A ut o mo t ive Te c h n ology Re p ort

Q2 - 2023

APRIL 2023
1935
THE STRENGTH OF ADVICE
Automotive Technology: In This Issue
May 2023

D. A . D a v i d s o n’s M a r ke t S e g m e n t a t i o n Pr i v at e M a r ke t A c t i v i t y, A d d -

01 a n d K e y Tr e n d s i n A u t o Te c h
The most comprehensive market map of
the automotive tech industry and a
discussion of key trends impacting the
02 Ons, and PE Roll-Up Strategies
A review of private market M&A and
capital raise activity, recent transactions,
and analysis of consolidation strategies
industry today, including digital and among large incumbents (R&R, CDK
physical channel convergence, tech stack Global, and Cox) as well as private-equity
consolidation, and data integration backed platforms

Pub l i c M a r ket Va l uat io n I n d ex a n d D. A . D a v i d s o n F i r e s i d e E v e n t : 2 0 2 3

03 S e l e c t D. A . D a v i d s o n R e s e a rc h
Analysis of the residual effects of COVID
inventory shocks on Carvana, Cars.com,
CarGurus, and TrueCar – and tracking
04 Outlook for Auto Dealers
An interview with Jeff Rubin, COO of
Competition Auto Group on the state of
the market, lead generation, and the
public market index valuation multiples observed (and potential) impact of
over the past 3 years emerging technologies for dealerships

$662M 100% 1,500+ 100+

NET E M P LOY EE NUMBER OF OFFICE
REVENUE OWNERSHIP E M P LOY EES LO C AT I O N S

THE STRENGTH OF ADVICE

 D.A. Davidson Has Deep Expertise in Vertical and Automotive Software

D.A. Davidson’s Vertical Software Thesis & Select Transactions D.A. Davidson’s Public Coverage of Auto Tech & Ecosystem

D.A. Davidson’s Vertical

Software Practice Tom White
Managing Director,
Senior Research Analyst
D.A. Davidson’s software practice focuses on
vertical software, with a core focus on
automotive. Vertical software fits specific needs
of clearly defined end-markets (compared to
one-size-fits-all horizontal software solutions).
Vertical software applications – particularly core Michael Baker
Managing Director,
ERP solutions – become deeply entrenched Senior Research Analyst
into daily operations and are difficult to replace.
D.A. Davidson sees consistent themes driving
vertical software growth across industries:
• Digital transformation in end-markets with low
historic IT budgets (like automotive)
• Replacing horizontal with vertical software, Proprietary Thought Pieces & Analysis
which continues to expand capabilities and
value proposition while consolidating vendors Industry Report: Davidson Deep Dive:
Automotive eCommerce Auto Advertising and Dealer Technology
• Embedding new monetization opportunities
(including vertical integrated payments and
data collection) into the core platform
For investors, vertical software offers high gross
margins and potential market share, predictable
revenue, more easily quantifiable synergies,
and a definable TAM, the latter of which is often
limited. For the auto industry – with 16,000+
franchised US dealerships, 200,000+ repair
shops, and $100B+ of value held by three
incumbents – there is massive opportunity to
grow.

D.A. Davidson – Automotive | 3

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Technology Report
 D.A. Davidson’s Automotive Practice Extends Across Core Segments of the Industry

DAVIDSON’S LIST: PRIVATE

COMPANIES MAKING WAVES

Inspection Warranty
CRM and
Marketing Marketplaces
Servicing
Data
DMS

Financing &
Wholesale Insurance
Listings Inventory Titling
Logistics Auctions

D.A. DAVIDSON’S CORE SEGMENTS OF THE AUTOMOTIVE TECH INDUSTRY

1 2 3 4 5 6 7
=
DMS / ERP Marketing, Online Inventory and Finance,
Connected
Auto dealership, repair, CRM, Analytics, Marketplaces / Car Rental Auto Parts Insurance, &
Vehicles
RV, and watersport and Data Digital Retailing Management Other

Online Listing & Security & Data Loan Underwriting

Service Management Sales Enablement Vehicle Tracking Lease Tracking
Marketing Management & Servicing

Online & POS Web Lead Online Inventory Maintenance GIS & Mapping Floor Plan
Fleet Management
Payments Management Sourcing Management Data Products Financing

Servicing Tracking Customer Profiling 3rd Party Service Online & POS
Data & Analytics Fleet Management Order Management
& Scheduling & Targeting Integrations Payments

Payroll & Employee Customer Real-time Price Check-in & Shipping Smart Traffic Registration, Titling,
Management Communication Discovery Check-out Scheduling Management and Warranty

D.A. Davidson – Automotive | 4

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 The Automotive Technology Ecosystem is Becoming More Interconnected...
Inc reas ing ly integrate d into a s ingle s olution – anc hored by bac kbone DMS c omp onent

Aftermarket Marketing, Finance, Insurance, Digital Retailing / Inventory & Auto

Retail DMSs (Autobody, Repair, Communications, & Online Sales &
Claims, & Payments Parts Management
Car Care) ERPs CRM Marketplaces

Connected Car RV, Watersport, & Title Warranty, Data Analytics &
Car Rental Software DVI & VIN
Software Powersport Registration, & Services
Logistics

D.A. Davidson – Automotive | 5

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Technology Report
 ...As Multiple Trends Transform The Automotive Technology Industry

