ACVA - NASDAQ

Greetings! And welcome to the ACV Q1 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Tim Fox. Thank you. You may begin.

Good afternoon. And thank you for joining ACV's conference call to discuss our first quarter 2024 financial results. With me on the call today are George Chamoun, Chief Executive Officer; and Bill

Thanks, Tim. Good afternoon, everyone. And thank you for joining us. We are pleased with our first quarter performance, which demonstrated continued strong execution by the ACV team. We delivered another quarter of record revenue, which was at the high end of guidance and grew 22% year-over-year. We delivered our first quarter of positive adjusted EBITDA since going public, which was also at the high end of guidance. Our innovation engine continues to hum along, further extending our competitive mode and driving operating efficiencies, resulting in a 800 basis point year-over-year improvement in adjusted EBITDA margin. Along with our continued momentum in dealer wholesale, we are very pleased with the early market adoption of ACVs consumer sourcing solution ClearCar. We kicked off a number of tech investments to support our commercial wholesale strategy. ACV remains focused on driving strong top line growth, continued margin expansion and delivering adjusted EBITDA profitability in 2024.We're confident that executing on its profitable growth strategy will result in creating long-term shareholder value. With that, let's turn to a brief recap of first-quarter results on Slide 4. First quarter revenue of $146 million was at the high end of guidance and grew 22% year-over-year. GMV decreased 4% year-over-year, driven by a 16% decrease in GMV per unit as wholesale prices continues to normalize. We sold 175,000 vehicles in our marketplace, growth of 15% year-over-year, reflecting strong listings growth and a modest year-over-year decline in conversion rate. Slide 5, I will again frame the rest of today's discussion around the three pillars of our strategy to maximize long-term shareholder value; growth, innovation and scale. I'll begin with growth. Turning to Slide 7, I'll share our observations about automotive market trends, as context for dealer wholesale volume. New retail sales were flat year-over-year, continue to lag 2019 level. However, the inventory picture continues to gradually recover and along with increasing OEM incentives, we believe new retail sales will improve in the back half of 2024. The used retail environment remains soft with unions and also flat year-over-year in Q1, because of affordability issues and the lack of late model inventory continue to pressure consumer demand. In terms of vehicle sourcing dealers are retaining a higher than normal percentage of trades for retail inventory, continuing a headwind for dealer wholesale supply. The trade to wholesale mix is expected to normalize over time as new and used inventory recovers from their price levels, which are currently about 25% below normal. Along with the supply picture continuing to normalize, we saw price depreciation and conversion rates in line with normal seasonal expectations. On balance, we believe the end markets are showing early signs of improvement, while the pace for dealer wholesale recovery remains difficult to predict, we do believe the market will post modest growth in the back half of 2024. Moving to Slide 8, I'd like to provide highlights from our value added services, beginning with ACV Transportation. The Transportation team delivered another strong quarter with attach rates in the mid 50% range, which is in line with our midterm target model, resulting in 95,000 transport requests source from our marketplace. The use of AI Optimized Pricing, which we introduced in early 2023, expanded significantly, and we achieved 94% lane coverage in Q1. By leveraging AI, our transport team drove growth and operating efficiency, resulting in a 300 basis point year-over-year increase in revenue margins, reaching the high teens and in line with our midterm target model. We also launched off-platform transportation services for our dealer partners. While still early, we're excited to be delivering additional value for our dealers and another long-term growth level. Turning to Slide 9. Our ACV Capital team also delivered strong results in Q1. Attach rates in the low double digits, combined with strong ARPU expansion resulted in 40% revenue growth year-over-year. Given the current challenging used vehicle market, we are focused on balancing the growth and risk of ACV Capital, resulting in a 1% credit loss provision in Q1. Moving to the second element of our strategy to drive long-term shareholder value, innovation. On Slide 11, I'll first recap some of our growth oriented product innovation. Let me begin with the dealer buying experience. We continued to add new market place features to increase conversion rate, including advanced Saved Search Capabilities and additional transparency of vehicle package information to help inform accurate pricing. The relaunch of ACV MAX has been promising, with Q1 bookings at the highest level since 2021. We are in the early phases of ramping our go-to-market and expect ACV MAX to be an additional long-term growth lever. We kicked off tech investments to support our commercial strategy, including integration with AutoIMS, new features required to service consignors, and integration efforts across our remarketing centers. Lastly, we're in the pilot phase with our dealer self-inspection solution, initially targeted at two use cases, private marketplaces and live appraisals. Feedback from our dealers has been very positive, and we look forward to sharing more details throughout the year as we expand capabilities and scale the pilot. Turning to Slide 12, we are very pleased with the market traction of ClearCar, ACV's Consumer Sourcing Solution that leverages AI and real-time market data to deliver highly accurate condition-based pricing. Based on dealer feedback, lead generation, conversion rates, and margins are significantly higher than competitive consumer sourcing tools. This speaks to the power of ClearCar in driving qualified lead and ultimately increasing overall supply for our dealers. We are excited to share feedback directly from one of our dealer partners, Lester Glenn Automotive Group, who is using a broad set of ACV Solutions, including ClearCar, ACV MAX, and our marketplace. We posted a video on our IR website featuring the Lester Glenn team describing the significant value they're deriving from the ACV Solution. It's a great opportunity here directly from our dealer partner. On Slide 13, we highlight examples of tech investments that extend into our operation, delivering customer success while reducing costs. One of the key drivers is inspection accuracy. Leveraging AI and our structured data is a massive competitive advantage, because each vehicle is unique and with its own imperfections. We recently launched Version 2.0 of CoPilot and ArbGuard. For CoPilot 2.0, we further leverage our vast data set by adding a visual representation of common high-risk vehicle heart failures based on specific year, make, and mileage of the vehicle. ArbGuard 2.0 continues to leverage some of the industry's best artificial intelligence for vehicle condition diagnostics. With the addition of Monk's exterior cosmetic model, we deepen our inspection capability, enabling our VCIs to produce an even higher level of accuracy. We expect these innovations will drive both VCI efficiency and lower customer assurance costs over the long term. To wrap up on innovation, ACV remains committed to delivering industry-leading technology to our dealer partners and to our own operations, driving both growth and scale. We look forward to sharing more details with you next quarter. With that, let me hand it over to Bill to take you through our financial results and how we're driving growth and scale.

