CarGurus, Inc. (CARG) Earnings Call Transcript & Summary

Good afternoon, and welcome to CarGurus' 2022 Investor Day. Thank you to those of you joining us in person and the many of you tuning in virtually. I'm Kirndeep Singh, Vice President of Investor Relations, and I'm thrilled to be here today kicking off a very exciting afternoon. Before we get started, I want to direct your attention to our slide regarding forward-looking statements. Please refer to this slide in the context of today's presentation. Furthermore, we may refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures can be found in the presentation posted on the Investor Relations section of our website. Today's agenda will cover a variety of topics. We've transformed our business and today's presentation will demonstrate exactly that. You will hear from a number of our executive team members as we review our evolution in a transaction-enabled platform, the consumer and dealer value propositions, the synergies that now exist as a platform business and our marketing strategy as well as our long-term growth strategy. We will take a short break around 2:30 p.m. Following the presentations, we will have an hour for Q&A and conclude the evening with a reception for those of you joining us in person. With that, I have a short video for you before turning the presentation over to Jason Trevisan, our Chief Executive Officer. [Presentation]

Okay. Hello, everyone. Good afternoon. Before we get started with the show and the presentation, I did just want to take a moment to acknowledge the horrific events that happened in Texas yesterday. It's notable that for 3 of the last 4 company events we've had, we've had to lead off with an acknowledgment of a tragedy, and it's very frustrating and difficult for everyone. But needless to say, our hearts go out to those affected, and CarGurus as a company has zero tolerance for violence or racism or any of these senseless acts. With a significant shift in gears to talk about our company today, we're really excited to spend the next few hours with all of you in person, with all of you virtually to really share our story in more depth. We're incredibly passionate about our business. We're thrilled with the momentum that we're feeling right now in our business, and we're excited to share that with you. We're going to layout not just more of the mechanics of our business, but really illustrate our expanded and expanding platform, and how that's producing a business today that looks quite different than it has ever before. We're also going to show how it's working together today for both growth and profits, and how we have the confidence and the proof points that, that's going to continue for the foreseeable future. Before I go into the slides, I do just want to reflect for a moment on our history and on our roots. When I was first introduced to CarGurus in 2015, I'd actually been in a different career. I was in a growth equity venture capital role for 12 years. And in that time, had seen and met and studied literally thousands of high-growth consumer Internet and software businesses. And what I saw at CarGurus in the time -- at the time was, hands down, the most compelling profile that I had seen. It was a business that was growth oriented, the growth was tripling that year. It had incredible capital efficiency. It had -- we would end up reaching $100 million that year, and they've done it on about $4 million of capital over the prior 10 years, incredibly capital efficient. It had technology innovation that was really turning the existing industry and the existing incumbents on their ear. And it also had a business model advantage. That business model advantage is really important because our freemium business model and the listings business, which was really antithetical to the paid inclusion models that existed elsewhere, allowed us to grow our business over the subsequent 6 years in a way that the incumbents couldn't replicate. And as a result, we're now the largest marketplace. The company relished breaking the mold. They were truly disrupting the listings in this industry at the time. And pioneering is one of our key company values, and they really pride themselves on that. And they had always run it profitably, as I said, and said that they always would run it profitably. Their stunningly similar -- I should go to the title slide here, sorry, stunningly similar parallels to us today. We have -- with our combination of us and CarOffer, we have that capital efficiency. We have the mindset to disruption of the wholesale industry and the instant cash offer industry, and we're using technology to really scale the business. But despite a lot of those parallels, we're clearly not the company we were even just 2 years ago. You just saw -- this is our mission statement video. Our mission statement is we help people reach their destination. Our mission statement in 2015 was we want to be -- to build the world's most trusted and transparent automotive marketplace. And we're proud to say that we accomplished that. Over the next 5 years, we became the largest, the most visited, the largest installed base of dealers. And so we accomplished that mission. And now we're on [ AC2 ] of the company, if you will, which is a much broader, much more ambitious mission. But yet again, we're demonstrating how we're disrupting the auto market. We're doing it with technology and always in a capital-efficient way. So what drew me to CarGurus 6, almost 7 years ago now, is exactly what drew us to CarOffer a year ago and is drawing us to the strategy that we're pursuing today. And together, we've built a transaction platform on top of our subscription foundation. So I hope that you'll come away from today having a better understanding of 3 fundamental concepts that we've transformed our business, that we now serve the life cycle of both our dealer and consumer customers. And that our combined platform, combined being listings, retail, and wholesale, has distinct and unique advantages. So those are the 3 key themes. Transformed, we built a thoughtful strategy 2018, 2019, that was based on market and customer trends and feedback. And we made the decision to transform the business from a lead generation marketplace to a transaction-enabled platform. And in doing so, you'll see today, it really did open up market opportunity for us. It opened up growth runway, but it also positioned us much better strategically in our relationship with our customers. The second theme is that we now do serve a much more complete life cycle for our customers. Having a marketplace, wholesale and retail, together and instant cash together allows us to serve dealers in their efforts to source inventory, market the cars, and sell the cars, whether they're selling them in retail or wholesale. And that leads to a much deeper engagement with dealers. On the consumer side, we now help consumers. Rather than very narrowly helping them shop for a car, we now help them shop, finance, buy and sell their cars. And that combined platform while we're proud of each of the distinct business elements of it and each of the distinct businesses have compelling financial profiles that we'll go into more detail on. It's when you put them together that they have synergies in the data and in the ability to see across the value chain that allow us to have already created some unique products, but you'll hear about more products still to come, which we would argue others can't replicate without this singular platform. And then the final piece is maybe the result of this. And so if you were to hear these 3 things: we've transformed, we're serving much more of the life cycle, we're a combined platform, you'd ask, "Well, how much is that going to cost?" What's so impressive, in my opinion, is that oftentimes these big transformations take years of investment, take trough of profitability. But we've done it while maintaining significant profitability. And it's part of that ethos of being capital efficient and having both a growth and profitability mindset. You can't spend 10 minutes in our company without hearing some version of unit economics or some version of path to profitability even if it's an early-stage pursuit. Even our international business followed this. We laid out a long-term path to profitability. We measured and even shared publicly the milestones of unit economics. Canada reached profitability, and U.K. is close on the heels. So there's evidence across our business as to the mindset we have, which is one of profitability. We're analytic, and we're strategic, though, too. And so what that means is that while we do balance growth and profitability, we're going to be opportunistic. And where we do see opportunities for a differentiated product or an opening in the market, we will get more aggressive. But at the portfolio level -- and increasingly, you'll hear us talk about the portfolio because we now have a wider set of products. At the portfolio level, the totality of our business will remain profitable in any scenario that we craft. And I think that's unique. It's unique to combine the growth that we have and the growth that we'll enjoy in the next several years with that profitability. So when we did the strategy work in really 2018, 2019, customer behavior was at the heart of our work. And to note that an industry is moving online is not that bold. It's -- every industry has done that. What's actually unique about auto is how long it's taken and how slow it's been historically. I mean, not many industries in 2018 had 1% digital share. So auto has been slow. It's been behind other categories, but it's accelerating now. And you can see on the left-hand chart that wholesale digital penetration is adding about 2 points a year. And we don't see any forces that will stop that. It's added a couple of points a year. And if anything, there are tailwinds behind that. And so where does that stop? 30%? 50%? 70%? It's got a long way to go still when you -- especially when you hear about the satisfaction from customers using digital. The right-hand side is more the retail side. So shopping and research has always been online for the last 15 years. That's our listings business. COVID accelerated that further. And what COVID really did was it accelerated the dealers embracing digital retail more. They had historically been a little bit reluctant, a little fearful of perhaps some channel conflict, not having consumers walk into their dealership and a sense of perhaps losing control. But over the course of COVID, they reduced their sales forces and they've now realized that they can sell pretty much as many cars and save a lot of money and have much better margins doing it. And so dealers have come to really embrace digital retail as well. Digital retail as a term means many things, though, and different dealers and different consumers embrace different aspects of digital retail. And so -- the key, in our opinion, is to build products and to build a platform that allows consumers and dealers to execute digital retail in a way that works for them. And that's not a silver bullet. There's not a single answer to that. And so a big focus of ours is flexibility in digital retail while still enjoying the benefits of it. And really, that's our opportunity. Our opportunity is that everybody wants digital, dealers want digital, consumers want digital. The tide is moving there, but the solutions for dealers and consumers to realize that are ill-equipped to do in a single spot. And so they find themselves having to try to stitch together a number of different solutions to get to a digital outcome. So we took our asset. Our asset is the largest audience of car shoppers in the U.S., the largest installed base of dealers and a really trusted marketplace. And we added an entire transaction layer to that. So we took our foundation of trust and transparency and leveraged that into transactions that require more, even more trust and transparency than simply a shopping marketplace would need. And we are using and we'll continue to use our listings audience as the fuel to feed the transaction layer. So let's do a quick thought exercise. Imagine if we didn't add the transaction layer and we just maintained ourselves as that foundational listings environment. It'd be a good site to browse, but consumers clearly want more. All the data shows that consumers want more. And so this would be a listings site that's pretty limited. Imagine if we tried to build a transaction layer without the foundation? Well, we know that, that would be expensive to acquire the users. We would have limited inventory, we'd have low liquidity, limited trust. I'll go even one step further. Why we are unique in our ability to do this? If we didn't have a trusted listings business, if we were, say, a paid inclusion and the dealers knew that the deck was stacked, they probably wouldn't trust us if we brought them a wholesale platform and said, "Hey, come trade on this, it's a fair playing field." Conversely, if CarOffer was an auction model, we couldn't execute Instant Max Cash Offer. In fact, we tried that in 2018, 2019. We built the capability for somebody to come on our site, sell their car to us, and we had dozens of dealers ready to bid. The car came on and we said, "Okay, dealers, bid." And the dealers didn't bid. We called them back up. We said, "You said you were going to bid, what happened?" They said, "I'm running a dealership and I'm busy. I can't bid on cars as soon they come in." So an auction model would not work for Instant Cash Offer, but it's possible with us because CarOffer is an instant trade platform which is very unique from an auction model. So this transformed business has broad reach. It has trust from its roots, and it has capabilities from our technology and our business model that don't exist elsewhere. So remember, the focus of our work, though, it was our customers. We really wanted to try and solve the pain points for our customers and then hope we could fashion a business model out of it. And we wanted to be a life cycle partner to both our dealers and our consumers. And rather than being an intermittent tactical solution, which is what we were, in the most pejorative sense, when we were just a listing site. And that took a little bit of a leap in 2019 because it didn't exist. A life cycle solution didn't and still doesn't, outside of us exist for dealers or consumers. But we felt that if we built it and we build products that were good enough, that we would drive stickiness and we would drive engagement. And it's early days, we acquired CarOffer only 16 months ago, but it's working. The data shows that it's working. Dealers are stickier and they're adopting more products. Dealers who use listings, enjoy using digital retail. You can see retention is significantly higher than it would be if they weren't. Dealers who use listings are enjoying using wholesale because they're able to tie together retail pricing with wholesale. That's intelligence that they've never had before in the wholesale arena. Consumers are doing more with us, and they're highly satisfied. Consumers who sell a car typically need to buy a car, and vice versa. That makes sense, and it's playing out. And the satisfaction of those who are using our Instant Max Cash Offer, as an example, is incredibly high. To have an NPS of 89, you need to have the vast, vast majority of your users giving you a 10 out of 10. It's that good an experience, which is why we're so excited to grow it in the market. And so what has historically been a disjointed and, at times, opaque world of buying and selling cars is now becoming more seamless on our platform, and consumers and dealers are both embracing it. On a stand-alone basis, each of our businesses are quite different, to be honest, but they're compelling for their own reasons. So our listings business, you know it well. It's our most mature -- it's healthy, growing, profitable. Importantly, it still has a lot of headroom. So we have about 20% -- a little over 20% revenue market share in the $3 billion listings market. But we have about -- we have significantly more consumer share than that. And so the levers to growing that continue to be adding dealers, growing [ carside, ] and growing our lead volume. And we have ample runway in that, even though that's not a high-growth segment, and it's a very profitable segment. In wholesale, we're just simply disrupting wholesale with CarOffer, period, full stop. And what you're going to hear today is how incrementally impressive it is that we're doing it in a hypergrowth way and profitably. And that is unlike any other digital wholesale business that is trying to enter the wholesale space. We are doing it quickly, and we're doing it profitably. The wholesale market transaction volume right now is actually lower than it has been for the last 20 or so years. And the reason is because inventory constraints have less cars flowing through the system. So as inventory comes back over the next 1 year or 2 years, there will be a rising tide of transactions in wholesale. So that's tailwind number one. Tailwind number two, you saw that digital is gaining share from physical. Tailwind number three, we are gaining share in digital as we grow faster than a lot of the other digital players. And so that's 3 tailwinds to that business that is only 2% of a $15 billion wholesale fee TAM. That's a significant runway. So it's a high-growth business. It's profitable. And it's a classic network effect business. The more dealers that come into it, the more powerful it gets, and we're adding dealers every month. So we're incredibly excited about that piece of the business. Instant Max Cash Offer, the ability for a consumer to sell their car on our site, and that gives a channel for dealers on the CarOffer system to get a flow of consumer cars, which is what every dealer will say that they want. That is a tiger by the tail. And that is only possible because of the instant trade nature of CarOffer versus an auction, as I shared with our attempts to build it. Based on our guidance, for Q2, Instant Max Cash Offer is already a $1 billion run rate gross revenue business in a multi-hundred billion dollar market that is really just emerging as a market, the ability to sell your car online. And so we have a business that's grown very quickly. It has unit economics, which we've said, from the beginning, we believe are mid-single-digit gross margins. And we have some control over those gross margins, largely in the bids that we are taking from our network of dealers and presenting to the consumer because we include in that data spread to cover our expenses and cover our margin. And so we have more control over gross margin in that case than you may in many other industries. NPS is off the charts. And dealer appetite is insatiable. These cars are brought to what's called a landed dealer. And so a dealer who's on CarOffer says would love to take cars that you source on Instant Max Cash Offer. And if you were to ask any of them, "How many would you like?" They'd say, "I'll take everyone you have," because they have an option then to buy that car or to just pass it back into the system. It's a free option for them. So this is a whole new opportunity for dealers. It's also a massive differentiator for D2D because when we talk to a dealer and say, let's try the CarOffer wholesale platform? Among the many other reasons they should try it, we say, "You will have a flow of consumer cars." And they will not hear that from anybody else. And we haven't even successfully branded ourselves yet. You'll hear Dafna talk about this more as a place for consumers to transact. So imagine the potential of this business when we have that awareness as well. And then lastly, digital retail. So we're moving there with preliminary products. We just recently launched a digital deal, as you all know, Currently, in that form, it's very profitable add-ons to listings. It's gaining adoption. There's diminishing concern really from dealers. I would say there's very little to no concern from dealers. They know that these leads that they're getting are that much closer to purchasing a car and we have data that we'll share with that. And if and when we do go to more of a transaction-oriented model in digital retail versus what today digital deal is a subscription model, we see that as an opportunity for accelerated growth. And everything we do in all of these is asset-light, capital-efficient. We look maniacally at the unit economics. And there are models that leverage the dealers, leverage the dealer's inventory, leverage the dealers' lots, leverage the dealer's capabilities and then leverage our customers that we have in our great foundation of the listings business. So now if we zoom out quickly, we've built a portfolio that is connected and drive stickiness. It's related so they feed each other. It's unique. Other companies with different models can't replicate this. And it's a combination of profitable and growing in huge markets. We're no longer chasing market share in a $3 billion segment anymore. So the economic result is that the portfolio has growing stakes in several large markets. And as a result, we're so enthusiastic that we're going to be growing for a very long time. Our philosophy has changed honestly from how can we find growth to what's going to stop us from growing in some of these different areas? But remember our roots, we're going to build a business that is strong, sound and doesn't require capital. There are compelling unit economics throughout our business. In wholesale, it's profitable through year 2, there's operating leverage with more transactions per dealer. We've just introduced price increases with very little pushback, and we have a step 2 and 3 valuation mechanism to acquire the remainder of CarOffer that is based on unit economics and profitability. In Instant Max Cash Offer, we've said from day 1, this is the gross margin profile that we believe it is and we can control that and have many levers to grow gross margin. We also know it can be huge, and we know that it sets D2D or our wholesale business apart because it makes us the trusted resource for consumers to buy and sell. And then listings, we've proven how lucrative it is, but we continue to look -- focus very closely on LTV:CAC for dealers, LTV:CAC for consumers, marketing ROI, et cetera. So it's a thoughtful business model with stickier and deeper relationships that we believe are upside to long-term profitability. And our strong execution historically has proven that we take earnings very seriously. We have the stability of a subscription business now with multiple growth levers of transaction on top. Now if you look at the future state, in many cases, we've shown the gross margin. We've already demonstrated the gross margin potential. It's not often that you have a situation where you have a high-growth company that is showing future state gross margins, which are not that different from what we've achieved already. So none of these really require a stretch. And our track record of producing EBITDA is one that we're very proud of because over time, we've been -- we've heard suggestions to get more aggressive on marketing to grow faster. But we didn't feel that the time was right. We didn't feel we had the product suite. We didn't feel that the market dynamics were right. But now we have a broader product suite. We have marketing leverage. But I want to be clear that despite our accelerated growth, I cannot picture a scenario where we aren't producing material and growing EBITDA. And even in this moment in time, in '22, off of a year of over-earning in '21, investment in building and launching digital retail, which we just launched the latest incarnation, and marketing Instant Max Cash Offer, we see our EBITDA in Q2 has only increasing from Q2 going forward, nominally. So what you'll hear today? You're going to hear about how we serve the dealer life cycle. We're taking our position of scale, ROI technology data and infusing that into the full life cycle of dealer solutions, and it's working. You're going to hear about how we serve the consumer needs. Likewise, here, we're leveraging our trust and transparency. We're leveraging the sheer scale of our audience to bring more of a relationship offering to consumers. So they do multiple things with us, and you're going to see that that's working. There are single platform advantages. So we're going to share with you that we have done some things from a product and bundling perspective already, but that there are arguably more exciting things coming that we can do, which speak -- which are only made possible by having wholesale, retail, and listings together. You're going to hear that we have both marketing leverage and huge upside. The leverage is the fact that we have a gold mine of 30 million uniques every month. And of course, we're going to leverage that. But we also have a more compelling story to tell. We have a more compelling brand to build, and we're going to do that as well. And if we do a better job at that, while others perhaps are pulling back given the environment, then that could be doubly positive. And last, you're going to hear about a capital-efficient model and a track record of success in execution. We have a business model that despite our growth, despite our innovation -- investment and innovation, despite our share gains that we have strong unit economics and impressive EBITDA growth. So we are so excited to go into the story in depth with you. We're going to show a quick -- the first topic we're going to dive deep on is dealer value proposition. We're going to show a short video that was from our Navigate conference, which we bring together hundreds of dealers from around the country, that speaks to how we're now helping them source market and sell their cars. And then Sam Zales, our President and CEO, is going to go into more detail on how we help them source cars with the CarOffer platform. [Presentation]

