ACV Auctions at Needham Conference: Strategic Growth Insights

On Monday, 12 May 2025, ACV Auctions (NYSE:ACVA) presented at the 20th Annual Needham Technology, Media & Consumer 1x1 Conference. The company outlined its strategic growth plans, highlighting its strong market position and innovative data-driven approach, while acknowledging challenges from the COVID-19 pandemic and supply chain issues.

Key Takeaways

• ACV Auctions holds a 10% market share in the dealer-to-dealer wholesale market, surpassing digital competitors.
• The company is expanding into the commercial market, targeting a 6 million unit opportunity.
• ACV projects revenue of $765 million to $785 million for the current year, with a 50% increase in adjusted EBITDA profitability.
• Ancillary services like ACV Transport and ACV Capital are significant revenue drivers, contributing over 35% last quarter.
• Market recovery is anticipated, driven by new car sales and the return of off-lease vehicles.

Financial Results

• Projected revenue for 2025 is between $765 million and $785 million, with a target of $1 billion in the midterm.
• Adjusted EBITDA is expected to grow by 50% on a 22% increase in revenue.
• ACV Capital grew by 33% last quarter, while ACV Transport improved its gross margins to the low twenties.
• Revenue margin increased by a thousand basis points since going public, with a Q1 margin of 55% and a midterm target of 60%.

Operational Updates

• ACV is leveraging its technology to expand into the commercial market, aiming for a 6 million unit market.
• The company plans to launch its first greenfield opportunity soon and has acquired 10 physical auction sites.
• About 800 vehicle condition inspectors are averaging 6.5 inspections per day, with mature territories reaching 10-12 inspections daily.

Future Outlook

• ACV expects market recovery as new car sales increase and off-lease vehicles return.
• The company aims to become a strategic partner to dealers, providing data-driven solutions.
• ACV’s "data moat" from vehicle inspections offers a competitive advantage in pricing and remarketing.

Q&A Highlights

• ACV’s market share is approximately 10%, with physical auctions still dominating 85% of the market.
• Value-added services like ACV Max and ClearCar help dealers acquire cars from consumers outside the network.
• The company sees significant growth opportunities, with most of the market still relying on physical auctions.

For a detailed account of ACV Auctions’ strategies and financial performance, refer to the full conference call transcript.

Full transcript - 20th Annual Needham Technology, Media & Consumer 1x1 Conference:

Chris Pierce, Needham Research Team, Transportation Technology Sector, Needham & Company: Name is Chris Pierce with the Needham research team in the transportation technology sector. Welcome to one of the virtual sessions of the twentieth annual medium tech Needham Tech and Media Conference. It’s my pleasure to welcome the team from ACVA. We have Bill Zarela, CFO, and Tim Fox, VP of IR and strategic finance, here with us. It’s my pleasure to welcome you guys.

We’re gonna go about thirty five minutes or so, fireside chat format. If any investors watching have any questions, you can put them in the portal on your screen, or feel free to email them to me at cPierce@Needhamco.com. Bill and Tim, welcome. I appreciate your time today and this morning. I thought I’d let you guys, you know, go thirty, sixty seconds, ninety seconds, wherever you think you need to kinda give us a high level overview of the business, what differentiates ACV versus legacy peers, and how you’ve been able to win share in the market consistently.

Bill Zarela, CFO, ACV Auctions: Yeah. Sure. Well, hi. Hey. Good afternoon, everybody.

And I’ll I’ll start, and, Tim, feel free to add in if I miss anything. But, so ACV is an online marketplace, supporting primarily dealer to dealer wholesale transactions. We’ve been disrupting kind of the legacy, market for, quite a number of years. We went public four years ago. And, really, what we offer is a digital solution in place of a physical auction for dealers to to wholesale their cars that, you know, they receive typically in trades and and, would rather wholesale than retail on their lots.

The bedrock and the the value proposition that we offer is really data based. We’re, we’re very much a technology company, and we’ve ultimately disrupted this market by creating, a dataset on the condition of a used vehicle that allows us to, sell that vehicle online sight unseen by buyers with confidence, and we will stand by the disclosures that we make in terms of the condition of that vehicle. And if we miss something, we’ll arbitrate it and make good on with the buyer. That’s allowed us to, you know, be very successful in terms of growing our business over time. We now have a roughly 10% market share in this in this market.

