Q1 2024 ACV Auctions Inc Earnings Call

Participants

Tim Fox; VP, Investor Relations; ACV Auctions Inc

George Chamoun; Chief Executive Officer, Director; ACV Auctions Inc

Bill Zerella; Chief Financial Officer; ACV Auctions Inc

Bob Labick; Analyst; CJS Securities

Michael Graham; Analyst; Canaccord Genuity Inc

Ron Josey; Analyst; Citigroup

Rajat Gupta; Analyst; J.P. Morgan Wealth Management

Nick Jones; Analyst; JMP Securities LLC

Gary Prestopino; Analyst; Barrington Research

Dave Kang; Analyst; B. Riley Securities

Presentation

Operator

Greetings, and welcome to the ACV Auctions 2024 earnings conference call. (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.

Tim Fox

Good afternoon and thank you for joining ACV's conference call to discuss our first quarter of 2024 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 involve factors that could cause actual results to differ materially from those expressed or implied by such date. A discussion of the risks and uncertainties related to our business can be found in our SEC filings and in today's press release, both of which can be found on our Investor Relations website.
During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is provided in today's earnings materials, which can also be found on our Investor Relations website.
So with that, let me turn the call over to George.

George Chamoun

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. It was also at the high end of guidance.
Our innovation engine continues to hum along further extending our competitive moat and driving operating efficiencies, resulting in a 100 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 ClearCorrect. We kicked off a number of tech investments to support our commercial wholesale strategy ACE 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.
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 at wholesale prices it 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.
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 5, and 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 2020 for the US 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 news and 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 for the 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, March, reaching the high 10s 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.
Turning to Slide 9. Our ACE Capital team also delivered strong results in Q1. Attach rates in the low double digits, combined with strong RPU 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 ACA 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 continue to add new marketplace features to increase conversion rate, including demand paid search capabilities and additional transparency and vehicle package information help inform accurate pricing the relaunch of Numax has been promising with Q1 bookings at the highest level since 2021.
We are in the early phases of ramping our go-to market can expect ACV Max to be an additional long-term growth lever. We kicked off tech investments to support our commercial strategy, including integration with Autohome as new features required to service consignors and integration efforts. Across our remarketing.
Lastly, we are in the pilot phase with our dealer self inspection solution, initially targeted at two use case in our marketplaces and layer appraisals. Feedback from our dealers has been very positive, and we look forward to sharing more details throughout the year to expand capabilities and scale the pilot.
Turning to slide 12. We are very pleased with the market traction of ClearCorrect ACV's consumer sourcing solution that leverages AI through real-time market data to deliver highly accurate condition based pricing based on dealer feedback, fee generation, conversion rates and margins are significantly higher than competitive consumer sourcing tools. This speaks to the power of their car and driving qualified lead and ultimately increasing overall supply for our D-ILL.
We are excited to share feedback directly from one of our dealers, lesser Glenn Automotive Group, who is using a broad set of ACI solutions, including clear car ACMA in our marketplace. We posted a video on our IR website featuring the lessors 19 describing the significant value they are deriving from the ACA solution. It's a great opportunity here directly modular.
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 with its own and refreshed, who recently launched Version two data of copilot and RBR for copilot to Datto, we further leverage our vast dataset by adding a visual representation of common high-risk vehicle part failures based on specific year make and mileage of the year.
Our Guard to that continues to leverage some of the industry's best artificial intelligence for vehicle condition, diagnostics for the addition of Monks exterior cosmetic model, we deepen our inspection capabilities, enabling RBC. I produce even higher level of that. We expect these innovations will drive our VCI efficiency and lower customer assurance costs over the long to wrap up on innovation, pace remains committed to delivering industry-leading technology to our dealer partners and to our own operations driving both growth and scale, and 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.