Easing Divergence Macro and Substitution of Manual Private Equity Roll-up Enhanced Data Changing Hardware &
Between Digital and Demographic / Processes With Strategies Aimed at Capabilities Will Lead Car Infrastructure
Physical Sales Generational Trends Software Resulting in Building an All-in-one to Greater and More Unlocks Critical New
Channels Fall in the Favor of Sustainable Gains in Solution Prevalent Broad Monetization Data Source
Digital Platforms Efficiency Across Auto Tech
1 2 3 4 5 6

$2.2B 84% 55 minutes 71 900B 121M

was spent by Carvana to of US dealerships are saved per inspection on M&A deals across all annual data points connected cars are
acquire ADESA (owned by using digital retailing tools, average when dealers use automotive tech sub- collected by Spireon – expected to be in the US
KAR Global) in May compared to 71% pre- a digital vehicle inspection verticals since 2019(1)(4) Solera’s recent acquisition by 2025(5)
2022(1) pandemic(2) tool compared to paper- aimed at building out its
based inspections(3) data monetization
capabilities(4)

Automotive Software
2022 Global Automotive Total US New Car 2022 Dealership Digital
$19B Software Market Size(7) 16,000+ Dealerships(6) ~15% Market’s Anticipated 2022 –
2030 CAGR(7)
$6B Advertising Spend(6)

Sources: 1) Pitchbook data 2) 2021 Cox Automotive Dealer Sentiment Index 3) J.D. Power Dealer
Financing Inspection Survey 4) Based on 400 company sample size 5) Berg Insights 6) National
Automobile Dealers Association 7) GlobleNewswire

D.A. Davidson – Automotive | 6

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Technology Report
 Key Auto Trends: (1) Digital Must Complement – Not Fully Replace – Physical Strategies

1 Narrowing bifurcation between digital and physical strategies 2 Digital platforms are benefitting from generational tailwinds
Vendors are investing to meet the balanced demands of convenience and practicality from retail As generational transfer of dealership ownership continues, younger operators /
consumers, dealers, and auction owners – most often requiring balanced physical and digital owners' comfort level and propensity in using digital platforms to source, market,
strategies. and sell inventory has, and will continue to, increase significantly.
KAR Global’s divestiture of US-based ADESA physical assets to Carvana: Carvana jarred Wall Street Digital platforms have taken hold at dealerships, online marketplaces, and wholesale
analysts’ faith in “digital only” retail model and reinforced dealers’ confidence in the perseverance of the auctions: The digital shift in automotive is gradual, and more evolutionary than
physical marketplace. Carvana is betting on its ability to: revolutionary. But the impact of digital and its place within the dealer toolset has been
1. Convert an expanded logistics and reconditioning footprint into improved unit economics while cemented by recent events:
it works on continued cost-cutting initiatives and; • COVID forced dealers and wholesale auction houses to adopt digital sales models to
2. Retain sufficient market access to capital and debt refinancing options to manage its $8B+ keep volumes running, with large auction conglomerates (ADESA, Manheim) shifting
debt load to all-digital auctions at the onset of shutdowns
The transaction signals KAR’s doubling-down on the future of digital – but the real immediate • Supply-chain and chip-shortage induced inventory constraints – along with
winners of the transaction were Manheim and independent wholesale auctions, which have consolidation of dealer groups – led to greater adoption of diverse inventory sourcing
benefitted from the migration of dealers’ auction volumes away from Carvana-owned ADESA. methods
Wholesale auction space moving towards hybrid: Digital-first auction platform EBlock continues to • Long-term automotive labor shortages are mitigated by tech – which is increasingly
acquire physical auctions – most recently Houston Auto Auction in early 2023, it’s fourth auction seen by dealers and customers as an essential tool to build trust and provide
acquisition. Eblock now has physical facilities and auctions in Louisiana, Michigan, Texas, and convenience
California. Customer satisfaction has increased with digital tool adoption: Millennials are now
Conversely, independent auctions (traditionally physical-only) are increasingly adopting digital auction America’s largest generation – and represent a new primary consumer base that prefers
systems. This strategy complements traditional physical auctions by expanding potential buyer bases, the convenience of online buying, with 76% of car shoppers open to buying completely
providing opportunities for upstream remarketing, and reducing fees. In doing so, physical auctions are online. Shifting consumer preferences, generational management changes, lower
going towards the puck - digital wholesale auction volumes increase while physical lane volumes overhead potential, and increased efficiency are long-term tailwinds for automotive
have been flat for the past decade. tech adoption.

