Summary of ACV Auctions (ACVA) FY Conference Call - May 13, 2025 Company Overview - **Company**: ACV Auctions (ACVA) - **Industry**: Automotive auction and technology services Key Points and Arguments Financial Performance - **Record Revenues**: The company reported a 25% year-on-year revenue growth for the quarter, with adjusted EBITDA growing over 200% year-on-year, indicating strong leverage in the business model [6][7][8] - **Guidance Maintenance**: The company maintained its full-year guidance, indicating confidence in its operational performance despite market noise [7][15] Market Share and Growth - **Consistent Market Share Gains**: ACV Auctions has been consistently gaining market share, attributed to a strong core marketplace and growing interest in value-added services [6][10] - **Annual Perspective on Share Gains**: The management emphasized that evaluating share gains on an annual basis is more meaningful than quarterly fluctuations [10][12] Industry Context - **Wholesale Market Outlook**: The company expects the wholesale market to remain flat or slightly up/down, which is reflected in their guidance [14][15] - **Impact of Tariffs**: Management expressed comfort with their guidance range despite potential tariff impacts, citing flexibility in their business model [13][15] Network Effects and Data Utilization - **Network Effects**: The company highlighted the importance of network effects, where increased supply and demand lead to better data, which in turn enhances product offerings [16][18] - **Data-Driven Products**: ACV Auctions is leveraging data from over a million inspections annually to predict vehicle values, which is a significant competitive advantage [17][32] Product Development and Innovations - **Key Product Offerings**: The company is excited about its ability to predict vehicle prices, which is central to several product offerings like ClearCar and ACV Max [28][30] - **Guaranteed Sales Model**: The introduction of guaranteed sales is expected to enhance revenue and margins, with a significant percentage of cars sold through this model [35][39] Commercial Strategy - **Expansion into Commercial Sector**: The company is working on expanding its commercial business, with plans to open new locations and enhance reconditioning capabilities [58][60] - **Partnerships with OEMs**: ACV Auctions is exploring partnerships with OEMs for trade-in platforms, indicating potential growth in off-lease vehicle transactions [47][50] Challenges and Future Outlook - **Trust Building**: The management identified building trust with dealers as a key challenge for growth, emphasizing the need for a reliable supply and demand balance [19][20] - **Adoption of New Models**: The company is focused on changing dealer perceptions regarding auction processes to drive adoption of their new models [65][66] Conclusion - **Long-Term Vision**: ACV Auctions is positioned to leverage its data and technology to enhance its marketplace, with a focus on delivering superior experiences for both buyers and sellers [71][72]

Summary of ACV Auctions (ACVA) FY Conference Call Company Overview - ACV Auctions operates as an online marketplace primarily facilitating dealer-to-dealer wholesale transactions, disrupting the traditional physical auction market [4][5] - The company went public four years ago and has achieved a market share of approximately 10% in a market where 85% remains physical [5][6] - Revenue has grown from approximately $200 million at IPO to an expected $765 million to $785 million for the current year, with a first year of profitability last year [7][8] Market Dynamics - The wholesale dealer-to-dealer market has contracted from 10-11 million units pre-COVID to about 7.5 million units currently due to supply chain issues and reduced new car sales [13][14] - The company anticipates a recovery in the market as new car sales and off-lease vehicles return, which will increase the supply of used cars available for wholesale [21][24] Competitive Landscape - Major competitors include Manheim, which holds an estimated 20% market share, and several hundred independent physical auctions [15][16] - ACV is positioned as a technology-driven player with a significant data advantage, having inspected millions of cars to create a robust dataset [18][66] Growth Strategy - ACV plans to expand its market share by engaging with a larger number of franchise dealerships, currently working with about one-third of the 17,000 franchise rooftops in the U.S. [9][10] - The company is also targeting the commercial vehicle market, which consists of repossessed cars, fleet vehicles, and rental cars, representing a total addressable market (TAM) of 6 million units [10][29] Financial Performance - The company