Thanks, George. Thank you, everyone, for joining us today. We are very pleased with our Q1 financial performance. Along with delivering accelerated revenue growth, we had meaningful margin expansion and recorded our first positive adjusted EBITDA quarter as a public company, demonstrating the strength of our business model. Turning to Slide 15, I'll begin with a recap of our first quarter results. Revenue of $146 million was at the high end of our guidance range and grew 22% year-over-year. Adjusted EBITDA of $4 million was also at the high end of our guidance range, and adjusted EBITDA margin improved approximately 800 basis points versus Q1’23. This demonstrates both the operating leverage in our model and continued strong OpEx management. Non-GAAP net income also turned positive in Q1 and was at the midpoint of our guidance range, with margin increasing approximately 500 basis points year-over-year. Next on Slide 16, I will cover additional revenue details. Auction and assurance revenue, which was 57% of total revenue, increased 21% year-over-year. This performance reflects 15% year-over-year unit growth and auction and assurance ARPU of $476, which grew 5% year-over-year. Note that ARPU increased year-over-year despite a 16% decline in GMV per unit, reflecting our Q3’23 price increase, and we believe we still have pricing headroom going forward. Marketplace services revenue, which was 37% of total revenue, grew 28% year-over-year. Results were driven by strong ACV Transport performance and another record revenue quarter for ACV Capital. Our SaaS and data services products comprised 5% of total revenue and declined 3% year-over-year. As George mentioned, we are very pleased with the relaunch of ACV MAX with strong Q1 bookings. Note that this is a SaaS based product with routable revenue, so growth will take time to materialize, but we're confident that the upgraded ACV MAX suite will drive long-term growth. Turning now to Slide 17, I will cover costs in the quarter. Q1 cost of revenue as a percentage of revenue decreased approximately 300 basis points year-over-year. The improvement was driven by strong auction and assurance results and by ACV Transport. As George mentioned, we delivered high teens transport revenue margins, which is in line with our mid-term target model. We continue to focus on expense discipline as we optimize and scale our business. Non-GAAP operating expenses, excluding cost of revenue, as a percentage of revenue, decreased 300 basis points year-over-year in Q1. Moving to Slide 18, let me frame our investment strategy as we continue driving profitable growth. Our focus on spending discipline and operating efficiency resulted in a material decrease in OpEx growth in 2023, resulting in a significant improvement in adjusted EBITDA year-over-year. As we mentioned on our Q4 call, OpEx growth is expected to increase in 2024 as we integrate our new remarketing centers and invest in our commercial wholesale platform. Even with this incremental investment, we continue to expect adjusted EBITDA margin will increase by approximately 800 basis points this year. Next, I will highlight our strong capital structure on Slide 19. We ended Q1 with $341 million in cash and cash equivalents and marketable securities and $125 million of debt on our revolver. Note that our Q1 cash balance includes $172 million of float in our auction business. The amount of float on our balance sheet will continue to fluctuate meaningfully based on the business trends in the final two weeks of each quarter, which has a corresponding impact on operating cash flow. In the figure on the right, you'll see that we delivered a strong quarter of operating cash flow. Note that for Q1’24, when excluding the quarterly change in marketplace float, we generated $5 million of operating cash flow. This is a significant increase year-over-year reflecting the transition to profitability and strong margin improvements. Now I'll turn to guidance on Slide 20. For the second quarter of 2024, we are expecting revenue in the range of $154 million to $158 million. Adjusted EBITDA is expected to be in the range of $6 million to $8 million consistent with our commitment to achieving profitability each quarter going forward. For the full year of 2024, we continue to expect revenue in the range of $610 million to $625 million representing growth of 27% to 30% year-over-year. Adjusted EBITDA is expected to be in the range of $20 million to $25 million reflecting operating improvements in our core business and integration investments in our remarketing centers. As it relates to guidance, we are assuming that the dealer wholesale market grows modestly in the back half of 2024, that conversion rates and wholesale price depreciation follow normal seasonal patterns. Revenue growth is expected to outpace non-GAAP OpEx growth, excluding cost of revenue and D&A by approximately 10 percentage points. Finally, moving to Slide 25, we remain committed to achieving our midterm target model, which is underpinned by sustaining market share gains, penetrating adjacent markets, and expanding margins through revenue mix and scale, all of which we've clearly demonstrated in our performance. Our midterm targets are primarily predicated on the dealer wholesale market recovering to historical volumes over time. In addition, we are expanding our TAM and consistently taking share, which will drive long-term growth. And with that, let me turn it back to George.

