Financial Data and Key Metrics Changes - First quarter revenue reached $120 million, exceeding guidance by $10 million and reflecting a 16% year-over-year growth [6][15] - GMV was $2.4 billion, flat year-over-year, with a solid unit growth offset by an 8% decrease in GMV per unit due to declining wholesale vehicle prices [6][15] - Adjusted EBITDA loss was $6 million, which was better than guidance, with EBITDA margin improving approximately 1,200 basis points year-over-year [15][19] Business Line Data and Key Metrics Changes - Auction and Assurance revenue, accounting for 57% of total revenue, increased by 17% year-over-year, driven by 8% unit growth and record ARPU of $454 [16] - Marketplace Services revenue, making up 36% of total revenue, also grew by 17% year-over-year, supported by strong performance in ACV Transport and ACV Capital [16] - ACV Transport achieved revenue margins in the mid-teens, significantly ahead of the 2026 target of 15% [9][17] Market Data and Key Metrics Changes - The new light vehicle SAAR increased by 8% year-over-year, marking the third consecutive quarter of growth, although still about 12% below pre-pandemic levels [7] - The used vehicle retail sales increased quarter-over-quarter but were down in the mid-single digits year-over-year, indicating affordability issues impacting demand [7][8] Company Strategy and Development Direction - The company focuses on three pillars for long-term shareholder value: growth, innovation, and scale [7][11] - The strategy includes expanding market share, enhancing technology capabilities, and driving operational efficiencies [5][11] - The company aims to achieve $1.3 billion in revenue and $325 million in adjusted EBITDA by 2026, with a 25% adjusted EBITDA margin [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in moderating industry headwinds and anticipates continued market share gains [5][20] - The company raised its revenue guidance for the full year 2023 to a range of $468 million to $478 million, representing an 11% to 13% year-over-year growth [19][20] - Management noted that new vehicle supply is expected to improve as production and inventory recover throughout the year [20] Other Important Information - The company ended Q1 with $526 million in cash and equivalents, and $96 million in long-term debt [18] - Cash flow from operations was $43 million, a significant improvement from a $31 million loss in Q1 2022 [19] Q&A Session Summary Question: Volume growth performance - Management indicated that the 8% growth in units was due to both new customer acquisitions and increased listings from existing dealers [26][27] Question: Cost efficiencies and savings - Management highlighted that technology investments in transportation and improved auction formats have led to better pricing and efficiency, contributing to cost savings [31][32] Question: Conversion rates expectations - Management expects conversion rates to normalize throughout the year, starting higher in Q1 and moderating down [38][39] Question: EBITDA guidance changes - Management clarified that the increase in EBITDA guidance reflects cautious optimism and the potential for additional investments if ROI is favorable [42][45] Question: Auction formats and higher-priced vehicles - Management noted that longer auction times have positively impacted market share for higher-priced vehicles, with ongoing testing of various auction formats [48][50] Question: ACV Capital opportunity amid market changes - Management stated that despite regional banks pulling back on floor plans, ACV Capital continues to grow, with a focus on managing risk effectively [54][55] Question: Territory expansion and adjacent markets - Management confirmed that they are well-staffed for territory expansion and are focusing on growing the commercial wholesale segment [81][83]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number: 001-40256 ACV Auctions Inc. (Exact Name of Registrant as Specified in its Charter) Delaware 47-2415221 (State o ...

Part I [Business](index=8&type=section&id=Item%201.%20Business) ACV Auctions operates a digital marketplace for wholesale used vehicle transactions, offering comprehensive data services and value-added solutions like transportation and financing - ACV's mission is to create the most trusted and efficient digital marketplace for buying and selling used vehicles, leveraging comprehensive and transparent data[17](index=17&type=chunk) - The platform is built on three core pillars: a Digital Marketplace, Data Services, and underlying Data and Technology[18](index=18&type=chunk) - Key value-added services include ACV Transportation, ACV Capital (financing), and Go Green (customer assurance)[19](index=19&type=chunk)[23](index=23&type=chunk) 2022 Marketplace Activity | Metric | Value | | :--- | :--- | | Active Marketplace Buyers | 14,453 | | Active Marketplace Sellers | 10,285 | | Marketplace GMV (billions) | $9.0 | - The company primarily competes with large, national physical auction companies like Manheim and Adesa, which have also expanded online[38](index=38&type=chunk)[70](index=70&type=chunk) - As of December 31, 2022, the company had over **2,000 employees**, including more than **760 Vehicle Condition Inspectors** nationwide[40](index=40&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including operating losses, intense competition, dependence on vehicle supply, data security, regulatory compliance, and its dual-class stock structure [Risks Related to Growth and Capital](index=16&type=section&id=Risks%20Related%20to%20Our%20Growth%20and%20Capital%20Requirements) The company faces risks from its history