Sources: 1) Automotive News 2) 2021 JPM Auto Annual Dealership Survey 3) Needham &
Company Research

D.A. Davidson – Automotive | 7

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 Key Auto Trends: (2) Tech is Replacing Manual Work and Tech Stacks Are Consolidating

3 Replacement of manual processes with software yielding long-term efficiency gains 4 Dealer tech stacks are consolidating and more integrated
Software is driving improved operational efficiency for historically labor-intensive processes like As seen in other verticals – vendors are building all-in-one, integrated solutions. A
vehicle inspection reports, logistics and transportation, titling and registration, payments, and DMS is most often at the center of consolidation strategies. Given the difficulty to rip-and-
inventory management. replace an incumbent DMS, they make the ideal platform for layering value-added
Tech adoption benefitting dealers, auction owners, and end customers: Dealers and other stakeholders monetization opportunities to sell to dealers, including:
benefit from reduced associated operational expenses, and technology is also driving the adoption more • Marketing automation and customer data platforms (CDPs)
consistent digital standards, which helps develop consumer trust. • Financing, insurance, titling, and registration
• Vehicle inspection and condition reports
Consolidation provides a clear value proposition – and is attracting widespread interest:
Digital Vehicle Inspection (DVI) / Condition Reports: Digital inspections Dealers benefit from reduced vendor touchpoints and improved functionality, while
captured with mobile devices in a standardized format, integrated into DMS vendors expand their cross-sell opportunities. This was spearheaded by industry
monoliths (including Reynolds & Reynolds, CDK, and Cox Automotive, see page 11) –
but is seeing industry-wide traction, reflected by surge of private-equity interest
(see page 12).
Consumerization of finance highlights value of F&I tech: J.D. Power acquired finance and
insurance menu and reporting software capabilities from Tail Light, driven by increasing
consumer demands:
"The pace of digital transformation in auto dealerships has been staggering, and the
F&I department has been leading that charge with growing demand for digital menu
solutions that clearly and consistently display financing details and special offers to
consumers whether they are in the showroom or buying online “ Phil Battista,
Titling and Registration: Integration with DMS and state systems for accurate,
President of dealership tech, J.D. Power
fast title processing and automated tax calculations
This trend is widely seen in other verticals, such as healthcare – consumers increasingly
expect greater transparency and optionality throughout the purchasing journey and auto
software vendors are accelerating solution deployment to meet this growing need. Solera
is promoting their “Solera Auto Finance” solution through variable discounts to their DMS
based on financing usage.

Sources: 1) Pitchbook 2) BusinessWire

D.A. Davidson – Automotive | 8

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 Key Auto Trends: (3) Data and Connected Car Ecosystem Are Growing Opportunities

5 The next wave of innovation will follow better data monetization 6 Nascent connected car infrastructure has potential to be critical data
Automotive tech is in the early days of leveraging data to improve operations and sales, with source
the relatively recent emergence of the first true CDPs and more integrated DMSs. Automotive is in the early days of realizing the benefits of connected car
S&P Global Mobility’s February 2023 acquisition of Market Scan Information System: Market Scan, technology, as the majority of vehicles lack the underlying physical infrastructure
which provides Automotive Payments as a Service and a payments calculation engine to over 10,000 layer necessary for data collection.
US-based dealerships, provides S&P Global with automotive pricing and incentive intelligence and will This is changing – and tech vendors are building out the application layer to collect,
enable S&P Global to provide more accurate predictive pricing and improved marketing engagement to interpret, and monetize the data for varying use-cases, ranging from insurance,
its customers. Data will specifically be used to advise clients on customer loyalty and customer product embedded payments, theft prevention, and service/repair push notifications.
migration likelihood.
At its core, connected car technology seeks to accomplish what Alexa did with the
"The future of the business will focus on customer marketing with specific customer incentives down connected home, and the mobile phone did outside of the home – it gives businesses –
the road curated and personalized for every customer“ Dave Mondragon, MD/VP Automotive including insurance companies, payments platforms, vehicle service centers – the
Incentive and Pricing Solutions for S&P Global opportunity to move closer to the consumer a confined space where many people spend
Solera’s acquisition of Spireon – and Cox’s recent FleetNet acquisition – show recent momentum hours every week.
among core tech stack providers in shoring up data capabilities, while expanding fleet solutions:
Spireon provides Solera with a core telematics and vehicle intelligence platform (with over 4M
connected devices and 900B data points collected annually) to sell to both fleet and dealership bases.
Cox’s acquisition of FleetNet – while more traditionally fleet-services oriented, provides cost reduction Consumer Marketing
data insights.
D.A. Davidson believes this trend will continue to accelerate, as automotive software vendors leverage
data to build platforms and tools designed to directly influence purchasing decisions across the
automotive value-chain, including inventory management, financing and insurance, repairs and Insurance Dealer Data
servicing, remarketing, and consumer-facing retail marketing. While vendors will face technical Technology Solutions
headwinds integrating disparate platforms – the value of data in driving purchasing decisions is just Connected
beginning to be realized. vehicle data
monetization

Financing and Repair, Safety,

Payments Recall, and
Tech Assistance

Sources: 1) Automotive News

D.A. Davidson – Automotive | 9

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 Auto Tech Activity: Capital Raising Down From 2021 Peak While M&A Stays Steady

COMMENTARY
Acquirer /
Date Target Industry Sub Segment Deal Type Target Business Description
Outlier deals – CDK’s $8.3B take private by Brookfield – drove most of Investor
activity in 2022 for Automotive Technology with capital raising hit harder
than M&A Provider of customer experience, trade cycle
4/23 Data & Analytics Buyout management, marketing, and employee engagement
▪ Brookfield’s $8.3B acquisition of CDK Global was the highlight for M&A software to auto dealers
activity in automotive technology for 2022. The space (similar to the rest of
the tech ecosystem) experienced a down year for both capital raising (72 Provider of digital remarketing software that uses AI to
deals vs 86 in 2021) and M&A (72 deals vs 86 in 2021) although still up Digital automate and enhance photos of cars used for
4/23 Buyout
from 2020 levels Remarketing marketing, integrate them into the distributor's system,
and publish them on internet sales platforms
▪ The slowing trend seems to be continuing, although mostly for capital
raises, with Q1 2023 seeing only 13 (5 M&A + 8 capital raises) total deals –
on pace for 52 deals in the calendar year Provider of a digital retailing, inventory management,
4/23 Digital Retailing Corporate M&A
and finance & insurance software solution for dealers
AUTOMOTIVE TECH TOTAL DEAL VOLUME 1

