Thursday of the 26th Annual Needham Growth Conference. My name is Chris Pierce, covering everything auto-related for Needham in the research department. It's my pleasure to welcome Jason Trevisan, CEO of CarGurus.
Thank you.
I almost said AutoGurus. CarGurus is the correct name.
You named it.
I appreciate you coming.
Thank you.
Just if you wanna just give a minute background on the company, just for anybody in the room not familiar, and then we can hop into some Q&A, and we're happy to take any questions from the room as well.
Sure. Thanks for having us. Hello, everyone. So we are the world's largest automotive marketplace. We began our business focused on a marketplace that was connecting car shoppers with dealers. What differentiated us was that we had a freemium model and a business model advantage that allowed us to bring on more inventory from more dealers. We gave more inventory of cars. We gave more information on those cars and on those dealers. We were more transparent about the value of the cars, and the history of the cars, and the quality of the dealership, and we sorted it in a way that made much more sense for the consumers.
At the same time, that allowed us to build up the largest audience of consumers, and in fact, by giving them more information and more inventory, they also spent the most time, were the most engaged, and were most likely to use our site before purchasing a car. So we then parlayed that back into a value proposition to dealers, which was, not only scale of audience, but also, quality of audience and ROI. We used our marketplace as a jumping-off point to then enable transaction capabilities, so now not only, does our site allow users to shop for cars and dealers to market cars, but we also support the transacting of cars. And so the value proposition has now expanded.
For consumers, we allow them to shop, finance, buy, and sell cars, and for dealers, we allow them to source cars through a wholesale channel and consumer channels, market those cars on our site, and then sell those cars through our transaction capabilities.
Okay, great. So kind of just picking up where you left off there, talking about changes and, you know, changes you guys have put in place. If you think about, you know, COVID pulling forward, changing consumer behavior and dealer behavior, what behaviors do you think are stickiest, and how is CarGurus best positioned or well-positioned to pick up on those changes?
Sure. So there's two I'd highlight. One is just the move to digital. I mean, there was a period, you may recall, when COVID started, where dealers had to close their stores, and so consumers had started a migration to wanting to do more of the transaction online. A small percent wanna do the full transaction online. But that accelerated in COVID. Prior to COVID, dealers really wanted to get consumers into their stores, for a variety of relationship building and transaction economic reasons. But they quickly got religion that, you can do a lot online. You don't need to have people in the store. So move to digital is number one. The second, I would say, is around inventory levels and supply chain. So when COVID first hit, obviously, supply chain was heavily disrupted and inventories shrunk.
I think the commonly held belief now is that inventories will stay lower than where they were pre-COVID. It will not go back to dealers having 60, 75 days' worth of inventory on their lot, and the reason for that is because holding inventory on the lot is very expensive, especially with much higher rates. And so, that has started to come back a little bit, but I think it will not go back to where it was.
Can we kinda drill down? We'll kinda hit on both of those, but the move to digital, dealers are sort of embracing digital now, or they're sort of more welcoming to it? And do they have to make changes on their end to kinda fulfill these digital to better connect with these customers, or? And how do they kinda maintain those relationships with customers over time if the customer isn't coming into the store or spending less time at the store?
Yeah, so just, let's first look at the landscape of consumers. A low single-digit % want to do or are doing a full transaction online. About 50% say they're willing to do the full transaction online, and a full transaction online means you're not going into the dealership, but you're, you are talking on the phone with people, and then you're having the car delivered to you. But today, that's low single digits. But about 80% of consumers say they wanna do more of the transaction online than what they have been doing in the past, and then the remaining 15% or so don't spend much time online and just go into a handful of dealerships to find their next car.
And so yeah, dealers are embracing this fact that if they're not meeting the customer where they wanna be, which is enabling certain or most of the features on a site, then they're gonna turn away customers. I do think dealers still, though, want to eventually get the customer in. Might be for a test drive, might be to cross-sell other F&I products. But they, I think, have turned from, "We don't even wanna think about digital," to, "We're embracing it." One other dynamic I'll mention is their sales forces are much smaller at the dealer groups.
Okay.