of net losses, uncertain future profitability, limited operating history, and potential need for additional capital to support growth Financial Performance (2021-2022) (in millions) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Revenue | $421.5 | $358.4 | | Net Loss | $102.2 | $78.2 | - The company had an accumulated deficit of **$347.4 million** as of December 31, 2022, expecting continued substantial resource expenditure[56](index=56&type=chunk) - The company entered a **$160.0 million** senior secured revolving credit facility (2021 Revolver) in August 2021, with restrictive covenants potentially limiting future indebtedness[65](index=65&type=chunk)[66](index=66&type=chunk) [Risks Related to Business and Industry](index=20&type=section&id=Risks%20Related%20to%20Our%20Business%2C%20Our%20Brand%20and%20Our%20Industry) ACV faces intense competition, sensitivity to used vehicle price fluctuations, and operational risks related to inspection accuracy, fraud prevention, and third-party transportation carriers - The company faces intense competition from established players like Manheim, Adesa, and KAR Auction Services, possessing greater financial resources[70](index=70&type=chunk) - The business is sensitive to changes in used vehicle prices, impacting transaction volumes and revenue per unit[72](index=72&type=chunk) - Failure to accurately inspect vehicles or manage fraudulent activities could harm the business and its reputation[84](index=84&type=chunk)[86](index=86&type=chunk) - The company bears settlement risk for vehicles sold through auctions and credit risk from dealer borrowers on floorplan loans[96](index=96&type=chunk)[97](index=97&type=chunk) [Risks Related to IT and Intellectual Property](index=29&type=section&id=Risks%20Related%20to%20Information%20Technology%20and%20Intellectual%20Property) The company relies heavily on its data platform and third-party tech, facing risks from system disruptions, cyber threats, data privacy law compliance, and intellectual property protection challenges - The business depends on its data-driven platform and may lose competitive advantage if new technology advancements are not leveraged[110](index=110&type=chunk) - ACV is subject to stringent data privacy laws like CCPA and GDPR, with non-compliance potentially leading to fines and liability[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) - The company faces threats from security breaches and cyber-attacks, potentially causing operational disruption, data loss, and significant financial and reputational harm[126](index=126&type=chunk)[127](index=127&type=chunk) - The use of open-source software could expose the company to litigation and require proprietary source code disclosure[145](index=145&type=chunk) [Risks Related to Government Regulation and Litigation](index=38&type=section&id=Risks%20Related%20to%20Government%20Regulation%20and%20Litigation) ACV operates in highly regulated industries, facing risks from non-compliance with federal, state, and local laws, and potential limitations on utilizing net operating loss carryforwards - The business is subject to extensive regulation from agencies like the FTC and state authorities, with non-compliance potentially harming operations[148](index=148&type=chunk)[149](index=149&type=chunk) - As of December 31, 2022, the company had significant U.S. federal (**$299.8 million**) and state (**$241.2 million**) net operating loss carryforwards, potentially limited by ownership changes under Section 382[153](index=153&type=chunk)[155](index=155&type=chunk) [Risks Related to Being a Public Company](index=40&type=section&id=Risks%20Related%20to%20Being%20a%20Public%20Company) As a public company, ACV faces increased legal, accounting, and compliance costs, particularly after losing its "emerging growth company" status and becoming a "large accelerated filer" - The company is now a "large accelerated filer" and no longer an "emerging growth company" as of December 31, 2022, increasing compliance costs and requiring auditor attestation of internal controls[157](index=157&type=chunk) [Risks Related to Ownership of Class A Common Stock](index=41&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Class%20A%20Common%20Stock) The dual-class stock structure concentrates voting power with Class B shares, potentially affecting stock price and index eligibility, while anti-takeover provisions and exclusive forum clauses limit stockholder influence - The dual-class structure grants Class B common stock holders (10 votes per share) approximately **75%** of total voting power as of December 31, 2022, concentrating control with insiders[160](index=160&type=chunk) - The company does not intend to pay dividends in the foreseeable future, requiring investors to rely on stock price appreciation for returns[172](index=172&type=chunk) - The company's charter includes anti-takeover provisions and an exclusive forum provision for most stockholder disputes, potentially limiting stockholders' ability to bring claims elsewhere[173](index=173&type=chunk)[175](index=175&type=chunk) [Unresolved Staff Comments](index=45&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - None[179](index=179&type=chunk) [Properties](index=45&type=section&id=Item%202.%20Properties) ACV Auctions leases all its facilities, including its Buffalo, New York headquarters and other offices in the U.S. and Canada, owning no real property - The company leases its corporate headquarters in Buffalo, New York, and other office spaces, owning no real property[179](index=179&type=chunk) [Legal Proceedings](index=45&type=section&id=Item%203.