ACV Auctions Inc (ACVA) Q2 2021 Earnings Call Transcript

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ACV Auctions Inc (ACVA -2.12%)
Q2 2021 Earnings Call
Aug 11, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

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 open for questions.

I would now like to turn the call over to Tim Fox, ACV's Vice President of Investor Relations. Please go ahead.

Tim Fox -- Vice President of Investor Relations

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 involve 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, that 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 to 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.

George Chamoun -- Chief Executive Officer

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 for 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 3, I'll begin with highlights of our second quarter, then share some perspective 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 a 117% year-over-year growth.

Our strong top line 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 ACV's suite of offerings and favorable market conditions yielded truly impressive financial results.

Turning now 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 tip shortages and other supply chain headwinds, could factor in 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 is an emerging view at 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 trading 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 5, we transacted a 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 in our Q2 2020 financial results, we included 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 and 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 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 front line vehicles transacting on our marketplace. While elevated vehicle values are transient, a sustained mix of front line vehicles on our marketplace could be a nice long term tailwind for ARPU.

Moving on to slide 6, we continue to make great progress toward our territory coverage goal on the 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 US. We have continued to attract great talent across our organization with some pretty ambitious 2021 goals. To put this in perspective, we ended Q2 with nearly 1,700 ACV teammates, effectively doubling our size over the past two years.

Turning to slide 7. One of our largest teams at ACV is our vehicle inspectors. This team has grown threefold over the past two years supporting ACV's hyper growth 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 8, 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 9, I'd like to highlight one of our offerings contributing to the 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 enabled our dealers to offer consumers an efficient and effective way to sell their vehicles in ACV's marketplace.

We expect these vehicle that 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 has grown significantly in recent quarters. In Q2, year-over-year unit volume growth more than a 150% and accounted for 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 launch that enables highly efficient vehicle sourcing for our dealers through programmatic buying. We have invested in two flavors of programmatic buying. Our Buying API enables dealers 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 wish-list 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-list 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 experience, which we believe will deliver better results for our dealer partners

Turning to slide 12. I would 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 flywheel 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 provide 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 an exciting growth synergies. These synergies include cross selling MAX Digital 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 session 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 it's 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 30s attach rates achieved in 2020. The number of transports 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 approach the mid-single digits in Q2 with loan volume improving greater than 30% quarter-over-quarter. We also saw 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 and 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 for 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.

William Zerella -- Chief Financial Officer

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 line 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 2020 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 1,100 basis points and we delivered this improvement, despite growing total operating costs, excluding cost of revenues 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 assurance 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 as noted benefit from high transport attach rates. And in our option 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, 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 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 guidance on Slide 19. For the third quarter of 2021. we are 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 2020 was a very strong quarter for ACV with the year-over-year revenue growth of 104% 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 2019.

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 commentary 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 are 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 options 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 long-term 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 at current levels, self-funded the ACV Capital business reducing interest expense.

And with that, let me turn it back to George.

George Chamoun -- Chief Executive Officer

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 [Indecipherable] expansion plans, we're launching exciting new offerings that further differentiate us in the market and we strengthen 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.

Questions and Answers:

Operator

[Operator Instructions]. Our first question comes from the line of Ali Faghri from Guggenheim. Your line is now open.

Ali Faghri -- Guggenheim -- Analyst

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 and 4Q.

William Zerella -- Chief Financial Officer

Yeah, Hey Ali, it's Bill. So I guess a couple of thoughts first. Just 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 revision there. That said, similar to what other companies in the automotive space have signaled, we're seeing a contraction in conversion rates due to the pricing normalization that's happening as the market adjust and we've taken that into account in our guidance. So we're effectively leaning a bit more conservative on organic growth in the second half until we see the market reached equilibrium.

I guess with that in mind, also 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, 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 tact 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 adjusting and it's going to drive some of these metrics the other way in terms of conversion rates and ARPU.

Ali Faghri -- Guggenheim -- Analyst

Got it. That's helpful. And so just digging in further, I mean is the expectation of volumes could still grow quarter-over-quarter in the back half?