They shrunk down during COVID, and so they have found that that leaner, meaner sales model helps their profits quite a bit, and in order to facilitate that and keep volume, they have to do more online.
Okay, makes sense. And then on the inventory side of the world, is that kind of a reflection of 2022 versus 2021, when nobody could keep cars on lots? And I'm just kinda curious why, why the change in mindset as far as needed inventory on the lot versus prior?
So let's talk about new. New cars are a different, slightly different story than used cars. New car-
Oh, we can just go used.
Just used?
Yeah.
Okay. So, yeah, used inventory has recovered a little bit, but is still below where it was pre-COVID. I think the belief is that prices have been more volatile in the last three years than they've ever been, and so dealers are reluctant or loathe to buy a car in the second week of January, at the prospect of not selling it until March, when they're uncertain about what price is gonna do.
Okay, makes sense.
loor plan financing rates are much higher, so the expense of holding a car is significantly higher.
Okay, and so we talked about the business, kind of how you laid it out in the beginning. If I just pull up the KPIs, you know, you've got the marketplace business. Dealers on the platform, times the average quarterly rate that they're paying you guys. It was 26,000 dealers pre-COVID, 24,000 now. It was about, you know, $5,000 you were generating in revenue per dealer on a quarterly basis, and now it's over $6,000. Like, what has changed as far as both of those KPIs, in terms of dealer kind of volatility, and then Q... what, what you call QARSD, kind of moving up and to the right?
Mm-hmm. In terms of dealer count, COVID really, you know, shook the market, and so I think a lot of smaller dealers may have struggled and needed to get their footing and just pulled back on the vendors with whom they work. In terms of, yeah, QARSD is quarterly average revenue per subscribing dealer, that has grown really nicely through, through COVID. And the last couple of quarters, it's grown 8%-9% year-over-year. There are several factors to that, and drivers to that, and we are really proud and comforted by the fact that we have several drivers. So, number one is, as we bring on new dealers, we're bringing them on at market rates.
We've historically priced below market, so when we bring on a dealer at a market rate, that alone raises our quarterly average revenue per dealer. The second is, we have multiple package tiers, package levels, and we are upselling dealers, and the mechanism for that is by packing a lot more feature and value and functionality into the higher packages. That's been a concerted effort. The third is simply price. We have always priced below the market, and we're bringing dealers up to the market, and then last is cross-selling other products.
Okay, and how does a dealer... Like, how sophisticated, and I imagine it runs a spectrum, but how does a dealer know that they're getting value for the leads you're sending them at a higher rate? Like, how, how do you kind of benchmark yourself versus peers, and how does the dealer, in turn, know that the benchmarks you're kind of relating to them are sort of... That that's driving their business?
Yeah, so we call that attribution.
Okay.
And when we talk about close rates, it's the rate of the leads that we send to them to a closed sale of a car. Dealers are becoming more sophisticated, and large dealer groups are very sophisticated about attribution. It is, admittedly, a difficult math equation to do, because the car shopping journey is long. It's about three months. There are many touch points for any consumer, and so there's multi-touch attribution at play.
But dealers have different mechanisms, typically through their CRM, to measure it, and the dealers, the largest dealers with whom we partner closely, will show us and they'll say, "Here are my channels of customers, and here are our close rates." And so, whether it's through that, or whether it's through. We have third parties that measure how we're doing relative to others, whether it's through surveys that you and your peers do, we typically see that we have a higher close rate and a higher quality.
Okay, and can you talk about the shift? We might have to go back a little bit, but you know, how dealers used to advertise, newspapers, Craigslist, that type of thing, versus how they, how they think about their advertising budget now, and the lion's share of it tends to be on marketplaces like yourself. Is that sort of, that sort of happened, or is there still kind of more room to go? Like, what's the right way to think about the dealer's advertising budget overall?
Yeah.
Then if you kind of loop in Digital Deal and Top Dealer Offer that way, where you're, you're sending them not necessarily a lead, but sort of a lead to a closed transaction-
Mm-hmm.
How do you think about that within a dealer's marketing budget?
