Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the ACV First Quarter 2021 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the call will be opened for questions. I'd now like to hand the conference over to, Tim Fox, ACV's Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining ACV's conference call to discuss our second quarter 2021 financial results. With me on the call today are George Chamoun, Chief Executive Officer; and Bill Zerella, Chief Financial Officer. Before we get started, please note that today's comments include forward-looking statements, including statements regarding future financial guidance. These forward-looking statements are subject to risks and uncertainties, and of all factors that could cause actual results to differ materially from those expressed or implied by such statements. The discussion of the risks and uncertainties related to our business is contained in our quarterly report on form 10-Q for the three months ended June 30, 2021 and will be filed with the SEC following this earnings call. Also during this call, we may present both GAAP and non-GAAP financial measures. Reconciliations for the most direct comparable GAAP financial measures are available in our earnings release, which we issued a short time ago. The earnings release is available on the Investor Relations page of our website and is included as an exhibit in the Form 8-K furnished to the SEC. Finally, we will be referencing our earnings presentation today, which you can find posted on our IR website. And with that, let me turn the call over to George.

Thanks, Tim. Good afternoon, everyone, and thank you for joining us. Let me begin by thanking the ACV team for continuing to deliver superior value to our growing dealer network, which resulted in record second quarter results. I would also like to welcome our newest team members from Max Digital. We're excited to have you on board and look forward to working together as we deliver best-in-class data and digital technology to the dealer community. Turning to Slide three, I'll begin with highlights of our second quarter. Then share some perspectives on the automotive market. As you can see, our momentum continued in the second quarter where we transacted $2.1 billion of GMV and over 150,000 vehicles sold on our digital marketplace, both of which were records for ACV. In fact, we transacted more GMV in Q2 than we did during all of 2019 and we delivered very strong revenue of $97 million representing 117% year-over-year growth. Our strong topline performance can be attributed to three factors. First, we continue to execute on our proven playbook to grow market share by attracting new dealers into our ecosystem and by capturing additional wallet share within our existing dealership network. Second, historically high used vehicle values along with historically low retail inventories resulted in record quarterly GMV and ARPU, and also drove elevated conversion on our marketplace. And third, adoption of our value-added services accelerated quarter-over-quarter, and was well above our expectations. Simply put, strong execution by the ACV team, along with continued customer adoption of the ACV suite of offerings and favorable market conditions yielded truly impressive financial results. Turning to the broader market backdrop; we have clearly been operating in unchartered territory over the past year on both the demand side and supply side of the automotive market. And these market dynamics contributed to record financial performance in the second quarter for ACV. As a reminder, in our first quarter earnings call, we provided an outlook for the balance of 2021 that assumed a more normalized environment, particularly around used vehicle values. I think it's fair to say that our timing was off by a few months, but the market is indeed turning. Wholesale vehicle prices after peaking in early June started to decline in July and continue to soften, which has been well-documented by the industry data providers. The other half of the equation is supply. Last quarter, we also discussed how the lack of new car inventory due to chip shortages and other supply chain headwinds could factor into our 2021 performance in the second half of the year. In Q2, automotive franchise dealers generally had enough supply to support strong retail performance. However, there's an emerging view that the third quarter or perhaps fourth quarter could be the low watermark for retail supply. Of course, these market dynamics are transient. In fact, most industry participants see the new vehicle supply challenge recovering in early 2022, which would be a tailwind for trade and volumes and benefit our wholesale supply. Ultimately, this is great news for ACV. A more normalized pricing environment allows buyers' and sellers' expectations to converge. More supply coming into the market feeds the top of the funnel, which in turn drives higher volumes in our marketplace. It will take a few quarters for these market dislocations to settle out. But in the meantime, we continue to execute on our plan and take market share. As Bill will discuss in more detail, we have again increased our outlook for the year and are now expecting to deliver approximately 60% revenue growth for the full year. For context, this is a full 20 points higher than our outlook at the beginning of 2021. To frame the rest of our discussion today, we will focus on the three top-level elements of our strategy to drive long-term shareholder value; marketplace growth, TAM and product expansion, and operating scale. Let me begin with marketplace growth, turning to Slide five, we transacted 153,000 units in Q2, which was 74% growth year-over-year and 19% growth quarter-over-quarter. Due to the impact of COVID-19 on our Q2 2020 financial results, we included the comparison to Q2 2019, which as you can see was very strong at 174% growth. As I mentioned earlier, our unit growth was driven by continued market share gains as measured by the number of new dealers transacting on our marketplace and by increased wallet share from existing dealers. In fact, we added more sellers to our platform in the first half of 2021 than all of 2020. Unit growth also benefited from very strong customer conversion on our marketplace, which was driven by the low supply environment I spoke about earlier. As expected, we did see conversion begin to normalize in July as market participants began to adjust to declining wholesale values. The record GMV transacted in Q2 was a tailwind for our ARPU reaching a new high. GMV per unit of $13,900 increased around 90% year-over-year, which reflects both higher