Thanks, Jason, and welcome, everybody. I'm Sam Zales. I have the good fortune of managing our go-to-market and commercial businesses here at CarGurus, and have had the distinct pleasure for the last 1.5 years of managing the CarOffer-CarGurus partnership, working very closely with Bruce Thompson, the -- who I call the industry Savant of the digital wholesale arena, on a day-to-day basis. Bruce and his second in command, Scott Johnston, the amazing Chief Operating Officer of the business, and I are talking about the business, operating the business, working together through both sides of the business. We have teams at CarGurus on the commercial and business operations side who are living back and forth to Dallas. I was there 1.5 weeks ago. It's a partnership unlike any other I've seen in my 35 years of business. From an M&A perspective, it is a true partnership. While Bruce and Scott are running the business and showing the incredible results, I'm going to show here today, I have the opportunity to talk about digital wholesale and how we are differentiating and transitioning to change the entire industry around us. To talk about this instant trade platform -- and I say, again, it's an instant trade platform, not a digital wholesaler auction product. It is not a physical auction, obviously. It is truly differentiated. What I want to focus on in this section is three things: one, differentiated because it's highly capital efficient. It's a theme you heard Jason talk about, and we'll keep reiterating that through these themes. It's sophisticated in the technology and what it uses, and it's scalable. Number two is we're in a TAM that is humongous. Jason talked about the $15 billion worth of transaction fees in the wholesale industry. But digital is taking over that arena, and we stand to gain more than others in the marketplace. And number three, we added the Instant Max Cash Offer capability. No platform in the marketplace offers a consumer trade into that marketplace as we do. We are the only players in the Marketplace who do it. We actually think Instant Max can be the sell-my-car widget across the Internet. And I'll talk about that as a future strategy for our business. What I want to spend a moment on, though, is to make sure I repeat this theme, and for dramatic effect, I'll apologize for this, is to say, this is the only business in the digital wholesale arena that is rapidly growing and scaling and is profitable. And I repeat that again, rapidly growing and profitable. Not a plan for profitability 4 years from now, is a profitable business and continuing to do so. It's even more amazing to think about the company is only 2.5 years old. Bruce, as I said, is a person who's built products throughout his career, built the technology years ago to bring forth to this company only 2.5 years ago. The Instant Max capability we launched in August of last year, 8 months to scale that business in that direction. We're also working in a relatively turbulent time in the wholesale industry. Price points going up and down and moving rapidly, inventory issues, chip shortages. Despite all of that, we're still running a rapidly growing and profitable business. So if you look at the chart on the left -- sorry, on the right side of this chart, CarOffer is that light blue chart with the gross profits growing up into the right over time. The competitors in that space have some gross margin in some cases, but they're not running a profitable business. So when you look at the growth despite some of the volatile up and down months that we've had in this business, everything moving up into the right as a profitable unit. The CarOffer offer business, profitable and fast-growing. And most importantly, down here to the left of the chart, they're incentivized to grow the business profitably. So the great work that Jason, our corporate development and our legal team did in creating this M&A transaction capability, we own 51% of CarOffer, the next 49% is all incented for the CarOffer team to grow their profits. We're mutually aligned in how we grow the business and grow profitability over time. So how is this business so sustainably different than any other player in the digital wholesale arena or the physical auction arena? Number one, it's an always-on highly efficient system. By always-on, it is like a stock market. Thousands of dealers in their matrix, putting all of the vehicles they'd like to buy and at what price point, and all of the vehicles they like to sell and at what price point. And the system matches buyers and sellers, time and again, creating transactions in the marketplace. How is it doing that? It's doing that when a vehicle in Florida, for example, an all-wheel drive vehicle that has somehow made it to Florida, is much more valuable in the winter months up here in the Northeast, that vehicle will transact the geographic opportunity to take the vehicle like a Soft Top Jeep Wrangler. How can that be more valuable in the summer months down to the warmer temperatures? It works in an always-on capability, and it's highly efficient. We don't have reconditioning centers. We don't have people spread around the country trying to help dealers create an auction environment. We've outsourced and used with partners, inspections, transportation and transaction capability that all happens digitally, all happens through partnership, highly capital efficient. That's how we make the business profitable and how it scales over time. Number two, it's highly sophisticated technology. It's a lot like CarGurus' -- those of you who knew us in the earlier days, our instant market value. We use technology to create machine learning, to create optimization of buy and sell in the wholesale arena. 150,000 rules in the matrix constantly evolving and updating. And we put the word on here for Matrix Intelligence. It's an optimizer for every dealer to see how they can get more value out of the system the instant trade platform. Last week, Bruce and I were looking at a customer. It lists -- because we have access to their dealer management system, the lifeblood of a dealership, we're looking at all the vehicles they sold, whether retail, through an auction site or through other third parties. What was the price point they sold it for? And you look at the CarOffer matrix and say here were the bids for those vehicles you missed selling through the car offer platform. $158,000 worth of profit, you didn't take advantage because you didn't put those vehicles into the matrix and sell them through our highly efficient system. That's a typical example of how we get more and more transactions with those dealers onto the platform. And finally, scalable. The only program in the market, the only solution in the market that is an index of both wholesale and retail because they're using our IMV, Jason talked about 30-plus percent of our customers using IMV, the retail index, to know how I can get the best arbitrage on those products that I buy and that I sell at retail. And finally, the only, the only consumer-to-dealer transaction capability in the market. We are the only wholesale platform that brings those Instant Max cars to the dealer directly. Jason talked about how big this business is. It's a $15 billion business, growing digitally. So as digital takes more and more share and CarGurus is winning the outsized part of that digital arena, we stand to gain the most in this business. And yet today, with the revenues of the business, it's only 2% of the opportunity. So how do we get more and more of that share in the market? Number one, we acquire more dealers onto the platform; number two, we get more and more transactions from dealers who are participating in that marketplace; three, we launch some new products to gain more share of the transaction revenue. So let's see how we've done so far. This partnership between CarGurus and CarOffer has been amazing. If you look at where we started in the first quarter '21, when our offer officially became part of the CarGurus business, we opened up the opportunity to tell our listings customers, you're missing out on the opportunity to acquire inventory and sell your inventory through this amazing instant trade platform. And by the way, at a time inventory is down and your listings business -- our listings business to market those vehicles can only help you with the vehicles you've got. If you acquire more vehicles from CarOffer, you'll be able to sell them through best system for listings in the marketplace. So we help them grow from 5,000 or 6,000, 7,000 when they started to now almost 11,000 dealers enrolled in the marketplace. We focused on the franchise businesses, the larger dealers in the marketplace who have ability to scale and grow and spend more on vehicles, but we've started to open up independent dealers. You saw that in the last quarter. We started to bring on more independent dealers. We can even bring on our restricted dealers in a freemium program. Spencer is going to talk about it in a minute. So more and more growth because we haven't even touched the full corner of our customer base. And our process going forward is to say, bundle products together. We're currently testing some bundling options to say, if you're not on the CarOffer platform, we'll discount one or the other platforms to get you on to both platforms and give us more and more revenue and help yourself grow your profitability as a dealer. Number two is, how do we get more transactions per dealer? So our effort with our whole dealer -- sales manager team is to help customers get an optimized use of their matrix. So you look at this chart on the right, and it shows over time, despite some up and downs in the months, this describes when wholesale pricing goes up and down rapidly and is volatile, you'll see some ups and downs in the months for the entire industry. But CarOffer has taken the approach of saying, if this is such a valuable process, you will get more ore out of this program and our average transactions per dealer in the first quarter '21 to the first quarter '22 grew 100-plus percent. We've got to keep doing that with all of our dealers getting more active on our program. We launched the Instant Max Cash Offer capability to say to a dealer when we first went out to the market, Jason talked about 2019. We said, "What would you like from a wholesale platform?" This is long before we saw CarOffer in the marketplace. And they said, "We will buy from any auction site, but the customer that will win our business the most is that, that will bring a unique set of inventory." Inventory, I don't see if I'm on the Manheim Index or something that I don't see if I go to a local physical auction. Consumers are that golden ticket to give dealers the opportunity to buy vehicles they've never seen before in the market. We're so thrilled to have launched this capability. How many people in the room have used Instant Max Cash Offer to sell a car? You got to do it. I don't like what I'm seeing out there. There are thousands of other people in the country doing it every day. So I think you should try it. What I'm really excited to talk about today is the success of that program. We were out to many states, and I told you when we launched for any investor who asked us about this, when we launched this program, we will only expand it nationally if we do 2 things: Have an incredible consumer experience because that's the brand of CarGurus with trust and transparency; and we have great unit economics that we're efficiently acquiring these consumers into the business. Today, I'm really, really excited to announce 5 new states launching as of today. You're hearing it first. Later today, we'll be sending out the press release. Nevada, Utah, New Mexico, Colorado and Washington are all opening up, meaning 85% of the country consumers will be able to sell my car on the CarGurus platform and those dealers in those 5 new markets get access to those local consumers, the vehicles they've never seen before that are so highly valued in the marketplace. We're really excited about this. And as I think about it, I'll take you to future thinking on this. Just to give you a sense of what we think Instant Max Cash Offer can be as it goes forward. I think of it as Instant Max as a service. And I'm not saying we're doing this today. I'm not saying this is tomorrow's future, but is where we think about for future opportunity in this business. Today, what we do is we offer this Instant Max capability to dealers to put on to their websites. We call it ConsumerLane. So this instance on the left is Sonic Automotive, their EchoPark division. They said, we have a ton of traffic coming to our sites, but I don't have a great trade-in vehicle, I don't have a trade-in widget on my site. Can we take your widget at Instant Max and put it on my site? Now thousands of consumers are coming and saying, "I think I may want to buy a car from EchoPark. What can I get for my trade-in?" And the trade-in opportunity has worked through 10,000 dealers matrices to say what is the best offer for that vehicle across the country. And that allows EchoPark to say, "Here's the price point for that vehicle. It's the highest in the market." I now have got that. Consumer said, they'll sell me their vehicle and then they're hopefully going to buy a vehicle from EchoPark. EchoPark then has the opportunity to take that vehicle, sell it back to another retail customer or put it back into the CarOffer matrix and we got more products coming into the matrix, and building more and more, as Jason said, network effects to our business. Where can I take this, the next step? So that will be, as we push that out over time? Where can we take the next step? The right side of this chart shows an instance where we've gone to a consumer website and said, "Let's put the same capability at a place people are buying other products and services that don't know I can sell my car for the highest price in the market by using the Instant Max Cash Offer capability." Maybe branded car offer, maybe branded Instant Max Cash Offer, maybe branded what that consumer business would do. So think about a consumer website where other transactions are going on. I'd say, "I'm giving that consumer a great deal. They can use a sell-my-car app that's backed up by the 10,000 customers on CarOffer bidding on that business." Think of the financial services players in the automotive industry. I've got a loan out, I've got a lease out. And for a return of that vehicle, here's the highest price you could get on that one. Let me get you into another vehicle. Think of the OEM websites. Think of service centers out in the automotive industry. All of them are dealing with a customer who doesn't know here's the greatest tool to sell my car. CarOffer is backing it up. It brings more vehicles in, those unique vehicles into the dealer to dealer website, that dealer to dealer platform, the instant trade platform. So that's the business of where we think it's going. It's a quick review of where we're going and how we're taking this business forward. Let me finish on one thought, as you as investors think about CarOffer and the CarGurus partnership. Jason said it before, this is what's made a unique partnership in my 35-plus years in business with he and I and how we think about the business and all of our leaders in this business on unit economics, profitability, and how to grow a great business. Langley Steinert, our founder of the company, brought me into the company in 2014. And he said to me, "I'm on to something big here. We're creating something big, but I need you to come in. I don't know what exact role you'll play, but I need you to help me scale the business and do it profitably because we're going to be a great steward of capital in this business." And I came in because he knew when I went to my first venture-backed company, he got me in there, and in 2000, I led my first venture-backed business. And my first Board meeting at that venture-backed business was to say to the Board, "I think I've got something turned around here. It's an unprofitable business, but I think I've got something on, what would you like, growth or profits?" And as any smart investor, like any of you would say, they turned around and said to me, "Both, that's what we want." Every day since year 2000, every business I've led and every business at this company that I work with is focused on doing two things: growth, and profitability. We are not a company saying, we'll think about profitability somewhere down the road. I've been lucky enough to work on that international business, Jason talked about since the beginning. We said, "Here is the P&L, and a year ahead of plan, Canada turned profitable." The business at CarOffer and CarGurus will continue to differentiate itself with technology scalability and run as a growth and profitable business, unlike every other in our industry. If you take that away, I'd really appreciate your thoughts on the CarOffer business. Thanks so much. I'm going to turn it over to Spencer Scott next, who's going to talk through the value proposition for our dealers in the listings business. Thanks very much.