86 Provider of software & data aggregation solutions

Automotive
2/23 Corporate M&A including “APaaS” Automotive Payments as a Service,
Payments
data analytics, and digital retailing
72
64 Provider of an online automotive marketplace
specifically designed for modern “enthusiast” cars. The
Online
53 1/23 Buyout company's website features a list of new and used
Marketplace
vehicles with previous history reports, car models and
68 other related details
56
47 Developer of a suite of tools offering assistance in
Sales Enablement
38 1/23 Buyout customer acquisition, client relationship management,
& CRM
and digital retail engagement

13 Provider of a comprehensive dealer management

18 8 7/22 DMS Buyout system with embedded customer data & analytics,
15 17 16 insurance, digital sales, and registration solutions
5
2019 2020 2021 2022 2023

M&A Capital Raise

Sources: 1) Based on 400 company sample size 2) Pitchbook

D.A. Davidson – Automotive | 10

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 Industry Behemoths Continue to Be Acquisitive – While Diversifying Beyond Core DMS...

ACQUIRER ACQUISITIONS ACQUISITION COMMENTARY

6/21 7/22 7/22 1/23 4/23

Chris Walsh, President of Reynolds and

Reynolds, sees an opportunity for ‘tuck
Communication RV Dealer Outsourced IT services: Financing & insurance Digital retail sales, in’ acquisitions in 2023 with focus on
software: live dealer management system: security operations, designed for automotive, inventory, and financing customer experience to “plug holes or
chat, text, video and CRM, accounting, and remote helpdesk, on- powersports, marine, & insurance tools enhance products they [already] have”1
messaging inventory management site support and commercial trucking
industries

6/21 10/21 CDK Global, and their private equity

investors Brookfield, will be looking for
additional add-on acquisitions in 2023.
Doug Bayerd Managing Director at
eCommerce solution – Embedded insurance – live Brookfield said part of the firm’s
digital storefronts for data extraction and utilization strategy is to grow through acquiring
dealers enabling carriers to provide additional software solutions to add to
quotes in real-time during the the existing DMS platform ex. Roadster
purchase process
and Salty Dot in 2021

1/21 1/21 3/21 7/21 2/23

Cox Automotive has been active to start

2023 through acquiring FleetNet in
Computer vision Repair and Ecommerce and finance Fleet management Vehicle maintenance February. CEO Stephen Rowley told
platform built to maintenance services software for OEMs, software designed for and repair service Automotive News “Mergers and
automate car condition software for vehicle fleet retailers, and lenders rental and lease provider acquisitions are a big part of what we
reporting owners and operators companies do”1

Steve Greenfield
“The three legacy DMS providers [Cox, CDK, and Reynolds and Reynolds] have the benefit of thousands of CEO, Automotive Ventures
existing paying dealer customers and are thus ideally positioned to acquire ‘tuck in’ acquisitions to cross-sell into
their installed dealer base”

Sources: 1) Automotive News

D.A. Davidson – Automotive | 11

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 ...While Private Equity is at the Wheel of Roll Up Strategies in Automotive Tech

ACQUIRER BACKER(S) ACQUISITIONS ACQUISITION TARGETS ROLL-UP STRATEGY

Create an end-to-end solution

across the vehicle lifecycle by
CRM Risk Management Body Shop Mgmt.
49 acquiring unfulfilled capabilities:
DealerSocket – CRM, Omnitracs –
fleet management, and Redcap –
Fleet Management Fleet Management
Dealer Logistics dealer logistics

Build an all-in-one solution for Top private equity

dealers and deploy across investors are pursuing
Remarketing CRM DMS European market by acquiring and
11 portfolio roll-up
integrating various geographically
diverse point solutions (CRMs, strategies acquiring
Sales Enablement Remarketing CRM DMSs, Remarketing tools, etc.) assets in multiple
automotive tech sub
verticals with the
Consolidate niche quality intention of building an
automotive marketing and “end-to-end” solution
Marketing Vehicle Appraisal
supplemental technology assets to for dealers, OEMs, and
8 build a comprehensive solution for
consumers
dealers and OEMs
Marketing

Add diverse and sophisticated

capabilities to an existing DMS
Sales Enablement Finance Digital Documents platform ultimately driving more
6 value to dealers and OEMs

Sales Enablement DMS

Sources: 1) Automotive News, Pitchbook, and CapIQ

D.A. Davidson – Automotive | 12

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 Public Market Performance: D.A. Davidson Automotive Tech Index
DAVIDSON AUTOMOTIVE TECH INDEX - MEAN EV/ LTM REVENUE