%20Legal%20Proceedings) The company may be involved in ordinary course legal proceedings, with a putative class action alleging antitrust violations settled and dismissed as of January 31, 2023 - A putative class action filed against the company in March 2021 alleging conspiracy to set bids was settled and dismissed as of January 31, 2023[181](index=181&type=chunk) [Mine Safety Disclosures](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - Not applicable[182](index=182&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=46&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's Class A common stock trades on Nasdaq under "ACVA", while Class B is not public; the company retains earnings for growth and does not anticipate paying dividends - The company's Class A common stock is traded on The Nasdaq Global Select Market under the symbol **"ACVA"**[184](index=184&type=chunk) - ACV has never paid dividends on its common stock and does not intend to pay any in the foreseeable future, retaining funds for business operations and expansion[185](index=185&type=chunk) - The report includes a stock performance graph comparing ACV's Class A common stock cumulative total return against Nasdaq Composite and Nasdaq-100 Technology Sector Indices[188](index=188&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=48&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, including a **17.6% revenue increase** to **$421.5 million** in 2022, a widening net loss to **$102.2 million**, key operating metrics, liquidity, and critical accounting estimates [Key Operating and Financial Metrics](index=49&type=section&id=Key%20Operating%20and%20Financial%20Metrics) Key metrics for 2022 show Marketplace GMV growth to **$9.0 billion**, a slight decrease in Marketplace Units, increased buyers and sellers, and a larger Adjusted EBITDA loss Key Metrics (2021 vs. 2022) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Marketplace Units | 546,088 | 560,959 | | Marketplace GMV (billions) | $9.0 | $7.9 | | Active Marketplace Buyers | 14,453 | 14,064 | | Active Marketplace Sellers | 10,285 | 9,025 | | Adjusted EBITDA (millions) | $(56.4) | $(44.1) | [Results of Operations](index=55&type=section&id=Results%20of%20Operations) Total revenue increased by **17.6%** to **$421.5 million** in 2022, but operating expenses grew by **21.2%** to **$527.7 million**, resulting in an increased operating loss of **$106.2 million** and a net loss of **$102.2 million** Consolidated Statement of Operations Highlights (in thousands) | Line Item | 2022 | 2021 | | :--- | :--- | :--- | | Total Revenue | $421,529 | $358,435 | | Total Operating Expenses | $527,737 | $435,240 | | Loss from Operations | $(106,208) | $(76,805) | | Net Loss | $(102,192) | $(78,182) | - Marketplace and service revenue increased by **17%** year-over-year, driven by higher transportation services revenue and increased buyer fees implemented in October 2022[232](index=232&type=chunk) - Operations and technology expenses increased by **35%** to **$136.5 million**, primarily due to increased headcount and continued investment in technology and infrastructure[236](index=236&type=chunk) [Liquidity and Capital Resources](index=61&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2022, primary liquidity sources were **$280.8 million** in cash and **$215.9 million** in marketable securities, supplemented by **$50.0 million** and **$160.0 million** debt facilities, with **$75.5 million** drawn - As of December 31, 2022, principal liquidity sources were cash and cash equivalents of **$280.8 million** and marketable securities of **$215.9 million**[256](index=256&type=chunk) - The company has two primary debt facilities: the 2019 Revolver (up to **$50.0 million**) and the 2021 Revolver (up to **$160.0 million**), with **$0.5 million** and **$75.0 million** drawn respectively as of December 31, 2022[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk) - Net cash used in operating activities was **$75.2 million** in 2022, a significant change from **$85.3 million** provided in 2021, primarily due to working capital changes from marketplace transactions[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk) [Critical Accounting Estimates](index=65&type=section&id=Critical%20Accounting%20Estimates) Management identifies critical accounting estimates including revenue recognition (principal vs. agent), accounting for seller guarantees, capitalization of internal-use software, and goodwill and intangible asset valuation - Revenue recognition requires significant judgment in distinguishing performance obligations and determining principal versus agent status[277](index=277&type=chunk) - The company capitalizes internal-use software costs during development and amortizes them over an estimated three-year useful life[282](index=282&type=chunk) - Goodwill is evaluated for impairment annually on October 1, with no impairment identified for the years ended 2020, 2021, or 2022[284](index=284&type=chunk)[337](index=337&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=67&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, with **$280.8 million** in cash and **$75.5 million** in borrowings as of December 31, 2022, and a **10%** interest rate change is not expected to be material - The company's main market risk is from interest rate fluctuations on its cash equivalents and variable-rate debt[287](index=287&type=chunk) - As of December 31, 2022, the company had **$280.8 million** in cash and cash equivalents and **$75.5 million** in borrowings, with a hypothetical **10%** interest rate change not expected to have a material impact[288](index=288&type=chunk) [Financial