Our next nearest competitor is roughly half our size, in terms of a digital offering, and then the rest of this market is is physical. So roughly 85% of this market is still physical in nature. We’ve deployed a territory model to expand the business, started in the Northeast, moved down the Eastern Seaboard, and then started moving West. And we now have national coverage across the country. The way our territory model works is the longer that we’re in a market, the more maturity and vibrancy we can generate in terms of the mic marketplace since, you know, we have we have a two sided marketplace with both buyers and sellers.

And our most mature marketplaces, you know, we are in certain cases actually the market share leader in those marketplaces. And over time, we just continue to mature and kind of expand our footprint. So we’ve been, you know, very successful. When we went public, the company was at roughly 200,000,000 in revenue. We’ll be, kinda approaching 800,000,000 in revenue this year.

You know, our guidance is 765,000,000 to 785,000,000. Last year was our first year of profitability. And this year, we’re looking to expand our adjusted EBITDA, profitability by a 50% on 22% revenue growth. So there’s a lot of leverage in our model, and it’s all about scale. As we generate more and more scale because of the, the digital nature of our business, it’s highly accretive to to incremental margins.

We have a what we call a midterm target, which is a billion foreign revenue and $350,000,000 of adjusted EBITDA. So, you know, we’re kind of aggressively moving forward and gain share every quarter. I’ll kinda leave it at that. Is there anything you wanna add, Tim, in terms of a background?

Tim Fox, VP of IR and Strategic Finance, ACV Auctions: No. I guess the only thing I’d add is just from, you mentioned the market share. So, you know, about 80% of our supply on the listing side come from franchise dealers. There’s about 17,000 franchise rooftops across the country, so individual stores. We we engage with about a third of those franchise dealerships across the country, so there’s still an enormous amount of white space out there, and and market share to go after.

So, while we’ve made great progress, it’s still very early days and, yeah, a long a long growth trajectory even just within dealer wholesale. And then lastly, I think, Chris, you’re probably gonna get into this a little bit, but we’ve, invested in in the Jason wholesale part of the market is commercial. So these are repossessed cars, fleet, off lease, rental cars. That’s a 6,000,000 unit market today if you consider everything that’s downstream. So that’s another very large TAM that we’re going after.

We’ll be going after more formally later this year when our technology technology platform has been rolled out.

Chris Pierce, Needham Research Team, Transportation Technology Sector, Needham & Company: Then going back to Bill’s early comments, I’d love to hear about, you know, who are the biggest competitors? You know, we hear we know about Manheim and Adessa. Talk about winning share from them, talk about winning share from regional auction houses that maybe don’t get the publicity that investors would have heard of, like or talk about other digital players have come and gone, however you guys wanna take it. But I’d love to hear about how you’ve gotten that 10% share and where shares come from.

Bill Zarela, CFO, ACV Auctions: Sure. So so first, we maybe should just talk about the market itself because, the market has actually shrunk as a result of COVID and supply chain issues. So new car sales basically drive trades into franchise players, which drives wholesale, volume. So pre COVID, the wholesale dealer to dealer market was somewhere between ten and eleven million units. Last year, it ended at roughly about seven and a half million units or so.

So, you know, with the market is still on, needs to recover from what it was pre COVID since a lot of dealers, when they did not have enough cars to sell, retained a lot of cars they normally would have traded into the wholesale market, recondition them, and put them for sale on their lots. And used car inventory levels are still well below normal. So, you know, we expect that to change over time and our market to to recover. So that’s first the backdrop. In terms of competition, as Chris mentioned, Manheim is the largest player in this space.

Manheim is owned by the Cox family, which has a, you know, a very large automotive portfolio of products and offerings. But Manheim is their auction business. They’re private company, so we’re not exactly sure how big they are. But, you know, rough estimates were, certainly pre COVID that they were doing about 2,000,000 units a year in the dealer to dealer market and about 2,000,000 in the commercial market. So they have a very big commercial footprint.

But, you know, just based on the dealer dealer market, you know, that would, pre COVID, represent about 20% share. So the market is highly fragmented. There are several hundred independent physical auctions around the country. These are mostly family owned. There is one group of physical auctions that are owned by a PE firm, and we certainly compete with all of those local auctions as well as as Manheim auctions.