As you saw in the video between Sam and Jason, we're a platform that allows dealers to buy, market, sell. Sam went over the buy. I am going to go over the market. How our dealers using our platform to market their vehicles. And if there are 3 things that I would like you to takeaway from my presentation today, and often, you've heard to this portion as called listings. So the 3 key takeaways are scale, superior ROI and room to grow. So I'll talk about all those in more detail. So I'm going to cover scale. So when we're talking about scale, we have more dealers on our platform than anyone else. That leads to more vehicles on our platform than anywhere else. And that leads to more consumers coming to our platform than anywhere else. So that's scale. Superior ROI, our platform is built on trust and transparency. So consumers come to us to be informed, and as informed consumers, they are much more likely to convert when they go into the dealership; therefore, delivering superior ROI compared to alternatives for the dealership and room to grow. So our platform and our products are flexible. We're innovating, and I'll walk through those, and there's certainly headroom for us to continue to grow the listings business. So let me first touch on scale. So as I think we've talked about a lot. I've talked about more users are coming to our platform than anywhere else. Now why is that important to our dealers? They're going to get more leads, right? They want to be where the consumers are. So if there's one place that a dealership needs to be, it's the place where all the consumers are going or at least the majority of those are going, and that's CarGurus. But these consumers are very engaged. We're not a click-in and click-out type of website. On average, consumers are spending more than twice as much time on our website than any of our competitors. That's where they're getting informed. They're shopping, they're looking, they're understanding what's a good deal, and they're seeing everything that's available in the market because we have all the cars. So ultimately, this is the thing, this is probably, I would say, the crown jewel in my pitch when I'm talking to dealers, is that, it is highly likely that we are the site that a consumer goes to right before they make a purchase. Now if we think about it as consumers, it makes a ton of sense, right? You're making a big purchase, you're buying a car, what's the one thing you want to know before you sign that piece of paper? That you're getting a good deal. And where is the place you're going to figure out if you're getting a good deal? CarGurus. So consumers are coming to our site before they make a purchase. So imagine if you're a dealership, right? I often talk about this is, imagine you're in the candy business, do you want to be buried in the aisle at the grocery store? Or do you want to be at the checkout counter? You want to be at the checkout counter. You want to be as close to the purchase as possible. And if 3x as many -- or our consumers are 3x as likely to be the last place they go right before they make a purchase, you need to be on our platform. So if we talk about the dynamics about how these work and I'll walk through our products in a second. But how this works is because we have the vehicles, we then are coming up with IMV, our instant market value. And then our search algorithm is exposing to the consumer and sorting best deal first down to a fair deal, right? So the consumer knows that the vehicles that they're seeing on the first page are the great deals. They could even be good deals, but they know that we've looked at all the others, right? This is what gives them confidence, right? Consumers want to be armed. Consumers are looking to be well informed, right? So these consumers are doing research. There's tons of research out there that I'm sure many of you have seen that almost all of these transactions are happening online. Consumers want to be informed when they go into the dealership, and they are. So when they make it into the dealership because they're more informed, they're much more likely to convert. And one of the interesting things that I hear from our dealer partners and many of them take it a step further, is that, they often aren't negotiating as much with our consumers. Because we go back to that single point, the consumer knows they're getting a good deal. And maybe more importantly, the consumer knows that their worst deal is out there, right? So with the paradox of choice, there's so many cars. You go to one and when you search for a white Ford F-150, you're going to see hundreds of results. So the consumer can buy with confidence when they're in the dealership. And these dealerships that take it one step further, we have many dealers that actually put our pricing, our deal rating on their own website. And they say, that's a powerful tool for them when they're going through the negotiation process of just bringing the consumer to the website and say, even CarGurus says this is a good deal. So we're able to help the dealer extract more margin, right? So this all works together. This trust and transparency that is the foundation of what we do, helps deliver a superior ROI for our dealers. So I want to talk for a few minutes about our products. And I'm going to do that by telling you a story about one of our dealers, dealer is Carlos. He is in the Midwest. He owns one store. He represents one brand, so he's a franchise dealer. When he first got into the business and started working at this dealership, he's the owner-operator. He had heard about CarGurus, whether that was from experience in the industry or from his 20 group, he knew that we were a place that needed to list his inventory. So we started by using our restricted platform. It was free. He put our inventory on the website. After a few months, he started to convert consumers. He started to work with our sales team, and he realized that he wanted to a direct integration into his lead management platform. He wanted uncapped leads so he can continue to convert our customers, so he could deliver a greater ROI for his business. So he became a paying customer on our Enhanced product. His business continues to grow. He's doing well in his market, and he has his first review with our account management team. And they exposed him to what we call our fair share report. And what this fair share report does is, it shows the dealer based on the type of inventory he has, and this could be based on make, model, pricing, what share of the market he represents from an inventory perspective. So he or she will see that -- and in Carlos' case, he was 5% of the inventory in this market, but he was only getting 3% of the leads because he was getting out-marketed on our platform by his competitors because they were buying Featured. So Carlos decides to upgrade the Featured. So now his vehicles are showing up in those top 3 spots, and Carlos' business continues to grow. In fact, it grows to a point where he is the #1 dealer for his brand in his area. And when he's going through the renewal process with us at the end of the year, he tells the account team that, and he's proud. "I'm #1. I want to maintain my #1 position. I have more vehicles from my brand than anyone else in the area." So we introduced him to Featured Priority. Why not rotate your vehicles in that very top spot, make sure that you're locked in, and he's been on Featured Priority ever since. But as Carlos' business grows, right, it happens beyond just CarGurus. He's investing in his own site. He's investing in his staff. One of the things now is he begins to outpace the local market. So he starts shipping cars. He can ship those locally. He can ship those farther away. So now he starts using our Area Boost product. So our Area Boost product allows Carlos to take his vehicles and market them to consumers outside of his local radius. Now Carlos can pick his radius. Some dealers go by state. I'm comfortable with the rules and the regulations in my state, I want to market everywhere in Massachusetts. Some dealers pick region. Some dealers may say, "I want to market everywhere in New England." Some dealers pick a radius, "I'm comfortable with how much it costs to ship a car 500 miles, so I'm going to do 500 miles." And some dealers go nationwide, but this is a significant increase in exposure for Carlos on his website, increases leads, in fact, increases all the connections that he sees from our website. But as his business continues to grow, he's investing in his site. He's buying billboards. He's buying TV. He's buying newsprint. So we started talking to him about RPM, real-time performance marketing. And this is one of the things that brought me to CarGurus, and I've been here 3.5 years. This is a tool where we allow a dealer like Carlos to market to consumers that are in market for a car that he has on his line. Now why is that powerful? I mean imagine all the things that we understand about targeting advertising and what's happening in the space, but to be able to put an ad on social media or in display that has a car that the consumer is looking for, that is on your lot at that moment in time, as soon as that car gets sold, we start marketing that car. But because of our scale, we know the consumers in his area that are actually shopping for that car. So it's this immediate connection of being able to go to an advertiser and say, "How about we know all of your inventory, and we market to just the consumers that are looking for exactly what you have in your inventory exactly at the moment they want." And that's what RPM does. But we also give Carlos a ton of unique insights. And this is a really interesting one for me. So dealers go into our dashboard all the time, right? And as a sales and service person, I'm often inquiring as to what they're doing in there? I want to know how we can service you better? What data can we provide to you? And what are you interested in about the audience about RPM? Are you interested in the CPMs, the CPCs, click-through rate, conversion on your website? What's happening with leads? Do you want to know what's happening on Area Boost? We have a lead AI product. They can activate the hot leads, but almost every single time the dealers represent -- tell to me a free tool that's in our dashboard for all of our paying dealers and that's the pricing tool. So it's a simple slide bar that they can click into for any one of their vehicles that shows them, based on the price, whether that vehicle is a good or a great deal and how much they have to change that price to be in the next deal rate. So our more sophisticated dealers will make sure they have a good deal for the first 10 days. The car is not moving fast enough. They'll lower the price -- but they'll lower the price just enough to become a great deal. We take all the guesswork out of it right in our dashboard, and that's free to all of our paying dealers. Now last thing that I'll talk about from a product perspective, but I won't go into it in great detail because it is the sell portion of buy, market, sell, and Brad is going to cover that. We are taking all of these transactions and all of these things that are happening on our website, and we put it together for the dealer to help them bring the consumer further through the funnel. So when consumers are on our site, they want -- "Can I afford this car? Am I going to get financing?" That's our financing in advance. Dealers have said to us, "Well, what about my financing? What about my F&I? I'm going to make -- and that's their finance back end and they make a lot of profit in F&I. Can I start injecting those? So when the consumer is on my vehicle page, on your website, they're getting my offers. They're seeing where I make money. You're not disrupting that for me." And our answer to that has been yes. And Brad's going to walk through that in a few minutes. But the bottom line is that it's working. If you look at the first chart here on the left, retention, we are retaining dealers at a rate that we did back in 2017, but now we're doing it at scale. Massive dip there, of course, in COVID. Dealers shut down. It was a hard time for the industry. And I'd say, we're certainly not out of the woods yet. Dealers are not flush with inventory, and I'm waiting for that day, right? It's probably a year from now, maybe 2 years from now, but they're going to be much more eager to spend on a platform like ours when it gets more competitive and cars are a little bit harder to sell than they are today. But even so, we're retaining them at a better rate than we ever had. On the chart on the right, they're spending more with us. So they're sticking around and they're spending more on our premium products even with the headwinds that they face as dealerships because we're bringing them the scale and we're bringing them the return that they're looking for. So in closing, I'll go back to those 3 points. Hopefully, you all wrote them down, right? We're delivering scale, we're delivering superior ROI, and we've got room to grow, right? It's challenging for me not only to stand up in front of all of you, but Sam, who I report to and Jason. And I'm cautious with my forecast, but there is a lot of room for us to grow, right? So if you take those 3 things together, QARSD, something we report on publicly, it's growing every single quarter. That's our customers buying more of our products from us. And on the bottom, I can't remember the number right off the top of my head, but 42% of the dealers in the U.S. are not currently paying customers. And as I said, if there's one place that you need to be as a dealer that's on our platform, and this is what our sales team is going after. We're making sure we're delivering superior service, so we're keeping the dealers around. We're making sure we're building trust with them so they're buying all of these new things that we produce, and we're aggressively going after the dealers that aren't on our platform. And certainly, again, there's headwinds for those dealers right now, but with the way that we're able to grow the existing business, you've seen from our public filings that we were growing dealer count. There's a big opportunity ahead for us, and I'm very excited about the listings business. So as I started with, buy, market, sell, this is the marketing portion, how dealers market their vehicles on our platform. Now I'm going to turn it over to Brad, and he is going to go over the sell portion.

All right. Thank you, Spencer. So again, my name is Brad Rosenfeld, and I'm the Executive Vice President of Digital Retail Commercialization here at CarGurus. I think Jason, Sam and now Spencer have actually talked to them a little bit about their origin story of kind of what brought them to CarGurus, and if I can share a little bit of mine. I've spent about the last 10 years or so before joining CarGurus at Amazon, where I ran a number of their digital businesses, both on -- like from books to music and was on the forefront of a lot of businesses that went through this transformation to the digital side. 1.5 years ago or so, Sam and Jason approached me about this opportunity at CarGurus. And as many of you have heard through this existing platform that we have, both of our current listing business, the huge growth on the wholesale opportunity, it just creates so many really interesting and compelling structural advantages to what our opportunity is for digital retail here that it was an awesome opportunity that I just really felt compelled to join this company. And I've been here for a little over a year now. And every day, I wake up even more excited than the day before, given how much progress we continue to see and how much more we see in front of us. The other thing I would like to say is, I'd like to refer to my back story a little bit here is the -- an origin story because I think it sets a nice stage for like a superhero arc, but I'll let you all judge that. So to start, I think one of the things I want to really highlight is how we think about the sell or the ROI for the dealerships in the space, right? I think, first and foremost, it's about helping dealers compete more effectively in this changing marketplace. Consumer behavior is changing. Competition is behaving. Competing more effectively and adaptability for the dealerships is critical, and CarGurus' digital retail products certainly help dealers adapt to this changing environment. I think secondly is efficiency. With this change that we're seeing in the marketplace, efficiency just -- these opportunities for efficiency continues to grow. As Sam and Jason mentioned, the opportunity is to sell more with less resources, and digital retail is part of the big forefront of enabling these dealers to adapt to these competing changes, but also to be more efficient with those changes. And then thirdly is selling more cars through flexibility. And like what I mean really by flexibility is that no dealership is exactly the same, no rooftop is exactly the same, and no consumer journey is exactly the same. And so having a suite of digital retail products that meet the needs of various customers and various dealers, ultimately, in combination with these efficiencies and the ability to compete more effectively, unlock the capabilities for dealers to ultimately sell more vehicles. And I think before I continue on the one thing I do want to talk a little bit around the ROI is that you frequently hear digital retails refer to as kind of this monolithic product offering. The digital retail is kind of only this end-to-end experience that ultimately results in the sale of a car completely online. And I think the way that I at least think about it, and I would encourage others too, is that digital retail is really a suite of services because again, every journey for the consumer and different dealers are going to be different. And so having a suite of services really unlocks both multiple monetization opportunities for CarGurus by providing different opportunities for dealers, but also enables strong future growth as we've been able to continue to transition within this business towards digital retail and more on the transaction front. We talked a little bit, and Jason mentioned some of this at the beginning, about some of the changes though that we're seeing on digital retail. And as Jason mentioned, 60% of shoppers surveyed have indicated a desire to do more of the process online. COVID has certainly accelerated that, but I don't think that's particularly surprising in line with other industries as well. We know this is a direction things have been moving in. And while COVID has certainly accelerated that, it's not fundamentally surprising. I think one of the things though that we take great pride in and we're quite excited about as we think about digital retail though is even how much stronger those trends are as we look at the CarGurus customers. 80% of CarGurus customers shopping on the site have indicated they would actually like to do more of that process or buying online. That number actually even goes up to 95%. 95% of customers who are using our app end up actually wanting to tell us that they want to do more of this process actually online. And I do think it's important to level set though here is, we're talking about this buy online is that when you do survey these customers, buy online means dramatically different things to many of them. For some customers, buy online is that end-to-end transaction, resulting in a full sale and ultimate delivery of a vehicle without ever stepping foot in dealership. But for other customers, it is going so far as maybe placing a deposit or maybe doing their financing and then still completing the purchase ultimately in that dealership. So again, how the customer journey is varies dramatically. I think on one hand, this is a signal of the overall trend that we're seeing towards digital retail, but I also think this trend of CarGurus customers being more inclined to do more of this digitally is also an output of some of the scale that we've already built on our platform for digital. So as I look around the CarGurus' listing sites today, we have over 400,000 listings that are already enabled with many of our digital retail products, including Area Boost and Digital Deal, 400,000. And I think it'd be hard pressed to find too many competitive marketplaces that were able to match that scale for digitally enabled listings today. Now to put that 400,000 in context, though, because it is kind of a large number and can -- I think putting some story behind it is beneficial, almost 80% of customers today, if you take any metropolitan area, have access to over 30,000 Area Boost listings. So on average, if you pick a metropolitan area in the United States, most customers are most likely to have access to over 30,000 vehicles that they could start the purchasing process online and ultimately have that car delivered to their house by that dealer. So again, we're seeing the growth of this platform already today through these types of programs. Secondly, we're also seeing this growth not just on the listing side, but starting more and more on the transaction front. So as we think about the finance in advance side, the ability for customers to do prequalification before stepping foot in the dealership. Last year in 2021, we helped facilitate in partnership with our dealer and our lender partners over $1 billion in funded loans. We already have a strong foothold, not only on the listing side, but also increasingly more on the transaction front, and we're seeing that also in our growth. In Q1, revenue from our digital products grew 37% year-over-year. And so these are with a lot of our existing products that we're building our foundation upon. But as many of you have seen in May 11, we launched Digital Deal, which Digital Deal is the next iteration of digital retail on CarGurus that allows the customer to do even more of the process online. That includes everything from the hard pull finance check to building a very -- a near penny perfect deal using vehicle-specific or dealer-specific financial and insurance products as well as placing the deposit. So I'd love to show a little bit of a video on some of that functionality, including Digital Deal next. [Presentation]

All right. I tried to get them to run the entire rock track as background throughout my entire presentation, but didn't have a lot of luck there. So -- but Digital Deal is helping dealers be more efficient and sell more vehicles. And we know this because actually, we've had Digital Deal in an early access program now for over a year. And so we've not only -- we've been seeing these results now in detail before eventually rolling this out to any dealer that want to sign up for this in early May, as I mentioned. And so what do we mean really here when we're talking about efficiency in this space? Well, I think one example of efficiency that dealers are seeing and the value that they're seeing for this is, for example, for appointments. Consumers, who are going through the Digital Deal checkout, are 7x more likely to end up scheduling employment in the dealership, right? So this is a great example of how when dealers are choosing to expand -- to purchase things on CarGurus, but they are having an efficient use of their capital because this is again driving foot traffic to them. It's an effective use for them. Additionally, we see the consumer doing more of this process online. So for example, 26% of users going through this process are actually completing the pre-qualification process. So this is helping really dealers to understand both the vetting of the customer. This is a customer that actually is creditworthy, can purchase the car that they're interested in, but it's also making their F&I office more effective because the deals are that much closer to being closed, right? So there's the effectiveness side, but there's also the volume side, there's the sales side. Leads that come through this program or transactions that flow through this checkout on the Digital Deal side are 2x more likely to close compared to a traditional lead. So dealers are not only seeing the efficiency of this and are selling leads with less effort and selling vehicles with less effort, but they're actually selling more that are coming through here. So ultimately, in the day, programs like Digital Deal allow the dealer sales team to be much more efficient operators, resulting in more volume for dealers who sign up for these types of programs. I think also it allows -- positions CarGurus to be in the place where we are not only helping to facilitate the listings and the research and some of the things that Spencer talked about, but also we are helping to facilitate the transaction today in multiple ways, which I think brings me to actually the point around flexibility. So as I mentioned, no one journey here is exactly the right. No customer journey is exactly the same. No dealer is exactly the same here. And I think that's a really important element to highlight. And kind of the analogy that I like to use here is that if we think about the digital car buying processes -- forgive the car analogy, but a highway, if you will, with maybe the end state of that highway is the complete end-to-end digital purchase, where the consumer has done everything online and then has that car delivered directly to their doorstep. But the fact of the matter is the vast majority of consumers today are still interested in going into the dealership. They want that mode of experience. They like to see the car. There's an element of that where consumer behavior still is, right? And so we acknowledge those differences in customer behavior while also acknowledging that every dealership has slightly different processes, right? So for example, if I stick with -- maybe let's stick with Spencer's example around Carlos, the dealership earlier. Carlos maybe has many of the functionality that we just talked about with Digital Deal, but maybe they just not set up the process deposits. They could have policies for that. They would not want -- maybe they don't want to dedicate the resources internally. For whatever reason, Carlos dealership doesn't enable deposits, right? And so what we've built is the flexibility in our programs like Digital Deal to enable the dealers to sign up for the processes that make sense for them. And in that way, we haven't tried to make a product that's one size fits all, but it's highly customizable to the needs of that dealership, enabling that they're able to sell cars effectively for them, which then in turns drives the value prop for Digital Deal and the overall adoption for programs like Digital Deal. And so some of the ways that we know that, that customization is working in addition to the efficiency and volume that I've talked about, is that as of today, through the early access program and from our launch just several weeks ago, we already have hundreds of dealers and over 50,000 listings on the Digital Deal platform today, right? And every day, we're signing up new dealers since our official announcement on May 11. So we're continuing to see growth here and a big portion of that is driven by this customization. Also, I think it's important that this continues to build down the path of enabling CarGurus to empower in partnership with our dealers more of this transaction, right? So we are now helping to facilitate transaction from everything from the initial research to doing the prequalification, doing the trade-in, doing the initial deposit to a hard pull credit check, and if they're on Area Boost, also helping to coordinate the delivery aspect as well, right? So this has continued to build CarGurus towards that future state of shifting beyond just as subscription revenue to also subscription plus transactional revenue. So we're very excited about where this is going to continue to lead and think that there's a long path in front of us for the future here. And again, Digital Deal -- or sorry, digital retail, pardon me, this is something that we've been working on for a while, right? As we think about our history, we launched finance in advance the prequalification program back in 2019. We then layered on Area Boost followed by Digital Deal just in May, as I mentioned. This is something we're continuing to build towards to enable these dealers to continue to iterate and grow over time. So as we think about this future state, I think there's a few key points we really want to highlight here and leave you with. One, the market and dealer what they're going to have to adapt to is going to continue to change. It's a rapidly changing environment, whether driven by volatility in the wholesale market, for example, new online competitors or just changes in consumer behavior. I think the point being that we're going to continue to enable dealers to compete effectively. Secondly, we're going to continue to facilitate the transaction more and more. I think this is clearly a path we already have some of the scale in place as well as the building blocks to enable the transaction, but this is just going to continue to grow in the future. The more scale we get, the more transactions we're going to start to see flow through the system, and we're going to continue to build upon that as we look towards the next several years. Removing geographical boundaries. We're already doing this with Area Boost, but as we think about the future and we have this continued national coverage for many of our programs, enabling dealers and consumers to shop nationwide is a clear opportunity for us to be thinking through, and it's something we're continuing to talk about and as we've seen with many of our programs, such as the Instant Max Cash Offer. We're continuing to scale other aspects of our business across the country and enabling more logistical capabilities. And it's not unthinkable to think this might be an area where we will continue to explore moving forward. But the one piece that I would really want to leave here as well is that by combining elements that we have with subscription revenue as well as these transactional elements that we already have in place, for CarGurus, we're putting in place multiple paths of monetization with relatively limited capital investments. Put another way, those 400,000 listings that I talked about or even the 50,000 that are just on Digital Deal, we don't have to have 50,000 vehicles stored in a lot somewhere or having to acquire reconditioning centers across the country to service those 50,000 vehicles. We're able to surface these vehicles and empower the consumer and our dealers to be able to do more of this transaction online with a capital-light way. And we think that is critical both to the future of CarGurus, but also for our dealer partners as well. And so if we continue to build out digital retail in the future, we think there's a massive runway here. We're incredibly excited about where we're heading with this, but we also think we have a great momentum from the scale that we've already built, which is just going to continue on into the future. So with that, we're going to take now a 15-minute break. And then Sam Zales will come back on to talk a little bit about the consumer value proposition Thank you, all. [Break]