Statements and Supplementary Data](index=68&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements, including statements of operations, balance sheets, and cash flows, along with notes detailing accounting policies, acquisitions, and debt - The independent auditor, Ernst & Young LLP, issued an unqualified opinion on financial statements and internal control effectiveness, identifying capitalized internal-use software development costs as a critical audit matter[291](index=291&type=chunk)[292](index=292&type=chunk)[295](index=295&type=chunk) Consolidated Balance Sheet Summary (in thousands) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $280,752 | $565,994 | | Total current assets | $754,774 | $857,413 | | Goodwill | $91,755 | $78,839 | | **Total Assets** | **$914,922** | **$982,960** | | **Liabilities & Equity** | | | | Accounts payable | $323,661 | $395,972 | | Long-term debt | $75,500 | $500 | | **Total Liabilities** | **$429,198** | **$426,863** | | **Total Stockholders' Equity** | **$485,724** | **$556,097** | Consolidated Statement of Cash Flows Summary (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(75,175) | $85,290 | | Net cash used in investing activities | $(282,979) | $(129,266) | | Net cash provided by financing activities | $72,933 | $376,245 | - In February 2022, the company acquired Monk SAS for approximately **$18.6 million**, and in 2021, it acquired MAX Digital LLC for approximately **$60.0 million**[272](index=272&type=chunk)[274](index=274&type=chunk)[431](index=431&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=100&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This item is not applicable, indicating no changes in or disagreements with the company's accountants - Not applicable[443](index=443&type=chunk) [Controls and Procedures](index=100&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with no material changes during the period - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[444](index=444&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2022, based on the COSO 2013 framework[445](index=445&type=chunk) [Other Information](index=101&type=section&id=Item%209B.%20Other%20Information) This item is not applicable - Not applicable[449](index=449&type=chunk) Part III This part, covering directors, executive officers, governance, compensation, security ownership, and related matters, is incorporated by reference from the company's 2023 Proxy Statement [Directors, Executive Officers and Corporate Governance](index=102&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information required by this item is incorporated by reference from the company's 2023 Proxy Statement - The information required by this item is incorporated by reference to the company's Proxy Statement for its 2023 Annual Meeting of Stockholders[450](index=450&type=chunk) [Executive Compensation](index=102&type=section&id=Item%2011.%20Executive%20Compensation) Information required by this item is incorporated by reference from the company's 2023 Proxy Statement - The information required by this item is incorporated by reference to the company's Proxy Statement for its 2023 Annual Meeting of Stockholders[451](index=451&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=102&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information required by this item is incorporated by reference from the company's 2023 Proxy Statement - The information required by this item is incorporated by reference to the company's Proxy Statement for its 2023 Annual Meeting of Stockholders[452](index=452&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=102&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information required by this item is incorporated by reference from the company's 2023 Proxy Statement - The information required by this item is incorporated by reference to the company's Proxy Statement for its 2023 Annual Meeting of Stockholders[453](index=453&type=chunk) [Principal Accountant Fees and Services](index=102&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information required by this item is incorporated by reference from the company's 2023 Proxy Statement - The information required by this item is incorporated by reference to the company's Proxy Statement for its 2023 Annual Meeting of Stockholders[454](index=454&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=103&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements and exhibits filed as part of the Annual Report, with schedules omitted as information is included elsewhere - This section lists all financial statements, notes, and exhibits filed with the Form 10-K[455](index=455&type=chunk) [Form 10-K Summary](index=106&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates there is no Form 10-K summary - None[458](index=458&type=chunk)