So, I mean, interestingly, the lion's share does not go to marketplaces like us.
Okay.
So the structure of the dealer marketing budget is ballpark on all these, but call it $22 billion-$23 billion are spent by dealers in the U.S., marketing. About 60% of that is digital, so 40% is still offline, still television, newspaper-
Okay
... billboard. Of the 60% that's digital, $12 billion-$13 billion, $14 billion, think of it as three channels: search, marketplaces, and all other. And all other being video and banners. So the marketplace spend among dealers is only, call it, $3.5 billion or so in the U.S. I think that has room to grow, and I think the reason is because on an economic basis, it is, as a category, a stronger ROI than the others. What the others have going for it is, it typically leads to traffic directly to their website, and dealers like traffic to their website, even if the ROI is not as strong. So that's, that's the makeup of, of dealer spend, and-
How does a dealer know attribution on the percentage they're not? Like, traditional media, how do they kinda— Is it just kinda ballpark, finger in the wind? Like, is it easier to kinda cross-sell against that over time? Like, how do they measure attribution on those other sources, or do they just don't?
No, I mean, I think the-- Again, these are, you know, there are sophisticated public dealer groups, of course, that I'm sure measure that well. But like any business, measuring offline is-
Okay
... much, much harder. But it remains multi-touch, and there is a value to brand, for sure, and there is a value to presence. But I think you would hear a lot of dealers say that the walk-in customer doesn't exist anymore.
Okay.
And so, you know, billboard is maybe creating trust and brand for the moment when the consumer sees that brand online, right? It's no longer. It's now a means to an end. It's no longer the direct purpose of it. So our business, as I mentioned earlier, is moving from a marketplace to a transaction-enabled marketplace, and we're taking steps to get there, and Chris mentioned a couple examples of those steps. So one is a product we have called Digital Deal. Digital Deal allows a consumer on our marketplace to, when they find a car they like, rather than just email the dealer or call the dealer, they can do various elements of the transaction on our site. They can get a trade-in value. They can get fully financed for that car. They can get.
They can purchase other F&I products from the dealer, or warranty products from the dealer, to get what's called a penny-perfect deal, so they know exactly what that car is gonna cost them on a monthly basis, including everything. They can then set up an appointment with that dealer, and they can then put down a deposit. So when they go into the dealer at that appointment time, they're effectively ready to buy that car, and that is effectively a sold car, more or less. Which is very different from them getting a lead of a consumer who's saying, "Hey, is that car-- What shade of blue is that car?" Which is clearly much less valuable to them. Another example that Chris mentioned is, as we now support transactions, consumers can now sell their car on our site.
So remember I said they can shop for cars, get financed, buy a car, or sell their car. Consumers can come to our site, enter some information from, on their car, they will get an offer from a dealer, and they can either have that car picked up at their home or bring that car to their dealer and transact. And those are single point-to-point, consumer-to-dealer, teed-up a transaction, ready to go.
So what's the right way to think about QARSD, you know, before you had these products and as these products kinda take hold in the consumer mindset? Because, like you talked about, you're giving someone a, a warm lead versus giving the dealer a closed transaction. Like, what's the right way to think about where QARSD could go or some sort of upper bound?
Well, so the value of what we're delivering to them in those examples is significantly higher, and so assuming we can grow both the quality and the volume, then those would be drivers, whether they're in the form of a new product or a package level, or other forms, those will drive QARSD up. There are models in this broader umbrella of transaction model that are transaction fee-based. So, as we build out the ability to, for consumers to buy cars on our site or sell cars on our site, there are some of those models where we are taking, a spread or we're taking a transaction fee that is different from subscription. So our core business is subscription. As we move into transactions, though, those will be layers on top of it, which are transactional in nature.
Okay. Can we spend a little bit of time on Annual Business Reviews? Kinda you, you kinda led with it, bringing new dealers on at market prices or speaking to dealers that were at below market prices.
Sure.
Something you've been doing for the past year or so.