aims for a midterm target of $1 billion in revenue and $350 million in adjusted EBITDA, with a projected 50% increase in adjusted EBITDA on 22% revenue growth for the current year [8][9] - Gross margin has improved significantly, with a target of reaching 60% in the near future [51] Technology and Data Utilization - ACV leverages technology to provide accurate valuations of used cars, enhancing the buying and selling process for dealers [35][66] - The company has developed additional services such as ACV Max for inventory management and ACV Capital for financing, which contribute to overall revenue [37][47] Operational Efficiency - The company has about 800 vehicle condition inspectors, averaging 6.5 inspections per day, with more mature territories achieving 10-12 inspections per day [60][62] - Efforts are underway to improve inspection efficiency and reduce time spent per vehicle, which will enhance productivity [63] Conclusion - ACV Auctions is positioned for continued growth in the dealer-to-dealer wholesale market, leveraging technology and data to enhance its value proposition and expand its market share [67] - The company is focused on building strategic partnerships with dealers and enhancing operational efficiencies to drive profitability [39][58]

Core Viewpoint - ACV Auctions Inc. reported quarterly earnings of $0.04 per share, exceeding the Zacks Consensus Estimate of $0.02 per share, marking a 100% earnings surprise compared to break-even earnings per share a year ago [1] Financial Performance - The company achieved revenues of $182.7 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 0.16% and showing an increase from $145.69 million in the same quarter last year [2] - Over the last four quarters, ACV Auctions has exceeded consensus EPS estimates two times and topped consensus revenue estimates four times [2] Stock Performance - ACV Auctions shares have declined approximately 28.5% since the beginning of the year, contrasting with the S&P 500's decline of 4.7% [3] - The current consensus EPS estimate for the upcoming quarter is $0.07 on revenues of $196.65 million, and for the current fiscal year, it is $0.25 on revenues of $776.65 million [7] Industry Outlook - The Internet - Commerce industry, to which ACV Auctions belongs, is currently ranked in the top 31% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact ACV Auctions' stock performance [5]

Financial Data and Key Metrics Changes - Q1 revenue reached $183 million, representing a 25% year-over-year growth, with adjusted EBITDA of $14 million exceeding the high end of guidance [7][22][28] - Organic revenue growth was approximately 20% year-over-year, with adjusted EBITDA margin improving by 500 basis points [22][23] - Non-GAAP net income was above the high end of guidance, with margin increasing approximately 300 basis points year-over-year [23] Business Line Data and Key Metrics Changes - Auction and assurance revenue accounted for 58% of total revenue, growing 28% year-over-year, driven by 19% unit growth and an average revenue per unit (ARPU) of $500, which grew 8% [24] - Marketplace services revenue comprised 37% of total revenue, growing 24% year-over-year, reflecting record revenue for ACV Transport and ACV Capital [24] - SaaS and data services products made up 5% of total revenue, with a growth of 5% year-over-year [24] Market Data and Key Metrics Changes - The dealer wholesale market grew in the low single digits, with ACV selling 208,000 vehicles, a 19% year-over-year increase despite soft market conditions in February [7][22] - The overall dealer wholesale market is expected to be approximately flat year-over-year for 2025, with expectations for conversion rates and wholesale price depreciation to follow normal seasonal patterns [29][107] Company Strategy and Development Direction - The company focuses on three pillars for long-term shareholder value: growth, innovation, and scale, with a strong emphasis on expanding its dealer partner network and enhancing product offerings [6][8] - The strategy includes leveraging AI across product offerings to provide accurate pricing guidance and improve operational efficiencies [9][15] - The company aims to continue executing its profitable growth strategy while investing in long-term growth objectives [6][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver strong top-line growth and increased adjusted EBITDA despite evolving macroeconomic conditions [6][31] - The company anticipates continued market share gains and is focused on expanding its addressable market as market conditions improve [31] - Management noted that while there are uncertainties in the broader market, the company is well-positioned to navigate these challenges [31][84] Other