vehicle values and an increased mix of frontline vehicles transacting on our marketplace. While elevated vehicle values are transient, a sustained mix of frontline vehicles on our marketplace could be a nice long-term tailwind for ARPU. Moving on to Slide six, we continue to make great progress towards our territory coverage goal of 160 by year-end. This will be about a 30% increase in our footprint since the beginning of the year and will position us to engage with nearly all the franchise dealers in the U.S. We've continued to attract great talent across our organization with some pretty ambitious 2021 goals. To put this in perspective, we ended Q2 with nearly 1700 ACV teammates effectively doubling our size over the past two years. Turning to Slide seven; one of our largest teams at ACV is our vehicle inspectors. This team has grown threefold over the past two years, supporting ACV's hypergrowth while delivering highly differentiated services to our dealer network and with increased territory density along with new technology investments; we're beginning to scale this business, which is a key element of driving long-term operating leverage in our model. Moving on to Slide eight, you can see that our strong unit growth and increased ARPU yielded nearly a 100% auction marketplace revenue growth and greater than 270% growth versus Q2 2019. Turning to Slide nine, I'd like to highlight one of our offerings contributing to this strong unit growth. In this case through consumer sourcing, you've been hearing a lot lately about direct consumer sourcing in automotive. ACV was an early mover in the category with our live appraisal offering. We enable our dealers to offer consumers an efficient and effective way to sell their vehicles in ACV's marketplace. We inspect these vehicles at dealer locations or in a consumer's driveway and deliver a real-time market-based offer based on what dealers are willing to pay. Live appraisals have grown significantly in recent quarters. In Q2 year-over-year unit volume grew more than 150% and accounted for a high single-digit percentage of our total volume and we plan to expand our offerings to help our dealers compete for consumer-sourced inventory. Let me pivot to our second element of our strategy to drive long-term shareholder value, TAM and product expansion. Moving to Slide 11, I would like to highlight another feature ACV launched that enables highly efficient vehicle sourcing for dealers through programmatic buying. We have invested in two flavors of programmatic buying. Our buying API enables dealers who have their own technology platform or centralized buying centers to integrate into our real-time API, to bid on vehicles on our marketplace, based on their inventory wishlist, all without human intervention. Our second offering currently in beta is our buying matrix, which enables dealers who don't have their own automatic bidding capabilities to create inventory wish lists within ACV's user experience, including vehicle type, condition, pricing, and location parameters to fill their inventory needs automatically. Marrying these programmatic buying capabilities with our nationwide inspection team enables us to offer both highly efficient and trusted experiences, which we believe will deliver better results for our dealer partners. Turning to Slide 12, I'd like to remind you about how our marketplace, data, and technology combined to power significant network effects. As more marketplace participants join our platform, we can provide greater liquidity and a better experience leading to greater scale. This in turn enables us to collect more vehicle and market data, bringing greater efficiency and more products. These reinforcing network effects continuously improve our digital marketplace and improve our data services for our customers. Ultimately, this drives greater liquidity, greater scale, and greater efficiency, which is demonstrated in our attractive unit economics. An exciting new addition to our data and technology capabilities is our acquisition of Max Digital. Moving to Slide 13, I'd like to touch on some key points about the Max Digital acquisition. Core to ACV's mission is our ability to provide automotive dealers with technology platforms and solutions to compete in a market that is rapidly shifting to digital. Max Digital is a leading provider of SaaS-based automotive data and software solutions that provides dealers with unparalleled capabilities to source and sell wholesale and retail vehicles. Max Digital's pricing guidance merchandising and inventory management products create data-driven insights that complement ACV's current data services resulting in exciting growth synergies. These synergies include cross-selling Max Digital's products into ACV's customer base and driving additional marketplace volume by arming dealers with tools to price and sell their wholesale and retail inventory more effectively. For example, ACV's pricing engine will be tied directly into Max's tools, helping dealers more effectively buy and sell used vehicles. This is just one example of many exciting opportunities our teams are exploring, and we look forward to sharing updates going forward. Moving to Slide 14, let me wrap up this section with an update on our value-added services. We had an excellent quarter for both ACV transportation and ACV capital. Our transport business has expanded significantly over the past year and has been a key enabler of attracting new buyers to the platform. Our expanded carrier partner network and fast cycle times resulted in attach rates of around 45% in Q2, well above the mid-thirties attach rates achieved in 2020. The number of transfers more than doubled year-over-year to around 70,000 in Q2. ACV Capital, which is still in its early days, has been gaining a lot of momentum in the market. Attach rates have approached the mid-single digits in Q2 with loan volume improving greater than 30% quarter-over-quarter. We also saw a material increase in revenue per loan, following the launch of our new finance offerings in early June. It should be noted that ACV transport and ACV capital are tracking ahead of our milestones in achieving our long-term targets. In summary, as it relates to our TAM and product expansion strategy, I think it's clear that we have created some exciting new avenues of long-term growth rates ACV, by leveraging our powerful data capabilities, expanding features across our technology platform and driving adoption across our growing suite of digital solutions. With that, let me hand over to Bill to take you through our financial results and how we're driving growth at scale.