Index: KAR, EINC, ACVA, CPRT, CAR, CARG, TRUE, CARS, CVNA, VRM, CPRT, SFT, AN, KMX - TEV/Total Revenues
8.0x
7.0x

6.0x
4.9x 4.2x

3.4x
4.0x

2.0x
Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23

Market Data Operating Metrics Operating Metrics Valuation Metrics

Share Market Enterprise Revenue Revenue Growth Gross Margin EV/Revenue EV/EBITDA

($ in millions, except per share data) Price Cap Value LTM CY2023 CY2023 CY2023 LTM CY2023 LTM CY2023

Davidson Automotive Technology Index

Copart, Inc. (CPRT) $79.05 37,675 36,124 3,673 3,963 7.9% NA 9.8x 9.1x 23.8x 21.3x
CarMax, Inc. (KMX) $70.03 11,071 29,872 31,126 26,595 (19.5%) NA 1.0x 1.1x 29.9x 34.2x
AutoNation, Inc. (AN) $131.70 6,007 12,600 26,631 26,116 (3.2%) 19.1% 0.5x 0.5x 5.9x 7.0x
carsales.com Ltd (CAR) $15.70 5,915 6,656 407 614 50.8% 276.8% 16.3x 10.8x 35.4x 20.3x
ACV Auctions Inc. (ACVA) $13.03 2,073 1,657 422 464 10.2% 77.9% 3.9x 3.6x NM NM
CarGurus, Inc. (CARG) $16.44 1,877 1,511 1,655 943 (43.0%) 64.0% 0.9x 1.6x 10.4x 12.3x
KAR Auction Services, Inc. (KAR) $13.54 1,478 4,130 1,519 1,590 4.6% 45.7% 2.7x 2.6x 17.2x 15.9x
Cars.com Inc. (CARS) $19.57 1,308 1,777 654 685 4.7% 78.0% 2.7x 2.6x 11.0x 9.2x
Carvana Co. (CVNA) $6.94 736 8,322 13,604 11,510 (15.4%) 11.4% 0.6x 0.7x NM NM
TrueCar, Inc. (TRUE) $2.57 228 75 162 171 6.2% 90.9% 0.5x 0.4x NM NM
E Automotive Inc. (EINC) $2.41 128 123 110 128 16.1% 40.5% 1.1x 1.0x NM NM
Vroom, Inc. (VRM) $0.81 112 679 1,949 1,020 (47.7%) 15.7% 0.3x 0.7x NM NM
Shift Technologies, Inc. (SFT) $1.44 25 173 671 288 (57.1%) 7.3% 0.3x 0.6x NM NM

Mean 1.8% 78.2% 3.6x 3.1x 19.1x 17.2x

Median 4.7% 64.0% 1.1x 1.6x 17.2x 15.9x

Sources: CapIQ data as of 4/28/23

D.A. Davidson – Automotive | 13

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 DADCO Research: Auto Tech Giants Feeling Residual Effects of COVID Inventory Shocks

Click here to reach out to the D.A. Davidson

team for access to any of the following reports:

Market Share Losses Emerge as a New Improving Inventories Bode Well Marketplace Performing Well; CarOffer
Issue for 2023 Operating Backdrop Recalibrations Ongoing 4Q light vs. expectations; No quick fix in ‘23

• Carvana looks to be bleeding market share to • Dealer inventories across the Cars.com platform • As local dealer inventories continue to • TrueCar’s revenue miss for Q4 ($36.7M vs
competitors as units sold for 2022 were down are up Y/Y for new (11%) and used (9%) are an rebuild, CarGuru’s core marketplace $40.4M consensus estimates) showcases the
23% relative to the industry average of 6% while encouraging sign that the Company could business – growing 4% Y/Y – remains a current difficult and uncertain macro
5 out of 6 top competitors also experienced weather a mixed and uncertain operating critical piece of the digital marketing puzzle environment as the company was hurt by the
accelerating unit sales in Q4 2022 environment in 2023 for local dealers pace of new vehicle production, the declining
health of smaller independent dealers, and the
• Long term profitability concerns remain as • New and expanding products offered by • Although CarGurus’ marketplace shows shift in OEM incentive marketing budgets to end
Carvana struggled on unit level (72% decline in Cars.com (CreditIQ and Accu-Trade) create overall strong performance, questions about 2022
gross profit per unit or GPU) and organizational further potential for cross platform revenue CarOffer’s (CarGurus Acq. in 2021)
level (-$291M Q4 EBITDA) synergies and potentially allow it to capture normalized growth rate and long-term margin • Investors and dealers are eagerly waiting in
valuable share in the local dealership market profile remain unanswered anticipation of TrueCar’s eCommerce solution,
TrueCar+ as both a significant revenue driver
and additional platform capability
SELECT AUTO TECH COMPANY'S EV/ LTM REVENUE

8.0x

6.1x
6.0x

4.4x
4.0x
2.6x 2.6x

2.0x 1.3x
1.1x
0.6x
0.3x
0.0x
Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23

Sources: CapIQ data as of 4/28/23

D.A. Davidson – Automotive | 14

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 D.A. Davidson Fireside Event: 2023 Outlook for Auto Dealers

D.A. Davidson hosted an April 2023 interview with Jeff Rubin, COO of Competition Auto Group, and member of multiple nationwide peer advisory Click here to reach out to the D.A. Davidson
groups. Jeff shared insights on the state of the market, lead generation, and emerging technologies. Here are select takeaways: team for access to the full report