Welcome back. Thanks, everybody, for being back here both online and here in-person. We're going to start the second half of today's presentation. We're going to switch it to the consumer value proposition. So I have the opportunity to talk about our consumers. You heard most of the first part of the afternoon focus on the dealer value proposition. In our view, both the transaction-enabled platform and our original marketplace, you don't win the supply side of the marketplace, the transactions, the revenue, if you don't win the consumer side of the business, and that's been a CarGurus' historical approach is how do we create best and most-valued capabilities for consumers in this process. And you know our history, we help consumers shop in the early days with our foundational listings platform. Today, it's shop, finance, buy and sell. And I'm going to talk about that in this overview here in this presentation. So we think of being life cycle partners to our consumers as we now can create the capabilities that consumers need from the origination of their ownership of a vehicle and shopping all the way through the disposition and selling of a vehicle. There's 4 things I want you to remember in this part of the presentation. First, we think that trust and transparency, the history of our company, the focus on that, won us the consumer audience in the listings business. We think that same trust and transparency will win as a transaction-enabled platform. Number two, our financing capabilities. Consumers want a multi-lender experience. Now they're getting a great rate on their lending experience. They don't want to be forced into one APR that a specific online retailer or a dealer has for them. Number three, the Instant Max Cash Offer program that I talked about this morning. Giving consumers the opportunity to get the best price for their vehicle and a convenient, easy transaction. If you put those all together, we think, as Brad just went through our phases of our digital retail platform, we have a value proposition that beats any player in the marketplace long term, which will provide us the opportunity to build our brand as that transaction marketplace that Dafna will talk about in a couple of minutes. So all of you have gone through a purchase process of a vehicle at some point in your life, your spouses have, your partners have, your kids have. It is a very complex process, and we built the original trust and transparency in the market and shopping by answering questions for consumers. What car should I buy? How much should I pay for that vehicle? Who should I buy it from? It's extremely complex. It's gotten better over time, but our marketplace has provided that trust and transparency and answered those questions for consumers. How did we do it in listings? And how do we become the #1 shopping audience in the marketplace? I want to take you through this in detail. For those of you who have been around since 2017 and known what our business was and how we created this differentiation, for those of you who haven't, let me talk about in the shopping process how CarGurus created a total differentiation and captured the consumer's mindset. Number one, it started with the largest inventory in the marketplace. So I'm working on the left side of the chart and then moving over to the right. The largest number of dealers and the largest number of vehicles to search from and shop for in the marketplace, a comparative shopping experience like no other in the market. How did we do that? Spencer talked about it, the freemium model. We broke the rules of the industry by saying, any dealer to put all of their inventory on our platform and that gave us the absolute largest inventory and selection for the consumers. We then built proprietary IMV, or Instant Market Value, allowing a consumer to see what the value of the vehicle was they're searching for versus every other vehicle located in that marketplace. Am I getting a good deal or not on the price of that vehicle. We provided dealer ratings, unique dealer ratings that said we're going to look at the experience consumers have with that dealer to make sure I'm getting a good experience with dealer. We provided the 5-star rating as well to the consumer seeing a 1-star rated dealer. Our competitors never did that. They said, we'll just show you the dealers that we like that you should be working with. That transparency came from our roots out of TripAdvisor. It was like let crowd source. Let's find out what's a great experience with that dealer. That Instant Market Value, the pricing, plus that dealer rating leads to a deal rating. And this, I really want you to understand, if you don't know our foundational listings platform. When I say a rigorous deal rating, look at the right side of the chart at the bottom row. We only allow 30% of our deals to be classified as good or great deals. Our competitors, every deal on the site can be good or great deal. We also say, a deal is fair. We'll say if it's overpriced. And a consumer can see through the bulls***, if you say every deal is a good or great rating. This transparency provides trust in the marketplace. And finally, it's sort order. We are not a pay-for-play classified site. We don't say to a dealer, if you pay me the most, you'll get to the top of the list. The first 5 pages will be flooded with your offerings. We say, what is the best deal for that consumer, put that at the top of the listings, whether it's a freemium dealer or a paying dealer, and that has won us this audience that comes to us, comes back again and spends more time on our site. As Spencer said, it's the last place a consumer visits before they decide to transact. But the market is changing. Consumer tastes are changing. Consumer interests are changing. On the left side, it's why do we become #1 in a listings platform. But as a number of the presentations today they covered it, 80% of our CarGurus' consumers today say, "I'd like to do most of my purchase online, but I'd like a test drive in the store." All of you know that a purchase of a vehicle, the second biggest purchase any consumer ever makes is an emotional purchase. It's a touch-and-feel purchase. So for most people, they want to do more of it online, but they may want to go into the store and have that experience right there in the store, as Brad talked about earlier with our Digital Deal capability. 20-plus percent of our consumers are saying, "I will do my financing online. I'll do my online -- vehicle trade-in valuation online." I'm taking more steps of that transaction of shop, finance, buy and sell through the online capabilities. So we think we've created a totally differentiated and unmatched end-to-end transaction capability. You got to have the largest selection of vehicles. You have to have price comparisons of those vehicles. You have to have a multi-lender shopping experience. So my finance experience as a consumer, I know I'm getting a good deal on my APR. You have to have maximized offers for my trade-in vehicle, and I want to be able to have the flexibility to shop online, but walk into a store and complete that transaction. We think that's totally differentiated in the marketplace. So how are we empowering the consumer? What are we putting together in the shop, finance, buy and sell process? It's a bit of what Brad just talked about, the consumer sees the marketplace listings, but we added Area Boost to allow dealers to show their vehicles across the country, if they're able to deliver those to the consumer. Last week on Friday, I was talking to 1 of the top 3 national dealer groups in the country, and the Head of Marketing said to me, "Sam, I cannot believe today how many consumers are buying across the country. They see one of our vehicles in one of our stores, they want to deliver because that's the particular vehicle they wanted." We're giving that consumer the option with our platform to allow those vehicles to be shown across the country. Digital Deal provides those financing options to allow the consumer to interact with multiple lenders and get the best APR for their business. They can put a deposit down. So if the consumer does most of this transaction process online, the deposit allows them to walk in the store and have a digital wallet, waiting for them to say, they've gone through the transaction process. They may have taken a loan out. We know where that loan is going, walk in, test drive and then they'll walk you out with a digital experience. And finally, Instant Max Cash Offer. As you know this is the product that allows consumers to have the best selling experience online. So how we done that on finance? I think some of our presenters earlier talked about this. There's 2 approaches to how we do this. The first is a finance-in-advance process that we built with some partners out in the marketplace, some lenders in the marketplace. It takes a minute for the consumer to go through this, and it allows them to know what they're financed for. What is the rate they can use without hitting their credit score. How much is my payment I'm able to make as I buy a vehicle down the road. Tremendous process for our consumers, and we've shown that consumers are 64% more likely to purchase after going through that soft credit pull process. Many consumers take that to the next step of the process. They fully go through their finance with a hard pull credit process and get lending experience that one matches the dealer's financing. So these are dozens of dealers, dozens of financiers in that process. It matches the dealer financing so they know exactly what that approval rate is and the consumer is ready to head out the door with their financing. This has been a tremendous increase, as you've seen from quarter-to-quarter, 44% increase in applications, 75% increase in accepted loans. Huge process for us to preserve dealer financing to get the consumer to have a multi-lender shopping experience to get the best rate for them. How does this work when you think about the buying process and how we compare to the market who we're up against in this digital transaction capability? So we focus ourselves against the next 3 largest online marketplaces and the online retailers that all of you know about. So you look at the attributes that make an exceptional experience for the consumer. Number one, multiple financing options. With the online retailer, they're going to say, "I need to get the profitability." Our model is not profitable. So I have a lending arm. I'm going to force that consumer into that APR that I want to sell, so I can make money for it as the online retailer. That's not what we're going to do. We're going to be consumer first on this front and give them multiple lending experience. Number two, deliver it to your home. The online marketplaces don't do that. With the opportunity we created with Area Boost, consumers can get that vehicle delivered right to their home. Number three, option to test drive. You can't do that with the online retailers. They'll say to you, we'll deliver the car to you. If you test drive it and you don't like that vehicle, you'll have to send that back to us. And that creates a lot of concern for consumers saying, "Do I want to get this vehicle ship to me if I'm not quite sure I want it." Instead, let's have our experience at CarGurus, where I can go in, do the process online, but then I can go in and test drive in the store. Everybody is now doing the deposits online to reserve that vehicle for you, but the last part of this process is the selection. We believe having more selection than our competitors, both the online marketplaces, the online retailers, wins in the digital retail game. We launched the Sell My Car capability through Instant Max Cash Offer just 8 months ago. I think we've got a quick video, if you don't mind teeing that up for us. [Presentation]

Thanks very much. So I asked earlier, if any of you have used this capability. I have, and I really encourage you to do so. My brother-in-law just sent me a note saying, "I bought a Chevy Traverse 3 years ago for $22,000. Just sold it on your platform for $32,000." So that means somebody you, as financiers, I hope it's important for you to know, this is the best product in the marketplace. It is for 4 reasons. One is maximum sale price. Remember, again, thousands of dealers putting their bids into the marketplace so you're getting the maximum of that bid to sell your vehicle to one of those dealers in our CarOffer matrix. Number two, it's easy. Two minutes to get your offer. When I sold my kid's vehicle when they're going back to college, less than 7 days before an inspector came up, took a look through the vehicle, made sure it was in good shape, handed me a check and walked away. Convenience and trust, really important. I'm an old guy, so I got a check instead of a digital payment options for the consumer, so it's trustworthy for what their needs are. We've started remote inspections. So the consumer actually is walking through their vehicle and showing it to the inspector at CarOffer, walking around showing the vehicle. It makes the consumer more ready to sell their vehicle because they have this trusting experience with our inspector at the CarOffer site and tremendous customer service. It's -- when you look at an NPS of 80, and as Jason said before, it is a -- it is -- every consumer saying, it's a 10 or 9-point scale. That's led to that growth in those numbers of transactions, and we're now testing convenience. The consumer can self-select when they want to pick up at their home, and we're also testing in the market and ability for them to drop off and drop off successfully to make it convenient for them. I'm quickly just going to finish up here with who we look at as our competition in this Instant Max Cash Offer capability. Big box retailer, online retailers and then the online marketplaces. None of the online marketplaces offer an exact bid and a specific dealer who's going to pay for that vehicle and trade it in. So there are all NA on these examples. CarOffer, you can see the price points winning on all of the $30-plus-thousand vehicles. Our average selling price today is in the mid-20s, slightly up higher. We haven't beaten the big box retail in every one of the situations. We're being smart about how we're bidding on any one of those capabilities, every one of those vehicles. We're going to win most of the time. Remember, the big box retailer will say, "Here's my price point, you've got to drop the car off 40 miles away." Not always the best experience for consumers. So we're winning most of the time. We continue to do that as we go forward. So I'm going to finish up here, 40 seconds to go, with our last message on why we think this value proposition wins in the digital retail game. One, selection. More vehicles to choose from, more lending options over time. Two, price. We think we will give the consumers an ability to say, how does that price compare to everyone in the marketplace? Are the APRs what I want for my lending? Is the Instant Max Cash Offer the best in the market? Convenience. Do it in-store, finish it all online, have it picked up from your home on your driveway or drop it off somewhere else. And trust, what I started the presentation with, we're known as the trust and transparency provider in the marketplace. We think we can win. We won in listings. We think we'll do the same as we bring this value proposition to digital retail. I'm going to turn it to Tom Caputo next, who's going to talk about synergies that are driving customer opportunity and efficiency and also how we run our business with more operating efficiency through synergies. Tom, take it away.