Thanks, Bill. Before we take your questions, I will summarize. We are very pleased with our strong execution in Q1. We are especially proud of our ACV teammates that deliver these results. We continue to gain market share by attracting new dealer and commercial partners to our marketplace, while expanding our addressable market, which positions ACV for attractive growth as market conditions improve. We are delivering an exciting product roadmap to further differentiate ACV and drive operating efficiency. We are on track to achieve our near-term adjusted EBITDA targets and deliver on our midterm targets that we believe will drive significant shareholder value. We are committed to achieving these results while building a world-class team to deliver on our goals. With that, I'll turn the call over to the operator to begin the Q&A.

Thank you. [Operator Instructions]. The first question we have is from Bob Labick of CJS Securities. Please go ahead.

Hey Bob.

Good afternoon. Hi. Congratulations on a nice quarter.

Thank you, Bob.

Thanks, Bob.

Lots of great stuff you already told us. I guess my first question, maybe give us a little update on your, I'll call it kind of commercial land and reconditioning strategy, if you could. I know, we talked about you had the Texas acquisition of a few locations to kind of experiment with this, given that the AutoIMS, you finally got through the AutoIMS lawsuit and you can now work with that. So maybe just give us a, what have you learned so far in this emerging strategy for you as it relates to land, reconditioning, and the commercial market itself? What are the pros and cons and what are the kind of next steps over the next several, I don't know, quarters or years or whatever your time horizon is there?