PART I [Item 1. Business](index=7&type=section&id=Item%201.%20Business) ACV Auctions operates a digital marketplace for wholesale used vehicles, enhancing transparency and efficiency through data services [Overview](index=7&type=section&id=Overview) ACV Auctions aims to build trusted, efficient digital marketplaces for used vehicles, leveraging transparency and data - ACV Auctions' mission is to create the most trusted and efficient digital marketplaces for buying and selling used vehicles, utilizing transparency and comprehensive data[18](index=18&type=chunk) - The platform offers a digital marketplace for wholesale vehicle transactions and data services, empowering dealers and commercial partners with technology-enabled capabilities for buying, selling, and valuing vehicles[19](index=19&type=chunk) [Our Platform](index=8&type=section&id=Our%20Platform) The platform integrates a digital marketplace, value-added services, and data services, leveraging detailed vehicle inspections and predictive analytics - The platform integrates a digital marketplace (**20-minute live auction**, Run List for pre-screening), value-added services (ACV Transportation, ACV Capital for financing, Customer Assurance '**Go Green**'), and data services (**True360 Report**, **ACV Market Report**, **MAX Digital** for inventory management)[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) - Core technology includes detailed vehicle inspections (**100+ details**, **Virtual Lift** for undercarriage, **Audio Motor Profile 'AMP'** for engine sound analysis), vehicle intelligence for predictive analytics, and marketplace enablement tools like MyACV and Private Marketplaces[27](index=27&type=chunk)[28](index=28&type=chunk) [Key Advantages to our Platform](index=10&type=section&id=Key%20Advantages%20to%20our%20Platform) Key advantages include a transparent, digital approach with seller assurance, significant marketplace scale, and a growing technology moat - Key advantages include a transparent, digital approach with seller assurance (**Go Green**), an industry-leading digital marketplace with significant scale (**14,064 active buyers**, **9,025 active sellers**, **$7.9 billion GMV in 2021**), a comprehensive suite of products and services, a growing technology and data moat, and attractive territory economics[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) [Our Growth Strategies](index=11&type=section&id=Our%20Growth%20Strategies) Growth strategies focus on increasing buyer/seller numbers, expanding service offerings, pursuing targeted acquisitions, and potential international expansion - Strategies include increasing Marketplace Buyers and Sellers through targeted sales and marketing, driving greater share of wholesale transactions from existing customers, introducing new data-powered products (e.g., programmatic buying), pursuing targeted acquisitions (TrueFrame, ASI, **MAX Digital**), and thoughtful international expansion[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) [Sales](index=12&type=section&id=Sales) The sales team is responsible for onboarding, customer success, and proactively sourcing new customers, especially in nascent territories - The sales team, including account managers and territory managers, is responsible for onboarding, ensuring customer success, and proactively sourcing new customers, particularly in nascent territories[39](index=39&type=chunk)[40](index=40&type=chunk) - Vehicle Condition Inspectors (VCIs) also play a sales support role by building relationships through frequent customer visits[40](index=40&type=chunk) [Marketing](index=12&type=section&id=Marketing) Marketing initiatives drive brand awareness, incentivize existing partners, and attract new dealers through digital and direct channels - Marketing initiatives focus on driving brand awareness, incentivizing existing partners, and attracting new dealers and commercial partners through digital channels (paid search, social) and direct marketing[41](index=41&type=chunk)[42](index=42&type=chunk) [Competition](index=12&type=section&id=Competition) ACV competes with large national offline auction companies expanding online, smaller digital marketplaces, and independent auctions - ACV primarily competes with large, national offline vehicle auction companies like Manheim and KAR Auction Services, which are also expanding online, as well as smaller digital marketplace companies and independent auctions[43](index=43&type=chunk)[44](index=44&type=chunk) [Human Capital and Culture](index=13&type=section&id=Human%20Capital%20and%20Culture) ACV emphasizes a mission-driven culture focused on employee development, diversity, inclusion, and professional growth - ACV emphasizes a mission-driven culture focused on employee development, diversity, inclusion, and professional growth, with a leadership team of seasoned executives[45](index=45&type=chunk)[46](index=46&type=chunk) - As of **December 31, 2021**, the company had over **1,910 teammates**, including more than **790 Vehicle Condition Inspectors (VCIs)**[46](index=46&type=chunk) [Intellectual Property](index=13&type=section&id=Intellectual%20Property) ACV protects its intellectual property through legal rights and contractual restrictions, including confidentiality agreements - ACV protects its intellectual property (trademarks, domain names, copyrights, trade secrets, patents) through legal rights and contractual restrictions, including confidentiality agreements with employees and third parties[47](index=47&type=chunk)[48](index=48&type=chunk) [Our Government Regulations](index=13&type=section&id=Our%20Government%20Regulations) The company operates in highly regulated industries, subject to extensive U.S. federal, state, and local laws - The company operates in highly regulated industries, subject to extensive U.S. federal, state, and local laws concerning wholesale, financing, and transportation of used vehicles, as well as internet, e-commerce, data privacy, and consumer protection regulations[49](index=49&type=chunk)[50](index=50&type=chunk) [Corporate Information](index=14&type=section&id=Corporate%20Information) ACV Auctions Inc. was incorporated in Delaware in **December 2014**, with its principal executive offices in Buffalo, New York - ACV Auctions Inc. was incorporated in Delaware in **December 2014**, with its principal executive offices in Buffalo, New York[51](index=51&type=chunk) [Available