So and as I mentioned earlier, physical is about 85% of this market. Outside of outside of ACV, you know, we do have a competitor that is is, we believe, roughly on average about half our size in the digital market. We’re not exactly sure since they don’t disclose their US, know, market data, but or unit volumes. But, you know, that is a company that bought several smaller, technology players, put them together, and created a unified platform. So, that’s kind of the landscape.

And, you know, we compete, we believe, as the only true technology player in this space. And, again, we’re very data driven, and we’ve now inspected millions of cars and have what we believe is a a significant data moat that we’ve built over time.

Chris Pierce, Needham Research Team, Transportation Technology Sector, Needham & Company: Talk about, you know, two parts to that. Just go a little deeper on the 10 to 11 of time by PO to this market being seven and a half now. Like, what, I understand the dealer behavior side of things, but as we think about the market coming out of it and maybe off lease cars coming back in ’26, what drives like, there’s multiple levers towards the market moving back to where it was even if it doesn’t get all the way back where it’s hard to, you know, time things out, but just what do you guys see the market developing, or how do you see developing? And then that’s probably my last macro question, I promise.

Bill Zarela, CFO, ACV Auctions: Okay. Sure. So so so what happened, because there was a period of time where all these supply chain issues related to, chips that weren’t available, resulted in millions of new cars not being produced, as a result of COVID, which meant there was a dearth of new car sales and new car leases. So the average lease expires and matures in roughly thirty six months. And off lease, you know, has historically provided very strong flow of late model used cars that dealers would then acquire if the consumer doesn’t buy the car and remarket those on their lot.

And those are, you know, typically what are called frontline vehicles. So low mileage, you know, in pretty good shape cars. And as a result of that that air pocket, there was a dirt there’s been a dearth of cars coming off lease and that supply feeding into the into dealers. So so, basically, that market will bottom out at the end of this year because it was three years ago that the market bottomed out, and it’s progressively been recovering over time. So that will provide, a shot in the arm for dealers in terms of late model used cars that are available on their lots.

That in turn will help them be more prudent in terms of which cars that they retain from trades and recondition and sell versus cars that they receive as trades that they wholesale. And that behavior, obviously has just been different since, since these supply chain issues with franchise dealers retaining cars and recondition reconditioning them that they otherwise would not have done so. Keep in mind that also reconditioning these cars uses up resources in their service bays, which are primarily dedicated to service, which is highly profitable and kinda guaranteed margins for dealers, and it’s a very big profit engine for dealers. So, we believe that’s that’s one key to kinda returning this market to to pre COVID levels. The other is affordability as well.

Interest rates play a role obviously in the cost of car of of both a new car and a used car. And affordability issues have certainly impacted used cars since typically, you know, with with a new car, you can get potentially low APR financing from OEMs due to their captive finance organizations. Right? So, over time, as new car sales recover, and as off lease cars start to feed back into the ecosystem, we believe that will create a tailwind in terms of the TAM for for the wholesale market, which will benefit us versus a headwind, which has been it’s been for the last several years.

Chris Pierce, Needham Research Team, Transportation Technology Sector, Needham & Company: Segue after that. Tim, why don’t you I’d if you went a little deeper on the commercial, Tim. I know you gave us the number, but, you know, what it’s new for it’s something you’ve been talking about for a while. How are you attacking it, whether it’s through acquisition, greenfield, kinda, and how you kind of you can take it to lever leverage the tech that you’ve already built and the data you have to win in that market.

Tim Fox, VP of IR and Strategic Finance, ACV Auctions: Yeah. So it’s, you know, it’s a really, it’s a natural extension of what we did, and have been doing in dealer to dealer. We are leveraging effectively the same technology. We’ve had to invest in new new parts of the platform to service commercial consignors. They have some some distinct requirements around reporting and, you know, you have to build in cost for recon and so on.

But that that work is is is coming to a to a close here, which is great. Within the next quarter or two, we should be launching our first greenfield opportunity, which is a isn’t a a, you know, a business that we buy, but necessarily it’s it’s land that we basically lease. And we have some recon facilities there, and we’ll be able to do a pure digital commercial transaction. But to supplement that, what we did do is we bought a number of of physical auctions across the country, that you and we have a footprint today of about 10 of these. And, basically, you need land to service certain portions of the commercial space.