1 • 2023 soft-landing: Dealers are in a “soft-landing” from the extraordinary market last year, as dealers profited from supply shortages across
brands and increases demands from post-COVID demographic shifts away from urban cores
Supply is likely to • Supply and demand imbalance will likely persist: OEMs and dealers have done exceptionally well with higher prices, fewer subsidies and
remain limited relative rebates, and lower unit output. Even as supply chain and chip shortage issues fade – inventories are likely to remain depressed
to demand
• Lingering COVID impacts: Supply is also likely to take a hit as the market hits the three-year mark after COVID shutdowns prevented new
vehicle transactions – as a result, there will be virtually no lease ends in the coming months

2 • Interest rates impacting consumers and dealers: Dealers are constrained by higher inventory carrying costs, and consumer demand is
Recessionary outlook Tom White
mitigated by the potential of a recession and overall higher borrowing costs
and interest rates place Managing Director,
emphasis on ROI • With a direct impact on tech adoption: ROI is front-of-mind for dealers, and new technologies need to support a demonstrable ROI or they Senior Research Analyst
are unlikely to be adopted
3 • Digital matters more for marketing than actual sales: A digital presence is extremely important for marketing, but complicated processes
Digital is important – but (leasing and financing), fraud risk, and experiential components of vehicle sales inhibit digital purchasing. Digital presence generates online
in-store presence leads than close at the dealership
necessary to close • Hybrid strategy offers the best of both worlds: Rubin sees the potential for a “digital concierge” model that better augments the digital
experience with personal (or AI) assistance and transitions leads to the physical dealership
4 • Platforms must consider – and measure – omnichannel sales cycle: Automotive sales cycles are complex and typically across multiple
Attribution and channels (including radio and television). Dealers struggle to unite the customer journey across channels and often lack multichannel Jeff Rubin
measurability are critical attribution capabilities, leading to less informed advertising spend COO, Competition Auto Group

for ad spend • Dealers looking to reduce costs should scrutinize digital lead generation spend: Cost-conscious dealers may benefit from analyzing
ad-spend ROI from multiple digital lead generation tools – and more sophisticated dealers are often only working with one or two third party
digital lead generation vendors
5
• Tension between OEMs and dealers for potential monetization opportunity: OEMs are increasingly involved in controlling connected car
OEM decisions on infrastructure – and it remains to be seen how this will impact third-party providers (including dealers) that typically provide, or serve as a
Competition Automotive Group is a
leading NYC-area car dealership
connected car channel, for these devices group, with six stores primarily in
infrastructure will impact the Long Island area across the
• Likely outcome – cooperation given the importance of the dealer to the customer relationship: Connected car is likely to open up new Mercedes-Benz, Subaru, BMW,
dealers avenues to do business with consumers – and given the critical role the dealer has in educating and influencing the buying decision, OEMs and Infiniti brands
and dealers are likely to work together

D.A. Davidson – Automotive | 15

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 A b o ut D. A . D a v id s on

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 D. A . D a v i d s o n’s D i v e r s i f i e d Fi n a n c i a l S e r v i c e s

A b o u t D. A . D a v i d s o n
D.A. Davidson provides investment National Leadership Across Three Lines of Business
banking, wealth management, nationally-
recognized research, and advisory services
– with an 87-year track record of excellence E Q U I T Y C A P I TA L F I X E D I N C O M E C A P.
W E A LT H M A N A G E M E N T
D.A. Davidson is headquartered in Great MARKETS MARKETS
Falls, Montana, with a growing footprint
across 30 states and four European Executing transactions and Providing trusted advice through A leader in fixed income financing
countries conducting research across verticals life’s key moments and distribution
Solutions backed by industry expertise and Straightforward advice and personalized Nationally-recognized leader in raising
experience across including consumer, strategies and solutions to help plan for, capital through fixed income banking,
O u r D i ff e r e n t i a t e d diversified industrials, financial institutions, and work towards, clients’ financial distribution, and repository strategy

Approach and technology verticals objectives ▪ Public Finance – underwriting, debt

financing, placement agent, and
▪ Investment Banking ▪ Wealth & estate planning
consultation
We focus on building relationships with ▪ Institutional Research ▪ Retirement planning
companies we believe in, relationships in ▪ Sales & Trading – bond market investing
▪ Sales & Trading ▪ Investment and Portfolio Management and strategies
which the value greatly exceeds the total of
the transactions we’ve completed on our
clients’ behalf
As a 100% employee-owned company, we
don’t need to rush clients to meet quarterly
goals. Our vision is for the long-term

Our Results

$662M $56B $326M 100% 1,500+ 100+

Net Assets Under Shareholders’ Employee Number of Office
Revenue Administration Equity Ownership Employees Locations

D.A. Davidson Overview THE STRENGTH OF ADVICE | 17

 D.A. Davidson Is One of the Most Active Tech Banks, With 90+ Deals Closed Since 2020

Our Services Our Industries

M&A Advisory
Advising clients through a range of M&A strategies
including sell-side and buy-side acquisitions, mergers,
and divestitures – working with both strategic and
financial parties across our global network
TECHNOLOGY