Information](index=14&type=section&id=Available%20Information) The company's SEC filings and other information are available free of charge on its investor relations and the SEC's websites - The company's SEC filings (10-K, 10-Q, 8-K) and other information are available free of charge on its investor relations website (www.investors.acvauto.com) and the SEC's website (www.sec.gov)[52](index=52&type=chunk) - ACV Auctions' mission is to build the most trusted and efficient digital marketplaces for buying and selling used vehicles, leveraging transparency and comprehensive data[18](index=18&type=chunk) - The platform includes a Digital Marketplace (**20-minute live auction**, transportation, financing, assurance), Data Services (**True360 Reports**, **ACV Market Report**, **MAX Digital** for inventory management), and underlying Data and Technology (inspections, vehicle intelligence, operations automation)[19](index=19&type=chunk)[20](index=20&type=chunk)[23](index=23&type=chunk) Key Operating Metrics (2021 vs. 2020) | Metric | 2021 | 2020 | Change | % Change | | :------------------ | :---------- | :---------- | :-------- | :------- | | Active Marketplace Buyers | 14,064 | 12,373 | +1,691 | +13.7% | | Active Marketplace Sellers| 9,025 | 7,152 | +1,873 | +26.2% | | Marketplace GMV | $7.9 billion| $3.3 billion| +$4.6 billion| +139.4% | - Growth strategies include increasing Marketplace Buyers and Sellers, driving greater share of wholesale transactions from existing customers, introducing new data-powered products (e.g., programmatic buying), pursuing targeted acquisitions (TrueFrame, ASI, **MAX Digital**), and international expansion[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) [Item 1A. Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks that could materially affect ACV Auctions' business, financial condition, and results of operations [Risks Related to Our Growth and Capital Requirements](index=15&type=section&id=Risks%20Related%20to%20Our%20Growth%20and%20Capital%20Requirements) Rapid growth may not be sustainable, with a history of operating losses and uncertainty about future profitability - Rapid growth may not be sustainable, and the company has a history of operating losses (**$78.2 million** in 2021, **$41.0 million** in 2020) with no assurance of future profitability, requiring substantial investments in platform, products, sales, and expansion[56](index=56&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk) - Future results are difficult to forecast due to limited operating history and potential fluctuations from factors like customer demand, retention, competition, and macroeconomic conditions[65](index=65&type=chunk)[66](index=66&type=chunk) - Additional debt or equity capital may be required for business objectives, but availability and acceptable terms are not guaranteed, potentially leading to dilution or restrictive covenants[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) - The phaseout of LIBOR may adversely affect interest rates on existing debt, requiring renegotiation of terms[71](index=71&type=chunk)[72](index=72&type=chunk) [Risks Related to Our Business, Our Brand and Our Industry](index=19&type=section&id=Risks%20Related%20to%20Our%20Business%2C%20Our%20Brand%20and%20Our%20Industry) The ability to expand products and services may be limited, incurring losses or failing to successfully enter new markets - The ability to expand products and services may be limited, incurring losses or failing to successfully enter new markets due to competitive and regulatory challenges[73](index=73&type=chunk) - The company operates in a highly competitive industry, facing large national offline auction companies (Manheim, KAR Auction Services) and smaller digital marketplaces, requiring constant adaptation to evolving trends and technologies[75](index=75&type=chunk)[76](index=76&type=chunk) - Business is sensitive to changes in used vehicle prices and supply, with decreases potentially impacting sales volumes, revenue, and profitability[77](index=77&type=chunk)[80](index=80&type=chunk) - Failure to accurately inspect vehicles or effectively deal with fraudulent activities could damage customer confidence and lead to financial losses, especially under the **Go Green** assurance program[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) - Reliance on third-party carriers for vehicle transportation exposes the company to risks like weather, traffic, and driver shortages, potentially affecting customer experience[93](index=93&type=chunk) [Risks Related to Socioeconomic Factors](index=24&type=section&id=Risks%20Related%20to%20Socioeconomic%20Factors) Health crises, economic conditions, and changes in the automotive ecosystem could significantly impact business operations and profitability - Health crises like the COVID-19 pandemic can disrupt operations, impact customer demand, and create market turmoil, making future performance unpredictable[103](index=103&type=chunk)[104](index=104&type=chunk)[106](index=106&type=chunk) - General business and economic conditions, including consumer demand, credit availability, and changes in the automotive ecosystem (e.g., autonomous vehicles, ride-sharing), could reduce auto sales and profitability[107](index=107&type=chunk)[108](index=108&type=chunk)[110](index=110&type=chunk) - Dealer closures or consolidations could reduce demand for ACV's products, and the influence of industry parties (associations, regulators) could negatively impact business relationships[111](index=111&type=chunk)[112](index=112&type=chunk) - The business is subject to risks from natural disasters, adverse weather events, and other catastrophic