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Welcome to the E Inc. 2022 Fourth Quarter and Year-end Financial Results Conference Call. Following the presentation, we will conduct a question-and-answer session. Listeners are reminded that a portion of today's discussion may contain forward-looking statements that reflect management's current views with respect to future events. Any such statements are based on certain assumptions and subject to risks and uncertainties that could cause actual results to differ materially from those projected. For more information on the assumptions, risks, and uncertainties related to these forward-looking statements, please refer to the cautionary statements in the company's MD&A for the period ended December 31, 2022. During this call, representatives of E Inc. will refer to certain non-IFRS financial measures. Although management believes that these measures provide useful supplementation, information about the company's financial performance, these are not recognized measures and do not have standardized meanings under the IFRS. Please see the company's quarter MD&A for the 3 months ended December 31, 2022. For additional information regarding non-IFRS financial measures, including for reconciliations to the nearest IFRS measures. As a final item, please note that all dollar amounts cited on this call are denominated in U.S. dollars. Today's call is being recorded on Tuesday, March 7, 2023, at 5 p.m. Eastern Time. I would now like to turn the call over to Jason McClenahan, President, and Chief Executive Officer of E Inc. Please go ahead, sir.
Good afternoon, and thank you for joining us today. This afternoon, we released our 2022 fourth quarter and year-end financial results, which you can find on our website at e.inc. Revenue grew 14% to $26.3 million in Q4 compared to the same period last year and was up 38% for the full year 2022 compared to 2021. This improvement was partially due to the 2 acquisitions we completed in 2022 as well as increased auction fee revenue due to pricing action and increased ancillary revenue due to a combination of pricing actions and increased adoption. Transaction volume was up 18% for the full year to $192,615, while Q4 was off 4% to $43,544 compared to the same period last year. Q4 is traditionally a seasonally lower period for used vehicle sales. Q4 of 2021 was also a remarkably strong quarter, with strong demand for used vehicles driving peak pricing, as we mentioned in our call in March of last year. Marketplace participants grew 25% to $12,531 as of December 31, 2022, compared to the same point in 2021, and we increased consignment on our platform by 32% in 2022 compared to 2021. On an annual basis, net of 2022 acquisitions, revenue was up approximately 12%, primarily driven by the business in Canada, which was up 16% compared to the U.S., where we were flat despite narrowing our focus to fewer regions mid-year. Despite a challenging macro backdrop that saw the broader wholesale market in North America down 20% to 30%, depending on the data source used, we were only down 6% organically on a transaction basis, which demonstrates we took share in the market. We have taken a focused approach as part of a broader strategy to realign the business for profitability sooner than we had planned at the time of our IPO in late 2021, which I'll speak to in a moment. First, let's address the dynamics in the macro auto market. They are very different today than what we are seeing in the last 3 quarters of 2022. We're starting to see some encouraging signs of improvement in early 2023. During 2022, wholesale supply existed but at elevated prices, given we were coming out of a robust market and the rapid price acceleration experienced in 2021. Prices peaked in December 2021 and January 2022. These high prices diminished demand in 2022 due to the imbalanced expectations between buyers and sellers. Prices subsided by approximately 20% from Q1 through the back half of the year into January 2023. The elevated pricing and dynamics in the second half of 2022 impacted conversion rates, the ratio of listed vehicles to vehicles sold. Conversion rates started to deteriorate in March of 2022 through the end of the year, dropping by as much as 1,200 basis points from 2021 to 2022. A lower conversion rate has a significant impact on both our top line and bottom line. Applying the historical conversion rate on the number of vehicles listed in 2022 implies that 52,000 fewer vehicles were sold due to the pricing demand dynamics. This equates to an additional $30 million in revenue, and an estimated $15 million more in EBITDA had the conversion rate remained consistent. What we're seeing in the first 2 months of 2023 is a different situation that brings with the promising tailwinds as well as some potential short-term new headwinds. In terms of the tailwinds, in the first 2 months of 2023, we have seen an improvement in the conversion rate, up 600 basis points from December, which is still slightly behind the same period in 2022, prior to the market turning in late March, or early April. This reflects an improvement in demand, which we are starting to see pick up modestly, the display of inflation, and the higher interest rate environment. This demand improvement is more evident in the U.S. than Canada. In terms of the headwind, supply is tight, which is a very different scenario than 2022. The key reason for this trend is the reduced new vehicle production and sales since the pandemic. This production loss is now appearing in the market with less new vehicles returning as to used