been doing this for a while now. This is very manageable, okay, based on all the data that we're generating. To George's point, I mean, the accuracy is unbelievable. And don't forget, we sort of average out gains and losses, right? So there's a netting effect, if you will, over a period of time. So it's -- this is not like putting a price on a house, if you're familiar with that company and what happened there, right? These are assets that we really have fine-tuned the pricing algorithms based on millions of inspections. It's pretty amazing the data that we're seeing, right, which is why we're talking about it. And I'm perfectly comfortable with it, and my team is even more critical than I am in terms of looking at all the data and the numbers. We feel really good about this.

Any other questions? One more?

This is more of a -- by the way, question, but you moved your listing from NYSE to NASDAQ. And what drove that listing change from -- or the exchange being moved?

There were some benefits that they offered us. And it's a competitive world out there, and they offered us that were attractive to us. I think that's the only thing we should say publicly in a forum like this. But at the end of the day, they're both great companies. NASDAQ is a great company. New York Stock Exchange, they're both great companies, but we were offered some value add that made it attractive for us.

And there are a lot of automotive names on the New York Stock Exchange as well as NASDAQ. So it just made a lot of sense for us and frankly, our shareholders based on some of the benefits that George mentioned.

So a lot of those were non-GAAP margin targets. Can you help me kind of as I think about a 3- to 5-year model, like what should GAAP numbers look like, stock comp, how does that kind of leverage? Any thoughts on that?

Yes. I mean, frankly, all the modeling that we do is on a non-GAAP basis, right? It's kind of on a cash flow basis, if you will. So that's kind of the mode we're in now. If you think about technology companies, as they get much larger and much more mature, then you start to look at stock comp as more de minimis relative to their earnings. We're not at that point yet. We'll look forward to getting to that kind of scale, but we're frankly not there today. So we tend to focus on cash-related expenses, recognizing there's a dilution factor there, obviously, in terms of stock comp. It's just a matter of maturity of our business. We're still a relatively young company. We will get there eventually. We're just not there yet.

Is there like a thing I should think about for dilution, like 3%, like?

So yes, our Board actually has held us internally to no more than a 3% dilution from equity issuances. And hopefully, again, you get to a scale ultimately where you're big enough and generating enough cash flow that you can offset that dilution. We're not there yet either. So it's all a matter of time and scale.

And we were able to do that, which included the M&A, right? So we were able to execute on that included bringing on some additional teammates, right, that became part of the ACV journey.

Rajat, you want to take it home.

Good. Well, thank you so much for joining us today. We really, really appreciate it.

Thanks, everybody.

Thanks so much.