Thanks, George and thank you everyone for joining us today. Q2 was a record quarter for ACV across many key financial metrics, and we made significant progress on our long-term strategic objectives. On Slide 16, I'll begin with the review of our second quarter results. We delivered very strong top and bottom line results with revenue of $97 million, which generated year-over-year growth of 117% and was well above the high end of our guidance range. Adjusted EBITDA loss of $4 million or 4% of revenue was nearly flat versus Q1 20 and was also very favorable relative to our Q2 guidance. This performance was driven by our strong revenue results in the quarter and underscores the inherent operating leverage in our business model. As expected cost of revenue as a percentage of revenue increased year-over-year and was in line with our expectations. The year-over-year increase was driven primarily by the mix of ACV transport revenue, which grew 10 percentage points year-over-year and exceeded our expectations. Total operating costs, excluding cost of revenue as a percentage of revenue improved by approximately 1100 basis points. And we delivered this improvement despite growing total operating costs, excluding cost of revenue by 76% year-over-year, once again, highlighting the leverage in our business model. Turning to slide 17, I will cover some additional detail on revenue. We have a diverse mix of products and services. Our auction marketplace revenue comprises about half of our revenue today, with our customer shorts offerings and our value-added services making up the other half of revenue. We had very strong broad-based performance across our portfolio in Q2, most notably within our services business, that has noted benefit from high transport attach rates and in our auction marketplace business, which grew 98% year-over-year, profitability remained strong. Moving to Slide 18. I would like to discuss the operating leverage in our business here. Here we're showing historical adjusted EBITDA margin along with our updated outlook for 2021. As discussed with you last quarter, 2021 is a year of significant investment for ACV. And as you've seen throughout our discussion today, we're delivering on territory expansion with nationwide coverage expected by year-end. We're launching a host of new offerings to drive additional market share and adoption of our value-added services and we're investing in technology to scale our operations. These investments translate into a 66% year-over-year increase in our operating expenses, excluding cost of revenue. And despite this increase, our adjusted EBITDA margin is down just 400 basis points year-over-year, again, highlighting the underlying operating leverage in our business model. Lastly, on operating leverage note that we have absorbed Max Digital's expense base without impacting 2021 OpEx guidance, excluding cost of revenue. Now I'll turn to the guidance on Slide 19, for the third quarter of 2021 we're expecting revenue in the range of $82 million to $85 million, a growth rate of 22% to 26% year over year, and an adjusted EBITDA loss in the range of $20 million to $22 million. As a reminder, Q3 20 was a very strong quarter for ACV with the year-over-year revenue growth of 112% as our business recovered from the COVID impacted second quarter of last year. As such, we've included the two-year growth comparison, which yields approximately 160% growth relative to Q3 19. For the full year 2021, we are expecting revenue in the range of $332 million to $338 million, a growth rate of 59% to 62% year-over-year, and an increase of $25 million from our previous guidance. Adjusted EBITDA loss is now expected to improve by approximately $17 million to a range of $62 million to $65 million. As George discussed earlier and consistent with our comments from last quarter, we believe it's prudent to assume that the favorable market dynamics driving elevated conversion on our marketplace, higher unit prices and supply headwinds for dealers will continue to normalize in the back half of 2021. And finally, on guidance, my earlier point about our investment plans, we're expecting total operating expenses, excluding cost of revenue to grow approximately 66% for the full year 2021. To wrap up my comments, let me highlight our strong capital structure on Slide 20. We ended the second quarter with $664 million in cash and equivalents, $124 million of which reflects the float in our option business. Note that we generated $27 million of cash flow from operations during the quarter due to an increase in the float of our marketplace since March 31, 2021. The amount of float on our balance sheet can fluctuate meaningfully driven by the business trends in the final two weeks of each quarter. We ended Q2 with $500,000 of loans from debt associated with our ACV capital business down from $7 million in Q1. Given our strong cash position, we optimized our cost of capital by paying down the revolving credit facility and at current levels self-funded the ACV capital business, reducing interest expense. And with that, let me turn it back to George.

Thanks Bill. Before we take your questions, let me summarize. We are extremely pleased with our execution in the second quarter, which illustrates the momentum we're seeing in the market for our leading digital platform. We continue to gain market share by attracting new dealers to our marketplace and by growing wallet share within our existing customer base. We are executing on our territory expansion plans. We're launching exciting new offerings that further differentiate us in the market. And we strengthened our data services and digital platform with the acquisition of Max Digital. We have a proven business model that can deliver scalable growth with attractive unit economics and structural operating leverage that we believe will drive significant shareholder value. With that, I'll turn the call over to the operator to begin the Q&A.

Our first question comes from Ali Faghri from Guggenheim. Your line is now open. Hi everyone.

Hi everyone. Thanks for taking my questions. So can you help me better understand the assumptions embedded in your second half outlook? In particular, I'm wondering about what type of volume growth in GMV per unit you're assuming in 3Q or 4Q?

Hey Ali. It's Bill. So, I guess a couple of thoughts first, right? Just kind of keep in mind first that full-year guidance reflects about 60% revenue growth and that's substantially up from our initial modeling of the year at 40%. So, pretty big upward. That said, similar to what other companies in the automotive space have signaled, right, we're seeing a contraction in conversion rates due to pricing normalization that's happening as the market adjusts and we've taken that into account in our guidance. Okay. So we're effectively leaning a bit more conservative on organic growth in the second half until we see the market reach equilibrium. I guess with that in mind, also a few other thoughts here. So keep in mind also that the second half of the year is seasonally weaker than the first half and Q2 is typically the strongest quarter, which of course was turbocharged as a result of the market dynamics in the quarter. That all said, right, we're going to continue to execute against the playbook we have in terms of adding sellers and buyers to the platform, expanding our footprint right on the go-to-market side, investing in tech with the thought that we're going to come out, the other end of this market adjustment, being that much stronger. So we did, assume obviously that the market's adjusting and it's going to drive, some of these metrics the other way in terms of conversion rates and ARPU.