Yeah. So when we began, you know, 10 years ago in the market, we were an upstart, and there were a handful of competitors in the market. And one of the ways that we earned our awareness and earned business was by pricing our product low at the time. So that's how we began life, and we continued to improve the quality, improve the volume, improve the insights and data that we deliver, and we slowly raised price over time. But we always remain, on average, below the prices of our competitors on an apples-to-apples basis. COVID, when COVID hit, we basically didn't touch pricing for 2.5 or 3 years, and so we remained below the market. And being priced below the market with higher quality meant that our ROI was significantly better than our peers.
We heard this from dealers. Beginning in 2023, we said, "Okay, that, that stay of price, touching price is over, and we're gonna start bringing our dealers back to market pricing." So we introduced a program called Annual Business Review, which addressed the lowest quarter or so, price point of our dealers, those who were paying the lowest price point per unit. And we said, "If you're not gonna raise your package and you're not gonna add on other products, then we simply need to change your price to get closer to market." And those changes were significant. They could be 40%, 50%, 60%, 70% because these are incumbent customers that were well below market. That was a very successful program.
It proved to us that consumers really value our product, because even in the circumstance of a significantly rising price, the vast majority of dealers stuck with us and still see the value in us.
Can you hit on the consumer side of the marketplace, then? You've got the dealers listing these vehicles. How do you kinda get consumer eyeballs to the site? Sort of, what's the secret sauce there that you can share?
Yeah, I mean, it's as a lot of great internet companies say, it's the product, it's not the marketing. So the product is more inventory from more dealers, more information on those cars and those dealers, and we tell them if it's a good deal, a great deal, an overpriced deal, and we sort it in a helpful way. And now we are leading the industry, pioneering in transaction capabilities. So the consumer that doesn't want to spend five hours in a dealership but would rather spend one hour in a dealership or not go to a dealership and have the car delivered to them, we offer that full selection of shopping, financing, buying, and selling. And we do, however, do marketing and both performance and brand marketing, and that's been, I would say, a strong core competency of ours.
We are in a crowded market where a lot of businesses market their products, and I think it can be confusing to consumers, so we do think a lot about differentiation and distinction.
Okay. And can we kind of shift from the marketplace to the wholesale side of the world? So these dealers, you know, they need to get cars to put up on the website. One way to get cars is through consumer traffic, through consumers selling their cars or the wholesale market.
Mm-hmm.
So you kind of undertook the CarOffer transaction. Can you kind of just walk us through the, you know, high level, why you wanted to kind of touch other parts of the dealership, kind of how it fit nicely with the marketplace product, and kind of why it was a fit at the time?
Sure. It's part of our vision to allow dealers to source, market, and sell. Historically, we helped them market their cars, and we saw an opportunity to bring wholesale and retail together to be a single place where they can source, market, and sell. Importantly, it's not just having those together, but it's actually leveraging the data across that whole value chain where it becomes valuable. The example would be that we see more retail transactions than anybody else, period, in the market, and so we see consumer demand trends, we see retail trends, we see search trends. That can really help inform the types of cars a dealer should stock on their lot.
At the same time, we now see all the wholesale trends, and so we can see where there are dislocations in the market and where a dealer in their geography or outside their geography would have an opportunity for, you know, juicier margin transactions, whereas before they were trying to predict, "What do I think I should buy based on what do I think I can sell?
Can you talk about how, when the pieces fit together and everything's kind of humming along, the dealer on their front end, they see kind of their car on their lot, their car, the price it's listed for. Kind of, you know, you can give them price guidance, but also where they could wholesale that car for too, so they get a certain idea of grosses they can make or how quickly they should kind of move on from a vehicle, and then what kind of vehicles they should get on your lot based on data. Like, how does it all kind of fit together?
I'll give you two ways that it fits together today already that we're offering to our dealer customers. So the first is when they are in our platform and they're looking at our pricing tool, which shows them the prices of all of their their retail prices of all of their cars, and allows them to adjust those prices and see what it will do to the Deal Rating of that car. On every one of those units, there is a standing wholesale offer. So that dealer can say, "I've had this car for 25 days. I've dropped the price from $19,000 to $18,500. I've gotten two leads on it. It's not moving that well. I have a...