Okay. Thank you -- are we good? All right. Thank you, Sam. I'm Tom Caputo, Chief Product Officer at CarGurus. In my 5.5 years here in this role, a big part of my responsibility has been thinking about what the underlying experience is for our consumers and dealers on the individual products that we build. We've had a portfolio of products, and we're always thinking about how do you make each of these products really great. But what's been particularly interesting in the last year or so is that we're now thinking more and more about not the individual products but rather how does the CarGurus and CarOffer platform come together. And how do we unlock a powerful set of synergies that allow us to build differentiation into our offering and ultimately, exceed our customer expectations. So what I would like to do for the next few minutes is actually take you through some visualizations and some examples of what we're currently doing regarding the synergies. I want to give you a little bit more visibility into what our roadmap looks like. And hopefully, in doing so, you come to appreciate, we think we're building something really unique. We're building a unified platform that is differentiated and it will ultimately be, in our estimation, hard for competitors to ultimately replicate. So with that, we now have a number of new capabilities that we've either built and brought to market. You've heard about that in the last few minutes or acquired through capability acquisitions like CarOffer. We now have a listings, Instant Max Cash Offer, Wholesale and Digital Retail suite of products. When they come together, they provide value for dealers by giving them data and tools that allows us to optimize profits or allows the dealers to ultimately optimize profits. And from a consumer perspective, we're creating products and insights that allow them to shop smarter and be more effective in their consumer vehicle acquisition and sale. And then finally, we're thinking also about the synergies in the context of what is it doing for the CarGurus business? We believe and we're already seeing that there is a series of operational and go-to-market synergies that we can leverage to help build our business and ultimately, set us up for success. So let's start with the consumer life cycle. So Sam and Jason had talked about this earlier. This idea that we are now bringing together with the combination of CarGurus and CarOffer, the full consumer life cycle across shop, finance, buy and sell. And we're doing it in a truly unified way that's delivering great experiences for our consumers. I'm going to give you some -- a little bit more of a visualization, kind of the product guy can't help, but they'll show some screenshots and help you hopefully appreciate the product here. We're thinking about each of these components and trying to make sure that they're all best-in-class and yet they're all working together exceedingly well. So from a shopping perspective, we're leveraging the CarGurus' foundational listings product, that unrivaled inventory that we had talked about, the decision support tools for consumers around deal ratings, again, that Sam highlighted and the ability to just direct the consumer to the right vehicle and the right dealership. We couple that with our financing capabilities, and we have prequalifications and hard pull that ensure the shopper is confident when they go about their buying process. They know what they can afford. And then for consumers that want to go deeper and want to go through the digital retail process, we'll let them go straight through to providing a deposit and reserving that vehicle with the dealer. And then finally, with the advent of CarOffer, we can now close this circle, and we can give them great offers on their vehicle, whether or not they want to sell it directly to us, separate from a transaction or whether or not they want to pull it in as part of the trade-in process. So we're really excited about the synergies this is creating for consumers. What we're pleased to see is that we're already seeing a bunch of cross-shopping behavior. For example, the staff that has been most encouraging for me of late is that shortly after the launch of IMCO, we're already seeing that 50% of the IMCO shoppers are also conducting a search on cargurus.com, our website, and getting to one of our vehicle detail pages. And a full 20% of those IMCO consumers, that's actually saving an IMCO offer, is moving forward into the shop process and submitting a lead. So we're seeing this cross-product shopping and cross-product behavior before we've really even started to promote it in the way that we think is possible. So lots of enthusiasm there. Now it's worth noting that we're not the only company that's trying to stitch together this consumer experience. We know that many companies are trying to do it. We do think that, as Sam called out, we're bringing together best-in-class components, and we're also working really hard -- and this is kind of near and dear to my heart on the product side, we're working really hard to make sure that it's an integrated consumer experience. It's not sort of a herky-jerky 4 different sites or 4 different pop-ups, but rather the consumer is moving through this in a really compelling end-to-end way. And our belief is that if we can do that effectively, we can create meaningful differentiation, and ultimately, deliver on that end-to-end all-in-one shopping experience that will be very, very hard for our competitors to do booking. Now we also want to go one step further. So it's not simply about let's create a great consumer experience and do each of these steps, but how do we create some really unique things. Some experiences that for consumers or dealers, they say like, wow, I can only get that here. And this is one example that we're working on right now that we're calling first. Look, the concept here is that by virtue of the fact that we see all the transactions that flow through our Wholesale platform, we know which vehicles are going to be available on a dealer site in the next 3, 5, 7 days. Well, why don't we show those vehicles to the consumer straight away? So a consumer shopping on cargurus.com can see a vehicle that a CarOffer dealer just bought even before that car hits their lot. So they're getting first look access. They're seeing that on our site before they can see it on any other sites because that car has not made it into the dealer's inventory feeds. And from a dealer perspective, we are marketing their vehicle. We are starting to drive sales and leads and drive their ultimate profitability through accelerated turns in a way that is really seamless for them and is easy for them to take advantage of and is unique on our platform. So this is just an example, but hopefully gives you a sense of the new capabilities that really, in our mind, create a differentiation. So let me jump over to the dealer side of things. So this dealer life cycle is one that we talked about a couple of times. Jason sort of highlighted it. From a dealer perspective, there is this -- there is the acquire, market and sell. And each of those steps, we believe that the combination of CarOffer and CarGurus were positioned to make that experience better. Part of it is, we're going to leverage our data. So we've got unique data, arguably more data than almost anyone has in the market on both sides. So how do you leverage that data? How do you turn it into insights? And how do you drive the profitability and the performance on behalf of the dealers? Now it's worth noting, this is not easy to do. We're leveraging a deep technology capability, data analytics, DNA, machine learning capabilities because as you process this data set, you have to then turn that into ultimately insights. So let me give you some examples of some of the work that we're already doing, that's already live right now, that hopefully brings this to life. So the first example here relates to the sourcing side of it, the acquisition side of it. And if I draw upon our dealer Carlos that we've been talking before, right, Carlos is very concerned, obviously, about making sure that he understands both sides of the dealer marketplace from an acquisition perspective. He wants to know what's happening at retail, but also has to fundamentally understand what's going on in the wholesale market as well to ensure that there's enough margin for him to ultimately be profitable with the cars that he acquires. We are now with the combination of CarOffer and CarGurus tying that experience together so that the dealer, when they're specifying their bidding rules within our auction, they are tying that bidding to the IMV. So they're not just using kind of old wholesale books that give you a sense for price and they may be update once a month, but rather the thinking about what can I -- how do I want to bid on this vehicle? How do I make sure I'm locking in profit? So in this particular example -- and again, these are real live screenshots. In this particular example, the dealer Carlos here, said, I want to make sure that at the end of the day after fees, I can clear $1,000 of profitability. And I'll let my bids ebb and flow based upon what's happening in the retail market. So I'm always making sure that I'm well positioned to grab inventory, but I'm going to do it in a way that allows me to ultimately succeed. And the good news here is that this is working. Not surprisingly, dealers are embracing it, a full 1/3 of our dealers on CarOffer are setting up their bidding rules to leverage IMV. So it makes sense. From a marketing perspective, this is another one where dealers are looking to use tools like geo arbitrage, which we talked about, and they're looking to understand what's going on both in their local markets, what's going on throughout the rest of the country. How are they tying together the data from retail, the data from wholesale, and ultimately determining how they can efficiently market their products. The interesting example here is that we're seeing that 31% of our Area Boost dealers right now are already utilizing CarOffer, and they are leveraging our platform to: one, find new vehicles that they can sell locally; but two, in a lot of cases, find these vehicles that they can sell in new and different markets. A lot of the dealers have sort of figured out this is a way to accelerate profits to grow scale. How do I use Area Boost to market outside of my region and continue to feed the right cars into that system based upon the CarOffer partnership. All right. Our last one here. This is another one that very much is live. And this is a situation where we're helping dealers sell cars more effectively. We talked about the pricing tool. We've got thousands of dealers that go into our platform on a daily basis. They adjust prices based upon retail market trends. They want to make sure that they stay a good deal or a great deal or they're responding to what's going on more broadly in their market. In those cases, the dealers are always thinking about in the back of their mind, "Well, what's going on with wholesale? I want to understand what wholesale pricing is, so I can price accordingly. And I may, at some point, decide I got to sell this car. It's been on the lot too long. I got to move on." In this case, we're bringing the CarOffer data into that CarGurus pricing tool. So now for every single vehicle you see, you have a sense for what the CarOffer price is that you could pay, so you have a sense for where your wholesale market is. And if a dealer decides it's time to get rid of that car, single-click, they've initiated that purchase, and now that car is on its way into the CarOffer bidding matrix. So again, a unique set of capabilities here, driving a bunch of dealer engagement and helping them be more effective in driving profitability across their products. Okay. So let me talk to you. So those are all things that we're doing right now, and we're seeing a lot of engagement. But there's a number of things that we believe we can do that will make this even more compelling going forward. And I'd say the theme here is that we want to continue to leverage the data and our product capabilities, but go beyond sort of a manual process where the dealer has to interpret the data and then take action. But how do we pull it all together? How do we create a situation where we're driving real-time insights? We're making recommendations, and we're making it super simple for the dealer to activate those recommendations. So the first example here that I'm going to show, again, ties back to our sourcing example. In this particular case, again, dealers continuously tell us that they want to understand what are the dynamics in the marketplace in terms of consumer demand, which we have. Wholesale pricing, which we have. Retail pricing, which we have. And how do they think about it on a make, model, trim level. Color, for example, what is it that's ultimately going to make them successful? How do they acquire the inventory that will drive profitability? And in this particular case, we believe, again, bringing together machine learning capabilities, our insights, we can make recommendations. So it's not just the dealer pouring over 3 or 4 different sources and trying to figure out, yes, I think I'm interested in Ford F-150s. But rather, let's come back and say, you need to increase your Ford F-150 allocation from 4 right now in the CarOffer monthly bidding matrix to 7 because these cars are going to drive profitability. Here's how much profitability we think you can drive. And then let's go one step further, and let's make it super simple for that dealer to click on a button that says, yes, I trust you, I've seen the data. I want to accept this recommendation. And now we've gone from 4 cars currently in their list of vehicles they're trying to acquire to 7, they're in a position to drive greater profitability, and they've done it with a single click once they've sort of gotten comfortable that we're giving them solid recommendations. Let's talk about the Area Boost concept here. Again, this is one where our really sophisticated dealers are the ones that are figuring out ways to make extra money by buying cars effectively and then figuring out where they can market them most efficiently. Well, let's actually automate this. Again, we have the data. Let's make recommendations to come back and say, "Hey, that particular car, you can do really well in Eastern Washington and Southern California." Let's send the dealer a text and say, if you're comfortable with this recommendation respond, yes, we'll activate that Area Boost campaign tomorrow, we'll help you sell those cars. And then finally, from a pricing perspective, again, this is another area where we believe we can make strong recommendations around how a dealer should price. So don't force them to come in every day and look at what's going on and adjust $50 to get into this deal rating. Why don't we give them recommendations? And maybe every morning, they wake up in the app, they get a notification that says, "Here's our pricing recommendations. Press yes to activate," and we'll initiate all of those pricing changes and now the dealer is in a position where again, they're taking into account what's going on in the retail market, the wholesale market and they're well positioned to ultimately drive greater profitability. So we're excited about the richness that we think we can bring to the dealer, the tools that we think we can offer them to drive more and more profitability here and fundamentally believe that what we're building is going to be incredibly hard for someone else to replicate. Not only do they not have the data, but they don't necessarily have the tools and capabilities and those that may think they do probably can't pull that consumer experience together and the automation that we're talking about. So looking forward to doing more and more work here to drive our platform forward in this way. Now before I wrap up, I do want to highlight a couple of quick things regarding other synergies that we think are going to be powerful for the business. So the first is relatively straightforward. It's around the concept of bundling. We've talked a little bit about this. We already have a number of tests live that are demonstrating that through bundling offering of our products to dealers, we can drive value for the dealer. We can provide cost savings to them, and we can drive greater attach and retention. Same is true on the consumer side, experimenting with a number of different ideas that pull together our IMCO, our digital retail, how do you get consumers doing more on the platform and ultimately providing more value to them. And then finally, operationally, we're building out new capabilities around customer support and sales that require new IMCO, new digital retail, new wholesale capabilities, let's do that in an efficient way. Let's have a single operational and technological platform for CRM, let's drive that forward. And then finally, logistics. We're moving a lot more cars across all of our products. That is inherently a business where scale matters, network effect matters. We have the ability to stitch all of that together in a way that we think, again, will give us unique advantages in the marketplace. So hopefully, you've come away with an appreciation for how the new platform capabilities will drive a new set of synergies, how we can build something that's differentiated and that we think will be incredibly hard for competitors to replicate. I can tell you from a product team perspective, having done this for a number of years, I and my team are as excited by our product strategy as we have ever been. There's a whole new canvas in which to work and a whole new set of consumer and dealer needs that we think we can address effectively and ultimately create that truly differentiated platform. So with that, I thank you for your time, and I'm going to hand it off to Dafna Sarnoff, who will discuss our next consumer marketing strategy. So thank you very much.

Hello. I'm Dafna Sarnoff. I'm the Chief Marketing Officer. I'm going to talk to you about marketing. I am at 5 or 6 month of tenure. I think the newest member of our executive team. And I thought it would be, before I get started, just to tell you a little bit about my own decision to invest in CarGurus for myself, very important decision. And just to give you a little bit of context. So [indiscernible] candidate the things that I really think about [indiscernible] business strength, where is the room to grow? And I'm going to talk to you about both of those things. My slides are coming. But the other thing that I thought was just really worth calling out was this connection of do I really believe as the voice of our product to customers to a lot of people that I don't know, do I believe that I would recommend this product to people that I do know and to tell my mother and my sister and my kids, and my kids' friends that if they are buying or selling a car, this is how they should do it, and it was a resounding yes for me. And I did homework before. I've done a lot of homework afterwards, but [indiscernible] have had the experience. So I would just say, this is a complex journey. We go -- most of you have probably been on this journey of buying and selling a car. You do it a bunch of times over a decade, most people. And mostly, people are lacking confidence, feel out of control. They're stressed out, they're worried they're going to make a mistake. And so for me, CarGurus is really building ourselves as a hero to those people. And I have -- I will implore all of you to go and tell your family and your friends that this is really the best place that you should be coming to buy and sell your car and you should do it online. And I think there's been a lot that you've heard today, but that's what I needed to fundamentally believe to feel that I could be impactful. I've done this before, and I know when you really believe in it and can get really excited about helping people with what you're doing, it's a really important factor for success. So I wanted to share that, and now I'm going to go through the slides that I am supposed to go through and excited to go through. So the 3 messages that I would have you take away are that were also important to me are amazing, incredible underlying marketing assets that any CMO would be excited to have. The economics which you've been hearing about how if you buy a car, you're likely to sell a car. If you sell a car, you're likely to buy a car. I'm going to take you through exactly what that looks like from my own budget and from our experience. And then lastly, the runway, which is really this opportunity to tell the story, which I'm so excited to tell. So here are the incredible assets that we have, which is you've heard this number. 31 million people coming every month. We have an e-mail database of 50 million people that have given us their information and asked us to reach out to them again. And we had 3.5 million, we are getting started on our apps download, people downloading apps. We've had 3.5 million installs, new installs last year. We expect that to grow a lot more. And I would say if you looked at the app, we have 4.8-star rating. People really like it, and it's our fastest-growing source of leads. So these are my own channels. These are the channels that tend to be more efficient, more effective, very powerful. So very important from a marketing perspective to feel good about those underlying assets. And then this is the economics, which is -- you know that when people sell with us, 20% of them also submit a lead. A really remarkable statistic is that our sell your car online business is now primarily being driven by the traffic that is coming to our site anyway for the listings business. So the biggest channel is simply from people who are coming to our website already, a pretty compelling statistic. The result of all of this is that when I spend $1 to drive performance for IMCO, for selling your car, I get about $0.30 back in my listings business. And if I spend $1 in the listings business, I get about $0.20 back on the sell your car offer. So just really compelling economics there. The way the businesses interact is really truly a sum being greater than the parts. So that is also compelling underlying asset as we think about going forward. And then the last thing that I want to talk about is just this opportunity to tell our story more broadly. So you've heard over the course of the day, the fact that we have a remarkable product that people want. We have a very high NPS score, we are differentiated, we can scale. What's really amazing and that even that I'm standing up and pointing this out to you is that very few people actually at this stage of the game, think of us as a place to sell or buy a car online. It's less than 5%. If you go talk to people who are in the market, which we have and say, where would you think of to transact online to sell your car or to buy your car? It's 3% and 5%, respectively, who would say CarGurus. And so it's an incredible opportunity to tell our story, and that's a place where we have tagged for investment and exploration now. This is -- and there's a few things that we would be trying to get out of that investment. We need to break through the noise. There's a lot of people out there talking about similar things to us, and we need to connect on an emotional level with customers to break through that. We need to -- we've been talking about trust a lot during the day, but there's a trust of we trust you to tell us about the good deal that you're going to get, and there's also the trust of I trust that you're going to come pick up the car. I trust that if I sell you the car, you're going to write me a check, I trust you to give you the money. And it's a new kind of trust and expanded kind of trust. It's very organic to who we've been, but it is really important for customers in being able to break through and give people that kind of confidence in us will affect us throughout the funnel. And so a big opportunity to do that. The other piece is just really going for reach, getting to people who haven't particularly thought of us before and setting up our campaigns in a way to do that. That means going into some channels where we've probably underinvested historically like network television, which are just this classic go for reach, tell your story to a lot of people. And so we are going to be looking to really focus on reach about our new -- on our new platform message. And then I would also say the last thing that we would -- not the last thing, but one of the other things that we would do is try to take advantage of this point in time where we have competitors who are in weakened places. The environment is very different. The ability to make noise ourselves and to have a share of voice in this market is we're more likely to be able to get a bigger bang for our buck to do that. So those are all the reasons to go out there and tell the story now. And I will also say this. I'm so excited to tell this brand stories I've been telling you, but of course, we are a data-driven company. And I will tell you about myself, I'm very data-driven. I have deep math and analytic DNA. And so we are really going to be looking for a return on this with the same amount of rigor that we would if we were running a performance campaign. It likely isn't -- with the performance campaign, you can see immediately what happens. So it's a bit easier. But the intend is to bring that degree of rigor. So if we -- as we do this, as we embark on telling the story, we are going to be looking for signals on what's working and what's not working. And you should expect that if we're seeing signals other than what we thought, we will be very smart about that, and we will analyze, we will redirect and we will be very agile depending on what we see in the market. So very excited to tell that story, also feel completely aligned and thoughtful about the way that we are going to do that and think about that investment. So the last thing that I'll just say, so those are the things to take away which is incredible assets today that are going to enable our marketing going forward. Great efficiencies from running these businesses side by side and a very measurable return that we get from spending in one place to where we see it pick up in the other. Note that we've had incredible success despite pretty limited brand awareness and the great opportunity is to tell our story more broadly. So as you think about those, I'm also going to ask you to take away, this is really a great product. And I know you have friends and relatives. And if they don't know about this, you are a free channel to me. Please go back and tell them that they should be using this product. And really, we're all committed to making sure that that's a tremendous experience for our customers. So thank you. I'm going to turn it over to Scot Fredo. Here you go.