vehicles. The production loss is estimated at 7 million fewer vehicles produced through the pandemic. This lack of supply could cause an upward movement in used vehicle pricing again. We are starting to see that in the first 2 months of 2023. New vehicle inventory is slowly improving on dealers' lots, more so in the U.S. than Canada. While this is a very encouraging sign, new production and forecast for new car sales are still below pre-pandemic levels but improving. Given the short supply of the resale market, dealers are more inclined to hold trade-ins for their own resale activity rather than moving them through the wholesale channel. As a result, the wholesale market is becoming more competitive for inventory. In short, supply levels are tightening. This is resulting in an improvement in the conversion rate but also higher pricing. That is good news for profitability, but it will put pressure on the number of transactions processed. As an exchange, we benefit more from volume than average sale prices. Within this context, our focus and emphasis are on growing with the right marketplace participants. It's not just marketplace participant growth for the sake of growth. We're focused on identifying new sellers and serving our existing participants that list and convert into transactions. So while we expect absolute volumes may come under some additional pressure in the current near-term market, our strategy is designed for less is more, focus on higher quality sellers to drive more profitable unit economics, and focus on fewer geographies to achieve profitability sooner. Achieving profitability is a priority for us. We took proactive actions during 2022 with a cost management strategy. In Q4, you can start to see the benefits of that strategy. We've reduced our SG&A expense by approximately $5 million in Q4 versus Q3, or 23% quarter-over-quarter. We entered 2023 with a run rate SG&A expense of approximately $18 million per quarter, and we believe there are further incremental efficiencies we can achieve. A key element to successfully achieve profitability is the focus we have on unit economics. We're already starting to see an improvement in Q4, with revenue per vehicle up to $604 in Q4. We have reduced our operating expense per car in Q4 versus Q3, and we expect to see a strong improvement in gross margin per vehicle in 2023, given the market dynamics I addressed earlier and the cost restructurings we implemented in 2022. On the acquisition front, the integration of Fast Lane of Louisiana First Choice has been completed and gone well. Our land needs tech strategy is powered by the EBlock technology, underpinning a single marketplace on a combined auction platform. Houston Auto Auction is obviously more recent, but we're making good headway there as well. As we move the acquisitions on to the EBlock platform, it sets the stage for our next innovation and growth opportunity within the market. Physical auctions bring an established and competitive marketplace of existing dealerships, experienced staff with regional relationships, and infrastructure to support digital expansion. Our platform enables these buyers and sellers to transact where and how they prefer to do business while attracting new ones. And our digital platform enables us to expand the reach of the physical auctions beyond their local region, increasing the distance between buyers and sellers, launching digital marketplaces more efficiently, and capturing more dealerships and transactions. With these integrations complete, it clears the path for the launch of our Live Lanes offering. Live Lanes gives us the ability to provide customers a single marketplace and experience. It's the first and only technology to bring vehicles together from a live physical auction and a digital auction on the same platform, running lanes at the same time in one single marketplace. The lanes are natively embedded in our EBlock platform, so buyers can see all the vehicles in a single view. Live Lanes differentiates us in the market, positioning us to take share with an efficient method to broaden and strengthen our market reach. We're nearing a formal launch date in the second quarter of this year, but we've already started to introduce the technology to customers. We demoed Live Lanes to select customers at the National Auto Dealers Association conference held in Dallas in January. And in February, we tested the technology at our ESP and Fast Lane auctions. The early feedback has been tremendously encouraging. It's another step forward in the full realization of our Land Needs tech strategy powered by EBlock. We continue to invest and innovate on the product development side. In Q1, we rolled out a new condition report in the U.S. that gives us the ability to have consistency across digital and physical marketplaces, inspecting a car once and allowing it to be run how and where the seller wants while increasing the efficiency of our vehicle inspectors. We also launched our EBlock API, which enables programmatic buying for dealer groups and inventory sourcing partners, allowing them to search a run less and place bids programmatically. This offering creates efficiency for large buyers and opens a new market vertical for us that will drive future market share gains and increased conversion rates. In Q2, in addition to the rollout of Live Lanes, we are looking forward to the pilot of our first retail meat wholesale product in Canada, guaranteed offer. With guaranteed offer, we empower dealers to provide an automated online offer to consumers from the e-dealer-dealership website, backing up the offer