There's a wholesale offer here for $18,300, and I now, for the first time as a dealer, can make that full-spectrum decision to say: Do I think I should sell, click the sell button, wholesale at $18,300, or do I think I should drop the price by $200, hope to wholesale it within 10 days? Et cetera, et cetera. Before, they've never been able to do that. They would have had to guess what they could sell it for at wholesale, put the car on a truck, take it to a physical wholesale auction, run an auction, and hope that it sold, and hope that it sold for more than $18,300, in this case. We now give them that, all of that in one view. The other example is, historically, when dealers have bought cars at wholesale, they have priced their...
The price tolerance is based on wholesale book value.
Yeah, at $2,000.
Yes. So they would say, "The wholesale book value for this is $16,000, because the potential retail value is $17,500, so I'm willing to spend 1% below the $16,000." Again, that's guesswork. We can now say to them, "You can set your wholesale bids based on backing it off of what the retail value of that car is, because we know the retail value of that car better than anybody else." So they can say, "Here are the bids that I'm going to set in wholesale, and they're all 9% below the retail value of each of those cars, so I know that I'm effectively locking in a 9% gross margin.
Can you talk about... Not to go back to the marketplace. Well, to go back to the marketplace. What – when a dealer sees, if you think about the, what a consumer sees, one thing that separates you guys is the ability of the dealer to move from, you know, good price to great price. Like, sort of, what does that look like on the page for the consumer eyeballs that you have, and sort of, what does that mean as far as them getting more leads in the vehicle and then turning over that vehicle?
Yeah. So the default sort on our site, as many of you have seen if you've been on our site, is sorted by Deal Rating. There's a couple sponsored slots, but then the bulk of it is what you would think of as organic search by Deal Rating. Deal Rating is a composite rating we apply that is primarily how well that car is priced relative to the most similar cars like it, and what is the dealer rating or the quality of that dealer. That composite is the Deal Rating. Great deals are listed first, then good deals, then fair, then overpriced. So yes, there is a skew, as you would think, to higher-rated deals, where even fair deals, though, get nice lead volume.
Yeah.
Because most consumers just want to know that they're getting a fine deal. They don't need to think they're getting a steal. And so one of the tools that we just introduced, or reports I should say, for dealers is called Next Best Deal Rating, and what it does is it looks at their entire inventory and says, "For each unit, here's the minimum amount you would need to drop price to get to the next best deal rating." So you may... Dealers may, this happens all the time, they may have a car that is rated as a good deal. If they drop it $50, it could go to a great deal, and they may double their lead volume and sell it 15 days faster.
They'll still see the wholesale price too, so they'll know how much gross they can make on that car if they move categories.
They'll... Exactly.
Okay, perfect. And then can you talk about how the marketplace and the wholesale, like what bundling opportunities are potentially available?
... So we're just starting to scratch the surface on that. There are a lot of data and technology sharing mutual benefits between them. In terms of actual bundling, we have started to toy with that, but I would say we've not implemented much yet. But you could imagine that, we would have offer higher tiers and better features and better capabilities for dealers who are more loyal to us across our portfolio of products.
Okay. And then can we talk about CarOffer? Sorta, you know, they went through some challenges when pretty much all dealers had challenges at the end of 2022. Kind of what you kind of learned in 2023, and how you're thinking about growth in 2024.
For CarOffer?
Yeah, please.
Yeah. So, again, CarOffer is our dealer-to-dealer wholesale, digital wholesale platform. It, what makes it different from other wholesale platforms is the wholesale industry has historically been an auction-based industry. I put up a car for sale, and other dealers can bid on that car, and if they don't meet my minimum threshold, the car doesn't sell, the auction ends, and I take the car back. CarOffer is unique and is the only one of its kind, that rather than being auction-based, it's what we call instant trade platform-based.
What that means is that dealers will say, "Here is my tolerance to pay for this make and model of a car, and if you can find cars that meet that threshold where my offer clears the price, I'll take up to three of them a month, or 10, or whatever." And they fill that out for any make, model combinations that they're interested in sourcing. That's called a programmatic platform or programmatic buying. So what Chris is referencing is that in 2021 and 2022... And CarOffer is about four years old, by the way, so it's a relatively young company. Two things were happening.