Thanks, Dafna. Before I jump in, I want to recognize a couple of people who this exec team and all of you who are here today should thank Emily, Alan and Kirndeep Singh put all this together, tremendous job, logistics, packaging, messaging, complicated story, hurting a lot of us cats over here on the exec team to pull this together. So amazing job. Thank you to Emily and Kirndeep for pulling this together. Let me jump into my slides. Just hit the green arrow here, right? Thank you. Okay. So we'll walk through my deck. There's going to be a lot of some redundancy with what you've heard today. I also feel like my thunder is stolen a bit because you've got all the materials. You know that we're issuing new guidance today, which is great news, but we'll go through the deck anyways, and you'll hear more of the great story that we've got from a financial standpoint. So financial DNA, even Dafna just talked about that, it's maybe a weird term, but I think it really fits in. It's on point with what you've heard throughout the organization with what Jason has talked about from the origin of the company, focus on profitable growth that is just part of who we are and will continue to be. It's been with CarGurus since the company was founded 15 years ago. We focus on ROI. We focus on unit economics. That said, as you heard from Tom and Brad, we're willing to take risks on investments. We iterate in marketing and test, but all of that comes back to looking at are the economics worth leaning into. So we do that regularly. That DNA of fiscal responsibility is how we have and how we will continue to run all of CarGurus including the companies we brought into the CarGurus' family from PistonHeads to Autolist and now CarOffer. That financial approach and discipline has yielded a strong history of growth and profitability with our marketplace business as a foundation, driving free cash flow to invest in organic growth as well as M&A like CarOffer, which has helped us to expand into large high-growth TAMs and build complementary products like Instant Max Cash Offer that really showcase the 1 plus 1 equals 3 of CarGurus and CarOffer. All of that while investing to enhance and grow the dealer-to-dealer wholesale product, as Sam discussed, expanding our listings and digital retail capabilities that you heard earlier from Tom and Brad, that capital efficient DNA will continue to drive growth and profitability through all the CarGurus portfolio of products. On that note, this chart illustrates our growth since our IPO in 2017 as well as the EBITDA margin expansion and corresponding free cash flow. We're really, really proud of the growth we achieved in 2017 through 2019 with an emphasis on profitable growth during what was really a hypergrowth period for the company. As Sam showed earlier, we have over 30,000 global paying dealers on the CarGurus marketplace and 10,000 enrolled dealers on the CarOffer platform, representing a diversified portfolio of customers and lots of headroom for growth. Of note on this slide, the profitability increases we drove in 2020 due to COVID that impacted our dealers in the marketplace business. So we pulled back a lot on spend and included $50 million of discounts that we gave to our dealers over the course of the year. So you can see that adjustment on a pro forma basis, what we would have done absent that, as well as when the inventory issue hit in early '21, we also pulled back on marketing again since we weren't going to be able to grow the business as we had hoped in our operating plan, pulled back and yielded more profitability again. Now we also added CarOffer to the mix. So you can see the tremendous growth that came from CarOffer. The cash flow of note here is adjusted because we would have generated upwards of $160 million, but $70 million went to the step one acquisition of CarOffer. So tremendous financial performance over these past 5 years with a real diverse mix of situations that we had to adapt to along the way. As we think about transforming, one thing that I want to talk about here is the transformation of our financials. So we had to change our public financials to this view on the left, on your left, that includes marketplace, products and wholesale. Products has to be broken out separately for SEC reporting reasons whenever 10% of your revenue is tangible product, in this case, cars. What tripped up for us was Instant Max Cash Offer. However, we sort of look at the business slightly differently. We look marketplace, Instant Max Cash Offer and dealer-to-dealer, and why they're a little different is mostly because of the arbitration element, which makes the product margins look worse than, say, what Instant Max is. And that's where there's been a lot of confusion as we've talked to investors and analysts since we broke this out this way. So I'll quickly go through this build, which seem like a good idea in theory, but when I was doing it in rehearsal, I realize they're not that good play-by-play of PowerPoint build. So look at the final product. And what you see side by side is the primary difference is product includes everything that would include a vehicle transaction. So it would be weighted down in any case by arbitration. But otherwise, Instant Max Cash Offer independent of anything to do with the dealer-to-dealer wholesale is broken out on the right and dealer-to-dealer down below, and we'll get into those details in a little bit. So I think this is a good reference point to answer a lot of questions that have come our way over time to differentiate between how the P&L is presented and how we look at it from a business unit standpoint. Jumping over to marketplace business. This business has been, as you've heard several times, all about stability and predictability, mostly via subscription revenue from our 30,000 global paying dealers plus highly profitable advertising revenue as well as finance and advance fees that we get for originating loans. Tremendous business through the past several years and lots of headroom, as you heard earlier. We'll continue to invest in this business judiciously. We do have the spend in marketing to satiate the leads gen that the dealers who are on our platform require so that they continue to stay. You heard Spencer's comments, we have fantastic retention which is incredible during challenging times for these dealers that they are staying on our platform because of the great value that we provide, but we need to invest in marketing to provide those dealers with enough economic value so that they stay with us and also so we can keep adding dealers through the platform. Now I'll move on to CarOffer's financials. What you see here is to orientate your eyes, focus on the red columns and red line, which represents the dealer-to-dealer business onto itself. And then gray is what is the Instant Max revenue and associated gross profit. The Instant Max Cash Offer transactions include the cost of the vehicle, both on the revenue side and the cost side, thus the lower margins, gross margins on that business. You can see the variability that has happened quarter-to-quarter with the dealer-to-dealer business. And there's just been volatility in the market, creating sort of strange dealer behavior. This business is challenging to predict, unique onto itself in that dealers have different behavior from quarter-to-quarter and really month-to-month, but we feel like we're getting a handle on that and watching wholesale pricing because that seems to be indicative of where dealers will transact more or less based on where wholesale pricing is moving. This has a huge runway for growth. We have positive unit economics. We're really proud of these businesses, and we'll keep investing in these businesses to grow them because not only do they have great unit economics at the gross margin level, but in aggregate, you can see CarOffer onto itself is now a $1 billion run rate business based on Q1 and profitable. To Sam's point earlier, this is something that is extraordinary for a company that is only 2.5 years old. We are only helping add fuel to that fire with the Instant Max product because we have the audience that can enable the benefits of dealer-to-dealer and take that to the consumer audience. So tremendous growth and runway here, top line, and we will keep expanding on bottom line margins to the point of the financial DNA that we talked about earlier. I'll jump into the basics of the unit economics of a typical deal on dealer-to-dealer and Instant Max Cash Offer. The basic difference between the 2 is, obviously, the Instant Max includes the cost of the vehicle in that transaction because we take title in that transaction. There's also only one side of a transaction fee, the buy fee. Whereas on the dealer-to-dealer side, that is a net transaction, so it's a higher margin and it's fees only, and you're getting a buy fee and a sell fee and its ancillary products that we can add on to that. This is an example of sort of steady state right now. We have a lot of opportunity to grow those margins. As you've seen in Jason's presentation, we expect long-term margin targets to grow in both of these 40% to 45% for dealer-to-dealer and 4% to 6%, I believe, we have for Instant Max. So lots of runway to improve on these economics. We're focused on adoption and customer satisfaction. Unit economics are important to us, but we'll be leaning more into that over time. I'll flip to my final slide specific to CarOffer. We've been providing GMS for the past few quarters. GMS is basically total vehicle sales coming through the CarOffer platform. That includes both the dealer-to-dealer transactions as well as Instant Max. That's on the right. On the left, now you can see the actual transactions. We've been guiding you on what the average sales price of the GMS was and people are backing at the transactions. What you can see here is the actual transactions in red that were dealer-to-dealer transactions and in gray, Instant Max on top of that. You can see Instant Max is already 10% of what we're doing on dealer-to-dealer transactions. And to Dafna's point and others, nobody knows about this yet. There's very little consumer awareness. So this has a lot of runway for growth. So the point I mentioned earlier, dealers get a little skittish sometimes when prices go up and down in the wholesale market. So we did see some flattish behavior from Q2 to Q3 last year, and again, Q4 to Q1. We've seen positive momentum this quarter, which is why we raised our guidance this quarter. All of this, especially from the core business leads to tremendous free cash flow. And you can see it's very linked to our EBITDA, as I showed earlier, really ticked up in '20 and '21 with our pullback in marketing, it's still driving growth for the business. And now CarOffer is adding to that free cash flow as well, albeit at lower margins. But you can see that it's EBITDA profitable. And on top of the listings business, we have a healthy runway for growth on EBITDA and cash flow. And that supports investments. So what are our top 3 investment areas. Number one is talent. We're well aware of a lot of companies that are pulling back with hiring, potentially laying people off that's top of mind for us. But as I showed earlier, we have been and will continue to be very fiscally responsible. The most important thing to our growth is our team, investing in our team and adding people, so we maintain profitable growth. So we'll be investing there at both CarGurus and CarOffer. Technology spend. You heard a lot from Brad and Tom about new products in development, but there's a lot of work that's going on in infrastructure and scalability, just launched a major product last quarter that was almost 2 years in the making to scale sales and cross-product adoption through the organization so we can be more efficient across the company. So major investments in technology, that's mostly people, both on new products and as well as making us all more productive. And then sales and marketing spend. I mean you heard Dafna's commentary. I would say that a lot of questions came up this quarter with our guidance and our language about increasing marketing spend. We will do it and do it judiciously. But I would say like this is probably a step function from Q1 to Q2, an increase that likely will not repeat a similar step function from Q2 or Q3. It's sort of like back to a new normal it will likely increase, but it will be modest, much less of a step function going forward than we saw from Q1 to Q2. So what does that mean for long-term targets? Jason flashed everything over here earlier, except for the EBITDA targets. So you can see, I would focus on the top section because that's really how we think about the business. The bottom section is the income statement view that we have to present from a financial reporting standpoint, the difference would come from products being burdened a bit more with any sort of D2D arbitration that would be more in wholesale with product being mostly Instant Max, but I would focus on what we believe Instant Max can be, which is 5% to 6% gross margins and 2% to 3% EBITDA margins. You can picture that business being I mean we're doing -- our guide now is almost $250 million of revenue. You can picture that business being $500 million a quarter, $2 billion business at 4% gross margin that's throwing off $80 million. Some of that is going to fall to the bottom line. So it's going to be meaningful profit, granted it's low margin at the top, and it will compress our overall margin from a percentage standpoint, but it will improve dollar growth on the bottom line. And then the guidance that we're issuing today. So this is what we issued in Q2. What we're issuing today is updated guidance that includes $10 million more on the top line. $8 million of that is from Instant Max and apples-to-apples non-GAAP operating income going up by $4 million in our range. And we're also, on a forward-looking basis, going to look at adjusted EBITDA instead of non-GAAP operating income because a lot of -- that is more of the default and a lot of folks have asked us to go that way. So that will be our new normal going forward. So we're excited to increase the guidance based on momentum we've seen through April and May as well as improved profitability. And with that, you've seen a lot of pitchers come up to the mount today. It's kind of like a Major League Baseball game. It's rare that you get the starter to come back and close, but we're going to bring back the starter to close it.

Thank you. Okay. I've never been called the closer before, but I'll take it. So there's been a lot today. And we're a few minutes ahead of schedule amazingly, but there has been a lot. And we used to be a simple story. We really did. In hindsight, certainly, at the time, we may not have felt it. But we used to be a pretty simple story and now we're a more comprehensive one. And the models that you may have built, that we certainly built in 2016, 2017, even 2018, they don't really apply anymore because of the fact that we've turned our -- if you remember my image, our foundational listings business, and we've now turned that into a portfolio of products that have transaction businesses on top of that subscription foundation. And I think it's an important distinction to call out maybe a little bit of patting ourselves on the back a little bit here, which is this is -- you're not hearing us say that we're going to transform the business. Hopefully, you've heard us say and you've seen the proof that we have transformed the business. And the 3 things that I talked about at the beginning were that we've transformed the business. We're now serving the life cycle needs of dealers and consumers and that a combined platform has advantages that other more point solutions don't offer and even some business models within our platform enable things that wouldn't be possible elsewhere. And that we've done it in a way that has maintained our profitability and it has, we believe, sort of shown further evidence that we operate with both a growth and profitability mindset. We've shown a lot of data here today. And there was some debate as we were prepping for this, if we had too much data or not enough data. Our sense was, as we looked at other presentations and other ones that we've given that sometimes the narrative can flow better without data, but the more we talked about it, the more we realize this is who we are and this is how we operate. And we won't pursue something if we don't have proof positive data that it's working. And if it's not working, then we go back until we have the data that does support it. And so as you heard about things here today, we're sharing them because we have the data to support them, and we're excited to share that with you. We're excited to share that proof that things are working. We're proving that dealers are adopting multiple products from us. We're showing that consumers will do multiple actions with us and have a really high satisfaction doing it and are really engaged as they're doing multiple things with us. We're quantifying how our marketing is getting leverage. It's one thing to say we used to market and had 1 product, now we market at 3. I mean we're showing evidence that we're getting leverage from our marketing dollars. And our historical results show that our foundational or sort of fundamental businesses are highly profitable. And our strategy is really -- and our newer businesses also have very strong fundamentals, very strong unit economics. Revenue and cost structures that are variable, where if something is not working, we can dial it down. And our strategy has us growing these strong businesses in their own right, but then making them better with efficiency, with cross-product usage and with new products. So as we look at our future of growth, there isn't a lot of hand-waving in here. There isn't -- there aren't assumptions that need you to believe too big of a leap. We are assuming growth in areas that have already shown growth and have big markets and have low awareness. That's a recipe for growth. We're forecasting gross margins that are very close to where they are already. So one thing I think we've demonstrated over time is our ability to measure and optimize, measure and optimize. So to make the advances in gross margin that we're forecasting is not a big assumption. We're assuming some cross-selling and some synergies and there's already been proof of that, and we've only just begun. Again, as a reminder, Instant Max Cash Offer was launched 8 months ago. It's a baby. It's in its infancy. We're a bigger platform, and we have more to offer. And so the notion to want to tell that to a consumer base that doesn't know this about us is a very natural step that we think will bear fruit. And if it doesn't, we'll pull back and we'll figure out how to make it more effective. And then we'll continue our behavior and our philosophy of building strong businesses that are fundamentally strong in their own right, but then on a combined basis, are producing a profitable business. So I want to close with a little bit of perspective and a little bit of pride here as well. This is a build slide. You're going to see a waterfall. We've shared this with our employees. We share this actually with candidates as well. And we actually started thinking in these terms and using it with some internal communications as far back as 4 or 5 months ago. So before there's been a new perspective in the market on valuation and company strength. This is not meant to portray good or bad. This is not meant to say there's a right way to build a company or a wrong way to build a company. Instead, this is more to give a window into who we are and how we operate. So back when we went public, we said we will try very hard not to manage to a quarter. We don't think we should manage to a quarter. But rather, we think we should build a strong business that gives us flexibility through profitability and gives us long runways of growth. And that requires a certain approach to creating a strategy and a capital allocation mindset. If I think back to periods of our growth in the listings business. We never rushed to raise prices and yet we knew we had a very strong value proposition with dealers and we knew there was an argument to raise prices. But we decided not to. We wanted to keep delivering great value to dealers. We didn't advertise with a blind eye to ROI. There was a line of thinking that said advertise very aggressively, and you can consume the oxygen in the market on listings. But we ended up spending where we did because we kept a reasonably tight view of marketing ROI. We struck what we thought was the right balance that allowed us to keep trust with dealers and keep our installed base. And now we find ourselves in a nice spot where we accomplished that, and they're amenable to hearing about other products from us. They're amenable to trusting us when we say, "Hey, CarOffer, I know it's not your traditional auction platform. I know you've done auctions in a certain way for the last 60 years. You should try this," and they're trusting us and they're trying this. So today, we continue to build technology that scales very well. We believe we're one of, if not the most, technologically innovative companies in our sector. And so we find ourselves among the 5000-or-so technology public companies. But we also have some scale. We scale in a few different ways. So in this case, it's scale of simply the value of a company. But in our minds, it's scale of an audience, of a dealer installed base, of a revenue footprint, of a technology team that's able to create new products. And so technology companies with our scale and you're getting into a much smaller subset. We're profitable. Profitability at least as measured simply by last year. Again, it's a smaller audience, but it's part of our DNA. We're growing. So again, in 2021, we picked a threshold admittedly an arbitrary 40% threshold, but we're growing. We've successfully added new growth vectors, and we've shown that the products work and that our customers like them and are adopting them, and that's driving growth. And we have a runway. So it's hard to -- can't see the future. So as a proxy you use the consensus. But the number of companies that have this mix of scale, growth and profitability and our runway for growth and you're down to a handful. And again, that's not to say this is right or wrong, but not a lot of companies fit this profile and it's who we are. And it's what we've spent the last few years working toward so that we can be in a position where we have both profit and a runway for growth. So our future is going to continue to use this technology. It's going to continue to use our foundation, our scale. We're going to leverage that for as much efficiency as we possibly can. So we also hope that the message has come through that while we're looking to leverage that and be efficient, we also see this amazing opportunity in front of us that didn't exist for us a year ago or 2 years ago, and exists now. We now can appeal to a much larger audience with a wider set of products and value propositions and ones that we know they love and ones that fit nicely together because when they use one, they're already starting to use the other. So as a result, it gives us not only the stability that we've had for some time now, but the stability and the growth opportunity to experiment and apply our analytical approach to building new products. So thank you very much for coming today. Thank you to those of you in person, thanks to those of you virtually, thanks to our team. We really appreciate your support in our company. We appreciate your interest in our company, and we're going to take a 5-minute break now, I believe. We're going to set up for Q&A. We encourage everyone to stay and we'll have the full group of us up here for live Q&A. Thank you very much. [Break]

Welcome back, everyone. We'll now begin the Q&A portion of the event. We will take questions from the room as well as questions from online. [Operator Instructions] And so Emily and Josh are walking around the room. They can hand you a microphone. But while they do that, I will take the first question from online. So the first question is for Jason. Jason mentioned that dealers can order vehicles on the CarOffer platform with no risk. How do you keep dealers from abusing CarOffer when wholesale prices fall?

Sure. Thank you. I'll start this and then, Sam, if you'd like to add anything. So again, as a reminder, and maybe for those of you who aren't as familiar with the CarOffer model as a bidding dealer places a bid and that bid on that type of car that order is filled, then the car arrives at their dealership. And like any wholesale program, there is an arbitration program in place and CarOffer is taking an approach, which is trying to be very customer-service-oriented. So if a buying dealer or a selling dealer for that matter, has an issue or a concern, they are very attentive to those concerns and they work through that with them. They're trying to build trust, which is important for a wholesale platform. There's a number of things that we do and are increasingly doing to make sure that dealers don't abuse the system. And ultimately, if a dealer does abuse the system by, say, arbitrating cars unnecessarily or too frequently, then they won't be allowed to use the system anymore, and that cuts off their access to our consumer cars and Instant Max Cash Offer. So that in and of itself is a caveat that they would lose. But we have dealer sales managers, which Sam mentioned, and we are hiring them aggressively to reduce the ratio of dealerships that each DSM or dealer sales manager works with. We're measuring. So we are measuring if dealers rather are arbitrating too frequently or above rates. And if so, if that's indicating in fact, bad behavior. We are always evolving and improving our inspection process, that makes it a tighter loop so that there's less subjectivity to even open itself up to arbitration. And then it's the arbitration process itself. I mean sometimes an arbitration might be that the car is not exactly the color I thought it was, which is really a nonissue. And so automating those types of things out from the system. But ultimately, bad actors won't last, and the CarOffer program is so compelling, especially with Instant Cash consumer channel that dealers that are using it want to stay on it. Sam, would you add anything?

You nailed it. I guess I'd add a couple of quick points. We're starting to test, as you just said, Jason, in the Instant Max capability, a virtual inspection process. So I talked about the walk through having a CarOffer representative who's got to make a decision on the quality and the condition of that vehicle, having a partner in either the consumer themselves or, in some cases, the inspector walking around the vehicle and taking a closer look at it. You get certain inspections that happened, but having that combination of both sides working together, I think, adds to that minimization of the risk. And I think we're always, as I said, the low-capital model, the capital-efficient model. It's working with partners. It's constantly testing the quality of our partnerships with inspection companies around the country that makes us efficient because we can use the right inspector in the right location in the marketplace, but they've got to live to that quality standard that Jason just talked about. Thanks for the question.

Thanks for putting this together, obviously. So just starting out, Jason, I think you guys have put out a deck before in the past around just the sort of influence you have over the units in the market. Can you just kind of remind us on those latest and greatest numbers? And then as a proxy for what we would measure success by as we think about modeling out Instant Max Cash Offer, in particular, over the next few years.