Bill Zerella

Thanks, George, and 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 record our first positive adjusted EBITDA quarter as a public company, demonstrating the strength of our business model.
Turning to slide 15 and 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% through the 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. Option 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 RPU of $476, which grew 5% year over year. Note that RPU 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 ratable revenue. So growth will take time to materialize, but we're confident that the upgraded ACVMAX. suite, we'll 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 option assurance results and by ACV transport. As George mentioned, we delivered high-teens transport revenue margins, which is in line with our midterm 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 re-marketing centers and invest in our commercial wholesale platforms, 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 to 158 million. Adjusted EBITDA is expected to be in the range of six to $8 million, consistent with our commitment to achieving profitability each quarter going forward.
For the full year 2024, we continue to expect revenue in the range of 610 to $625 million, representing growth of 27% to 30% year over year. Adjusted EBITDA is expected to be in the range of 20 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 dealer wholesale market grows modestly in the back half of 2020 for 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 G&A by approximately 10 percentage points.
And 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.

George Chamoun

Thanks, Bill. Before we take your questions. I'll summarize. We are very pleased with our strong execution in Q1. We are especially proud of our ACV teammates that delivered 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 road map 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 target 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.

Question and Answer Session

Operator

(Operator Instructions) Bob Labick, CJS Securities.

Bob Labick

Walter afternoon and congratulations on those core tangible results and lots of great stuff you already told us on.
I guess my first question, maybe give us a little update on your I'll call it the kind of commercial land and reconditioning strategy, if you could. I know we talked about you had that Texas acquisition of a few locations to kind of experiment with this, given it the auto IMS, you finally got through the Auto IMS lawsuit. You can now work with that. So maybe just give us what have you learned so far in this 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?

George Chamoun

Yes, certainly, Bob, thank you. So we're making really, really great progress on 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 locations around the country, start to get the technology in place, which we've got a phased approach here. Our phased approach allows us, to your point, get access to online mass also allows us to begin our journey of leveraging the ACV tools.
So our first, our phase of throughout this year really starting to bring the ACV condition report and methodologies and leveraging our inspections at these auctions that will be happening throughout the year. They may be up for a broader integration for us because it allows somebody like a broader integration of activities is also going on as we speak, and we're also starting to get some early wins.
For example, even since our last our call to now, we've had both one rental car company. And one bank who we've get repos have given us several hundred units at a new location than they were previously just working with us at one location. So this idea of build relationship with the commercial consignor show them it works. So other than that, we've got the right model for them.
We had some early wins, albeit these are were sold early, how these were hundreds of cars a month, but even hundreds of vehicles a month start to show the story starts to prove that we're going to be a great marketplace. So hopefully that you're looking for that kind of gives you a very quick summary. But we're on path and and really nothing has changed from our last call. We're on path of executing on this strategy and a great overview.

Bob Labick

Appreciated. And then just one more for me. I'll jump back in queue. You obviously have a very strong quarter and one of the things that stood out was the and I guess, operating leverage on your own to your operations and technology line. Can you talk about the drivers there? Maybe the efficiency of your VCIC.s. What's what how much more can you drive there or how do you feel about where the BCOs are currently?
I know like years ago we talked about they were doing six today. 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 VC. and obviously, you're leveraging that loss because we can see it in the results.

George Chamoun

Yes, certainly, I'll start.
And then Bill could also chime in. So I would say we're making on small incremental changes and enhancements to our scheduling our inspectors. And so the small wins quarter over quarter, we're happy with some of those small wins to your point, those incremental changes will all add up. And as you know, in our more mature areas, we're already hitting our midterm target. So and we're very pleased there there also to your point of broader operating efficiencies from our operations team on bringing in automation in some of our back-end functions as well beyond natural inspections. So look at those results. Words in one area like inspections, who's actually what a broad, a broad on improvement in billing and where you want share?

Bill Zerella

Yes, it pays out still, but I would just add a couple of points. So I know we've talked in the past about continuing to just optimize every aspect of our business, and we're continuing to do that every quarter. Some interesting, maybe some data for you is if we look at just some of the organic growth rate of our OpEx in the quarter was low single digits on that, 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 starting to see those results in our financials.

Bob Labick

Yes, great stuff. Thank you very much. Thank you.

Operator

Michael Graham, Canaccord Genuity.