to the dealer with a guarantee from the EBlock marketplace. This also allows us to move further upstream into the consumer acquisition channel and have those cars flow directly into our wholesale marketplace for so competitors when not resold at retail. We are excited to leverage our vast data and expansive logistics from our wholesale marketplace to provide a better experience at retail for both dealers and consumers. Stepping back for a moment, given the changes in the resale market and our acquisition activity since the IPO, we thought it would be useful to provide a clean look at the business and where it stands today. At the time of the IPO, we had a strategy to invest ahead of growth. We were on plan with that strategy through the first half of 2022. We weren't investing more than planned. We were on plan, but the markets changed in 2022. Both the resale vehicle market and the capital markets, with its focus on profitability over growth, we had to adapt. We have implemented strategies that will achieve profitability much sooner while still continuing to invest in innovation. We pulled out of regions that would have taken more time to reach critical scale. We are not entering new regions. We're focused on deeper penetration in the regions that we're already in. We reduced our headcount, and we are continuing to reduce our OpEx. The 3 U.S. acquisitions since the IPO, our wholesale business is now split approximately 60-40, Canada versus U.S. on a revenue basis. Our core regions in the U.S. are the West, the Midwest, and the Gulf states. Our digital retail offering in Canada is consistently growing in the mid- to high single digits. Given the capital markets, we intend to be very disciplined in our acquisition strategy moving forward from both a cadence and valuation perspective. We have no immediate targets in the funnel in the near term. We announced in January that Houston Auto Auction was the only acquisition we would be completing of the previously disclosed multiple acquisitions that we had under finalized term sheets. We continue to build a pipeline of attractive opportunities, but we're being patient and methodical in our approach. With that, I turn it over to Andy to highlight the financial performance. Andy?
Thanks, Jason, and good afternoon. As Jason mentioned earlier, revenue was up 14% to $26.3 million in Q4 and up 38% to $110.1 million in fiscal 2022 compared to the corresponding period in 2021. Vehicles transacted were down 4% to 43,544 in Q4 and up 18% to 192,615 in fiscal 2022. This drove gross transaction value across our EBlock platform of $577.4 million, down 18% in Q4 and $2.9 billion, up 32% in fiscal 2022 compared to the corresponding period in 2021. On the e-dealer side, we finished Q4 with 1,123 subscribers, up 6% from the end of 2021. Gross profit was down 10% to $8.9 million in Q4 and up 10% to $40.9 million in fiscal 2022 compared to the corresponding period in 2021. Gross margin came in at 34% in the quarter and 37% in the annual period. The change in gross margin was a result of both normal seasonality as well as the high volume of vehicles listed on the platform and the macro conditions Jason mentioned earlier, which affected conversion rates. We incur cost to list vehicles like condition reports, which we recoup when transactions occur. As a result, the dip in conversion impacted our margins. Also contributing to lower gross margin in Q4 was a higher mix of ancillary revenue, which increased to 39% of total revenue in Q4 from 32% in Q4 2021. This is a continuation of the trend we saw in Q3. While our ancillary services are an excellent means of increasing our share of wallet, they have lower margins. Our gross transaction value per vehicle continued to normalize in Q4 relative to the upward trend we experienced in late 2021 and into Q1 of 2022. GTV per vehicle was $13,300 in Q4 compared to $15,500 in Q4 2021. Despite this, we've been able to increase our ARP 19% to $604 as of Q4 2022. For fiscal 2022, GTV per vehicle was approximately $15,100 compared to $13,400 in fiscal 2021. So you can see how the Q4 metric is more in line with the historical figure in the 12 months ended December 31, 2021. The impact of the 2022 restructurings are beginning to show up in our Q4 results, and we expect to see more improvement in the current and coming quarters in 2023. Operating expense, which consists of product technology and development expense and SG&A, was $20.1 million in Q4, up 13% from Q4 2021, but down 19% sequentially from Q3 2022. The 2022 restructurings were designed so that we achieved profitability earlier than originally planned at the time of our IPO, streamlining our business process and improving efficiencies in order to drive quarterly operating expenses lower and taking price where we can with the goal of increasing revenue per vehicle transacted. Adjusted EBITDA loss was $8.3 million in Q4 and $39.5 million in fiscal 2022. Based on the 2022 restructurings, we expect to significantly improve the adjusted EBITDA performance in 2023, with improved sequential performance in each of the first 3 coming quarters with normal seasonality in the fourth quarter. The shape of this curve would see the largest loss in Q1, albeit an expected improvement from the Q4 2022 loss, with a continued improvement in Q2 and Q3. Based on the addressable market in front of us and our growth plans, we believe it's important to manage for the long-term market opportunity while recognizing the importance of having a clear line of sight to profitability. Our confidence in the strategy is based on the success we've