Yeah, certainly, Bob. Thank you. So we're making really, really great progress. The initial locations we have are helping us build relationships with commercial consignors. Obviously, we're still in the early days here, but step one was for us to start to have, a handful of locations around the country, start to get the technology in place, which we've got a phased approach here. The phased approach allows us to your point, get access to AutoIMS. Also allows us to begin our journey of leveraging the ACV tools. So our first phase throughout this year, we started to bring the ACV condition report and methodologies of leveraging our inspections at these auctions. So, that will be happening, throughout the year. A broader integration, but this could take a long time to summarize, like a broader integration of activities is also going on as we speak. We're also starting to get some early wins. For example, even since our last call to now, we've had both one rental car company and one bank where we get repos, have given us several hundred units at a new location. They were previously just working with us at one location. So this idea of build a relationship with a commercial consigner, show them it works, show them that we've got the right model for them. We had some early wins. All be it these are – we are still early. These were hundreds of cars a month, but even hundreds of vehicles a month starts to show the story, starts to prove that we're going to be a great marketplace. So, hopefully that's what you're looking for there. That kind of gives like a really quick summary, but we're on path. Really nothing has changed from our last call. We're on path of executing on the strategy.

Great overview, appreciated it. Then just one more for me, I'll jump back in queue. Obviously a very strong quarter. One of the things that stood out was the, I guess, operating leverage on your O&T, your operations and technology line. Can you talk about the drivers there? Maybe the efficiency of your VCIs is, how much more can you drive there? How do you feel about where the VCIs are currently? I know like years ago we talked about they were doing six a day. The best ones are doing 12 to 15 a day or any other kind of, just metrics there and where you are moving in that path of increasing the efficiency of VCIs. Obviously you're leveraging that line because we can see it in the results.

Yeah, certainly. I'll start and then Bill could also chime in. So, I would say we're making small incremental changes and enhancements to scheduling our inspectors. So, I would say small wins quarter-over-quarter. We're happy with some of those small wins, to your point. Those incremental changes will all add up. As, in our more mature areas, we're already hitting our midterm targets. So, we're very pleased there. There are also, to your point, a broader operating efficiencies from our operations team, bringing in automation and some of our backend functions as well beyond actual inspection. So look at those results, weren't in one area like inspections. It was actually a broad improvement. Bill, any more you want to share?

Yeah. Hey, Bob. So I would just add a couple of points. So, we've talked in the past about continuing to just optimize every aspect of our business. We're continuing to do that every quarter. An interesting, maybe set of data for you, if we look at just the organic growth rate of our OpEx in the quarter it was low single digits. That carves out the M&A impact in terms of OpEx. So we're continuing to manage our OpEx as effectively as we can while making sure we're also investing properly in the business. So we are starting to see those results in our financials.

Yeah. Great stuff. Thank you very much.

Thank you.

Thank you.

The next question we have is from Michael Graham of Canaccord Genuity. Please go ahead.

Hi, thank you. I wanted to ask two questions. The first is it looks like auction revenue per unit stepped up about 5% sequentially, even though GMV per unit came down a bit. So just wondering if you could comment on whether you're seeing lower incentives or what's going on there. Then just more broadly, you mentioned that you're assuming for the year that the dealer wholesale market, sees modest growth, which I think is consistent. But, maybe you could just give us a little more depth on, what you're seeing in the market and what you think the puts and takes are around like the market, really opening up to its full potential.

Yeah, I'll start and then you can.

Sure.

Yeah. So our auction ARPU went up 20 bucks quarter-on-quarter. I believe that's the highest actually it's been since we've gone public. So, you're just continuing to see the benefit of our previous price increases and other optimizations that we're doing in terms of managing ARPU. So, we're pretty pleased with that result, especially in the context of GMV per unit going down 16% for year-on-year. So, and that certainly, drove the outperformance in our revenue margins for just our auction insurance revenues, which it's 73% for the quarter, which is also the highest since we've gone public.

I'll add, as we've been obviously pretty consistent that we felt comfortable with that midterm market sort of pricing ARPU targets that we've given our analysts and investors. So we're on path to hitting that. Even though GMV has pressure, we said, what we said to you all is even with the GMV pressure, meaning used car values going down, we still feel good about our midterm target. That should give investors’ confidence in our ARPU. We feel good about that. Then your other question was really, I would say generally about the market. I would say Q1 a little -- a little more color would be January started out a little hotter than maybe March ended. Just generally you probably saw that with some of our competitors and others out there in the marketplace. The overall market in Q1, I would say was okay. It wasn't like the market sort of like really, really came back just yet. Having said that when you read all the GMV, not just the volume, the dealer wholesale volume, I would say across the industry, but it was not stellar yet. But you are seeing overall, you saw one of our competitors even recently say used car values are starting to go down. You're starting to see, we look at all the signs of market health. We like where the industry is going. At the end of the day, used car values go down would mean that independent dealers would buy these cars more affordably. They can then retail it to their end consumers. So, when we look at all the signs, even though some of them at the moment from an investor perspective, you may look at like GMV going down was like a concern on ARPU. I wouldn't worry about that too much. We feel good about our ARPU. So GMV going down will actually mean independent dealers can go buy these cars from trades and others. They can retail them to their end consumers. So to your point, I would say not a lot changed from last quarter. Our feeling is things will probably get better for us.