William Zerella -- Chief Financial Officer

We don't really guide, Ali, the unit growth. I mean, there is always puts and takes between units and ARPU. 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. 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 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.

Ali Faghri -- Guggenheim -- Analyst

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 are 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?

George Chamoun -- Chief Executive Officer

Hey Ali, it's George. I hope you're well and thanks for the question. Right now, we're being prudent and we're assuming that based on what we're hearing from dealers that inventory is going to stay very short for Q3. We also -- as you heard in the call, we said, Q3 and Q4 could be that leveling out and I think going into 2022, this will all be noise, from our perspective and I think right now, what we're assuming is dealers are going to still be in the same predicament and in summer, even assuming right now in Q3, it actually might be the toughest, I would say, phase of this lack of inventory.

So I think, Ali, that's really at least how we're thinking about the forecast right now and the lack of inventory and to your point, does that mean dealers maybe keeping cars that they would have historically wholesale, I think, yes, I think that's already happening. We have to assume that for now. Fast forward, as these new cars come back, as the factories start to correct with the issues of the chips or other constraints they have, our new car dealers will have more cars, so go back to selling the cars that their brand is really aims to be selling, and they're going back to be wholesaling the types of vehicles that historically they've wholesaled. Is that helpful. Just to give a little more that color?

Ali Faghri -- Guggenheim -- Analyst

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

George Chamoun -- Chief Executive Officer

[Indecipherable] Sure.

Operator

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

Nat Schindler -- Bank of America -- Analyst

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

William Zerella -- Chief Financial Officer

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

Nat Schindler -- Bank of America -- Analyst

Totally understand. So, and I guess your answer from last question about being conservative on the change to what's going on the market, on the pricing side. When 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 if 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?

George Chamoun -- Chief Executive Officer

Hey, Nat. Thank you. Overly conservative, I don't know, but we're -- when you look at the correction that's happening as the prices started to decline, really sort of two third into the quarter. We started to see used car values decline, that's one trend happening. So that's something we're being conservative or not, it's starting to happen, so therefore, GMV in other factors will also imply lower GMV. 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 [Indecipherable] we can control. So, we're predicting to your point, as we're modeling, 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 yes, so we are predicting both. Is that helpful or are you looking for [Speech Overlap].

Nat Schindler -- Bank of America -- Analyst

No, I think that's very helpful [Phonetic].

William Zerella -- Chief Financial Officer

Yeah, hey Nat. Let me add one more piece of the puzzle here, just to be clear. So when prices are declining, there is basically lower conversion rates on the marketplace. Because buyers are more hesitant to commit, so these prices with the exposure that, by time they sell the car, the price might be even lower. And it takes time for sellers to adjust to the new reality in terms of what their inventory is worth.

So what it does, it kind of has the opposite effect of what has happened in Q2 when prices go up. Because there is a lot of very high conversion because buyers know they're going to flip that car and probably sell for more than even thought because prices are going up, When prices are going down, you have the opposite effect. Until 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 and I think that's consistent with what you would hear from other players in the industry.

Nat Schindler -- Bank of America -- Analyst

That makes perfect sense, but I was also wondering if On the other side, when the Manheim Index was approaching two are going north of two and pricing was going crazy, I would think the 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.

George Chamoun -- Chief Executive Officer

Yeah, Nat, we had a great quarter, so that works. [Speech Overlap] We're gaining a lot of sellers. We also mentioned that we had more, net new sellers this year added -- this first half of the year than we did all of last year. So we're gaining interest in the platform. These other trends are important. I would say we're all looking at these quarter to quarter trends. We are just trying to, as you know our style, we're always prudent. Here. we do believe there is going to be dealers are going to have a lack of inventory this quarter. And so how do we forecast is obviously what you see.

Nat Schindler -- Bank of America -- Analyst

Okay, great. Thank you.