Important Information - The company ended Q1 with $342 million in cash and cash equivalents and marketable securities, alongside $167 million of debt [26] - For Q2, the company expects revenue in the range of $193 million to $198 million, reflecting a year-over-year growth of 20% to 23% [28] Q&A Session Summary Question: Is there any customer pushback regarding recent fee increases? - Management reported very little pushback from customers regarding price increases, emphasizing a fair pricing strategy and strong value proposition [34][36] Question: What growth avenues does ACV see under a tariff backdrop? - Management highlighted that ACV continues to grow and take market share, with value-added solutions helping to differentiate the company [39][42] Question: Have dealers' needs shifted due to tariffs? - Management noted that dealers are primarily focused on acquiring more inventory, with increased interest in new products [50][52] Question: What is the penetration and potential impact of the price guarantee tool and Project Viper? - Management indicated that the guarantee offering is growing, with significant interest, and Project Viper is in early beta stages with high demand [57][66] Question: How is ACV managing risk in ACV Capital? - Management explained that risk is minimized through regular dealer visits and improved risk management capabilities, resulting in reduced bad debt expense [75][76] Question: How does the company view the impact of tariffs on wholesale listings? - Management stated that while tariffs may affect pricing, the company primarily sources supply from dealers, which mitigates potential impacts [80][82] Question: What are the competitive dynamics in the market? - Management noted that competition remains strong, but ACV continues to execute well and take market share, positioning itself as a neutral partner for dealers [92][95] Question: How are dealers leveraging real-time data provided by ACV? - Management shared examples of dealers using ACV tools to buy cars from service drives and automate pricing, enhancing their operational efficiency [98][100]

Financial Data and Key Metrics Changes - Q1 revenue reached $183 million, representing a 25% year-over-year growth, with adjusted EBITDA of $14 million exceeding the high end of guidance [6][22][27] - Organic revenue growth was approximately 20% year-over-year, with adjusted EBITDA margin improving by 500 basis points [22][24] - Non-GAAP net income was above the high end of guidance, with margin increasing approximately 300 basis points year-over-year [22][24] Business Line Data and Key Metrics Changes - Auction and assurance revenue accounted for 58% of total revenue, growing 28% year-over-year, driven by 19% unit growth and an average revenue per unit (ARPU) of $500, which grew 8% [24] - Marketplace services revenue comprised 37% of total revenue, growing 24% year-over-year, reflecting record revenue for ACV Transport and ACV Capital [24] - SaaS and data services products made up 5% of total revenue, with a growth of 5% year-over-year [24] Market Data and Key Metrics Changes - The dealer wholesale market grew in the low single digits, with ACV selling 208,000 vehicles, a 19% year-over-year increase despite soft market conditions in February [6][22] - The overall used car supply is expected to be at a trough year, impacting market dynamics [42] Company Strategy and Development Direction - The company focuses on three pillars for long-term shareholder value: growth, innovation, and scale [7][31] - ACV is leveraging AI across its product offerings to enhance pricing guidance and improve dealer experiences [8][16] - The company aims to expand its total addressable market (TAM) and competitive moat through innovative product roadmaps and value-added services [5][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in executing a profitable growth strategy to create significant long-term shareholder value, despite evolving macroeconomic conditions [5][31] - The company anticipates revenue growth to exceed non-GAAP operating expense growth by approximately 500 basis points [28] Other Important Information - The company ended Q1 with $342 million in cash and cash equivalents and marketable securities, alongside $167 million of debt [26] - For Q2, the company expects revenue in the range of $193 million to $198 million, reflecting a year-over-year growth of 20% to 23% [27] Q&A Session Summary Question: Customer pushback on fee increases due to tariffs - Management reported very little pushback from customers regarding recent fee increases, emphasizing a fair pricing strategy [34][36] Question: Growth avenues under tariff conditions - Management highlighted ongoing growth and market share gains, with