All right, perfect. Thanks a lot for all that color.

Yeah, thank you, Mike.

The next question we have is from Ron Josey of Citigroup. Please go ahead.

Hi, this is Jamesmichael. This is a question for Ron. Quickly for me, it's encouraging to see the progress in transport. It's a 95,000 unit source and the 300 basis points improved revenue margin. Can you expand on the operational work you're doing to improve transportation profitability?

Yeah, the margin expansion and enhancements to transport have been consistent, obviously, and we've done a good job of continuing to add to our product and tech, lane optimization, pricing, size of the vehicle, all the different attributes. We keep working on it. We're doing this, actually, in obviously not an easy market. So overall, we're very pleased with our team. We've got more work to do in this area, meaning that we've got more investments in the technology of ACV Transportation, but we're really just so pleased with the intelligence we're building into the lane pricing and sort of scaling lane by lane across the country.

That's helpful. Thank you. And then I wanted to turn to ClearCar. Can you provide some additional color on how the lead gen conversion rates and margins are improving, and the specific leverage you have to improve execution? Thank you.

Yeah, certainly. ClearCar is going really well. I mean, we keep growing additional rooftops out there. Dealers love the product. Consumers really like the product. We're seeing incredible feedback. One of the things we did this quarter, to give you all a little bit more color, is we went out and we had a video done of a dealer group called Lester Glenn Auto. I really would encourage all of you to watch this video. It will give our investors really the voice of the customer. You'll hear them talk about how these tools are helping them, at the end of the day, make more money, close more transactions with the end consumer. There's a quote in there about how they are doing so much better on their own internal conversion. And then think about it, like optimizing their inventory. Optimizing their inventory is really important. The last couple of years, dealers have been retailing cars they should not have been retailing. They really were wholesale cars. So we'd encourage you to watch this video, because it'll give you a customer that's using ClearCar, ACV MAX, and our marketplace, our ACV Auctions marketplace. So I think I'll leave you with that, at least. I think that'll be better than me just telling you what's in the video. I really would love for you to actually watch it.

Fair enough. We'll take a look. Thank you so much.

Thank you.

The next question we have is from Rajat Gupta of JP Morgan. Please go ahead.

Great. Thanks for taking the questions. Just had one clarification from the prior answers. I think Bill, you mentioned that organic OpEx was up a low single digit. Does that also include some of the incremental investments related to AutoIMS and other integration efforts? And what would be the organic volume number tied to that low single digit OpEx number? And I'll follow up. Thanks.

Hey, Rajat. It's Bill. Yeah so we, as you know we're not breaking out specifically any organic versus inorganic numbers, other than to say that the Alliance acquisition from last quarter will represent about 5% of revenue for the year, so a little less than that for the quarter. The organic growth in OpEx does include partially some of the investments that we're making in connection with the acquisitions that we did, but the balance of that is part of the M&A bucket if you will, since those integration costs directly relate to the M&A transactions. And if you remember, in terms of the EBITDA that we inherited as part of those deals, we used part of that EBITDA to fund those integration costs.

Got it. That's helpful. And just, I think in the past you've given us some color in market share in every quarter. What would you say your D2D market share performance was in the first quarter?

Yeah Rajat, if you remember last call, we said we're going to start to do market share once a year. Obviously we are doing it more often than that prior, when the market was all crazy and wild. But having said that, just to give you a little bit more color I guess, but I guess moving forward just keep in mind, we really like to be doing this once a year, is one of our – one of the outside sources out there, AuctionNet, which is a NAAA, mentioned that in their report that physical auction volumes were down 5% year-over-year. So that's not giving you like – that just kind of gives like a framework of at least what collectively the physical auctions said that dealer wholesale specifically, even though commercial was up, dealer wholesale was down 5%. So at least it’ll help you kind of get an idea. But having said that, I mentioned we'll be doing that moving forward now that things are starting to normalize. We'll start to do that once a year.