Michael Graham

Thank you. And I wanted to ask two questions. The first is on 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? And 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?

George Chamoun

Yes, I'll start and then you can have some. Yes. So our auction RPU went up 20 bucks following quarter. Along with that, the highest actually on expenses, we've got 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 our costs. So we're pretty pleased with that result, especially in the context of GMV per unit going down 16% quarter year on year. So and that certainly drove the outperformance in our revenue margins for just our option on insurance revenues, which is 73% for the quarter, which is also the highest since we've gone public.

Bill Zerella

So what I'll add is we've been obviously I'm pretty consistent that we felt comfortable with that mid term market mid term on market turnover on pricing are we target? So we're giving our analysts and investors. And so we're on path to hitting that. And 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. So that should give investors confidence in our growth. We feel good about that.
And then your other question was really, obviously Germany about the market. I would say Q1 will be a little more color would be January. So a little hotter than maybe in March. And then just generally, if I thought out of some of our competitors and others out there in the marketplace that the overall market in Q1 and I would say was okay, it wasn't like the market sort of late really really came back just yet.
Having said that, when you read all the tea leaves not just the volume of the dealer wholesale volume, I would say across the industry, but 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. In fact, we like where the industry has come at the end of the day, used car values go down would mean that independent dealers that buy these cars more affordably kick in and resell it to their end consumers. So we look at all the signs, even though someone at the moment from an investor perspective, may look at AT&T going like a concern on our book. I wouldn't worry about that too much.
Are we feel good about our book.
Cmb going down will actually mean independent dealers and the variety of cars from trades and others think at retail and for their end consumers. So and to your point, I would say not a lot changed from last quarter. Our feeling that things will likely get better for us.

Michael Graham

All right. Perfect. Thanks a lot for all that color.

George Chamoun

Yes. Thank you, Mike.

Operator

Ron Josey, Citigroup.

Ron Josey

Side is James. Michael, one for Ron are quickly from me. It's encouraging to see the progress in transport with 95,000 stores and this 300 basis points improvement in margin.
Can you expand on the operational workforce through improved transfer fees and profitability.

George Chamoun

Never forget them from margin expansion and enhancements to transport have been consistent obviously. And we've done a good job of continuing to add on to our product.
Can tack on Lane optimization, pricing sides of the vehicle, all the different attributes we keep working on it and we're doing this action, I would say is obviously not an easy market. And so overall, we're very pleased with our team and we've got we've got more work to do in this area through, meaning that we've got more investment in the technology of a transportation but we're really just so pleased on with the intelligence we're building into the lean pricing and sort of scaling, yes, scaling for a lane by lane across the country.

Ron Josey

That's helpful. Thank you. And then I wanted to turn to clear card. Can you provide some additional color on how the lead gen conversion rates and margins improving the specific levers you have to improve execution after a quick price going really?

George Chamoun

Well, I mean, we've got we keep growing additional our rooftops out there. Our dealers love the product. Consumers really like the product we're seeing incredible feedback. What are the things we did on this this quarter? Give you all a little bit more color. As we went out, we had a video done of a dealer group called lesser Glenn in auto. I really would encourage all of you to watch this video. It will give our investors really the voice of the customer, and you'll hear them talk about how these tools are helping them at the end of the day make more money, both more transactions with the end consumer. Actually there's a quote in there about how they're doing so much better in their from their own internal conversion and then think about it like optimizing their inventory, optimizing their inventory is really important in the last couple of years, dealers have in retailing cars. They should not have been retailing. There really were wholesale cars. So yes, we'd encourage you to watch this video because they'll give you a customer that's using clear car ACV, Max and our marketplace, you see options marketplace. So they've got I'll leave you with that at least I think probably better than me just talking with in the video, I really would love for you to actually watch it.

Ron Josey

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

Operator

Rajat Gupta, JPMorgan.

Rajat Gupta

Great. Thanks for taking the questions. I just had one clarification. I know from the prior answers, I think we mentioned that our organic OpEx was up low single digits. Does that also include some of the incremental investments related to auto? I'm asking like other our integration efforts and and what would be the organic volume number now tied to that tied to that low single-digit OpEx numbers? And I have a follow-up.