Sure. So in terms of influence, we refer to that typically as attribution. And I don't know if this mic is still on. Everyone can hear me okay. So there are the leads that we drive directly to a dealer via a phone call or an e-mail. There are additional indicators for consumers who use our site to look at a VDP and then walk into a dealership. And then there are the -- then there is the fact that tens of millions of consumers are looking at our site and not showing a signal that they're going to go into the dealership, but then they're walking into the dealership. And we have tried and with third parties tried to measure what that impact is. And depending on the assumptions and depending on how you stitch together the data, you get to different results, but all of the results show a range that says that for across the industry, we're influencing significant double-digit of units sold. And so that's the sort of influence on leads. We then have the influence of the brand halo effect that a dealer gets by being on our site, especially by their deal ratings and someone on the panel mentioned earlier that many of them are now putting our deal ratings on their site. And so that's influenced of us building a brand as being the sort of arbiter of value and price in the industry. So it depends on the dealer, but many dealers are seeing a significant drop off if they were to come off our platform in their volume. You're also seeing -- this is an anecdotal piece, but increasingly, dealers will say, yes, the consumer comes in and they look at their phone and they say, this is what the price should be. So what can you do for me? So consumers are using it to influence the dealer's pricing behavior. The second part was a separate question, right?

Yes. Like how should we measure it? Maybe like as a percentage of penetration of its whole influence. Think about the units you could actually drive on the retail transactions.

On digital retail?

Instant Max. On Instant Max catch-up, for example, or on the digital fees.

Yes. So there's a number of ways to cut it. Both digital retail and Instant Max have literally just scratched the surface. I'll take Instant Max and then I'll hand it to you, Brad, for digital retail. So from an Instant Max perspective, you can look at it sort of top-down, which says that there are about 1 million cars sold a month by consumers. And so if that's the ceiling, then that's the TAM for us to go after. The -- you can also acknowledge that 2/3 of shoppers on our site need to sell a car. So that would say that we have about 20 million people a month on our site that need to sell a car. And whether they're -- they can sell it peer-to-peer, they could sell it as a trade in, they could sell it as instant cash, but that creates a huge opportunity. And so -- and then there's the fact that we don't have brand awareness yet as a place to transact and so as we continue to grow that. So from a top-down perspective, we have extraordinary runway in Instant Max Cash Offer. From a bottoms-up perspective, I would say that we have improved our conversion rate in the funnel. So funnel being someone lands on our sell your car page to actually selling it. And we're in such early days that we're finding very big optimization wins, conversion optimization wins almost every day, if not every day, then multiple a week. And so that tells us that we certainly have more to put into the funnel, but even short of that, we have much more to get out of the funnel. And so that includes things like automation -- education would be the first. Just it's hard to explain to consumers how exactly it works that multiple dealers can bid on their car in 3 seconds, like that's a hard concept. So there's an education piece. And in fact, one of the reasons that levers of our funnel leave, I think it's top second or third reason, is because they don't believe it. They just don't believe how it works. So education is one. Automation is another. We've taken things that, again, we launched in August, we're manual setting up an appointment to now automating them. And we now have, I think, 9 out of 10 users now set up an appointment in an automated way with self-schedule. And then the third is just sort of good old-fashioned customer service and support. To sell your car, you need to upload a handful of documents. Consumers have questions about that. They're not sure where to get the documents. They're not sure if they've done it right. And so there is a piece of customer hand-holding that we're just now starting to invest in, and we're seeing huge leaps and conversion rate optimization. Digital retail is different angle, so if you want to talk about what success could look like there.

Yes, sure. So from a digital retail perspective, we think in a lot of ways it's going to be similar to how you potentially might think about like a traditional e-commerce business in terms of a checkout flow, right? In the sense of, again, digital deal is kind of in its infancy, but let's stick with that one as an example. The more listings that we start to post through the site and the more discoverable those listings are, we're going to drive increasingly traffic to those enabled digital deal vehicle detail pages. And then as customers then start to click through that, we then start to see direct attribution about how many are actually showing up in the dealership by setting appointments or doing other activities that we directly see monetization activity from such as funded loans and those sort of things you can imagine. So that presents us a number of opportunities to continue to grow that over time. One is obviously increasing discoverability on site, which will happen both organically as we continue to add just more listings and more dealers sign up. We'll also come through some of the efforts that Dafna outlined earlier about how we're going to continue to grow the awareness in general, and CarGurus has become that increasing destination to both buy and sell. And then secondly, we're also continuing to monitor that conversion funnel of customers coming through, right? Like just in the first -- over the last month or so, while we are still in this early access for digital deal, we actually just started experimenting, for example, with the educational material that was on those vehicle detail pages. And just by making these simple changes, we started to see increases of behavior that we would like to see more of, whether that's conversion through some of the financing activity, deposits or appointments. So we have a long runway of areas that we can continue to experiment with and continue to drive that checkout funnel, which ultimately provides both value for dealers, which then in turn will have more dealer sign-ups than the flywheel and drive more selection on the site as well as additional conversion for the monetization activities that we want to drive as well.

Right. Just on the EBITDA commentary. I think, Jason, you emphasized that EBITDA is going to basically be up sequentially from here. So for Scott or Jason, can you just give a little bit more in terms of the algorithm that goes into that, particularly from a sales and marketing standpoint. How -- where does the confidence come from that we don't have to potentially lean back into sales and marketing to the point where EBITDA could be down at some point? Maybe just talk about your confidence in that.

Sure. And as I -- I tried to choose words carefully specifically to say that our expectation is that it goes up nominally from Q2, and that's a function of our operating plan, right? And so our operating plan, which we revisit frequently, but that is established at the beginning of the year takes into account a number of factors like the release of products, the success of products, market dynamics. And so we believe we have a recipe, a really wonderful recipe to expand marketing right now. So that's what's in our operating plan. But we're also analytical. And so if the performance isn't there or if something else changes in the market, then that would change as well. But as we sit here today, looking at our market, looking at our product performance, looking at the market, looking at all the drivers, both top line and expense-wise, our expectation is that it's up sequentially starting into Q2.

Yes. A lot of great stuff today. On digital retail, a lot of good products. Just a question, how much buy-in do you need from the dealers to adopt your digital retail products where they still feel like they're maintaining a solid relationship with their customer?

Yes, sure. So it's a great question. I think one of the great things that we've seen that maybe 5 years ago, especially, digital retail, at least to some dealers, especially large segment dealers, kind of had this initial fear around it, right, of them being disintermediated from part of the process potentially or losing that connective tissue with their customers. But we're frequently, especially now hearing and really, especially after the COVID period started to normalize a little bit more, that this is increasingly just normalized behavior and what they expect, right? And they're also seeing increasing levels of competition from online players. And so the desire to be able to go toe-to-toe with them through digital retail offerings through like programs like that we're doing through digital deal, we're increasingly seeing a high level of interest in that. In terms of like the level of concern for these types of programs, I think it's important that still the vast majority of customers going through that are still ultimately going into that dealer to complete that sale. And so they are not only still maintaining all their key finance and insurance products on both the back end and the front end side, which is critically important to them, but they're also still maintaining that like one-to-one relationship with the customer, even if that customer has done even more online. So overall, as I mentioned, like, we've seen great success with the digital deal in terms of our initial adoption. We're very excited with where we are with that. We haven't really received very much pushback at all about that concern about being removed from that process from the dealer so far. That being said, it is something we're mindful of. We talk to dealers every single day about how we're building these products and how we're continuing to ensure that the dealers, what we're building and enabling have that value add for dealers and they're part of that process.

I'll just add, sorry, if I may. Maybe take it up a level. So because we're building it in a flexible way, which you heard Brad talk about, because we've been very value price-oriented with it, the subscription price of digital deal is very low because we want to gain adoption because consumers are demanding it. And because we're showing that dealers who do this on our platform generate more value, we're increasingly confident that it soon shifts to promo for dealers. If they can choose to partake in this in a value-oriented way or if they don't, then they know that the market will start to flow the dealers into.

Got it. And then just one more on Instant Max Cash Offer. On the bid-ask spread, how much of that of a tool can you use for bid-ask to drive either more engagement to your platform, either through wholesaling or just convert more consumers by giving them a better deal for the car?

So specific to Instant Max only, when we have a dealer who's bidding on the matrix, bidding, say, offering $20,000 for that car, we then have algorithms that say what we should actually offer that consumer for that car. And that's -- the delta between those 2 is what we call the spread. That spread is to -- is for a number of reasons. There are costs embedded that need to be covered, et cetera. And then ultimately, it's for our margin as well. We have complete and full control over that. And so not surprisingly, when we offer the consumer more, conversion rate goes up. When we offer them less, conversion rate comes down. But we are getting much smarter on that quickly. We've done -- we ran promotion in April that offer the consumer more than they normally would. It was a flash sale of sorts, conversion rates went up significantly. When we pulled it back, we see changes there as well. And it's also a function of competitors in the market. And so that's a dynamic decision that we have full ball control over, and we're getting smarter and smarter there.

Jason, if I could. Just to answer that process Jason just talked about. We've built decision sciences the way we've done it in bidding for performance marketing, the way we've done it in other parts. Tom talked about some the AI tools and our data tools for our clients. To get smarter about those spreads and the bidding process, you saw that chart I showed with how we compare to the online retailers, the big box retailers, everybody is bidding against us. We're using that now down to a trim and option level to say smartest bids, spread volume, what will maximize conversion rates and profitability of that program. And so we're building that decision science into that IMCO bid process.

Just a point of clarification. It looks like on your D2D gross margins, I understand the guide for that business is always low compared to the gross margins. It looks like the [indiscernible] you're now saying 40% to 45% gross margin. So can you give an update on your long-term guidance? And then a question around that is what are the drivers of that increase? I'm assuming some of it, we know we have a [indiscernible] that's driven some of the gross margins. Are you looking at 36%, so what drives the 36% to be 40% to 45%? Two questions, is there an increase in your guide, long-term guide? And what's drives that?

Yes. I don't think we ever had a formal guide in the 30s as the first answer. And so this is our first formal guide on the 40% to 45%. We have spoken about the 30s. So you're right, it's an increase from that. There are a number of -- sorry, at the same time, Q4 in 2021 had some oddities to it as this business is growing. And in the broader context, because this business is so early, a few things in this are a very straight and perfect line, but you could see from the regression lines on there that it certainly is -- they're all moving in the right direction. So the levers to gross margin in the dealer-to-dealer wholesale business are around revenue per transaction. And so, again, we did have a price increase recently. It was met with not much reaction at all. And so that's a lever we have. We have opportunities to price some of our ancillary add-ons like transportation and inspection differently. We have the ability to drive more transactions per dealer. And as we do that, that's a big source of operating leverage. And then the last one is not something that is in our control or is necessarily a value driver, but it's one that we should all be aware of, which is the impact that average order size or the price of the car has. And what I mean by that is used car prices are very high right now. If we take a $325 fee on a $30,000 car versus on a $20,000 car, the margin is much higher on the second one. And we don't believe we don't currently reduce the fees for lower-pricing cars. So as AOS, average order size, normalizes and we introduce more independent dealers to the program, that's another opportunity for increasing the take rate, which, again, is indirectly a gross margin enhancer.

One more to add, if I could, which is what we talked about earlier, the inspection process and arbitration. When you are very flexible, as Jason said, with your customers in the early stage of growing your business and saying, we'll be customer-friendly, we'll take back that vehicle, there's a cost to doing that. You pay for the transportation for it to come back, you're going to remarket that vehicle somewhere else. Our process as we've learned when pricing gets volatile in the marketplace is to fail more vehicles, if that's the right way to do it, increase your fail rate on the inspection and make sure the vehicle has passed every trim and option test you need to, to send it onto the dealer to make sure you have a customer-satisfied transaction.

Naved Khan from Truist. A couple of questions. So Jason, you mentioned transportation maybe is an area where you could look to maybe leverage pricing. Maybe just give us some thoughts on like could this become a moneymaking or part of the business? Or do you see it as mostly breakeven? How much of a margin it could make? And then maybe on the bundling side, you mentioned opportunity there. Just curious how much you're pushing on the gas that are on that opportunity?

For bundling CarOffer and CarGurus?

Correct.

Sure. I'll take transportation and then, Sam, if you want to take bundling specifically. So on transportation, it may be as simple as right now, we effectively treat it as passthrough. And in fact, in some cases, even we may lose money on a transaction and transportation in large part because we are not as sophisticated as we can be, nor are we as aggressive as we want to be because we're trying to create -- we're trying to grow adoption right now. And so we could decide that we want to add 10% above the expected cost of transportation, and then it would be a 10% margin revenue line to oversimplify it. And so there's added sophistication that I think can make us more accurate in what we do. There's network density which will just lower the -- literally the distance the car needs to travel, in which case, transportation costs become less of an important factor in the buyer's decision because you're just reducing transaction cost and friction. And then there's a pricing strategy associated with transportation. All the while, we have -- we are adding to our transportation partners and in fact, have built a logistics hub into which all of these partners plug that likewise continues to get more and more sophisticated. So we're ensuring that we're mapping the best from a quality and service perspective provider with the lowest cost provider to make sure that it's executed as well as possible. And then there's the pricing aspect on top of it.

That's a great overview on transportation. We're even not charging for some of that capability in Instant Max Cash Offer where a landed dealer might have a benefit of getting that vehicle right away, and being careful about charging for that at this point, which is upside for us longer term. On the bundling aspect, Naved, for the CarOffer, CarGurus platform, which Spencer and I have managed together is, first looking at the number of CarOffer customers who are not yet on the CarGurus platform. Spencer said, my big opportunity is 42% of the market is still not on the CarGurus platform despite the fact that we're the best ROI tool in the marketplace. So we went to those CarOffer customers, offered a discount to join our listings program and that yielded some really significant fruit for us. So we think that's an ongoing program. There's only 3,000 or so of those that we haven't yet brought onto the platform, but our upside there is to be able to do that more aggressively. The second part of that process in this inventory-challenged marketplace is Spencer gets some requests from a dealer who says, "My inventory is the lowest it's been in 3 years. I can't pay for the same price point in the listings package because I'm at 20 cars in the lot instead of 80 that I used to have." So the opportunity is to say, join the CarOffer platform, build back up your inventory because it's the best digital wholesale platform in the marketplace, and we'll give you a discount on the combination of that package in doing so. When you build back up over time, we'll build up your listings rate back to the rate it should have been when you're fully at the 80 cars, but we'll give you an opportunity to build back up that through the combination of our 2 programs. So the start of our synergies and the bundling here. It may say it's starting to sound like a discount on one program, over time that gives us the leverage to go with full pricing on both of those programs.

Okay. I'm going to go to an online question. So the question is, did you size your CarOffer payout liability? And can you talk about how you're going to get to long-term gross profit margins for Instant Max Cash Offer. Two questions in one.

So I don't think we've sized the step 2 and step 3 potential. It's a math formula. Step 2 is a call option that we have to exercise or not. And that's based on 7x trailing gross profit -- trailing 12 months gross profit. Step 3 is measured at the end of June in 2024. That's a put call and that's calculated as 12x trailing 12-month EBITDA. But we have not made an estimate on sizing it. What was the second?

Yes, how do you get to your long-term gross profit margins for Instant Max Cash Offer?

Do you want to take it?

Sure. So the opportunity is a little bit what Jason already talked about. Transportation is a huge opportunity for us. Today, as I said, we dropped a landed dealer capability and don't get a full payback for that, and that's something we can up over time. We found the efficiency of adding more transportation partners to cover the country with more density, as Jason said, and maximize the efficiency of the low-cost provider who has great coverage of their transportation capabilities. Remember, you're coming to a consumer's driveway to pick it up. Some do great in the Northeast. They're not great at coverage in the Southeast, if they're doing that. So optimizing that. We take some spec bids in the IMCO capability. So what we've done, and as Jason said, in a first quarter market where pricing was moving around, we still said we'll speculate. We're going to buy those vehicles from our consumers to build up the opportunity and the positivity for them. And in some of those cases, we took a loss in some of those vehicles. And that's what we're learning in this smart spread experience and maximizing the profits of what we're doing and not just winning every consumer's bid. So those are 3 ways we're thinking about it. We also have ZIP codes where we're not sure that will be an efficient purchase for us. You saw my map earlier in the day. We're now at 85% in the country. There are still 18 states, I think, that we don't participate in, in the country. We have to be sure that we serve a customer who's in Nantucket, as an example. We may not have a really efficient transportation process to get that vehicle onto the mainland over here in Massachusetts. So we're going to be thoughtful about each of those, and then gross margin today is 3%. Going up a couple of percentage points, we think, is a doable effort in the next period of time.

And that one also is subject to the same AOS comment I made. If we can make a similar nominal spread on the $24,000 cars on a $29,000 car, gross margin just went up and we didn't do much different. And we think that consumers' price sensitivity would support a similar spread on a car that might be $5,000 less.

Rajat Gupta from JPMorgan. There has been some near-term pressure at Carvana, in other online retailers like Vroom Shift, et cetera, to slow down some of their investments in order to protect EBITDA and free cash flow in this environment. And you're actually increasing your investments year-over-year, it looks like, on your platform. So just curious, in your conversations with dealers recently, how are they responding to this environment? Many private dealers have generated above normal levels of free cash flow in recent years. Do you think this emboldens them to invest and pivot more aggressively to digital, including leveraging tools that you are offering: CarOffer, instant cash, digital deal, et cetera?

Sure. Spencer, why don't I hand it to you for dealer spend mindset, and then I'll talk about our mindset investment.

Sounds good. Dealers certainly are making more profit per unit, but they have significantly fewer units. So cars are selling faster at a higher margin. There's certainly consolidation that we can see happening in the market. But as I talked about, we're not -- if not the best place for dealers to be, so if they're going to choose one platform to market on, it's going to be with us. And I think it's an opportunity. And we continue to see in the data that dealers are sticking around. When the first big spike from COVID, we saw a massive uptick in churn, saw less impact from the inventory crisis. But certainly, it was there as a headwind for dealers. And now through the programs that we've been able to offer, we're spending more time with them. We're giving more data. We're trying to make them smarter about how they're marketing. They're sticking around, and in fact, they're investing. So I think I would echo what you're saying as it's a headwind that we face on the sales side. And I think we -- I know we can weather through it. And I think it's a great opportunity when they start to get inventory levels back to normal.