Got it. That's helpful. And so I'm just digging in further, is the expectation that volumes can still grow quarter over quarter in the back half?

So, we don't, we don't really guide Ali to unit growth, right? I mean, there's always put and takes between units and ARPU, right? So, we try to focus everybody in terms of what the revenue output will be. So we don't get to that level of fidelity typically, right. And again, it's going to be very much driven by market conditions. At the end of the day, we keep gaining market share. I think Q2 reflected that really strongly in terms of adding sellers to the platform and buyers. So at the end of the day, we're going to keep doing the same thing and then, however, this plays out it's in part going to be dictated by how the market adjust this quarter.

Great, great. That's helpful Bill. And then just one more quickly on your comments about conversion, starting to normalize here as used car prices also start to normalize, shouldn't that also drive just more trade-in supply making its way to auction? So, one thing we had heard about is with new car supply constrained, a lot of dealers were just keeping a lot of these trade-ins to sell at retail versus potentially wholesaling them. And so while used car prices, moderating could have a negative impact on conversion rates. Couldn't it help just the overall supply of cars that are being sent to wholesale auction?

Hey Ali, it's George. I hope you're well, thanks for that question. Right now we are being cautious and assuming that, based on what we're hearing from dealers, inventory will remain very limited for Q3. As mentioned earlier in the call, we indicated that Q3 and Q4 could represent the lowest point. Going into 2022, this situation should be viewed as noise from our perspective. We believe dealers will still be facing the same challenges, and I think Q3 may actually be the toughest phase of this inventory shortage. So, that's our current thinking regarding the forecast and the inventory issue. In response to your point about dealers possibly keeping cars that they would typically sell at wholesale, I think that's already occurring. We need to consider that for now. As new cars become available and factories address their issues, including chip shortages, our new car dealers will have more inventory and will return to selling the types of vehicles their brands aim to offer. They will also resume wholesaling the vehicles they previously handled. I hope that provides more clarity.

It is very helpful. Thank you, George. And thanks Bill for taking my questions.

Thank you. Our next question comes from the line of Nat Schindler from Bank of America. Your line is now open.

Yes. Hi guys. Thank you for this. So one, is there any revenue associated in the second half with Max Digital?

Hey, it's Bill. So there is, but it's not material Nat, so, we haven't broken it out. It's a relatively small, but yeah, it's just not material enough for us to break out.

Totally understand. So and I get your answer from last question about being conservative on the change to what's going on in the market on the pricing side. Wouldn't that the problem in the market is a lack of supply, which is driving the price up because there was a demand as the equation for used cars. So wouldn't it, the pricing starts to normalize, we get more supply, are you taking any indication that supply is going to come back in which case is that overly conservative?

Hey well again, thank you. Overly conservative, I don't know. But when you look at the correction that's happening is the prices started to decline really sort of two-thirds into the quarter, right? We, started to see used car values decline. So that's one trend happening. So that's something we're being conservative, right. It started to happen. So therefore GMV and other factors will also imply lower GMV. Okay. So that is a fact. The other fact is dealers are getting to historical lows right now in inventory. How quickly that's going to change, you're seeing a lot of folks in the automotive market predict. We didn't want to predict really anything more than sort of we can control. So we're predicting to your point as remodeling that our new car dealers, which is where the majority of our supply comes from, are going to have a low amount of supply and therefore a low amount of trades. So, that is sort of what we're predicting that is sort of what we're hearing from our new car dealers. There are many factors going on. But yeah, so we are predicting both. Is that helpful or are you looking for the ability to…

Hey Nat, let me add one more piece of the puzzle here. Just to be clear. So when prices are declining, okay, there is basically lower conversion rates on the marketplace, right because buyers are more hesitant to commit, right? So these prices with the exposure that by the time they saw the car, the price might be even lower right and it takes time for sellers to adjust to the new reality in terms of what their inventory is worth right. So what it does, it kind of has the opposite effect of what's happened in Q2 or what happened in Q2 when prices go up right? Because there's a lot of very high conversion because buyers know they're going to flip that car and probably sell it for more than they even thought, because prices are going up. When prices are going down and you have the opposite effect, right and so you get to this normalization equilibrium where it's kind of a more of a normal marketplace. So while it's adjusting your conversion rates go down, but I think that's consistent with what you would hear from other players in the industry.

That makes perfect sense. But I was also wondering if on the other side, when the Manheim index was approaching two, or going north of two and pricing was going crazy, I would think that dealers would just simply not sell their car into the auction because the longer they keep the car on the lot, the more valuable it was.

Yeah, we had a great quarter. We're seeing a significant increase in the number of sellers. In fact, we've added more new sellers in the first half of this year than we did throughout all of last year, indicating increased interest in the platform. These other trends are also noteworthy. As always, we're being careful with our assessments. We believe that dealers will face a shortage of inventory this quarter, which complicates our forecasting.