value-added solutions helping to differentiate ACV from competitors [38][41] Question: Dealers' needs and focus shifts due to tariffs - Management noted that franchise dealers are increasingly seeking more inventory and showing interest in new products, rather than being significantly impacted by tariffs [49][50] Question: Penetration and impact of new tools like price guarantee and Viper - The price guarantee tool is seeing strong interest, with an average of 10 bidders per car, while Viper is in beta testing with high demand anticipated [55][64] Question: ACV Capital's growth and risk management - ACV Capital grew revenue by 33% year-over-year, with improved risk management capabilities leading to a 50% reduction in bad debt expense [74][75] Question: Impact of tariffs on fleet owners and wholesale listings - Management indicated that while tariffs may affect new vehicle pricing, the current supply primarily comes from dealers, minimizing potential impacts on ACV's business model [78][80] Question: Competitive dynamics in the market - Management noted no significant changes in competitive dynamics, asserting that ACV continues to execute well and take market share [90][92] Question: Leveraging data for dealer decision-making - Management described how dealers are increasingly using ACV's tools to make informed decisions on pricing and inventory management, enhancing operational efficiency [95][100] Question: Year-to-date performance of the dealer wholesale market - Management reported that the dealer wholesale market is up low single digits year-to-date, with expectations for a flattish performance throughout the year [104][106]

Marketplace Performance - Marketplace Units increased to 208,025 in Q1 2025 from 174,631 in Q1 2024, representing a growth of 19.1%[81] - Marketplace GMV reached $2.6 billion in Q1 2025, up from $2.3 billion in Q1 2024, indicating a year-over-year increase of 13.0%[81] - Marketplace and service revenue increased by 28% to $165.9 million for the three months ended March 31, 2025, compared to $129.8 million in the same period of 2024[118] - The volume of Marketplace Units sold increased to 208,025 in Q1 2025 from 174,631 in Q1 2024, indicating higher customer engagement[120] - The average total revenue per Marketplace Unit increased due to higher buyer rates and additional ancillary services[120] Financial Performance - Adjusted EBITDA improved to $13.9 million in Q1 2025 compared to $4.3 million in Q1 2024, reflecting a significant increase of 223.3%[81] - Adjusted EBITDA for Q1 2025 was $13.908 million, compared to $4.272 million in Q1 2024, reflecting improved operating performance[137] - Non-GAAP Net income for Q1 2025 was $7.496 million, up from $1.218 million in Q1 2024, indicating a significant improvement in operational efficiency[142] - Net loss for the three months ended March 31, 2025, was $14.8 million, compared to a net loss of $20.5 million in the same period of 2024[115] Revenue Streams - The company generates revenue primarily from its digital marketplace through auction and ancillary fees, with additional revenue from data services and customer assurance products[103] - Customer assurance revenue rose by 6% to $16.8 million for the three months ended March 31, 2025, up from $15.9 million in the prior year[121] Operating Expenses - Total operating expenses increased to $197.1 million for the three months ended March 31, 2025, compared to $168.2 million in 2024[115] - Marketplace and service cost of revenue (excluding depreciation & amortization) increased by 25% to $69.4 million for the three months ended March 31, 2025[122] - Operations and technology expenses rose by 16% to $44.2 million for the three months ended March 31, 2025, compared to $38.1 million in 2024[125] - Selling, general, and administrative expenses accounted for 32% of total revenue in Q1 2025, down from 37% in Q1 2024[115] - Selling, general, and administrative expenses increased by $5.165 million (10%) from $53.853 million in Q1 2024 to $59.018 million in Q1 2025, primarily due to higher personnel-related costs[126] - Personnel-related costs rose to $47.2 million in Q1 2025 from $42.9 million in Q1 2024, attributed to headcount increases from prior year acquisitions and increased stock-based compensation[126] - Depreciation and amortization expenses increased by $2.754 million (35%) from $7.787 million in Q1 2024 to $10.541 million in Q1 2025, mainly due to increased amortization of internal-use software costs[127] Cash Flow and Liquidity - As of March 31, 2025, the company had cash and cash equivalents totaling $291.9 million and investments in marketable securities totaling $49.9 million, indicating strong liquidity[145] - Net cash provided by operating activities