events, which could interrupt operations and affect financial results[113](index=113&type=chunk) [Risks Related to Information Technology and Intellectual Property](index=26&type=section&id=Risks%20Related%20to%20Information%20Technology%20and%20Intellectual%20Property) Failure to leverage technology, maintain platform reliability, or comply with data privacy laws could harm the business - Failure to properly leverage technology advancements or provide a compelling user experience on web and mobile platforms could lead to a decline in customer engagement and harm the business[114](index=114&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) - Reliance on third-party technology and information systems for critical business functions (e.g., AWS, Google Cloud) exposes the company to risks of disruption, security breaches, and performance issues[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk) - The company is subject to stringent and changing privacy and data security laws (e.g., CCPA, CPRA), with non-compliance potentially leading to enforcement actions, fines, litigation, and reputational harm[123](index=123&type=chunk)[124](index=124&type=chunk) - Failure to adequately obtain, maintain, protect, and enforce intellectual property rights (trademarks, trade secrets, patents) could harm the business, as could claims of infringement or misappropriation by third parties[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[148](index=148&type=chunk) [Risks Related to Government Regulation and Litigation](index=35&type=section&id=Risks%20Related%20to%20Government%20Regulation%20and%20Litigation) ACV operates in highly regulated industries, facing risks from non-compliance, legal proceedings, and limitations on tax benefits - ACV operates in highly regulated industries (wholesale, financing, transportation of used vehicles, internet, e-commerce, data privacy), with laws varying significantly by state and federal agencies[157](index=157&type=chunk)[159](index=159&type=chunk) - Non-compliance with licensing requirements or other regulations could result in punitive fines, operational changes, and adverse effects on financial condition[158](index=158&type=chunk)[160](index=160&type=chunk) - The company is subject to legal proceedings and claims in the ordinary course of business, including a putative class action alleging federal antitrust and New York State law violations related to bid-setting[161](index=161&type=chunk)[195](index=195&type=chunk) - The ability to utilize net operating loss carryforwards (NOLs) to reduce future tax liability may be limited by their duration or restrictions under U.S. tax law (e.g., Sections 382 and 383 of the Code)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) [Risks Related to Being a Public Company](index=36&type=section&id=Risks%20Related%20to%20Being%20a%20Public%20Company) Operating as a public company incurs increased costs and requires substantial management time for compliance - Operating as a public company incurs increased costs (finance, legal, accounting, D&O insurance) and requires substantial management time for compliance with Sarbanes-Oxley Act, Dodd-Frank, and Nasdaq listing requirements[166](index=166&type=chunk) - Failure to develop and maintain effective internal controls over financial reporting, or the reoccurrence of material weaknesses, could adversely affect investor confidence and stock value[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) - As an 'emerging growth company,' ACV utilizes reduced reporting and disclosure requirements, which may make its Class A common stock less attractive to some investors due to non-comparable financial statements[171](index=171&type=chunk)[173](index=173&type=chunk) [Risks Related to Ownership of Our Class A Common Stock](index=38&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Class%20A%20Common%20Stock) The dual-class stock structure concentrates voting control, limiting Class A holders' influence, and the stock price may be volatile - The dual-class structure (Class B has **10 votes/share**, Class A has **1 vote/share**) concentrates voting control (**82.4%** with Class B holders, **67.8%** with directors/executives and affiliates as of **December 31, 2021**), limiting Class A holders' influence[174](index=174&type=chunk) - The stock price may be volatile due to financial performance fluctuations, competitive announcements, litigation, future stock sales, and general economic conditions[177](index=177&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk) - The company does not intend to pay dividends in the foreseeable future, requiring investors to rely on stock price appreciation for gains[185](index=185&type=chunk) - Anti-takeover provisions in charter documents and Delaware law could make company acquisition more difficult and limit stockholders' ability to influence management or receive a premium for their shares[186](index=186&type=chunk)[188](index=188&type=chunk) - ACV's rapid growth may not be indicative of future performance, and the company has a history of operating losses, with no guarantee of future profitability[56](index=56&type=chunk)[62](index=62&type=chunk) - The business is highly sensitive to changes in used vehicle prices and supply, and faces intense competition from both traditional and digital auction companies[77](index=77&type=chunk)[80](index=80&type=chunk)[75](index=75&type=chunk) - Operations are vulnerable to health crises (e.g., COVID-19), general economic downturns, and disruptions in the broader automotive ecosystem, including shifts in consumer demand and dealer consolidations[103](index=103&type=chunk)[107](index=107&type=chunk)[111](index=111&type=chunk) - Significant risks exist related to information technology, including the need to leverage advancements, maintain platform reliability, and comply with stringent and evolving data privacy and security laws (e.g., CCPA, CPRA)[114](index=114&type=chunk)[119](index=119&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) - The company's dual-class stock structure concentrates voting control with executive officers, directors, and affiliates, potentially limiting the influence of Class A common stock holders[174](index=174&type=chunk) [Item 1B. Unresolved Staff Comments](index=42&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report [Item 2. Properties](index=42&type=section&id=Item%202.