So I mentioned rental repo fleet and off lease. Certainly for repos, you need to have land to store the car for a certain period of time based on the state. You you may be up to two or three weeks for the car to have to sit there. Some of the other categories will require some light reconditioning. And so having access to land and recon facilities is sort of part and parcel of this commercial, go to market.

But as I mentioned, you know, if you if you sort of exclude the upstream off lease, it’s 6,000,000 units. It’s a very big market, very attractive. Our buyers that buy dealer cars wanna buy commercial. Right? Some of this stuff is really, really attractive inventory, particularly some of the fleet and and rental car.

10 to be a later model in kind of lower mileage. So it’s it’s a it’s a great way for us to leverage our inspection technology, all of our AI pricing pricing guidance, and building a, you know, an incremental amount of supply that we can provide to our buyers. Right? It just increases the velocity and vibrancy of our regional markets, by adding more commercial supply over time. How

Chris Pierce, Needham Research Team, Transportation Technology Sector, Needham & Company: do you kinda convince the sellers to give a ACV a chance? Is it is this a warm market where it’s a small industry and they’ve sort of heard of you guys? Like, how do or is it brand new? Or because of the way you’re entering these 10 markets to start, like, how do you kinda get them to trust you on supply? Or is it that the buy side drives the equation because you’ve got buyers that are willing to bid because they trust the condition of the car?

Tim Fox, VP of IR and Strategic Finance, ACV Auctions: Yeah. I think it you know, look. We’re obviously we’re leveraging some of some of these businesses that we bought have a some of them have a substantial amount of existing commercial business today. So part of the initial playbook, even before we have our tech platform rolled out, is to broaden the relationship that we may have in a certain region and bring that that commercial consignor to nine other areas across the country. Right?

So there’s a natural expansion with existing commercial customers that will be able to drive even before the tech is completely done. Then, you know, then it really is just we’ve got a commercial sales team that’s out there, building business, convincing the commercial consignors as we get this thing launched that we have a, you know, we have a much better value proposition. We’ll be able to get them, a better value, better margins, better clearing prices, faster cash conversion. You remember these these physical auctions run basically once a week. And if it doesn’t sell in the first week, it sits there for another week.

Our auction runs twenty four seven, basically, seven days a week. Right? So this is this is a much faster turnaround. You got a bigger buyer base. You’ve got transport and capital that are available to the buyers.

So we think that the the sort of nationwide footprint, vibrancy, and all of the ancillary services along with the tech stack will really be a high a highly differentiated value proposition for commercial consignors.

Chris Pierce, Needham Research Team, Transportation Technology Sector, Needham & Company: Yeah. Okay. Great. And then before we move on to sort of the model and the puts and takes, I’d love to hear just you know, I don’t want you I wanna give you guys a chance to to you’re not just an auction platform anymore. Right?

You’re not there’s more that you’re doing with dealers. I’d love to hear what you’re doing with dealers and how to become more of a partner with them and why you’re uniquely positioned to do that versus maybe someone in lead gen trying to move into wholesale or something. Like, just kinda what sets you guys up for success, and what are you offering them that others aren’t?

Bill Zarela, CFO, ACV Auctions: Yeah. So so, you know, for those not familiar with ACV, you know, we clearly started as an auction player. You know, over time, we have found that we’ve increasingly been able to use our our data moat to put a value on a on a used car with more accuracy than we think has ever been done before. And we’ve talked about this, you know, the last few earnings calls where, you know, we’re starting to see a a lot of empirical data that says we can value a used car condition adjusted based on, you know, the results of our inspections within a hundred dollars of what would it it would sell at the wholesale level and with the $200 at the retail level. The name of our company ACV stands for actual cash value, And that we believe ultimately can be the holy grail in terms of, you know, disrupting, you know, an industry that’s really never had the capability to do what we believe that, you know, we’re doing today.

Being able to value a used car, which is a highly complex asset, can open, you know, a lot of doors in terms of opportunity to help dealers, buy cars from consumers. Okay? Help dealers more easily understand what, what they can sell their cars for that they don’t wanna keep, that they wanna sell wholesale, whether it’s dealers or commercial consignors. It allows us to, you know, potentially put a value on a car and stand behind that value and eliminate any risk for dealers in terms of transacting. So it it really gives us a lot of opportunities to augment, our marketplace and kinda go go beyond what, you know, traditional auctions have done, for dealers.