George Chamoun -- Chief Executive Officer

Yeah, certainly,

Operator

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

John Colantuoni -- Jefferies -- Analyst

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

William Zerella -- Chief Financial Officer

Okay. Let me go through Transportation first. I think one of the reasons why Transportation adoption increased is the -- we are getting better. So when you think about pricing, you remains [Phonetic], just to kind of give it one example, we're now to the point where 20% to 24% of the moves in Transportation. We have a programmatic way [Indecipherable] our ACV Transportation load board to have a price from a carrier and what does that mean? That means that, because we're starting to invest in technology, we're starting to invest in our network, we're able to really optimize our lane pricing for transport, allows us to have predictability and the more we invest both in our technology for transport and we invest in our network of carriers, it allows us to get stronger as the price [Indecipherable] appropriately.

And ultimately, if we've got the right pricing, the right service for our dealer partners, they're going to choose ACV Transportation. So I would say we're very proud of what we've done with a ACV Transportation. In addition, I would say there is also just more density. So density and scale, obviously also helps in getting better pricing from our carriers. And ACV Capital, we did announce that we had some product mix additions recently. We are listening to our dealer partners. It's also the first time, we're starting [Phonetic] and it's just now starting to market our product in our app.

So, think this was an early product we mentioned during the IPO. We mentioned words in the IPO process that it was nascent at the time. We're just starting to market the product, we're just starting to add additional staff, but really with both initiatives, we're investing in technology, investing a great people, we're absolutely excited about the progress and the progress is add [Phonetic] or exceeding in both cases what we set out to do this year.

John Colantuoni -- Jefferies -- Analyst

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.

George Chamoun -- Chief Executive Officer

Thanks, John. 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 why ph] 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 [Indecipherable] -- and we mentioned this in our IPO that this will 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 in this digital world and helping them take more of these cars. Whether they're going to take them as a trade or whether they're going to turnaround and wholesale it, we're here to help dealers.

John Colantuoni -- Jefferies -- Analyst

Thank you. Appreciate the questions.

Operator

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

Ron Josey -- JMP Securities -- Analyst

Great, thanks for taking the question and lots to unpack here. Another great quarter. But I wanted to maybe follow up on that Colantuoni [Phonetic] question just now and ACV Capital. And George, you mentioned Capital is now available in the app and that drove awareness and probably getting to 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 would what we say mid single-digit attach rates from low single digits prior. Do you think this gets to mid-single digit? Talk to us a little bit more about the strategy with Capital and I have a quick follow-up.

George Chamoun -- Chief Executive Officer

Certainly. We are, tight now, currently doubling the size of the sales team, that's all in the model. We now felt comfortable and ready that It was time to increase that the specific sales teams and think about when ACV starts to have these [Indecipherable] product sales teams, the product sales teams leverage the leads and relationship from the other company managers. So we're already on the phone with thousands and thousands of dealers among and the specialized teams, whether it would be ACV Capital or MAX Digital et cetera. These teams now are leveraging the fact that we have these relationships. We are doubling the size of ACV dedicated product sales team. We're really excited about that. Our expectations are in line with what we -- for your second question, our expectations are in line with what we outlined in our -- while we're on the road show. Bill, you want to give a little bit more of our expectations were ACV Capital should be in the next handful of years.

William Zerella -- Chief Financial Officer

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. So I would say we're making really good progress this year. We'll most likely kind of update you and the investors on that kind of longer term 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 on our Capital and by the way, we're also not just investing in sales. We're investing on the tech side as well.

So we're dedicating more resources. So just continue to make our offering more compelling and competitive in the marketplace. So yeah, what I would just say at this point is we're making great progress. We're going to be looking at, most likely in the order of 4x prior year revenue from Capital granted it was small last year, but over the next few years, it'll certainly become more meaningful. And will we 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 investors know, this is a very high margin business for us. So it will be accretive to margins over time.

Ron Josey -- JMP Securities -- Analyst

Perfect, that's super helpful. And then one quick follow-up. I think, George, you mentioned you added more dealers on the network in the first half in all of last year. As we get to normalization in the market whenever that is maybe in the first half of next year or the first quarter. Just talk about if you think that it will be easier to add sellers then or is the environment is going to be the same in terms of adding sellers and I think you also said vehicle inspectors are up 3x in the last three years. So you're seeing progress in feet on the street. So just talk to us about adding more sellers as things normalize and whether it might get easier or not. Thank you.