for the three months ended March 31, 2025, was $66.6 million, compared to $43.0 million for the same period in 2024[158] - Net cash used in investing activities increased to $30.9 million in the three months ended March 31, 2025, from $20.9 million in 2024, primarily due to an increase in finance receivables[159] - Net cash provided by financing activities rose to $32.0 million in the three months ended March 31, 2025, from $5.3 million in 2024, driven by higher proceeds from long-term debt[161] - The company had cash and cash equivalents of $291.9 million and marketable securities of $49.9 million as of March 31, 2025[169] Debt and Financing - The company may require additional equity or debt financing in the future to support operations and expansion, depending on sales volume and capital expenditure needs[145] - The 2021 Revolver provides a revolving line of credit of up to $160.0 million, with $100.0 million drawn as of March 31, 2025, at an interest rate of 9.25%[151] - The Warehouse Facility has a maximum principal amount of $125.0 million, established to fund new auto floorplan loans, maturing on June 20, 2027[152] - As of March 31, 2025, borrowings under the Warehouse Facility were $66.5 million with an interest rate of 7.49%[153] Tax and Interest - Interest income decreased by $1.142 million (38%) from $3.031 million in Q1 2024 to $1.889 million in Q1 2025, driven by a lower balance in marketable securities and lower average interest rates[129] - Interest expense increased by $1.375 million (257%) from $535,000 in Q1 2024 to $1.910 million in Q1 2025, primarily due to interest and fees related to a new Warehouse facility[130] - The provision for income taxes decreased by $75,000 (17%) from $440,000 in Q1 2024 to $365,000 in Q1 2025, with an effective tax rate of approximately (3%) in Q1 2025[131] Future Outlook - The company aims to grow its share of wholesale transactions from existing customers, which is critical for revenue growth[92] - There is a significant opportunity to add new Marketplace Buyers and Sellers as the company expands its presence in existing territories[93] - The company continues to invest in technology development and sales and marketing efforts, anticipating increased operating expenses in the near term[98] - Demand for used vehicles remains strong, with the company benefiting from rising consumer demand since early 2020[99] - The company expects to drive customer adoption of value-added and data services, enhancing revenue growth opportunities[97] - Seasonal fluctuations in used vehicle sales are anticipated, with sales typically peaking in late Q1 and early Q2[100] Compliance and Accounting - The company is in compliance with all applicable covenants as of March 31, 2025[154] - A hypothetical 100 basis point change in interest rates would not result in a material impact on the company's financial statements[169] - The company’s financial statements are prepared in accordance with GAAP, requiring estimates and assumptions that could differ from actual results[166]

Financial Performance - First quarter 2025 revenue reached $183 million, representing a 25% year-over-year increase[7] - Total revenue for Q1 2025 was $182.7 million, a 25.4% increase from $145.7 million in Q1 2024[31] - Marketplace and Service Revenue was $166 million, an increase of 28% year-over-year[8] - Marketplace and service revenue reached $165.9 million, up 28% from $129.8 million year-over-year[31] - First quarter GAAP net loss was $15 million, an improvement from a loss of $20 million in Q1 2024[8] - Net loss for Q1 2025 was $14.8 million, compared to a net loss of $20.5 million in Q1 2024, representing a 27.5% improvement[31] - Non-GAAP net income for the first quarter was $7 million, compared to a loss of $1 million in Q1 2024[8] - The company reported a non-GAAP net income of $7.5 million for Q1 2025, compared to $1.2 million in Q1 2024[36] Growth Expectations - The company expects full-year 2025 revenue to be between $765 million and $785 million, reflecting a growth of 20% to 23% year-over-year[12] - The dealer wholesale market is expected to remain approximately flat year-over-year in 2025[12] Marketplace Metrics - Marketplace GMV for the first quarter was $2.6 billion, an increase of 13% year-over-year[8] - The number of Marketplace Units transacted was 208,025, up 19% year-over-year[8] Adjusted EBITDA - Adjusted EBITDA for the first quarter was $14 million, compared to $4 million in the same quarter of 2024[8] - Adjusted EBITDA for Q1 2025 was $13.9 million, significantly higher than $4.3 million in Q1 2024[36] - The company anticipates Adjusted EBITDA for the full year to be between $65 million and $75 million[12] Cash and Assets - Cash and cash equivalents increased to $291.9 million as of March 31, 2025, from $224.1 million at the end of 2024, a 30.3% rise[33] - Total assets grew to $1.15 billion, up from $984.1 million at the end of 2024, reflecting a 16.9% increase[33] Operating Expenses - Total operating expenses for Q1 2025 were $197.1 million, up from $168.2 million in Q1 2024, a 17.2% increase[31] - Stock-based compensation expense for Q1 2025 was $16.6 million, compared to $14.8 million in Q1 2024, indicating a 12.1% increase[36] Debt - Long-term debt increased to $166.5 million as of March 31, 2025, from $123 million at the end of 2024, a 35.3% increase[33]