Part of this is is is, delivered, via other offerings that we deliver today. One is what we call ACV Max, which is a, inventory management and merchandising, application that incorporates an offering that we call ClearCar, which allows a dealer and a consumer ultimately to, answer questions, use our application to take pictures of of the outside of a car, you know, using some optical technology, and and based on our data, allow us to put a value on that car, you know, that we can ultimately stand behind. So, you know, there are about 10,000,000 cars in The United States that are sold peer to peer that are outside of the dealer network. Obviously, companies like, Carvana and CarMax are capturing, you know, some of that market. But it’s a very big market, and typically franchise dealers have historically not aggressively, you know, tried to buy those cars.

Ultimately, we believe we can help them acquire those cars from consumers, you know, through, ACV Max and ClearCar. And, you know, the more cars that they buy, the more they’ll keep and they’ll have as frontline vehicles to to to retail on their lots, and, ultimately, the more they’re wholesale, which would, you know, allow us to to leverage our our marketplace to help them monetize those transactions. So there’s really more and more opportunity for us to be more of a partner to dealers versus just an auction, you know, kind of remarketing partner for them by bringing in some of these value added services and leveraging, you know, technology. In in certain cases, we’re leveraging actually LLMs to, deliver a new level of capability and insight to guide dealers as to, you know, how to most cost effectively, monetize any inventory that they have on their lots. So I’d say we’re moving, you know, directionally towards being more of a strategic partner to dealers, and that’s what we’re hoping to achieve over time versus just a transactional partner, if you will.

And, you know, time will tell if we’re successful so far. You know, we’re starting to get an engagement, you know, at a at a at a a really compelling level with, some some big groups around the country, you know, kinda better understanding the value that we can deliver. Ultimately, it’s if we can help dealers, improve their business, deliver better, you know, operating results, you know, we could we believe we can be even more successful over time.

Chris Pierce, Needham Research Team, Transportation Technology Sector, Needham & Company: And is that you know, who are you displacing there, or do dealers not have this real time data on what a car would actually be valued with, like, science and data behind it in a sort of greenfield? Or, like, what was and what do they do with this information? I know you touched on it’s buy sell decisions and helps them gain inventory or that type of thing.

Bill Zarela, CFO, ACV Auctions: Yeah. It’s like, an example would be providing insight that they have a car on their lot that’s been sitting there for thirty days, hasn’t moved. This would be a used car that they’re trying to retail. And we you know, based on our our our data insights, we would suggest, you know, they should adjust the price to from x to y, and they should remarket it and, you know, provide the explanation and the rationale for that based on data driven analysis. And and, hopefully, a result, help them drive better decision making.

Right? So, at the end of the day, it’s all about how do you help them improve their operating performance.

Chris Pierce, Needham Research Team, Transportation Technology Sector, Needham & Company: Perfect. So we’ve got the auction. You’ve got your VCIs out there kinda doing the legwork, the the shoe leather, car goes into auction, condition report, buyers bid on the car. You’ve got a winner. What happens next?

Late you know, talk about ACV transport, finance, capital. Kinda how do you guys these ancillary products within the auction that you guys have been layering in that have been growing?

Bill Zarela, CFO, ACV Auctions: Yep. Yeah. So these are, you know, other services that attach into our marketplace. Last quarter, they represented, roughly little little over 35 of our, total revenue streams, so the largest being ACV transport. We have our own transport marketplace.

We don’t own any, actual trucks ourselves. We have a a marketplace in which transporters can, compete for business. So when a buyer, successfully wins an auction, there’s a button they can press and, get a price for ACV transport. And then if they move forward, 80% of those transactions are automatically dispatched via software. So there’s no human, involved.

And, you know, we deliver on an SLA in which we can very quickly and reliably get that transported to pick up those cars on the dealer’s lot and deliver them to the buyer. And we’ve been doing that, with great success. And over the past couple of years, we went from a business that was actually generating negative margins to low twenties revenue margins or gross margins, if you will, which doesn’t sound like a lot. But on an accounting basis, we have to record those revenues on a gross basis. So, you know, it is increasingly more and more material to our results over time.