Public Equity

Tailored public financing solutions including IPOs,

ATMs, PIPEs, and Preferred Securities Offerings –
distributed through hundreds of institutional CONSUMER
relationships and a broad network to bring your story a company backed by

to investors
has acquired
$596,937,000

Private Corporate DIVERSIFIED

INDUSTRIALS
Placements Advisory
Curated private offerings Services for companies
to carefully selected and and executives looking
vetted parties, including for experience, product FINANCIAL $1,306,000,000

INSTITUTIONS
institutional investors knowledge and guidance

2022 Transaction Highlights: Delivering Superior Outcomes For Our Clients

108 Transactions $8.2B Deal Value 50 M&A Transactions 27 Debt & Equity Financings

D.A. Davidson Overview THE STRENGTH OF ADVICE | 18

 Advisory Prowess Meets Technology Industry Expertise

Sector Specialists First: Expertise Across Four Technology Verticals

▪ Automotive Tech
▪ Construction Tech ▪ Transportation

▪ Ed Tech ▪ Supply Chain

▪ Field Services ▪ Cybersecurity

▪ Health Tech ▪ Dev. Ops

SOFTWARE
▪ Hospitality & Retail ▪ Infrastructure
Application Management
Infrastructure & ▪ Food Tech $1,306,000,000

▪ Financial &
Vertical ▪ Industrial Tech Compliance
▪ Legal Tech ▪ BI / Analytics
▪ Gov. Tech, Nonprofit ▪ Collaboration
▪ Real Estate Tech
$596,937,000

a portfolio company of

Financial has been acquired by

has received an investment from has been acquired by

Technology a portfolio company of

Internet & Tech- Cloud

Enabled Services Double
Eagle
Capital
Infrastructure

Bringing Scale To Your Deal

250 + Transactions $20B + Raised in Public

Offerings Since 2019 27 + Deal Countries 60 + Tech-Focused
Professionals

D.A. Davidson Overview THE STRENGTH OF ADVICE | 19

 Advisory Platform Supported by Robust Transaction Capabilities
UNITED STATES
Key Contacts
BALTIMORE, MARYLAND
1 . Pu b l i c M a r ke t s
BO STO N, MASSACHUSE TTS
Tailored public markets equity financing and market connectivity
Senior-level expertise and attention providing clients flexibility through a range
CHICAGO, ILLINOIS
of solutions and hundreds of institutional relationships
• Initial Public Offerings (IPOs) • Convertible Securities Offerings
DENVER, COLORADO • At-the-Market Offerings (ATM) • Private Investment in Public Equities (PIPEs) Fred Johnson Tim Monfort
Managing Director Managing Director
• Preferred Securities Offerings • Unit Investment Trusts (UITs)
GREAT FALLS, MONTANA

2. Financial Sponsor Coverage

NEW YORK, NEW YORK

ORANGE COUNTY, CALIFORNIA Adding value at every stage of the investment

Our team works with hundreds of funds across the globe, bringing an
PORTLAND, OREGON unwavering focus to helping middle market private equity firms and
family offices generate returns for their investors Yaron Redlich Zach Rosen
Managing Director Managing Director
SALT LAKE CITY, UTAH

SEATTLE, WASHINGTON

3 . I n t e r n a t i o n a l Fo o t p r i n t
Transatlantic M&A platform and global deal experience
EUROPE D.A. Davidson partners with MCF International to leverage the power of
our network of decision makers and investors across the US and Europe
Erik Pettersson Christoph Bregulla
HAMBURG, GERMANY* – and have completed 250+ transactions across 27+ continents Partner Partner

HELSINKI, FINLAND*

4. Debt Advisory
LONDON, UNITED KINGDOM*
Unique solutions across the capital spectrum
STOCKHOLM, SWEDEN*
Access to non-dilutive capital, providing increase flexibility to optimize capital
structures across varying economic conditions
Amy Johnson Clinton Miyazono
*MCF CORPORATE FINANCE OFFICE Managing Director Managing Director
LOCATIONS*

02 | D.A. Davidson Overview THE STRENGTH OF ADVICE 20

 Experienced Senior Bankers With Software Expertise & Deep Buyer Connectivity

Senior bankers focused on developing long-term relationships and

45 $100B+ 1,500+
delivering lasting value to clients while helping them navigate and
INVESTMENT TRANSACTION CLOSED
BANKERS VALUE TRANSACTIONS capitalize on the industry’s rapidly evolving landscape.

Anticipate outcomes
Navigate headwinds
Exploit opportunities
RORY MCKINNEY MICHAEL MAXWORTHY AALAP MERCHANT GREG THOMAS KEN MARLIN AMY JOHNSON ZACH ROSEN
PRESIDENT MANAGING DIRECTOR MANAGING DIRECTOR MANAGING DIRECTOR VICE-CHAIRMAN MANAGING DIRECTOR MANAGING DIRECTOR
EQUITY CAPITAL MARKETS CO-HEAD OF TECHNOLOGY
CO-HEAD OF TECHNOLOGY
CO-HEAD OF TECHNOLOGY TECHNOLOGY HEAD OF DEBT ADVISORY FINANCIAL SPONSORS GROUP