To the second part, virtual dealers and perhaps dealers more broadly are looking at GPU per unit or -- sorry, margin per unit. And if you're a first-party dealer, then that is one of your lifebloods. And if the virtual dealers if -- I don't think had models that have enough margin to cover their expense. And instead, it's been dependent on growth and scale. And in an environment where growth and scale comes into question a little bit because of macro factors, consumer demand, unit prices being high, et cetera, potential recession, then much more scrutiny goes on the per unit. But we're not first party. And so gross profit per unit for us, it applies a little bit in Instant Max Cash Offer. But even in that case, we have a contractually bound bidding dealer behind us. So as we think about whether and when to invest and how much to invest, we -- as you heard earlier today, we look at the fundamentals of the product or do the unit economics work? Does the contribution margin work if we market it? What is the return on the marketing spend? How big is the market opportunity? And we look at it on a pretty rigorous analytical stand-alone basis. But then we also look as it's now, we look at its place in the portfolio. And so Instant Max Cash Offer is a really good example to say -- and digital retail, frankly, for that matter. We're pricing both of those in a customer-friendly way. We're not trying to maximize margin in either of those businesses right now because we're trying to gain adoption. And the reason we're trying to gain adoption is because in digital retail's case, as you saw, that makes dealers much stickier on our listings business. And in Instant Max Cash Offer's case, it makes our dealer-to-dealer wholesale business just in an absolute league of its own relative to other wholesale providers. So each of those, for different reasons, are strategic linchpins to a broader portfolio, in which case, we're going to have the mindset that says, we're going to be safe and we're going to be diligent about it, but we're going to be aggressive to gain the volume to strengthen that strategic linchpin. But all in the mindset of the totality of the business will remain profitable and, as we said, we believe increased sequentially from Q2.

Got it. That's helpful. Just a follow-up on Instant Max Cash Offer. I think you had a slide where [indiscernible] concentrated in the 30,000 [indiscernible].

Sure. Great questions. Sam?

Thanks for asking. I think I showed that we're winning on that slide at the 30,000 plus over that 4-week period, we were the winning bidder on those. I think we've shared that the average selling price for those vehicles is in the mid-20s. That's where we've -- that's our transactions. We've sold a vehicle in IMCO from $3,000 up to $78,000. But the midpoint has been in that mid-20s, where we've had our sweet spot in most of our success. We've done that because we have this backing of mostly franchise dealers on that CarOffer platform. CarOffer started their business in the larger, more sophisticated, more capital-free dealers who work in the franchise business. They'll pay more. They'll typically pay more for the used car vehicle that's more valuable at a higher price point. And our opportunity is to say, as we bring more independent dealers who are on our listings package into the CarOffer platform, you're now going to see interest that comes down from that $25,000 to the $20,000 and below. I'd be honest to say I can't see us at this point with our capital-efficient model building and using that system for a $5,000 vehicle, an $8,000 vehicle, that vehicle has much less margin in it. You've got to be perfect in the reconditioning. You got to be sure that, that product can be sold again at retail with some sort of spread for the dealer. So we think the other players in the market who focus on those are focusing on a product that's going to lead to a lot of arbitration and a lot of challenge for those dealers. So we'll come down from where we are as we bring independents onto the platform. But I can't say to you that we're going to focus on below $15,000 vehicles. We'll come down. When I talk about virtual inspections, though, that's that process of saying we're using inspectors around the country, and we're matching them up against the CarOffer inspection team that will do things in combination and look at that vehicle. If it's one, as you said, Rajat, that you've got to get underneath the vehicle and look and let the engine run for a minute or drive it around a location near the consumer's driveway, as Bruce tells me, that's a lot more capital intensive to do that. We're going to probably stay away from those in the near term.

[Operator Instructions]

So there was a disclosure in the last 10-Q. I think there was one customer that accounted for 13% of consolidated revenue. I think it was noted that was a CarOffer customer. So that's more like 20% of CarOffer's revenue. So was that a rental car company customer? And can you just generally talk about the buyer concentration of your CarOffer business? And maybe when the world normalizes and the rental car companies aren't buying in auctions, how much of a headwind could that be for the business?

I won't get -- can you hear me, right?

Yes.

I won't get into specifics. But certainly, the car rental companies have been bigger buyers because they can't get fleets from OEMs, so they've entered the wholesale market and the they've loved the car for platform. We have cited data, and we feel like we don't love customer concentration, and we look at that intently. But we have data that we have backup bids that are within an acceptable range on -- I think we said it's at 90% -- 90-plus percent within end range of where those offers are. So we don't feel like it's revenue concentration risk in any way because there's more than 1 buyer. It's just there's a buyer that values that car more because they can put that asset into use and have it generate revenue potentially versus someone who's just going to make margin on it. And if you're looking at it from a dealer perspective, it's like, well, that is out of my range where I can make margin versus a potential fleet buyer. So certainly, there's a bit more concentration with regards to the rental companies stepping into the market, but we don't worry about it from a business risk standpoint.

Sam, you nailed it. I think the last point we made, Kevin, as you saw earlier, the approach to more of our dealers upping their average spends -- their transaction with us per month is the diversity in the cohorts all growing over time that we know those backup bids are there. If they happen to happen, if one of those big players stop spending on the buy side, we've got more of those transactions filled by the other players in the matrix.

Everything gets laid out today. It was around kind of improving monetization because you guys are #1. To what extent would things have to stop? Because if you were no longer the #1 in terms of unique visitors, so you guys are at 31 million unique visitors. The #2 guy is at like 27 million. Should we expect you guys to maintain that difference? Widen that difference? Do you care? Like I'm just curious like if we woke up one day and that 27 million competitor was at 35 million and you were at 28 million, would you guys say, we got to actually spend more on sales and marketing and get back to that #1 slot?

Sure. I'll take a shot. You've probably heard us say on earnings calls that we don't get paid for audience. Our dealers don't pay us for audience. So we've actually -- they -- in our core business, they pay us for leads and in our transaction businesses, we obviously get paid for transactions. And so we don't focus a lot on driving audience. What we focus a lot on is driving value to dealers. Audience can be a number of -- it can be defined in a number of different ways. I mean, it could be unique. It could also be just sessions. It could be time on our platform. And really, it's just about mind share and a key ingredient to mind share is trust. And so if site A has a lot of uniques that come in once and leave and have lower trust score. And on another site, you have fewer uniques, but they trusted a lot more and they use it frequently, you get into sort of a value judgment. I think what you heard from us today is about taking this -- the core foundation and building on top of that. If that core foundation was 5%, 10% lower from a uniques perspective, but from the dealer's perspective, they view it as their most valuable or from the consumer's perspective, they viewed it as their most trustworthy, then I think we would -- nothing you would have heard today would have changed. In terms of our -- if we're compelled to spend to get to a uniques leadership perspective, it's hard to imagine that we would do that unless we felt that holding that position either supported the dealer confidence or supported consumer trust and transparency. And we, as we stand -- as we sit here today, don't think so. And there's still a lot of upside to go in terms of driving more leads to our dealers just from our installed base of audience. And my gosh, there's through-the-roof upside on Instant Max Cash Offer and digital retail from our current installed base. So as we think about how do we say, grow digital retail leads, do we add more into the funnel? Or do we just get those in the funnel, more aware of it and using it? It's certainly the latter. And to -- there are audience measurement sites out there that change algorithms frequently and report data that doesn't always make sense. And we typically use our internal metrics, which do make sense to us as guiding a lot of our decision making. But we're certainly aware of those that are out there. We don't get asked about it much by dealers. I would say it's much, much more of an investor question.

I'm going to jump to one online one, last online one. Can you help us understand how the portfolio of new products has helped with retention with respect to the core listings business?

Sure. I'll start and Sam or Spencer, if you want to add to it. So we have not given -- we gave some data today that showed the dealers who adopt the digital deal pilot, which was converted, have retained at a much higher level. We've also given the data that said that our retention in aggregate for listings customers is improving. And I think that's in large part a function of the fact that we're adding more products to them, adding more products for them. So it's giving us more reason to get -- more products is giving us more reason to engage with our customers. And we believe that, that deeper relationship establishment is one of the key drivers to improve retention. We've not given specific data on listings retention relative to other products.

I'd just say market trends are moving in the direction to help us with that synergy of those products. I talked about inventory being down. So dealers saying, how can I make my listings platform more valuable? Let me buy vehicles from CarOffer. Likewise, the consumer is moving further and further to digital-initiated capabilities. I get on to digital deals. So I'm getting more opportunity to sell those consumers that move to a product set that you didn't have before. I'm happy to sign up, and Brad talked about digital deal launching just a couple of weeks ago. It's been a great take rate for us because they're seeing, to one of the questions earlier, the online retailers are struggling a little bit. I know consumers want more of this. If I can get a tool set from CarGurus that lets me serve those digitally initiated consumers, it helps me close more business and close it more profitably. So the trends help us to achieve that retention rate that Spencer talked about earlier.

One of the more interesting things you spoke about today on the consumer side was first look. And I think it's because you're uniquely positioned as a marketplace that has this type of inventory that's transferred. Can you talk about any kind of statistics on what percentage of the inventory today is unique? What do you plan to get to in the future? Because you're transacting tens of thousands, potentially hundreds of thousands through the wholesale model that you could go put up on the website. And then if you do get that 1 day, a large percentage of the inventory, do you plan on communicating that to consumers? Because I think that's something that they would be interested in as well.

Yes, I'm happy to speak to first look and perhaps out of the gate will clarify that, at this point, is a concept. So we don't actually have that capability live, although we are actively pursuing it. We recognize, I think a couple of things. One, there's absolutely an opportunity to identify vehicles that are moving through our various dealer-to-dealer or IMCO platforms and make those available uniquely to the consumers so that they can actually see those cars. I think there's value in us recognizing that, that will be, hopefully, in time, a nontrivial percentage of the overall inventory. But I think importantly, it's worth doing it. It's also worth recognizing there's a couple of benefits there. One, there's an opportunity for us to market the uniqueness there. And even if it's not a huge percentage, the very fact that there is something unique on our platform that others don't have creates that differentiation, creates a reason for a consumer to come back and say, "I know there's unique cars there. I'm going to spend time there as opposed to someplace else." So I think you'll see us not only incorporating that inventory over time, we're trying to make sure that we are promoting it. Secondly, it's worth noting that sometimes those vehicles really are unique vehicles, and they are maybe a modest percentage in aggregate, but they may appear in a lot of different search results. And I think we will continue to look for opportunities for those cars that, again, really meet consumers' needs, their searches and make sure that we're sort of prominently featuring those capabilities. So I think there's more work to be done there as we push these products forward, but we're thinking about it more than just a pure inventory percentage and more how it reinforces the brand and reinforces that unique experience. We have quite a bit of unique inventory today. We have more dealers, and so we have more inventory. And we've done some research and we can resurface it certainly that talked about at that point we did it, what percent of our inventory was literally not available on any other sites. This is having nothing to do with first look. And as compared to on other sites that had inventory that was found on the other site, it was -- theirs was miniscule, ours was material. And honestly, I think we have not cracked the code on how to convey that to consumers well enough. Because the example I always give is would you -- if you had 2 sites, 1 that listed all the airlines and on the listed half of the airlines, which one would you use to search for a flight? You'll never use the one with sub inventory. And -- but we just -- we haven't gotten that to resonate yet with consumers, but we're going to keep trying. And this would make it even better. Got one over here, and then I saw that you have one. Chris?

Spencer, you were talking about when demand comes back. But if you talk to investors, the thrown-around term is like demand destruction, unit is down year-over-year. And that kind of plays into you guys being countercyclical where dealers need you guys in leaner times, and you added dealers quarter-over-quarter. But I guess, how should I think about that? Am I thinking about that wrong that the time is now as far as that? But then when I hear you say when dealers need help, is it because inventory is so constrained that you're not getting that benefit right now and that benefit will kick in eventually? Or how should I think about that?

We're -- I think we're executing well right now. And so we're gaining market share in -- but in talking to dealers, I know they're still struggling, right? So I look at that as being very cost efficient. They're cutting some marketing channels. So the fact that we've been able to grow share of wallet and maintain and grow the dealer base, I think, puts us in an advantageous position. Why I'm saying, and again, being very speculative, why I say I think there's more a brighter future ahead is we bring -- I look at us as a demand solution, right? We help dealers bring more demand to the vehicle, sell cars faster and sell more cars. And in a time where it's easier to sell cars and they have fewer cars to sell, my mind just goes to, at some point, inventory is going to snap in the other direction, right? I don't think I've ever read in an economics textbook of some sort of supply chain issue that didn't lead to a plot on the other side. There's going to be too many cars at some point in the future. And in that environment, I see dealers lean in at a much harder rate with us. So maybe there's a new normal ahead of us, but I think we're executing well now despite the headwinds that we're facing. And I think as -- whether it's economic constraints on the consumer side, which makes it harder to sell cars, and there's longer time on site or whether it's more inventory that increases the time on site, in the past, dealers have always invested more, and we're in a great place to invest. So that's why I think with the base that we're building now, it leads to a bright future when dealers do start to spend more.

We probably have time for 2 more questions.

So if we kind of look at the Instant Max Cash Offer numbers, it looks like you're trending to about $1 billion of revenue with not a huge marketing budget behind it. So as you put more marketing dollars behind IMCO, how should we think about the growth trajectory? And then a follow-up, how is your infrastructure -- how do you manage your infrastructure to manage more volume if you do lean more marketing dollars into Instant Max Cash Offer?

Sure. So yes, your math is roughly right. And you also heard us say that the majority of transactions, they are coming from our own channels. So the growth levers in Instant Max thus far have been adding geographies. It's been -- we have started some marketing for sure. And then it's improving the conversion rate effectively. To some extent, too, it's growing the real estate on our site and on our own channels, which is -- think of that as free marketing. So the geography lever has been pulled to 85% as of today. So that is becoming less of a lever even though we continue to grow within existing geographies sequentially. As we do add marketing, yes, that's going to grow awareness as well as just direct performance. But that's going to grow awareness as us as a place to transact. And so as we were talking about earlier in terms of what can Instant Max be, from a top-down perspective, it's just an enormous market. And if you look at some other prolific online buyers of consumer cars, they're transacting tens of thousands a month. From a bottoms-up perspective, we've got those growth levers, some of which are highly efficient like conversion rate, others which are more marketing-oriented. In terms of how we handle the throughput, a lot of it is improving automation, which we talked about with people in the funnel. From a partner perspective, it's growing our logistics and inspections partners, which we have done well, will continue to do. And we've sort of built the building blocks now to allow more to plug in. So I think we've done a lot of the heavy lifting there. And then the last is the beauty of the landed dealer. I mean landed dealer, so just maybe very quickly so everyone understands. If I sell my car here out of Boston and the highest bidder for that car is a New Jersey dealer, when we pick up that car, we don't take it to -- when our partner picks up the car, they don't take it to New Jersey, they take it to a dealer that's about 7 to 10 miles away called the landed dealer. That landed dealer is a CarOffer dealer who is handed the car. They know they're landed dealers, so they were expecting some volume of cars. They're thrilled to get it, and they have a right of first refusal. They have a couple of days to decide if they want to keep it. And so that is a key element to us being able to do this so that we don't have to incur the transportation costs all the way down to New Jersey out of the gate. So the growth of landed dealers helps with our scalability and the growth of landed dealers grows by the mere function that our CarOffer network is growing because the vast, vast majority of dealers using CarOffer would love, would kill to be a landed dealer. And so that network is just becoming more and more dense by the growth of that business.

I would just add from a logistics standpoint, when you look at the transactions, I mean, Instant Max is still only 10% of the transactions that the D2D business is doing. So the capacity is there already as Instant Max grows.

All right. Okay. We'll squeeze one more in. Go ahead.

So my impression has been that while new car inventories are still very constrained, it seems like used car inventories have actually been returning to more normalized levels. And despite that industry used car sales, have still been very weak. So I was wondering from your conversations with dealers, do they think that once inventories come back, like used car sales are just going to recover? Or do they think the worst is yet to come with regard to consumer demand, especially those nonprime and subprime consumers as loan rates keep going up?

Well, I think used car inventories are still down 20%, 25%. I mean they're nothing like the 75%, 80% decline for used cars but -- for new cars, used cars are still down. And used car pricing is obviously up a significant amount, and so consumers have gotten wise to that. And I think that's been that plus other macro factors has dampened consumer demand recently mildly for used cars. As inventory comes back and prices more normalize, we have no reason to not think that used car volumes and used car prices will go back to something close to normal. And back to the comments that Spencer was making, when the perfect situation for us would be high inventory -- high used inventory on dealers' lots, and low consumer demand. And then they have to market. That would significantly help our listings business. One of the beautiful things of our portfolio now is that our listings business and our wholesale business are a bit of a hedge because dealers had a lot of used cars in their lots, they wouldn't need to source much and so they would be less active in wholesale in general. But if I'm understanding the question correctly, I mean, our belief is that as inventories come back and pricing normalizes, then you'll get to this more competitive state among dealers where they'll need to outmarket the other dealers in order to move cars at a quick enough pace from their site. I feel like -- did I answer the question?

Yes.

I'd also add to that, that Jason mentioned it earlier that wholesale transactions because inventory is down, wholesale is down 30% -- 25%, 30%. So there's less throughput on the wholesale side. So that will be a rising tide for all. So rising inventory, I think, really helps both our businesses.

Okay. Great. So this concludes the Q&A portion of the day. We appreciate everyone's spending the afternoon with us as we reviewed not only our incredible transformation, but the growth opportunity that still lies ahead. A replay of the event will be available on the Investor Relations section of our website. And on behalf of the entire CarGurus' management team, thank you very much for joining us today. We invite the audience in person to join us for a reception now. Thank you, and have a great night.

Thank you.

Thank you.