One, prices in wholesale were rising really fast, and so dealers felt that if they could just buy a car on, you know, Monday the 6th, by the time they had it ready to sell on Thursday the 23rd, it was gonna be worth more. And so they were just clamoring to buy as much inventory as possible, and the wholesale markets were very buoyant. That environment in a programmatic model, it fits very well, and so dealers flocked to the platform. The second thing that happened is rental fleets, who have historically bought new cars from OEM manufacturers, had been kinda locked out of that market and needed to source cars at significant scale to build up fleets for the upcoming travel of the 2022 or 2023 summer travel season.
So fleets, for the first time, came into the wholesale market, and needing to buy at scale, also fell in love with the programmatic platform model. And so volume grew significantly, and growth hides a lot of operational challenges, and as the rental fleets pulled out and the prices came down, we realized that programmatic buying needed to be operationally tight, and we had gotten loose in the growth of the business. So, we focused on operational improvement around the inspections, around arbitration, around customer buying and selling behavior, around contract terms, et cetera. We've done a lot of that. We now have a healthy relationship with the rental fleets, and maybe most importantly, we completed acquiring 100% of the business.
We had only owned 51% until a couple of months ago, and we have a new CEO at the business who has run two other digital wholesale platforms before.
And so now it's sort of positioned for growth, but it's kinda up to the internal signals that you guys see that kinda give you the idea that it's time to really kinda think about turning it on again. Is that the right way to think about it?
Yeah, I think there's... Yes, it's operationally in a much better place. Yes, it's stabilized. The market is not, the wholesale market is still not robust, but it's, it's not, prices aren't crashing like they were. And so I think, you know, it's not overnight, but it's in a position where we're ready to, you know, begin building trust and begin generating more volume again with our customers. But also, a lot of these ideas that we've had of how we bring wholesale and retail together, we can now actually start to implement.
Can you talk about programmatic? You know, for a rental car company that's trying to sell a lot of cars, it, it sort of makes a lot of sense. But what does it mean on the dealer side, where they're kinda, you know, if you have a dealer with 100 cars on their lot, how many cars are they trying to buy? Like, is there an education issue on the buy side, or kinda are you beyond that already?
There's certainly an education issue because this has never been built or done before. That said, we've done a good job, I think, in educating the industry between our go-to-market team and CarOffer's go-to-market team. So I think there's some mild education. I do think there's a comfort level still, and I think dealers, because of the price volatility in wholesale, have been a little skittish in wholesale in general. And then I do think this lends itself to larger dealers. I mean, if you're a dealer, every dealer's different, but if you have 100 used cars on your lot, you may be sending 15 to wholesale a month and buying 15 or 20 from wholesale a month.
I think at that level, rather than having one or more individuals, you know, bid on hundreds of auctions and only be successful a fraction of the time, having a more programmatic approach can certainly make sense at that level.
Okay. Okay, and then can we talk about gross margins for the business? 'Cause, so you've got the marketplace business, where the gross margins are high. It's kind of... And then what drives the CarOffer side of the world gross margins? Is it kinda arbitration, or like what's the right way to think about where gross margins can go on that side of the business?
... Gross margins in our marketplace business, you've all seen in our financials, are 92%-93%. They're very steady, and nice EBITDA margins as well in the marketplace. We've long-term target of 35-ish%. In the wholesale dealer-to-dealer business, gross margins are closer to 40% and potential, and we've been above that, we've been below that, so in this volatile market, it hasn't been exceptionally steady. And what drives it is, so there in any given transaction, there's a buy fee and a sell fee, so the pricing of those fees. There are two elements that are largely pass-through or low margin around an inspection fee and a transportation fee. There are some smaller add-on products that can be nice margin, but are smaller dollar amounts.
And then, yes, arbitration is a key aspect of the gross margin, and that's where I think a year and a half ago, things got a little sloppy, and now I think we've got arbitration, like, really dialed in.