Got it. Got it. Just one more on OpEx, if I may. You obviously mentioned like the step-up in the re-marketing integration, just the integration of the new re-marketing centers. Should we treat this like OpEx step-up this year, because of that as more of like a one-time thing or – and then you have like better revenue versus OpEx leverage going forward? For example, like this year you are diving to like 17% OpEx growth and 27% revenue growth, for example. Does that ratio get better going forward? Should we assume this is more of like a one-time dynamic for this year? I'm not sure if that question was clear, but any color would be helpful. Thanks.

Yes. I mean, I'm not sure if I would look at it as one-time. And that we're going to be spending money for the integration through the end of this year. It'll certainly dip into next year. That said, as we scale the business, we're going to continue to get OpEx leverage as we approach our mid-term targets across the P&L, right, as we get more scale. So as we drive towards those targets, you are going to see leverage throughout the P&L right, from kind of revenue margin down through OpEx. So we're essentially going to get that leverage, but that doesn't necessarily mean we're going to incur kind of one-time costs that are just going to go away, since most of this is labor, right, because it's product development by the engineering teams. So it's – I'm not sure I would look at it as per se one-time. But we'll certainly get the leverage and continue to get the leverage like we've demonstrated in the past, and we'll continue to get that going forward as we scale.

Understood. Thanks for all the color and taking the questions.

Thank you.

The next question we have is from Nick Jones of Citizens GMP. Please go ahead.

Great. Thanks for taking my questions guys. As you look to land more rooftops and you are having those conversations with those dealers, how much of a factor is kind of the lower wholesale volume potentially in their reluctance to get on, just because maybe they don't feel the need or the pressure to diversify? To the extent that that is part of the conversation, things do start to improve in the back half and into next year. How well-positioned is ACV to kind of accelerate landing rooftops while also kind of winning share in existing rooftops?

Yeah Nick, that's a really good question and maybe one I wasn't prepared, but I'll do it on the fly. I think you are really pointing out an interesting topic, and that's that dealers have less to wholesale. So it's really not the top of mind, right. They are really, they are trying to source more and trying to buy more from consumers. So your question, which I'll put back in the statement, is interesting. We could see a tailwind. As wholesale starts to come back, we start to see a conversion. I guess my initial gut reaction is probably favorable. Yeah, I think you are onto something there, but I wouldn't say I put a lot of thought going into that coming to this call. But I think your guide is probably right, that we could see as you – it's almost like anything in life, the more of it comes to you, the more of a problem there is to address. There could be something there.

Great. So then I guess my follow-up would be, to the extent that there's potentially a tailwind and you guys are approaching your midterm targets, I mean how much of a North Star is the midterm target if there's an opportunity to kind of maybe either more aggressively invest in technology or landing those rooftops? You know, because technology investment has always been kind of part of the ACV story. So I guess how nimble is the roadmap to the extent that maybe a tailwind manifests?

So I feel really good about the roadmap. I mean, when you look at, consumer sourcing will help these dealers get the right inventory. When you look at the pricing strategies, helping them price vehicles correctly. When you look at the way we're merchandising assets inside the platform. We've got our commercial customers. I mean, you'll start to see commercial volume start to become more material over the next year. You know each of these areas are all going to add up, and that's why I still feel great about our midterm targets. We really have quite the sizeable product and tech investment going on here across several different areas, and as those areas mature, we're already doing great, but there could be an accelerate. There could certainly be an accelerate. But I would say for now, instead of creating yet a new expectation, I think the expectation I'll manage right now is I feel great about the midterm targets. And I would say as we get closer to it, then we'll create new expectations. But for now, I’ll just leave it there. I think our product and tech investments and our overall position we're in, we're in a really good spot.

All right. Thanks, George.

Thank you, Nick.

The next question we have is from Gary Prestopino of Barrington Research. Please go ahead.

Hey. Good afternoon, George, Bill and Kim. Hey, a couple of questions on ClearCar. And I know it's early in the game here, but how much has this really proliferated through your dealer customer base at this point?