demonstrated scaling the Canadian Digital Platform business, which historically has generated strong contributions. As of December 31, 2022, cash and cash equivalents were $17.1 million. The cash net of AR and AP totaled $29 million, along with $8 million of available credit from our revolver. Our cash for operations balance is subject to significant variance day-to-day due to the changes in working capital, specifically the accounts receivable and accounts payables for the GTV value that we collect and pay dealers across the EBlock platform. Net change in cash of $2.6 million from Q3 2022 was impacted by a $4 million swing in non-cash working capital items, including accounts receivable and accounts payable balances due to the timing of collections and payments. Excluding this item, the net increase in cash of $1.4 million reflects the cash from financing for the private placement with Inner cap, less cash used in operations in the fourth quarter, plus repayment of lease obligations and other current liabilities. Thank you to everyone for participating in today's call. And with that, I'll pass it back to Jason.
Thanks, Andy. The digital transformation of the auto wholesale market is a tremendous opportunity. We bring a unique offering to dealers that provide us a differentiated position in the market with our Land Needs tech strategy and the coming launch of our Live Lanes technology. The used vehicle resale market continues to experience challenges, but we are also seeing early signs of positive tailwinds, specifically increased demand, which we believe will slowly normalize as inventory supply improves in the back half of the year and entering 2024. Achieving profitability is a priority, continuing our track record of innovation, bringing new products to market, and increasing our wallet share with dealers with a disciplined approach towards operational efficiency and cost management. We're focused on deeper penetration of our existing regional markets, acquiring sellers that transact, and continued improvement on our unit economics and disciplined cost management.We're excited to bring our Live Lanes offering to market this summer, and we have more innovation on our product road map behind it. The market is increasingly looking for solutions that offer the greatest flexibility and choice, and our Land Needs tech strategy is positioned to deliver just that. We appreciate the trust that shareholders have shown in us. I look forward to updating you further on our progress during our Q1 call in May. With that, I'll turn it back to the operator and open up for questions.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Todd Coupland with CIBC.
I wanted to ask you a couple of questions. The first one was on the balance sheet. So you gave quarter-end cash and true it up for working capital. Does that balance sheet change pro forma any of the acquisitions that you've announced or is now everything incorporated in that in terms of payments and obligations for the business that you plan to acquire?
Todd, yes, thanks for the question. The balance sheet will be updated for the acquisition of Houston Auto Auction, which we announced subsequently to year-end results. With that acquisition, I think we announced that the total deal value was about $5.5 million, $2.5 million was paid for upfront with the remaining $3 million paid over the next 2 years. So that will be reflected in the balance sheet as of the end of the first quarter.
Okay. So the takeaway is with the roughly $30 million in cash and your goal of breakeven, I guess, in the not-too-distant future, you have enough cash. Not to put words in your mouth, but it sounds like you're saying you have enough cash to operate the business at this point. Is that the takeaway?
That's correct.
Yes. Okay. My second question had to do with the market conditions. Like, how are you thinking about volume growth over the first half of '23? Do you expect it to be down in the marketplace? Can you hold it flat? Can you give us some direction on that?
Yes, I can take that. Thanks, Todd. What I would say is, like we said during the call here, we're seeing very different dynamics right now that we were faced with last year in 2022. So last year, there was obviously an influx in vehicles in the market due to that imbalancing between pricing between buyers and sellers. So pricing really stabilized late in the year. A lot of dealers cost average out of their inventory. We move into January, and all of a sudden, the conversion rate is starting to sort average sales, prices started to pick up, which there is a little bit of seasonality that is normal heading into tax season in the U.S. heading into the spring market, the Canadian market, conversion rates, and average sales prices typically do go up. One thing we are seeing, though, is there is less inventory and it's to the point where I just mentioned, which. the production issues that hit the North American market and building and selling 7 million less vehicles since the onset of the pandemic is now creating just less of those vehicles are turning into used trades coming back to the dealers. So while we are seeing improved supply on the new car side, it's the used cars that are a little bit more compressed right now. So we're highly focused on unit economics, managing our expenses, and continuing to do our best to earn more market share. So we absolutely expect to earn a market share in a market that will be, I think, less vehicles available in the first half of the year, and that should normalize more in the back half of the year would be how I would portray it.