Thank you. Our next question comes from the line of John Colantuoni from Jefferies. Your line is now open.

Hi, thanks for taking my questions. It's good to see the faster than expected progress in penetration rates for ACV transportation capital. Talk about if there was any benefit to adoption from the unique inventory environment that we saw, and if you'd consider the increased engagement to be sticky once the inventory cycle begins to normalize in the second half and I have a follow-up.

Let me start with transportation. One of the reasons for the increase in transportation adoption is that we are improving. For example, currently, 20% of our transportation moves are being managed programmatically without needing a price from a carrier through our ACV transportation load board. This suggests that our investments in technology for our network are paying off by optimizing lane pricing for transport, which gives us predictability. As we continue to invest in our technology and our network of carriers, we can price our lanes more effectively. If we align our pricing and services properly with our dealer partners, they will choose ACV transportation. I’m very proud of our achievements in this space. Additionally, increased density and scale help us secure better pricing from our carriers. Regarding ACV capital, we've introduced some new products recently. We're listening to our dealer partners, and for the first time, we're starting to market our product through our app. This early product was mentioned during our IPO process when it was still in its infancy. We're beginning to market it and hire additional staff. Overall, with both initiatives, we're investing in technology and hiring excellent people, and we’re excited about our progress, which is exceeding our expectations for this year.

Great. That's helpful. And now that you've developed capabilities behind consumer sourcing, which you mentioned in the prepared remarks could you at some point start to leverage the connection you've now made between dealerships and consumers to become an online marketplace or platform for dealerships to begin selling retail ready cars to consumers. Thanks.

As of right now, we're not yet planning or broadcasting to helping dealers sell cars to consumers beyond our tools. So for example, within the Max Digital products, we have the industry-leading way to merchandise car by car and some of the largest dealer groups in the country use this platform. And these are data tools. It helps, really market this one specific Ford 150, and exactly why this Ford 150 should be priced at $35,000 and has all this value. So we've got these unbelievable tools that now help dealers enrich their data, enrich their experience. As of right now on that, I would say, as it relates to e-commerce that's at least for today and all of our broadcasting and helping dealers where you are seeing us lean in and start to open up a little bit more on our strategy. Is dealers buying cars from consumers and dealers taking in trades and competing in this digital world, you're going to see us and we mentioned this in our IPO that this would be coming we're starting to lean in there. We do think peer-to-peer will shrink over the coming years. We think dealers are very well positioned to buy these cars from consumers and we're here to help dealers compete and then sort of in this digital world of helping them take more of these cars, whether they're going to take them as a trade or whether they're going to turn around and wholesale it, we're here to help dealers.

Thank you. Appreciate the questions.

Thank you. Our next question comes from the line of Ron Josey from JMP Securities. Your line is now open.

Great. Thanks for taking the question and lots of unpack here. Another great quarter, but I wanted to maybe follow up on that call in that question just now on ACV capital and George, you mentioned capital's now available in the app and that drove awareness and probably getting the mid single-digit attach rates. Can you talk a little bit more just about how you plan to ramp awareness besides just putting in the app? Talk about the drivers here to ramp awareness and really where you think this can get to over time from that. What did we say mid-single digit attach rates from low single digits prior? Do you think this gets to mid single digits? Talk to us a little more about the strategy with capital and I have a quick follow-up.

Certainly. We are currently doubling the size of the sales team. We now feel comfortable and ready to make this increase, particularly for the sales team focused on product sales. These product sales teams will leverage leads and relationships from the other account managers. We are already in contact with thousands of dealers each month, and these specialized teams, such as ACV Capital and Max Digital, will use these established relationships. We are excited about expanding the ACV dedicated product sales team. Our expectations align with what we shared during our roadshow. Bill, could you provide additional details on our expectations for where ACV Capital should be in the coming years?

Yeah. Hey Ron. So yeah, if you remember on the road show, we talked about really getting to a 20% attach rate over five years, right? So I would say we're making really good progress this year. We'll most likely kind of update you and investors on that kind of longer return path and whether or not we're getting there faster. We're certainly getting to our milestones a lot quicker on the transport side. But we're really happy with the progress that we're making in the capital. And by the way, we're also not just investing in sales. We're investing on a tech side as well. Right. So we're dedicating more resources. So, just to continue to make our offering more compelling and competitive in the marketplace. So yeah, I would just, I would just say at this point is we're making great progress. We're going to be looking at, most likely, when the owner of 4X prior year revenue from capital, granted it was small last year, but over the next few years it will certainly become more meaningful. And whether we'll get there faster than five years, I don't want to comment at this point. I would just say that we're making really great progress and obviously as you and the other professors know, this is a very high-margin business for us. So it will be accretive to margins over time.

That's very helpful. I have a quick follow-up. George, you mentioned that you added more dealers to the network in the first half of this year than in all of last year. As we approach market normalization, possibly in the first half or first quarter of next year, can you comment on whether it will be easier to add sellers during that time or if the environment will remain the same? Additionally, you mentioned that vehicle inspectors have increased threefold over the last three years, indicating progress in the field. Please discuss the potential for adding more sellers as conditions improve and whether it might become easier. Thank you.