You know, we didn't really come in with a number today, but I think we've got – we don't want to broadcast a number every earnings call, so I won't answer every call. But I think we're close to 700 rooftops or something like that. So we're still early, but Gary, I mean that's fantastic for a brand new product as you know. It might be one of the fastest growing auto tech companies, and we can look at it as like one product niche. Probably one of the fastest growth ones out there. So we're – but to your point, still early. I mean there's 16,500 franchise rooftops. There's tens of thousands of independent rooftops, but the signs are positive. The end results are positive. We are not broadcasting necessarily everywhere either. Like, we focused on the ACV MAX joint customers. We focused on our good wholesale customers, and maybe towards the back half of this year, early next year, we'll start to step on the gas a little bit more from a sales perspective. But we kind of had our own pacing, and I will say we're a little – we're definitely ahead of our pacing, which you just need to be set up to do so. I mean, behind the scenes you are trying to turn on 30, 40, 50 customers a month. It's a lot to do. We feel great about it. We're ecstatic about our progress so far.

No, that is good. And that just gives us an idea of the potential growth trajectory. And then I have two other questions regarding ClearCar. Of the dealers that are sourcing cars through ClearCar, are you finding that the majority of them will sell something through your platform, because they are sourcing the car through your ClearCar product?

Yeah, so they have two options. They can either pay us the subscription, like look at this like a bundle, like what we're doing with ACV MAX, and so either they are paying us a healthy subscription, or they are actually giving us wholesale cars. So we're getting one of the two. Most of the customers we've turned on have agreed to the wholesale volume commitment, and some of the customers that have come on, have gone down the subscription bundle then with ACV MAX. So we're happy with both. So we're not like pushing every dealer down a path. They have two options. Go down path A or path B, and both are positive for ACV.

And then just lastly, there's a lot of these kind of products out there dealers can use. How are you differentiating this competitively in the market?

Yeah, there's a few elements of why our product truly is unique. Before I get into those features, I'll just remind everyone we're inspecting somewhere around a million cars a year with humans. That inspection is giving us a data mode and detailed information about cars that really no one else we believe in the world has. Well, we're leveraging our technology using products like Monk to go around a vehicle, and we're getting this unbelievable data mode. And what it's allowing us to do is take our inspection data, and we've created this consumer offering where all the consumers do is go around the product basically using Monk. It's called ClearCar Capture. We don't call it Monk for the end consumer. And then we get the ClearCar condition based on hints. They have a new consumer ask. We ask the consumer a few questions. Well, those questions map to the same data in our inspection reports, and we all know that really the benefit of machine learning and leveraging artificial intelligence is having a really deep, deep, deep data profile. We have that. So at least for right now, we have a huge competitive advantage over anyone else trying to price a consumer car. Now it's just a matter of us taking that competitive advantage, sitting in front of dealers, and helping it sort of transcend to sort of value that for ACV as well.

Thank you. Good answer.

[Operator Instructions] The next question we have is from Naved Khan of B Riley Securities. Please go ahead.

Hi, this is Ryan on for Naved. I was just hoping you could talk about plans for cash usage and also the M&A appetite going forward. Thanks.

Hey, it's Bill. So yeah, we certainly did consume some cash in Q1 for some of the M&A transactions. We still have a fair amount of cash on the balance sheet, but what I would point you to are two factors. Number one, look at cash net of the outstanding debt that we have on our credit facility, which was $125 million at the end of March. And also keep in mind that at the end of Q1, $174 million of our cash was comprised of marketplace float, which is volatile quarter-to-quarter. And typically the high point for the year is at the end of Q1, and that tends to trend down through the rest of the year. At this point, we feel pretty good about our liquidity position. We certainly have some flexibility and want to retain that flexibility for other tuck-ins. As they come about as part of executing on our strategy to be in a position to penetrate the commercial market. Hopefully that answers your question.

I'll just add to what Bill said. We're in a very, obviously lucky and favorable position with a strong balance sheet, to be able to go after these tuck-ins and other opportunities. We don't take that favorable opportunity lightly, and we're leveraging it to our advantage.

That helps. Thank you.

There are no further questions at this time. I would like to turn the floor back over to Tim Fox for closing comments.

Thank you, Eileen. Sorry, thanks Eileen. We'd like to thank everybody for joining us on the call and look forward to seeing you on the conference circuit this quarter. Again, thank you for your interest in the ACV and have a great evening.