And we’re we’re, employing, you know, some pretty sophisticated pricing algorithms to optimize our margins. And now we’re starting to expand that offering to include cars that need to be transported that beyond just those that that transacted on our marketplace. So that’s our transport business. We also have a, what we call ACV Capital, which is our floor plan business, which is something that our competitors do. So, this is common in the industry for auction players in which we provide short term secured financing for, independent dealers who buy on our platform.

And typically, those dealers do require financing to to consummate a transaction. So if they select our, our capital floor plan, then, you know, basically, they can take delivery of the car, and then we get paid at the sooner of maturity of the of the loan or when they sell it to a consumer. And the average, days outstanding for those loans are about sixty five, sixty five days, and it flows through at, at over 90% margins down to our EBITDA. So it’s very attractive, very, very, attractive to buyers, and it certainly has attractive financial attributes. That business grew 33% last quarter, and we’re seeing ex we expect accelerated growth through the rest of this year.

So, you know, those two together represent kind of these these offerings that attach into our marketplace and have been a nice, augment to our auction just our pure auction revenue streams.

Chris Pierce, Needham Research Team, Transportation Technology Sector, Needham & Company: Then if we move down the model Tim, I’d love to get your take on, you know, cost of revenue. What are some, you know, puts and takes there, and where do you guys have leverage there as you move forward? And where have you seen leverage? Because we’ve it’s been a positive cost of revenue story.

Tim Fox, VP of IR and Strategic Finance, ACV Auctions: Yeah. So, cost of revenues, it it has been quite a great story. We’re just looking at this a little bit earlier today. So since we went public that that that gross margin equivalent, we call revenue margin, has increased by a thousand basis points. Right?

So we’re actually within relatively short distance of getting to our midterm target, which is 60%. You know, q one, it was 55%. And so one of the biggest driver there was Bill just mentioned transport going from being basically losing, losing money at a at a margin level to, low twenties. That’s been a part of that as well. As a ACV Capital grows as a percentage of revenue, when that mix comes in, we’re gonna grow that pretty quickly over the next number of years.

That comes in at a very high revenue margin as well. And then we get just, a little bit better on arbitration. Right? So arbitration can be, you know, relatively high level of cost associated with that. Even though we have a very small percentage of our vehicles that get arbitrated, it’s something that we focus on very heavily.

And we think with through technology and different processes, we can continue to drive down the incremental unit cost of arbitration over time. So the combination of those three things really will will get us to, I think, 60%. Again, we’re we’re 500 basis points away from that.

Chris Pierce, Needham Research Team, Transportation Technology Sector, Needham & Company: If you move down to SG and A, I think you’ve kinda referenced it this year. Should investors be thinking of this? I don’t wanna use the term investment year, but you said you’re spending money to build out the plumbing to connect the marketplace to the commercial seller marketplace. So what what are what sort of going in? Like, what are you doing to kinda connect those two, and how should we think about spending this year and beyond?

Bill Zarela, CFO, ACV Auctions: Yeah. So so a lot of the the the plumbing that you’re referencing is really on the technology side. Our product and tech team has been kind of building our next generation platform that will support commercial consignors. So on the s g and a front, let’s separate kind of the the sell sales cost, sales and marketing cost versus g and a. We inherited a lot of g and a when we acquired a bunch of these physical auctions.

So, you know, that’s, kind of distorted our OpEx leverage, the past year. You know, this year, unless we do unless we do a number of other acquisitions, we’ll start to, you know, kinda not see that distortion continue, and start to see leverage going into next year. So, you know, we are starting to launch our plan is to launch a greenfield site to support commercial business by the end of this year, and that will have a different cost profile and give us better unit economics. So you can expect to see us, you know, launch more of those over time as we, you know, as get our as we get our platform built out and kinda create the the the workflows and processes to operate, you know, a greenfield site, which also will will result in a dramatic reduction in capital required versus acquiring, you some of these locations. Not to say we may not acquire some other locations if they’re very strategic and have, you know, a strong level of commercial business.

But, right now, our our our focus has shifted much more to much more so to to greenfield launches. So that was that’s that’s been a big part of the g and a, you know, lack of leverage, if you will. You know? And then on this on the sales and marketing side, you know, a lot of those costs are primarily fixed. I mean, our our all of our territories are fully staffed, you know, with territories territory managers and regional sales directors, you know, rolling all the way up to our chief sales officer.