Bill Zerella

And with that, Bill? Yes. So we as you know, we're not breaking out specifically any 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 on the organic growth in OpEx, does that include partially?
So 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 related to the M&A transactions, if you remember, in terms of the EBITDA that we we inherited as part of those deals, we used part of that EBITDA, so to fund those integration costs.

Rajat Gupta

Got it.
Got it.
That's helpful.
And just you know, I think in the past, you've given us some color on market share now in the quarter, what would you say lower due to the our market share performance was in the first quarter.

Bill Zerella

And if you remember last call, we said we're going to start to do market share once a year on. Obviously, we're doing it more often prior with when the market was all crazy and wild. So but having said that, just to give you a little more color, I guess, but but I guess moving forward to keep in mind, we will really like to be doing this once a year. He's one of our in one of the outside sources out there auction that which is interplay. You mentioned that in their report that physical auction volumes were down 5% year over year. So that is not to give you a link that just kind of gives us a framework of at least what the collectively, the physical auctions said that dealer wholesale on specifically even though commercial was up, dealer wholesale was down 5%. So it could help you kind of get an idea but I guess having said, as I mentioned on, where will we start, we'll be doing that moving forward. Now that things are starting to normalize. We'll start do that once a year.

Rajat Gupta

Got it. Got it. This is just one more on OpEx, if I may. Are you obviously mentioned like the step-up and now with the remarketing integration, I guess the integration of the new monitoring centers on your business. Should we treat this like a OpEx step-up this year? And because of that, as more of you know, for the one-time thing or you know, and then you have like better revenue versus OpEx leverage going forward. You know, for example, like this year you're guiding to that 70% OpEx growth and 27% revenue growth, for example, does that ratio get better going forward? You should assume this is more of a onetime dynamic for this year?
I'm not sure the question was clear but in any color would be helpful.

Bill Zerella

Yes.
I mean, I'm not sure if I would look at it as one time on and that we'll be spending money for the integration through the end of this year will certainly different for next year. That said, as we scale the business, we're going to continue to get OpEx leverage as we approach our midterm targets across the P&L, right, as we get more scale. So go on.
Yes, as we drive towards those targets, you're 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 a one-time cost that are just going to go away since most of this is labor, frankly, this product and product development by the engineering teams and so on. I'm not sure I would look at it as per, say, one-time, but we'll certainly get deleveraging to get the leverage that we've demonstrated in the past and will continue to get that going forward as we scale.

Rajat Gupta

But Understood. Thanks for all the color in the questions.

George Chamoun

Thank you.

Operator

Nick Jones, Citizen's GMP.

Nick Jones

Great. Thanks for taking the question, guys. As you look to land more rooftops and you're having those conversations with those dealers, how much of a factor is kind of lower wholesale volume, some potential in their reluctance have to get out that could maybe they don't feel the need or the pressure to diversify. And to the extent that that is part of the conversation, if things do start to improve in the back half and into next year on how well positioned is ACV to kind of accelerate landing rooftops, also kind of winning share in existing reserves?

George Chamoun

Here is a really good question. And maybe one. I wasn't prepared to do it on the fly, but I think you're really pointing out an interesting topic, and that's the dealers have less time to wholesale. So it's really not the top of mind right there really they're trying to source more than trying to buy more from consumers. So that as your question was on the back of the statement is interesting. We could see a tail on as wholesale starts to come back, we start to see a conversion. I guess my my initial gut reaction is probably favorable.
Yes, I think I think you're onto something there, but I wouldn't put a lot of thought going in coming to this call. I think I think your guidance probably right that we could see as you it's almost like gaming and likely with more of it tomorrow that constancy of them more of a problem to address. There could be something there.

Nick Jones

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 mid-term target. There's an opportunity to kind of maybe more aggressively invest in technology or are landing those rooftops on the technology investments always been kind of our VTV. story as I guess how nimble is the roadmap to the extent that maybe CAROLYN manifest?