George Chamoun -- Chief Executive Officer

Yeah, certainly. So it seems obviously between our brand increasing, our network increasing, territory managers getting out into the field, it could be also going public, in all these factors, the ACV brand is out there. We're growing sellers 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 selection of assets on the ACV platform, you're 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 of 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 from growing from one product to multiple products. You've heard me talk about in a prior call of hybrid marketplace as an example. We've been adding, just 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. We didn't say we're just a marketplace company. We had this vision. We're executing on this vision. And you can 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. When you add tremendous value back your dealer partners, it not only helps in retention, but also helps us grow more with [Indecipherable] with ACV. Hopefully, that's helpful.

Ron Josey -- JMP Securities -- Analyst

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

Operator

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

Stefanos Crist -- CJS Securities -- Analyst

Good afternoon, this is Stefanos Crist calling in for Bob. Congrats on the quarter.

George Chamoun -- Chief Executive Officer

Thanks, Stefanos.

Stefanos Crist -- CJS Securities -- Analyst

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

George Chamoun -- Chief Executive Officer

Sure. First of all, in the territory manager side, we are slightly ahead of schedule. So we are on plan. We will come back over the next few quarters and I'm very confident to say, we'll have reach full coverage coast to coast, that we have the territory managers out there in the field to reach out to 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 writing vehicle condition inspectors. We are just looking at some data earlier on this and this is helpful [Indecipherable] to share is right now, our average time from posting a vehicle 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. So when you think about that. there is a lot going on in this world right now and I don't want to underestimate or under signal. Yes, I would say labor challenges are a challenge I think for all companies, to be safe, but [Indecipherable] those two rolls out in the field right now, we're executing our goals and it's going well,

Stefanos Crist -- CJS Securities -- Analyst

That's great color. Thank you.

Operator

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

Rajat Gupta -- JP Morgan -- Analyst

All right. Good afternoon, good evening. Thanks for taking the questions. A lot of questions around the conversion, second half, but just has 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 versus today, moving away from the near-term dynamics on the market. I'd say 2022, 2023, does that automatically imply more units just because we were 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 again.

George Chamoun -- Chief Executive Officer

Sure, Rajat. First, thank you for the questions and let me try to answer that. I think there is a few questions within that. So I would say we accomplished 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 executing our model and I would generally say bringing on sellers in the first half, we are very successful, I would say the part that's different is most sellers have less inventory than in prior, let's say, last year, let's say in 2019. So part of what's been going on, and this it's in the mix already. There might have been a dealer partner who had 220 cars they wholesale with us, they may only have 150, 160 whether they're keeping them or whether it's they just don't have enough, whether it's less overall retail, whatever those reasons, you really are 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 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 in their lot but which mean less retail and likely, less conversions to wholesale.

As relates to the stickiness, I don't have any data to really sort of give you on stickiness or retention. But I will say that we believe our strategy is working extremely well. We believe this idea of not only at being a great marketplace by having this end-to-end platform of services is going extremely well. We believe offering more and more capabilities, investing in these partnerships -- these dealer partners is going well, Investing in our team is going well. So I would say really no change on our belief of how any of these market dynamics are going to change retention. I think the other part, the third part of your question, would be, could it accelerate our growth even more and I don't know how to answer that. Bill, 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 mean accelerating growth. But obviously, we can see you to that,

William Zerella -- Chief Financial Officer

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

Rajat Gupta -- JP Morgan -- Analyst

Got it. Okay, great that's helpful color. I'll jump back in queue,

George Chamoun -- Chief Executive Officer

Thanks, Rajat.

Operator

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

Alex Potter -- Piper Sandler -- Analyst

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 is limited supply and prices are high, so all else equal, the dealers, If they 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, marketwide that dynamic is accurate. There has 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 when you're out talking to dealers, trying to pitch sell as a partner, do you find yourself pitching yourself against the digital platforms more often than you used to? That's my only question. Thanks.