So, you know, we don’t expect those costs to dramatically increase, you know, outside of inflation and, you know, expanding our commercial sales team as we kind of build that out over time and and scale that business. So, you know, we will we will start to see more leverage, operating leverage next year as we head closer towards our, you know, midterm targets, which, you know, from a model perspective, is very doable. But m and a does does distort it a bit. So we’ve had to, you know, try to parcel that out as best we can for investors to understand how much is m and a versus the true operating leverage we we get in terms of incremental margins associated with organic growth.

Chris Pierce, Needham Research Team, Transportation Technology Sector, Needham & Company: Can you talk about leverage on the the vehicle petition inspectors? I think, you know, at the end of twenty one, you had x number of VCIs out there. I believe you have roughly the same number now, but you’re doing a lot more cars. Is it the tools they have in place, the training you’ve put in place for them, them sort of getting more comfortable in the territories? Sort of talk about the leverage you’ve got there and where they sit within the model.

Bill Zarela, CFO, ACV Auctions: Yeah. So our, our, for those of you not familiar, we have about 800 inspectors around the country that inspect cars. They go to dealers lots every week. We’re averaging about six and a half inspections per day per inspector. However, that’s an average of our most mature territories are averaging 10 to 12 inspections per day.

There’s a lot more density in those territories where an inspector can go to a particular dealer, inspect a bunch of cars versus driving from one dealer to another. Right? So much much better operating efficiency. And then our less mature territories are, by definition, obviously, even, you know, less productive in terms of low single digit cars that they’re inspecting per days per day. And that’s that’s just the way our model works.

Right? We we kind of plant a flag in a territory. We have to have an inspector to get started. And as volume increases, then we get more operating efficiency over time. So, you know, as we continue to scale and grow, our less mature territories get bigger and we improve the productivity in those territories.

So our midterm model assumes that we get to between eight and a half and nine inspections per day, you know, across the country. So that’s primarily a function of our less mature territories getting more mature. And for our more mature territories, we’re very happy with kinda 10 to 12 inspections per day. Notwithstanding the fact, we are looking at ways that we can, in general, reduce the inspection time, you know, and make our inspectors more efficient. So even on our more mature territories, you know, to the extent we can leverage, you know, our our tools and help them inspect cars in fifteen minutes instead of twenty minutes, then, you know, we can make them more productive as well.

Chris Pierce, Needham Research Team, Transportation Technology Sector, Needham & Company: And then just lastly for me, I’ll let you guys get out here and you get a flight to Boston. I love to hear you talked about data a couple times. I’d love to hear just sorta, you know, the data advantage you think you have versus peers, the data you’ve collected. You sorta talked about how you leverage it, but just kinda what investors should look for here in the future.

Bill Zarela, CFO, ACV Auctions: Yeah. So we’ve inspected millions of cars, at this point in time. And we’ve created what, again, we believe is a is a is a data moat, and we just continue to leverage that data. And and that’s that’s one of the prime drivers of us being able to determine, you know, the value of a used car, you know, based on not just inspecting, you know, a a car in the field, but also leveraging data, you know, make, model, year of those cars. You know, there are certain cars that have at certain levels of mileage, for example, might have transmission issues, might have other things that we’ve seen, you know, based on our data, and then merging that with market data in terms of what used car pricing is.

So, again, as I said earlier, this is kind of the bedrock of our business is we are ultimately a data company, and, you know, we’ll continue to to leverage that data and deliver value to dealers as a result. So, you know, the more scale we get, the more data we’re go going to get. The more data we get, the more value we can deliver. So that’s that’s, kind of the reinforcing cycle and leveraging some of these other offerings that I mentioned earlier, which is the way that we deliver, you know, that value in terms of the data, to dealers. You know?

So far, we’re we’re liking what we see in terms of dealer engagement. And the good news is there’s a lot of opportunity for growth with 85% of those markets still being kinda white space for us because most of this market is still physical.

Chris Pierce, Needham Research Team, Transportation Technology Sector, Needham & Company: Okay. Well, I appreciate the detail there, and I appreciate the time. Bill and Tim, I appreciate spending the day with investors today, and we’ll let you get out of here onto the next conference.

Bill Zarela, CFO, ACV Auctions: Okay. Great. Thanks, everyone. Okay. Take care.

Bye.

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