Okay. And then my last question had to do with integrating Live Lanes if I'm describing that correctly. What kind of impact is that going to have once that's up and running? Just talk about like how that might impact your overall business. I guess if you launch it in Q2, second half impact, I guess, would be the first chance for us to see it in the results.
Yes. So Live Lanes is going to really reduce the amount of expense that's going to cost to organically grow digital market share in the markets that we're in around our physical locations. So we've obviously built Canada really from the ground up. The California market, we're organically expanding there. And organic expansion from the ground up is expensive. And when you buy a physical auction like we have and get them integrated, you still got to go offer them a different solution and a different portal to log into to buy your physical auction vehicles. So the way I view it is we're basically capturing the whole audience for the customers that we have acquired at these digital marketplaces and adding in an extra opportunity for them to buy offsite inventory. So it's going to be more cost-effective to answer your question to launch new markets. We've been very careful and methodical with the path to profitability and not layer in too much investment around our auctions in that regard until Live lLanes is built because we feel we can do it with the profit being generated from our core physical auction business and expand our digital footprint.
Your next question comes from Martin Toner with ATB Capital Markets.
Are the customers that you've added as a fortune of the physical acquisition -- physical auction acquisitions in the U.S, how frequently are they participating in other digital auctions. Just wondering if you can give us a bit of a flavor for what those customers are like.
Yes, I can attempt to that one, Martin. I'd say right now -- I mean, it depends on buyer and seller, I'd say. I think we've had this question in the past. And typically, sellers are a little bit more loyal. They might try a couple of different marketplaces, but you would typically get repeat business just like you do for buyers. The buyers will shop anywhere there's cars as long as you provide them a transparent and efficient way to access inventory. So I'd say buyers are shopping around and lots of platforms, I would say, much more than sellers going between cross-platform selling and using different options. I don't have an exact number because it's really impossible to put a number on that for how much they use other auctions compared to ourselves.
Yes. And I would just add to that, too, Martin, that a lot of the physical auctions have a digital solution that they're offering to their buyers already in the form of a simulcast product, which our Live Lanes product is going to be replacing. And generally speaking, I think a lot of the physical auctions, the independents that we've been talking to, generally, are transacting about 20% to 30% of their sales through the digital solution offerings such as Simulcast.
Great. Is it reasonable that the average revenue per transaction and conversion rate will both improve at the same time?
Yes. Typically, like that's what we saw last year, and that's typically what happens when prices start to increase, the conversion rate would ride alongside that, and sellers are having good success in getting top returns to their vehicles. It isn't always a complete linear line, but some of the -- like when we saw the conversion rates come off, that was obviously following the highest historical growth in used car pricing we've ever seen and the highest collapse we've ever seen at the same time. So they don't follow exactly linear, but a lot of them, there is correlations there throughout the year when markets adjust, and pricing normalizes. Like we'll see this in the fall when new models typically come out, and fleets are defleeted, a lot of inventory hits the market, prices come down a little bit. That would soften conversion rates. Everybody would get priced into the new environment, and then it would get back to steady course. So there is typical seasonality there, and we feel like this year will be a little bit more normal than we have seen in the past.
Awesome. Can you comment on the impact of the repo market improving or is it too early?
Yes. It's definitely happening, Martin. We have lots of, I would call them, leads and opportunities right now. There's not a lot to update on that front just yet. But we do -- it is an area of focus for us. And as everybody can read the news, repos are going through the roof. There's lots of opportunities in that space, and it's going to be a core area of focus for us in the back half of this year.
And is it reasonable to assume that cash flow from operations will be relatively similar to adjusted EBITDA?
Yes. I think when you -- excluding the changes in non-cash working capital items, Martin, then it should be generally close to the adjusted EBITDA.
Okay. Super. Were those noncash items, not cash working capital items, will they fluctuate a lot in a particular fashion quarter-to-quarter?