George Chamoun -- Chief Executive Officer

Yes, thanks, Alex. Yeah, we're, if you remember, we had, and I hate these names, but one of the large auction companies had a digital company right away. So when we started this journey, there is already digital competitor. So I would say this entire time, there has been digital competitors and has been physical competitors. If you look in fairness, when you look at the, let's call it, 8 million to 9 million cars that were sold at physical auction last year and we're very proud of the number of cars we sold, we look at it from a percentage basis, we're still small. We're growing, but I think the majority -- I think if you added up most of the other digital competitors collectively, 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, it's still the physical auctions [Indecipherable] really trying to [Indecipherable]. And yes, there are other digital companies, but this whole category should grow 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 to the physical auction lanes and we've got some room to grow this category, I think the broadening of our services and you're seeing now with broader mix, different types of vehicles, we started the journey with just the lower priced vehicles, the typical $3,000 to $5,000 car with 120,000 miles on it that a dealer would never want to retail -- a franchiser would never want to retail. We're still getting a lot of those units, but we are seeing the type of inventory and 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 offering other data services that we believe we can really, not only become too dominant marketplace in time, but add more value to our dealer partners

Alex Potter -- Piper Sandler -- Analyst

Very good, thanks. Thanks a lot. Nice quarter.

George Chamoun -- Chief Executive Officer

Thank you.

Operator

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

Nick Bacchus -- Raymond James -- Analyst

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

George Chamoun -- Chief Executive Officer

Yeah. Nick. We really aren't sharing any cohort data about this. So I can share something, but I'll share with you is, how we're going into these new markets has starting to broaden. We're looking at -- 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 is dealers for the first time ever being introduced ACV through our private marketplace for their part of a dealer group, that will be different

We wouldn't have had that entry. We'd have to wait till we got that first seller, that first buyer, if that makes sense. So our broader product selection will be helpful. The first time you're sort of hearing about ACV may not be the day we hire our territory manager, they go through training and we got into the market. So I would say that part will start to be different. That's a new theme, I would just say over the last 60 days or so. But that would be like the newest thing. I don' think there's something else that we can share from a cohort basis.

William Zerella -- Chief Financial Officer

Not really.

George Chamoun -- Chief Executive Officer

Okay. Hopefully that's helpful, Nick.

Nick Bacchus -- Raymond James -- Analyst

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

George Chamoun -- Chief Executive Officer

Sure. So there's two parts of our programmatic buying product strategies. The first part 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 have let's call the internal technical resources to integrate with our API. So that product is live. And we're starting to integrate with additional dealer groups.

That product allows a large dealer who has the technical capacity will automatically putting bids on ACV without any human intervention and not only picking the types of vehicles, but in addition to the types of vehicles. It's condition and other factors. So think basically what a human would do and picking inventory, we're ingesting our condition report into the buying process, so that their machines and our machines can help them at the end of the day buy the vehicle, so that live and we're very excited to get that live.

We are working on this part of our platform for a while and 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 without having any human intervention, which is just awesome. That's product one, that's the buying API and I believe, I'm not sure, but 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 would like to buy as well as condition, and so it's basically emulating what our API does, but it's an interface of the dealers that don't have the engineering team to integrate with us. So we're going to have both options, I think whether they have an engineering team and 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 is in beta. That one is 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 that 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 whether be one of our API buyers are one of our the preferences on the Bio-Matrix, we have this persistent demand and persistent demand is helpful and think about persistent demand plus the ACV marketplace demand, the two together is extremely unique. Because there some vehicle types, you really want an auction format and you really want that competitive bids and the API and our BIo-Matrix actually it's not just a separate thing. It actually delivers results into our 20 minute auction. So yeah, we're very excited about that I can't wait to roll it out even further.

Nick Bacchus -- Raymond James -- Analyst

Sounds exciting. Thanks for the time

George Chamoun -- Chief Executive Officer

Yeah, thanks Nick.

Operator

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

Daniel Imbro -- Stephens, Inc. -- Analyst

Yeah, good afternoon guys. Thanks for taking our questions and I'll squeeze me near the end,

George Chamoun -- Chief Executive Officer

Thank you, Daniel

Daniel Imbro -- Stephens, Inc. -- Analyst

[Speech Overlap] Just on how the industry should change as supply demand normalizes. Maybe first, so as conversion rates begin to tick down, and it takes longer to sell the vehicle, does the capability of having land help you or hurt you win share. I mean obviously dealers right now have plenty of excess capacity, but as lots begin to fill up, are you seeing more dealers asking you to start moving inventory off their lot and if so, Bill, can you talk about your ability to flex your land capacity through their partnerships or buying land to service that demand?