Should arbitration have a natural tailwind as used car volumes kind of in the industry kind of move back towards where they were pre-COVID? Will that sort of be a natural tailwind as well? Is that the right way to think about it?
I think the two biggest elements to arbitration remaining in check are, one, price stabilization, and two, running a great operational business.
Okay. Okay, and then if we move down to OpEx, pre-COVID, there was sort of a, you know, a larger, I would say, S&M spend for the business. And so then you were able to kind of shut down Google Search spend, that type of thing. What did you learn from that, and sort of where do you see that going back to, or how do you see it kind of trending as we leave that in the rearview?
So pre-COVID, we were spending aggressively on marketing to build our audience as quickly as possible and get it as large as possible, really to establish ourselves in the market because we were an upstart at the time. When COVID hit, most of our peers, as well as ourselves, cut back significantly on marketing, so CPCs went down a lot. Also, consumer demand for cars went up a lot, and so, they were seeking dealers and cars out. We didn't need to market as much. So our marketing spend went from 2019 to 2020 into 2021, you know, down by a considerable amount. In 2023 and 2024, we're getting to a more normal, I would say, steady state marketing environment-
Okay.
Marketing spend environment.
Okay, and then as you kind of get below that, you've got EBITDA, free cash flow, you know, you've got the buyback. What do you think of as far as use of cash or...?
Share buyback, for a while, we had the remainder of CarOffer as-
Yep
... an unknown, but that obviously clarified itself and is behind us now. And then, you know, we keep it for future M&A. We don't have a lot of CapEx in the business, so we're a high free cash flow conversion business. And we're debt-free, so we have a very strong balance sheet position and capital position, and right now we're, you know, very excited about buying our shares.
Okay. And what springboard keeping you excited? What gets you most excited about 2024 and beyond?
Yeah, I think so. I've talked about this transition from a marketplace to one that actually supports transactions, and that may sound easy, but it's actually there's actually a lot of work that goes into that. It opens up huge markets for us, huge TAM, but also a much deeper relationship with dealers and with consumers, and so there's extraordinary strategic value to it. And it's taken us three years, really, to build those capabilities, whether it's through acquiring CarOffer or building the technology to have full digital retail capability. And so we've been doing that and investing in that, all the while growing nominal EBITDA.
Now I think 2024 is the first year where we not only have all the technology capability, but we actually have all of these pieces in market under full ownership with our core marketplace that's accelerating its growth. So we really are incredibly excited about 2024 and beyond because it's sort of this, the start of our life as a company that has the foundation of a marketplace and all of the opportunity of the transaction.
Okay, and how do you measure just on Digital Deal like that, you know, is it that dealers are accepting it, and when I go on the platform, I see home delivery available? Like, how do you...? Or is it transactions? Like, how can kind of investors follow along that, like, how quickly it's kind of working?
You can look at... We speak about dealer adoption, and we speak about price points. So, you know, dealers are savvy and sophisticated, and so I think their continued adoption at these price points is validation of the value that it's driving. We also give information on the heightened quality of these leads and the conversion rates of these leads, and then we're adding feature and functionality to it. Then lastly, with Digital Deal in particular, we've layered that into our higher tier products and just made it standard. I mean, it is where the future of the market is going. Very few consumers, as I said before, just want to connect online. Most consumers want to do certain elements of the transaction online, and rather than spend five hours in a dealership, they want to spend one hour in a dealership.
That is the future, no question, and so we're just making that more mainstream to our product, and we're leading the industry in innovating on that front.
Does that mean the future of the dealership, we could see further compression of salespeople and that frees up dollars for QARSD? Is that the right way to think about it?
I think the more... Not necessarily that it frees up dollars for QARSD, although it could, but they could choose to put that into margin. But yes, I do think you will, you know, the walk-in doesn't exist anymore, and when consumers come in on average now, they more than likely have not only picked out the car they want, but they've started constructing their deal online. And when they come in, it's in the CRM, and the salesperson can pull that out and say, "Okay, I know all this about you. Now, all we have to do are these remaining things.
Okay, great. Why don't we leave it there? I appreciate the time today.
Great! Thank you very much. Thanks for having me.