Yeah, certainly. So, it seems, I would say between our branding, increasing, our networks, increasing, territory managers, getting out into the field, it could be also going public, in all these factors, right the ACV brand is out there. We're growing sellers and in a very successful way. So we're very excited. Maybe a way to answer your question instead of will it grow even faster next year is, our mix is also changing. So we think about the selection of assets on the ACV platform. You're also noticing our GMV has gone up and really some part of that is yes, vehicle costs right now are higher, but part of this is the mix and selection has increased. So think, we will get, we think a broader selection of vehicles as we grow. So that would be part of the trend we think can happen going into next year. Our product mix is growing. So as we're adding on new dealers and we're successful, it's from growing sort of from one product from multiple products. You've heard me talk about in a prior call up of private marketplace, as an example. We've been adding this as an example about one dealer group a week coming on to private marketplace, which has been exciting. So think, yes, we'll keep adding more and more sellers. I don't want to predict that growing even faster at this point but really excited about what's going on here. And so far, the momentum and the scale is helping and I believe the product mix is also helping. So when you look at this sort of broad strategy, we've outlined to you a few months ago is we're both a marketplace and data story you're seeing that become true, right? We didn't say we're just a marketplace company. We had this vision, we're executing on this vision and you're going to see it's very focused and executing on both sides, marketplace, and data. And I think it's in that mix, we add tremendous value back to our dealer partners. And you add tremendous back to your dealer partners not only helps them retention, but helps us to grow more, what they're considering to do with ACV. Hopefully that's helpful.

It does. Thank you, George. Thank you, Bill.

Thank you. Our next question comes from the line of Bob Levine from CJS Securities. Your line is now open. Good.

Afternoon. This is Stefanos Crest calling in for Bob. Congrats on the quarter.

Thanks.

So you discussed your goal of expansion to 160 territories. Can you discuss the tight labor market and how, if at all, is impacting your ability to fill those?

Sure. First I'll and the territory manager side, we are slightly ahead of schedule. So we are unplanned. We will, you know, come back over the next few quarters and I'm very confident to say we'll, we'll have reach sort of full coverage sort of coast to coast. So we have the territory managers out there in the field to reach out to all, all the franchise dealers from a supply perspective and these other products. The other part of, I would say maybe also related to your labor question is riding vehicle conditions, factors. We were just looking at some data earlier on this, in, in this, this was helpful to me. I'd love share is right now, our average time from posting a vehicle condition in sector teammate to and this is average, obviously some higher, some lower, but the average from posting a VCI teammate to selecting one is 16 days, that's average. And it's about a month from start date, meaning when they start being trained to be an inspector teammate. So that's pretty strong, right? Like, so when you, when you think about that, you know, there's a lot going on in this world right now. And I don't want to you know, underestimate or under-signally at the asset would say labor challenges are a challenge, I think for all companies these days. But for, I would say those two roles out in the field right now we're executing our goals and, and, and it's, it's going well. That's great color. Thank you.

Thank you. Our next question comes from the line of Rajat Gupta from JPMorgan. Your line is now open.

Good afternoon. Good evening. Thanks for taking the questions. You know, a lot of questions on that conversion now, the second half, but, you know, just have a bit of a longer-term question. Did the second quarter market dynamics accelerate, the value of your offering or, did it allow you to penetrate into more customers than you would have previously thought maybe at the time of the IPO? And if yes, that is the case. Do you expect those customers to be sticky and would that then imply that versus March, or was this today?

No, we're moving away from the near-term dynamics on the market, like say 2022 or 2023.

Does that automatically imply, you know, more units just because you weren't able to accelerate your customer base in the second quarter? Just any color around that would be helpful.

Not sure if my question was super clear, but I can go over it again. Thank you for the questions. And I'll, let me try to answer that. I think there's a few questions within, within that. So I would say we accomplish our goals for the first half. As you know, we've been at this now for a little over five years, we've got a model we go out there, we execute in our model. And you know, I would generally say bringing on sellers in the first half w we were very successful. I would say that the part that's different is most sellers have less inventory than in prior, let's say last year, let's say in 2019. Okay. So, part of what's been going on, and this is in, it's in the mix already. There might've been a dealer partner who had 220 cars. They wholesale with us. They might only have 100 5,060, whether they're keeping them or whether it's because they just don't have enough, or they cause they have less overall retail, whatever those reasons you're really seeing a signal. I would read into this less about, I would say keeping more about dealers have less cars. And, we hear this every day, dealers will reinforce, I'm giving you all my wholesale and more and more of them signaling that we're getting a lot of their vehicles, but it is going to be, there are going to be some of these dynamics that are short-term right now. We all read about it every single day. And that's really all we're really broadcasting there as it relates to the supply. As we think dealers have less cars on their lots, but which also means less retail and likely less conversions to wholesale as it relates to stickiness, I don't have any data to really sort of give you on sickness or attention, but I will say that we believe our strategy is working extremely well. We believe this idea of not only it being a great marketplace, but having this end-to-end platform of services is going extremely well. We believe offering more and more capabilities, you know, investing in these partnerships, these dealer partners is going well, so I would say no really no change on our belief of how any of these market dynamics are going to change retention. I think the other part you made a third part of your question would be, could it accelerate our growth even more? And I don't know how to answer that. I don't know if you want to answer it, but I think at the end of the day, we're growing extremely well. And all these dynamics could, could, could mean accelerated growth, but obviously we can't speak to that.