William Zerella -- Chief Financial Officer

Yes. It certainly and so well, I'll go through both of those for you. 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 of these lots. 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. You can debate between wholesale-retail. So, I believe upstream in digital for this environment is beneficial, not a detriment. I don't believe land -- it 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. Right now, It's an even lesser percentage

The second part of your question. If we needed land, There's a lot of land out there in this country. so we're not worried about if we have any land, There is -- it's noise. We have a few, very few [Indecipherable] going on in small parts of the country that we don't usually broadcast. If we really need it, we would just stand it up. Atlanta 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 we need it, but for right now, it's by far not even in the top three things that are usually come up, like, why they would go with us for not with us, but land is not even in the top three at this point.

Daniel Imbro -- Stephens, Inc. -- Analyst

Great, that's helpful. And then one just following up, I think earlier you mentioned helping dealers maybe source 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.

William Zerella -- Chief Financial Officer

Yeah, certainly so our dealer partners right now look at it for our current products, one of our current products is called Live appraisal. So what does that mean? That means our dealer markets to their consumers, that they will pay more for the cars than others. The others aren't using our live appraisal. Some might use ACV's brand in their marketing, some may not use our brand, it's is really up to them of whether or not they're going to use our brand. But the marketing would say something like this. Why have a local dealer or national dealer give you a price in your car when you can have one of the largest digital auction, we're having dealers across the country, bet on your car, get transparency, know what your car is worth, things like that.

So our dealers are marketing to consumers that they're going to pay more because they partnered with ACV basically. Now that might be [Indecipherable] and the dealers lot where there is like a 10 and imagine like coffee and I you go there. And if I can event or it might be us going to consumers driveway and actually doing a 20 minute inspection and a 20 minute auction. So that was sort of thing. That's our first product and our dealers are enjoying this product because there's differentiation. They're not just -- everyone's going to say we're going to pay the most of your car. It's almost become noise. I'm going to pay the most of your car, you're going to pay the most of the car, just kind of like, why? how?

So at least they've got something to market and our dealer partners and that's expanded quite a bit this year, we mentioned earlier, how much Live appraisals has grown. in addition, you're seeing us build [Indecipherable] data and pricing capabilities that will help our dealers sort of compete more and more. We're alluding to that. The MAX products will help because they're behind the scenes doing appraisals even when it doesn't go to currently our marketplace, there is additional products were alluding to that will be coming as part of our product roadmap that will help dealers compete for consumer car sales. We love the category, we think our dealer partners are very well positioned to buy more cars from consumers and you can sort of think about ACV's role, so the shopify type of role for all these dealer partners

They need someone that has the scale, the nation's largest inspection network, the technology, the data and that's what we provide for our dealer partners.

Daniel Imbro -- Stephens, Inc. -- Analyst

Thanks so much guys. Good luck.

George Chamoun -- Chief Executive Officer

Yeah. Thank you.

Operator

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.

Tim Fox -- Vice President of Investor Relations

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, albeit the Canaccord Genuity Conference tomorrow, All the details are on our website. 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.

Operator

[Operator Closing Remarks]

Duration: 68 minutes

Call participants:

Tim Fox -- Vice President of Investor Relations

George Chamoun -- Chief Executive Officer

William Zerella -- Chief Financial Officer

Ali Faghri -- Guggenheim -- Analyst

Nat Schindler -- Bank of America -- Analyst

John Colantuoni -- Jefferies -- Analyst

Ron Josey -- JMP Securities -- Analyst

Stefanos Crist -- CJS Securities -- Analyst

Rajat Gupta -- JP Morgan -- Analyst

Alex Potter -- Piper Sandler -- Analyst

Nick Bacchus -- Raymond James -- Analyst

Daniel Imbro -- Stephens, Inc. -- Analyst

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