It's really day by day. With the accounts receivable and accounts payable line items, right, in terms of collection cycles and payment cycles, for each of the auctions that we run, there's pretty significant fluctuation in that in and out of cash with that AR/AP balance on a day-to-day basis. So there is predictability as we model our auction days and events, we can provide that. But yes, it is really a pretty significant fluctuation day today. So I would say on a quarterly basis, it's very difficult to say, quarter-to-quarter, there's any type of seasonality in that.
Your next question comes from Aravinda Galappatthige with Canaccord Genuity.
I just have a quick clarification. Jason, I think you mentioned a 6% organic volume decline compared to 20% to 30% for the industry. Is that -- I just want to clarify, is that a full year number that you gave as opposed to Q4?
Yes. Yes, that's a full-year number, Aravinda. So we were 6% down organically, with the market contracting between 20% to 30%, depending on the source you're looking at. And when we break that down between U.S. and Canada, Canada was actually essentially flat last year, and the U.S. was down 9%. But as everybody is aware, we did reduce our footprint down there. So we actually would have probably leaned in and gained more market share. We have not regrouped and focused on profitability. So impressed with the year-over-year improvement as far as the market contracted there.
Okay. And I know Q4, obviously, everybody's volumes were very weak. But are we just kind of talking about on an organic basis, something in the 15% to 20% range? Is that in the ballpark there?
Yes, you're absolutely right in the ballpark. We've seen -- and what we saw is inventory has started to normalize a little bit quicker and more in the United States versus Canada. Canada's inventory continues to be tighter overall, and the market has picked up from a demand standpoint a little bit earlier in the United States. So a little bit different from country to country right now.
Okay. Great. And then just focus on profitability and sort of your shape of the improvement, I guess, that's anticipated. A, do you -- is there more restructuring work that you're working on? Are there more costs that you anticipate that you can take out? Or are you essentially what you've done at the end of Q4? And I guess you kind of maybe I'll ask it this way. I mean, is your objective to kind of break-even exit the year breakeven kind of thing from an EBITDA perspective? I don't know if you can ask that. But -- and I know there's lots of variables, but just wanted to get your high-level thoughts on that.
Yes. I feel good about all the rightsizing of the business that the team went through last year to prepare for the difficulty that 2022 presented when it came to supply and demand imbalance. So I feel like we have rightsized our operations. I mean, we always look for efficiencies in how we can increase capacity, but we have enough capacity still built in our model for growth, and we don't want to be so fixated on pulling profitability ahead a quarter or 2 when there's opportunities in front of us with the team we have to grow revenues and grow transactions that we can right now. So the goal is to continue to grow into the capacity model that we have in our business and show quarter-over-quarter improvement, like Andy had mentioned during the call there, for Q1, 2, and 3, we do expect some normal seasonality into that Q4 mark. And depending on what happens here with volumes here in the back half of the year, I mean, we are seeing some really good signs that there is some improvement happening. It's just that's very hard to predict when it comes to what volume is going to look like until that normalizes. But we feel very good about where we're positioned and hoping to exit the year in a really good spot there.
Your next question comes from Richard Tse with National Bank Financial.
Just like a higher-level question. If you look at the past few years, do you think there have been any sort of structural changes that are kind of blasting in the market that you didn't think about at the beginning of all this?
Hey, Richard. No, we don't see anything in regards to that. I think what we are seeing is everybody knew 2021 was an incredibly strong year, but I don't think anybody knew how strong it was until you look at Q4 2021 in particular. And we said it on our first earnings call here this past March, where I've never seen a Q4 in my 23-year career in this business that was that strong. And I think everybody felt that same way. So I think the biggest thing is coming into 2022 last year, it was the demand coming off as hard as it did, as fast as it did with prices coming down. I think it was a very unforeseen circumstance that a lot of us had to navigate. It made the team stronger. It forced us to be more efficient and really look for every opportunity to pull efficiencies kind of years ahead of what we anticipated to bring that path to profit. So to answer the question, I don't think there's anything structurally that has changed aside from the capital markets wanting to be profitable much quicker. And now we feel like we're going to be in a position to have a more normalized year, I would say, this year, as inventory starts to come back.
Okay. And I certainly appreciate you have to invest in the business here because it does look like things will eventually turn. So as you look over the next 12 months from a capital allocation standpoint, what is sort of the order of ranking in terms of priority here?