Yeah. And then what I would add is that, look, we've been, as George said, we've been really successful in adding, you know, a lot of sellers on the platform. And obviously they've had a chance to see how we perform as a marketplace. Right and the mix has changed as well. So we're more broad-based at least right now, you know, to the extent we come out the other end of this, adjustment in the market. And those and those sellers you'll feel good about the value-add from ACV, then we should benefit. Right. Whether it's, whether it's more accelerated than what had been prior it's kind of hard to say, all we can say is we feel really good about, you know, our penetration and market share gains.

Thank you. Our next question comes from the line of Alex Potter from Piper Sandler. Your line is now open.

Great. Thanks. Thanks for the question. Great quarter guys. So, I wanted to go back to a question that was asked earlier about how, I mean, obviously there's, there's limited supply and prices are high, so all else equal the dealers. If I can, should just sell the inventory they have to retail and not go to wholesale. And your response was we just put up a great quarter, which is obviously I think indisputable at this point, but generally market wide, that dynamic is accurate, right? There's been a disincentive to push vehicles to wholesale, which implies that you guys are basically just running away with the market. And I don't think that's a secret anymore. So the question that I have is do you experience a change in the competitive response of some of these other platforms? You know, when you're out talking to dealers, trying to pitch yourself as you know, a partner, do you find yourself pitching yourself against digital platforms more often than you used to? That's my only question. Thanks.

Yeah. Thanks Alex. We're, if you remember, we had, and I hate these names, but one of the large auction companies had a digital company, you know, right away. So when we started this journey, there was already, you know, digital competitor. So I would say this entire time there's been digital competitors and there's been physical competitors. If you look, in fairness when you look at the let's call it eight to 9 million cars that were sold at physical auction last year, and we're very proud of, you know, the number of cars you know, we sold we look at it from a percentage basis. We're, we're still small, we're growing. But I think the majority I think if you added up most of the digital competitors collectively they, I believe which still just be a fraction of our size. So I think the majority of the competition of where these vehicles are going is still a physical auction, cause I'm really trying to paint it. And, and yes, there are other digital companies but this whole category should grow up. And, again, we believe we're the leader and will reign the leader in the category. But still the majority of the cars have been going through, let's say the physical auction lanes and we've, we've got some room to grow to grow this category. I think the broadening of our services of, and you're in, you're seeing now with broader mix, you know, different types of vehicles, we started the journey with just the lower priced vehicles, you know, that typical three to $5,000 car, the dealer the 120,000 miles on it that a dealer would never want to retail a franchise. So we never want to recap. We're still getting a lot of those units. We are seeing the type of inventory I'm ACV grow, which is fantastic because we're really becoming a broader marketplace. Sellers are becoming buyers, buyers are becoming sellers it's in that mix and then offer these other data services that we believe we can really, you know, not only become the dominant marketplace in time, but add more value to our dealer partners.

Very good. Thanks. Thanks a lot. Nice quarter. Thank you.

Thank you. Our next question comes from the line of Nick Bacchus from Raymond James. Your line is now open.

Hey guys, thanks for taking the question and congrats on a great quarter. Just on a cohort behavior, maybe you could just talk about any learnings or changes in dealer behavior in your newer cohorts, newer territories in terms of number of vehicles transacted per dealer, any other important metrics you look at versus past cohorts in the earlier stages?

Yeah, Nick, we really aren't sharing any cohort, but just so I can share something well, I'll share with you is Howard going into these new markets has, has starting to broaden where looking at you know, one of the themes we're looking at, because right now we're just getting into markets within the Northwest and we're just opening up some of the markets on the west coast. How we're going in, we're looking at, for example, there, there was dealers for the first time ever being introduced ACV through our private marketplace because they were part of a dealer group that would be different. We wouldn't have had that entry. We'd had to wait until we got that first seller or that first buyer, if that makes sense. So our broader product selection will be helpful. You know, the first time you're sort of hearing about ACV may not be, you know, the day we hire our territory manager, they go through training and we go into the market. So I would say that part will start to be different. That's a new theme. I was just say over the last 60 days or so. But that would be like the newest thing. I think there's something else bill we can share from a cohort basis because we've not really okay. Hopefully that's helpful.

Got it. Thanks very much. And then just real quick on the Promatic buying just maybe just, you know, a little bit more about this, this new offering and the launch in fourth quarter, do you view this as a meaningful kind of incremental driver or is it more of a complimentary type feature?