Advice anchored by the

experience of thousands of
transactions

D a v i d s o n ’s s e n i o r b a n ke r s
bring hundreds of years of
FRED JOHNSON ANUP AGARWAL DEREK BELL BRAD GEVURTZ GREG HARTLEIN JONATHAN LEJUEZ TOM SELBY experience so you can focus
on running your business
MANAGING DIRECTOR EQUITY CAPITAL MANAGING DIRECTOR MANAGING DIRECTOR MANAGING DIRECTOR MANAGING DIRECTOR MANAGING DIRECTOR MANAGING DIRECTOR
MARKETS

ADAM WAITE VIVEK GARG DAVID DOUGLAS MATTHEWEICHENBLATT AL SISCA JORDAN WITTBROT EDDIE MCCARTHY
MANAGING DIRECTOR DIRECTOR VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT

02 | D.A. Davidson Overview THE STRENGTH OF ADVICE 21

 Le t U s I n t ro d u c e Yo u : Fi re s i d e A c c e s s To Fi n a n c i a l I n v e s t o r s

Exclusive Events Catered To Tech Companies

Institutionally-Focused Thought Leading Equity Research and Proprietary Insights, Networks, and
1:1 Meetings With Leading Sponsors
Leadership Exclusive Institutional Calls Market Perspectives
D.A. Davidson’s Big Sky client event in D.A. Davidson’s New York Technology D.A. Davidson hosts fireside chats with leaders Anchored by D.A. Davidson’s Herd
Montana provides 1:1 connectivity Summit* in the tech space publications and Davidson Expert Network
Big Sky brings together technology leaders, investors Technology Summits connects our clients with leaders Our extensive equity capital markets team hosts With materials that chart the journey from initial
and our own professionals to create an immersive from a diverse mix of public and private companies: conferences, tours and events providing our clients funding to IPO, D.A. Davidson provides industry
experience, including: ▪ 1-on-1 and small group meetings unique industry insights: bankers’ thought leadership and expert network access
▪ Exclusive fireside chats for our clients with relevant ▪ Best-in-class technology and networking ▪ Award-winning institutional equity research ▪ The Davidson Expert Network offers access to
financial investors opportunities with investors, entrepreneurs, team covering over 400 companies technology industry perspectives and insights,
▪ Trends and opportunities within targeted sectors founders, and corporate executives ▪ Differentiated research based on industry and disruptive and emerging technology trends, and
company analysis in context with valuation direct access to exclusive expertise

Select Big Sky Sponsors Previous Conference Attendees Recent Fireside Chat: C3.ai Tech-Focused Thought Leadership

21 Select Featured
Companies

Analysts

Tom Siebel, 20+

C3.ai CEO
Average Years
of Street Exp.

415
Gil Luria, Managing
Stocks
Director Covered

*: 2023 New York Technology Summit is pending final confirmation and date selection

D.A. Davidson Overview THE STRENGTH OF ADVICE | 22

 D.A. Davidson Knows Automotive Software

Connect with our team of industry professionals

A T L A N T A H A M B U R G * O R A N G E C O U N T Y
1201 Peachtree St NE Emporio Tower 611 Anton Blvd.
Office #222, #223 Valentinskamp 70 Ste. 600
Atlanta, GA 30361 D-20355 Hamburg Costa Mesa, CA 92626
(470) 645-6385 +49 40 39803 0 (714) 327-8800
GREG THOMAS
MANAGING DIRECTOR DAVID DOUGLAS
CO-HEAD OF VICE PRESIDENT B O S T O N H E L S I N K I * P O R T L A N D
st
TECHNOLOGY Ddouglas@Dadco.com One International Place 1 Floor 222 SW Columbia St.
Gthomas@Dadco.com Ste. 320 Etelaesplanadi 20 Ste. 1400
Boston, MA 02110 00130 Helsinki Portland, OR 97201
(857) 318-0200 +358 9 6227 1890 (800) 249-2610

C H I C A G O L O N D O N * S A L T L A K E C I T Y
227 W. Monroe St. 14 Waterloo Place 110 S. Regent St.
Ste. 5250 London SW1Y 4AR Ste. 410
Chicago, IL 60606 +44 20 7968 2760 Salt Lake City, UT 84111
(312) 525-2777 (801) 333-3123

DEREK HEINONEN DYLAN BRAUER

ASSOCIATE ANALYST D E N V E R N E W Y O R K C I T Y S E A T T L E
Dheinonen@Dadco.com DBrauer@Dadco.com 1550 Market St. 757 Third Ave. 701 5th Ave.
Ste. 300 Ste. 1902 Ste. 4050
Denver, CO 80202 New York, NY 10017 Seattle, WA 98104
(303) 571-6100 (800) 450-3942 (888) 389-8001

G R E A T F A L L S N E W Y O R K C I T Y S T O C K H O L M *
8 Third St. N. 570 Lexington Avenue, Fl. 48 Vastra Tradgardsgatan 15
Great Falls, MT 59401 New York, NY 10022 111 53 Stockholm
(800) 332-5915 (212) 257-6300 +46 8 545 680 80

*MCF Corporate Finance Office Locations*

The information contained in this report has been obtained from sources believed to be accurate and complete. However, because of the possibility of human
and/or mechanical error, the accuracy and completeness of the report, and the opinions based therein, are not and cannot be guaranteed by D.A. Davidson & Co.

D.A. Davidson Overview THE STRENGTH OF ADVICE | 23