Q1 2025 Performance - Revenue for Q1 2025 reached $183 million, a 25% year-over-year increase compared to $146 million in Q1 2024[13] - Marketplace units transacted in Q1 2025 totaled 208,000, up from 175,000 in Q1 2024[13] - Adjusted EBITDA for Q1 2025 was $14 million, significantly higher than the $4 million in Q1 2024[13] Financial Outlook - The company projects revenue between $193 million and $198 million for Q2 2025, representing a year-over-year growth of 20% to 23%[67] - Full-year 2025 revenue is projected to be in the range of $765 million to $785 million, also indicating a 20% to 23% year-over-year increase[67] - Adjusted EBITDA for Q2 2025 is expected to be between $18 million and $20 million, with an Adjusted EBITDA margin of 9% to 10%[67] - The company anticipates full-year 2025 Adjusted EBITDA to be between $65 million and $75 million, maintaining an Adjusted EBITDA margin of 9% to 10%[67] - Non-GAAP net income for Q2 2025 is guided to be between $11 million and $13 million, and for the full year 2025, it's expected to be between $33 million and $43 million[67] Revenue Diversification - The company's revenue streams are diversified across SaaS & Data Services, Marketplace Services, Transportation, Capital, and Auction & Assurance[57] - SaaS & Data Services accounted for 57% of the revenue in Q1 2025[57]

Core Insights - ACV reported strong first quarter results with revenue growth of 25% year-over-year, reaching $183 million, and Adjusted EBITDA of $14 million, exceeding guidance [2][5][6] - The dealer wholesale market experienced modest growth but remains below historical levels due to a shortage of used vehicle inventory and challenging market conditions [3][6] - The company is well-positioned for sustainable growth in dealer wholesale and is executing on its commercial wholesale strategy [3][6] Financial Performance - First quarter revenue was $183 million, a 25% increase from the previous year, with marketplace and service revenue at $166 million, up 28% year-over-year [5][6] - GAAP net loss for the first quarter was $15 million, an improvement from a loss of $20 million in Q1 2024, while non-GAAP net income was $7 million compared to a loss of $1 million in the same period last year [6][27] - Adjusted EBITDA for the first quarter was $14 million, significantly higher than $4 million in Q1 2024 [6][32] Market Outlook - For the second quarter of 2025, ACV expects revenue between $193 million and $198 million, representing a year-over-year growth of 20% to 23% [5][6] - Full-year 2025 revenue guidance is set at $765 million to $785 million, indicating a growth of 20% to 23% year-over-year [5][6] - The dealer wholesale market is anticipated to remain approximately flat year-over-year in 2025, with conversion rates and wholesale price depreciation expected to follow normal seasonal patterns [3][13] Operational Metrics - Marketplace GMV (Gross Merchandise Volume) reached $2.6 billion, a 13% increase year-over-year, with marketplace units transacted totaling 208,025, up 19% [6][22] - The company’s total assets as of March 31, 2025, were $1.15 billion, an increase from $984 million at the end of 2024 [29] - Cash and cash equivalents increased to $291.9 million from $224.1 million at the end of 2024, reflecting strong cash flow from operations [30][29]

Core Insights - ACV is a leading digital automotive marketplace and data services partner focused on transforming the automotive industry through transparency and comprehensive insights [2] Company Information - ACV offers a range of services including ACV Auctions, ACV Transportation, ACV Capital, ACV MAX, True360, and ClearCar aimed at sourcing, selling, and managing used vehicles [2] - The company is committed to building the most trusted and efficient digital marketplace for the automotive sector [2] Upcoming Events - ACV management will present at the 20th Annual Needham Technology, Media, & Consumer Conference on May 12, 2025, at 2:15 p.m. ET [3] - The company will also participate in the 53rd Annual J.P. Morgan Global Technology, Media and Communications Conference on May 13, 2025, at 3:10 p.m. ET [3]