George Chamoun

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

Nick Jones

Thanks, George.

Operator

Gary Prestopino, Barrington Research.

Gary Prestopino

Hey, good afternoon. George grown campaign. A couple of questions on clear car mix, and I know it's early in the game here, but how much is this really proliferated through your dealer customer base at this point?

George Chamoun

You know, we didn't really commit with a number today, but I think we've gotten you know, we 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.
Okay. So we're still early on. 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 would look at it as a one product mix, probably the fastest growth ones out there. So where it's your point still early in the there's 16,500 franchise reports. There's tens of thousands of independent repair shops, but the signs are positive. The end results are positive and we are not broadcasting necessarily everywhere either like we've refocused on the ACE max joint customers. We focus 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 pace on which you just need to set up to do so anywhere you're behind the scenes or you're trying to turn on net 30, 40, 50 customers month is that it's a lot to do. And we feel great about where we're ecstatic about our progress. So that is good.
And there just gives us an idea of the growth potential growth trajectory.

Gary Prestopino

And then I have two other questions regarding clear car, all of the dealers that are sourcing cars through Clear, clear car on, are you finding that the majority of them on tools, we'll sell something through your through your platform because they're sourcing the car through your clear car product.

George Chamoun

Yes. So the two options, they either pay us a subscription like look at this like a bundle like that with what we're doing with HBO Max. And so either they're paying us on how the subscription for they're actually giving a wholesale hire scheme. So we're getting one of the two most of the customers we've turned on have agreed for the wholesale volume commitment and some of the customers that have come on have have gone down the subscription, but bundled in with a C-max. So where we're happy with both so rapidly pushing every dealer, not a task because they have two options for downtown their pathway and both are positive pricing.

Gary Prestopino

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

George Chamoun

I'm in the market. Yes, there's a few elements of why it's hard product that truly is unique. And before I get into those features, I'll just remind everyone where we're inspecting somewhere around 1 million cars a year with humans that inspections it is giving us a data now in detailed information about cars that really no one else we believe in the world. Well, we're leveraging our technology using products like amongst that go around the vehicle. And we're getting this common believable data. 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. People are using market called our capture video, call it, mindfully and consumer. And then the third part condition based and that having a consumer ask we ask the consumer a few questions. So those question map to the same data in our inspection group. And and we all know that really the benefit of machine learning and leveraging artificial intelligence. It's having a really deep, deep, deep data profile. We have that. So we at least right now, we have a huge competitive advantage over anyone else trying to price the consumer. Now it's a matter of us taking that competitive advantage day in front of dealers and helping it out. So trends and sort of value add for ACV as well?

Gary Prestopino

Yes, good answer.

George Chamoun

Yes, be safe.

Operator

(Operator Instructions) David Kang, B. Riley Securities.

Dave Kang

This is Ryan on for David. I was just hoping you could talk about plans for cash usage and also the M&A M&A appetite going forward?

George Chamoun

Thanks. Hey, Bill. So on, yes, we certainly did consume some cash in Q1 for some of the M&A transactions, how we sell a fair amount of cash on the balance sheet. But what I would point you to are two factors, number one, the cash net of some outstanding debt that we have on our credit facility, which was $125 million at the end of March. And also keep in mind that and at the end of Q1, 174 million of our cash was are comprised of marketplace flow, 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. So at this point, we feel pretty good about our liquidity position on. We certainly have some flexibility and want to retain that flexibility for other tuck-ins on that come about as part of us executing on our strategy. There do have the ambition to penetrate the commercial market.
Hopefully, that answers your question, but I'll just add to what Bill said. I mean, we're in a very obviously on Lucky and favorable position and a strong balance sheet to be able to go after these tuck-ins and other opportunities. So we don't take that favorable opportunity lightly, and we're leveraging to our advantage.

Dave Kang

That helps. Thank you.
There are no further questions at this time. I would like to turn the floor back over to Tim Fox closing comment.

Tim Fox

was 81 million in all the children were certified by Boeing. Would 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 ACV, and have a great evening.

Operator

Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your line.