Yes. So priority is going to continue to innovate. That's one area we have not peeled back. We're continuing to lean in on bringing great technology to the market. Live Lanes will be one product of that and the guaranteed offer that we're bringing into the Canadian market, and have aspirations to expand that further. Those are going to be some great product offerings that we bring into Q2, with more following on to that. So we're going to continue to execute that. Majority of our capital allocation outside of investing in technology is going to be investing in our land meets tech strategy. We are very confident this is the way of the future. With the fleet business over the next couple of years and repos already starting to pick up, it just opens up a whole new vehicle segment that the pure digital dealer-to-dealer players have not been able to service that segment. So those are the 2 areas that I would say the majority of our capital is going to go here in the next 12 to 18 months on our path to profitability.
Okay. And just one last one for me. With respect to the acquisitions, can you sort of walk me just through the high-level mechanics of the bigger things that you do and typically how long it takes to bring these acquired assets onto your operating model?
Yes, great question. You've got the basic stuff out of the gate. Most important is financials right off the gate. So we want to get them onto our ERP system right away, so we can get everything chart of accounts lined up expense base, revenue base and get everything nice and consistent and the way that we need them to report, obviously, publicly. So that's a big lift right out of the gate. From their, basic stuff, payroll benefits and bring them into our culture and our team and train them on who we are and what we're looking to do together. The one piece that has been missing that I'm really excited is the Live Lanes piece. So as everybody knows, we kind of bought these businesses, and they're able to go offer our EBlock digital marketplace, but Live Lanes makes that so much more efficient and effective and really rolls everything into a single combined auction platform on day 1. So this is going to get easier moving forward. We've now done 4 physical auction acquisitions across North America, and everyone's gotten a little bit more efficient and effective. So within 6, 8 months, we have -- we feel we can have these businesses fully integrated and then leaning in for opportunities in the market.
Your next question comes from Christian Sigro with A Capital.
My first question, I also want to start at a high level. And how is the shift to digital progressed over the last year or 2, maybe in conversations with customers or from recent conferences or shows? Has that shift moved faster or slower than you guys would have thought compared to initial expectations?
Yes. Hi, Christian, thanks for the question. We were just at the NADA conference, the largest automotive tech conference in the world, in Dallas. And there's such an appetite, I would say, for customers to buy and sell digitally. It continues to grow. The digital dealer-to-dealer auction marketplaces are just purely digital vehicle transactions, whether that's rising product is going to continue to grow year-over-year for the foreseeable future. And that was the overwhelming feedback we've got from every single customer. And especially as technology gets more advanced and dealer groups, in particular, have their own dev team, so to speak, with things like programmatic buying and APIs that you can feed your inventory into them to make more intelligent purchases like this is going to accelerate over the years. So I would say, to answer your question, it's going at the pace that we thought. I think COVID maybe gave it a shot in the arm for sure. And some of those naysayers, like we said when we went public that maybe wouldn't have tried digital as early adopted it early, and they didn't go back to it to just physical only. So I think it's going to be a big part of the future. It's going to be the largest growing segment, but the hybrid model between physical and digital is going to be the way of the future.
Got it. And then a second question last today in the Canadian market. The unification of the 2 e-Dealer and EBlock platforms is something that we were excited to roll out. You gave us some sort of specifics on the guaranteed offer. Just wondering if there's any other update you'd provide around the progress around that offering, when we could expect it to be live in the market, and then which way the cross-sell goes there, whether retail to wholesale or the other way around or some combination?
Yes. So we're selling our new dealer platform for independent dealers right now. We've still got a little bit of work to do here in Q1, Q2 to get it ready for OEM migrations. The big benefits of the e-Dealer connection retail to wholesale are going to be later in this year because in order to -- we still have to migrate the dealers onto the same platform so we can push and pull the inventory from EBlock e-Dealers. So we are in the early stages of piloting some features and some benefits with some dealers, but it will be later this year when we reap the benefits and especially into 2024.
Got it. Looking forward to updates.
[Operator Instructions]. I'll turn it back to Jason McClenahan for his closing thoughts.
Perfect. Thank you for all those questions, and thank you for joining us this afternoon. We look forward to updating you on our progress during the Q1 call in May. So thanks, everybody, and have a great evening.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.