Sure. So there's two parts of our programmatic buying product strategy. The first part is, is live and we've got some dealers who are already integrated with ACV, the dealers who integrate with us for our buying API tend to be larger dealer type groups. They have a technology department and can and, and have what's called the internal technical resources to integrate with our API. So that product is live and we're starting to integrate with additional dealer groups. What that product allows is a large dealer who has the technical capacity will automatically putting bids on ACD without any human intervention and not only picking the types of vehicles, but in addition to types of vehicles, its condition and other factors. So think basically what a human would do. In picking inventory, we're ingesting our condition report into the buying process so that their, their machines and our machines can help them at the end of the day, you know, buy the vehicle. So that's live and we're very excited to get that live. We were working on this part of our platform for, for a while and we're, we're, we're so happy to get some dealer partners now using it. And the feedback has been tremendous. It's still early days, but we're actually seeing, for example, arbitration rates being lower than our averages for dealers buying, you know, without having any human intervention, which is just awesome. So that's product one, that's the buying API and I believe I'm not sure, I believe we're the first in the industry to do programmatic buying via an API. At least as far as I know, the second is we've started to build a buying matrix approach where dealers can via interface, select the types of vehicles they'd like to buy as well as condition. And so it basically emulating what our API does, but it's an interface. So the dealers, they don't have the engineering team to integrate with us, right? So we, we're going to have both options. So think whether they have an engineering team, the ability to integrate, or if they are going to use our user experience at the end of the day, they do the same thing that product's in beta that one's not live. We only have a few dealers using it today because I'm getting such positive feedback. I felt why not announce it? I usually wait for products are fully live. But the feedback we're getting is tremendous so far. So we'll be looking to launch that and really what does it do to your second part of your question? Is it adds a persistent demand into the platform for the vehicle segments that we have where, whether it be one of our API buyers or one of our the preferences on the buyer matrix, we have this persistent demand and persistent demands helpful and think about persistent demand. Plus the ACV marketplace demand. The two together is extremely unique because for some vehicle types, you really want an auction format. You really want that competitive bids and these, the API and our buying matrix, actually, it's not just a separate thing. It actually delivers a result into our 20-minute auction. So yeah, we're, as you probably could tell, we're very excited about this. I can't wait to roll this out even further.

Sounds exciting. Thanks for a central the time. Yeah. Thanks. Thanks.

Thank you. Our next question comes from Daniel from Stephens Inc. Your line is now open.

Good afternoon, guys. Thanks for your questions. And squeezing me in here at the end. Of course, just on the industry should change a supply to men normalizes that maybe first, so as conversion rates begin to take down and it takes longer to sell the vehicle. Does the capability of having land help you or hurt you when share? Obviously dealers right now have plenty of excess capacity, but as lots begin to fill up, or are you seeing more dealers ask you to start moving inventory off their law? And if so, Bill, can you talk about your ability to flex your land capacity through their partnerships we're buying land to, to, to service that demand?

Yes, certainly. So we'll, I'll go through both of those phrases. So it doesn't seem like at least this year land will be much of a problem for franchise dealers. Now, if you've driven by any lately but there aren't many cars in these lines. So I would say digital, I believe this is my opinion is an advantage because at least you can try to sell it wholesale while it's still on your lot. And you can debate between wholesale retails. So I believe upstream in digital for this environment is beneficial. Not, not a detriment and I don't believe land if maybe historically let's say, 10% to 15% of dealers historically had a land challenge as it relates to wholesale, whatever the right percentages, you can guess 10%, 15% or 20% of dealers have land challenges, but right now it's an even lesser percentage. The second part of your question is if we needed land there's a lot of land out there in this country. So we're not worried about if we ever need land. You know, there's, it's noise. We have a few, very few lots of loops going on in small parts of the country that we don't usually broadcast that if we really need it, we would just stand it up. Land is generally cheaper these days and it's really just not a problem if we need it, we can just go and rent it from somebody who we need it for. But right now it's by far not even in the top three things that are usually come up as like why they would go with us or not go with us. Land is not even in the top three at this point.

Great. That's helpful. And then one just following up, I think earlier you mentioned helping dealers, maybe stores directly from consumers. Can you talk a little bit more about that service, how differentiated it is maybe from some of your other peers offer and then longer term as you help dealers, source inventory, maybe outside the auction channel, how do you balance that longer-term risk to them finding ways to buy outside of your digital auctions and maybe directly from consumers just how you balance that long-term impact. Thanks.

Our dealer partners are currently utilizing a product called live appraisal. This allows them to tell consumers that they will offer higher prices for cars compared to those who don’t use our service. Whether or not they incorporate our brand in their marketing is up to them. For example, they might promote the idea that instead of getting a car price from a local or national dealer, consumers can access one of the largest digital auctions with transparency about their car's value. Our dealers market themselves as willing to pay more because they are associated with ACP. This could be done through events at the dealership or by sending a team to a consumer’s home for a quick inspection and auction. This differentiation is important, as in a crowded market, simply claiming to pay the most for a car loses impact. Our product provides a unique selling point for dealers, and we've seen significant growth in the live appraisal this year. We're also enhancing technology and pricing capabilities that allow our dealers to compete more effectively. Our additional products will support dealerships in acquiring consumer cars, positioning our dealers well for purchasing more cars from consumers. ACV plays a comparable role to Shopify, offering scale, a large inspection network, technology, and data to support our dealer partners.

Thanks so much guys. Good luck.

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Tim Fox for closing remarks.

Great, thanks. Thank you everybody for joining the call today. So we're going to be on the road virtually participating in a couple of conferences coming up here. I'll be at the Canaccord Genuity conference tomorrow. All the details are on our websites. So we look forward to seeing you on the conference circuit in the coming months. And again, thank you for your interest in ACV. I hope you have a great evening.

This concludes today's conference call. Thank you for participating. You may now disconnect.