%20Properties) ACV Auctions Inc. leases its corporate headquarters in Buffalo, New York and other offices across multiple states and Canada - ACV leases its corporate headquarters (**25,000 sq ft** in Buffalo, NY, lease expires **November 2022** with a **5-year extension option**) and other offices (over **49,000 sq ft**) in multiple US states and Canada[193](index=193&type=chunk) - The company does not own any real property and believes current facilities are suitable, with additional space obtainable if required[193](index=193&type=chunk) [Item 3. Legal Proceedings](index=42&type=section&id=Item%203.%20Legal%20Proceedings) ACV Auctions Inc. is generally subject to various legal proceedings, with one putative class action currently pending - ACV is generally subject to ordinary course legal proceedings but currently faces no material adverse litigation, except for a specific class action[194](index=194&type=chunk) - A putative class action was filed on **March 19, 2021**, alleging federal antitrust and New York State law violations related to an alleged conspiracy to set bids on the marketplace from one seller[195](index=195&type=chunk) - In **January 2022**, federal claims in the class action were dismissed with leave to amend. ACV intends to vigorously defend the case and believes its resolution will not materially affect its consolidated financial position[195](index=195&type=chunk) [Item 4. Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to ACV Auctions Inc PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=43&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) ACV Auctions' Class A common stock trades on Nasdaq, while Class B is unlisted but convertible, with no dividends planned [Market Information and Holders of Record](index=43&type=section&id=Market%20Information%20and%20Holders%20of%20Record) ACV's Class A common stock trades on Nasdaq, while Class B is unlisted but convertible, with **61** Class A and **71** Class B holders of record - ACV's Class A common stock is traded on The Nasdaq Global Select Market under the symbol 'ACVA'[198](index=198&type=chunk) - Class B common stock is not listed but is convertible into Class A common stock[198](index=198&type=chunk) - As of **February 15, 2022**, there were **61 holders** of record for Class A common stock and **71** for Class B common stock[198](index=198&type=chunk) [Dividend Policy](index=43&type=section&id=Dividend%20Policy) The company has never declared dividends and intends to retain all funds for business operations and expansion - The company has never declared or paid dividends on its common stock and intends to retain all available funds for business operations and expansion in the foreseeable future[199](index=199&type=chunk) [Use of Proceeds](index=43&type=section&id=Use%20of%20Proceeds) In **March 2021**, ACV completed its IPO, raising **$385.0 million** in net proceeds for general corporate purposes - In **March 2021**, ACV completed its IPO, selling **16,550,000 shares** of Class A common stock at **$25.00 per share**, generating **$385.0 million** in net proceeds after deducting underwriting discounts and offering expenses[200](index=200&type=chunk) - There has been no material change in the planned use of proceeds from the IPO[200](index=200&type=chunk) [Recent Sales of Unregistered Securities](index=43&type=section&id=Recent%20Sales%20of%20Unregistered%20Securities) In **November 2021**, ACV issued **182,813 shares** of Class A common stock for the TruePartners USA LLC acquisition - On **November 1, 2021**, ACV issued **182,813 shares** of Class A common stock as consideration for the TruePartners USA LLC acquisition, exempt from registration under Section 4(a)(2) of the Securities Act[201](index=201&type=chunk) [Issuer Purchases of Equity Securities](index=43&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) The company made no issuer purchases of equity securities - The company made no issuer purchases of equity securities[201](index=201&type=chunk) [Stock Performance Graph](index=44&type=section&id=Stock%20Performance%20Graph) A graph compares ACV's Class A common stock return to the Nasdaq Composite and Nasdaq-100 Technology Sector Indices - A graph compares the cumulative total return of ACV's Class A common stock to the Nasdaq Composite Index and Nasdaq-100 Technology Sector Index from **March 24, 2021**, through **December 31, 2021**[202](index=202&type=chunk) - ACV's Class A common stock trades on Nasdaq under 'ACVA'; Class B common stock is convertible to Class A but not listed[198](index=198&type=chunk) - As of **February 15, 2022**, there were **61 holders** of record for Class A common stock and **71** for Class B common stock[198](index=198&type=chunk) - The company does not intend to pay cash dividends in the foreseeable future, retaining funds for operations and expansion[199](index=199&type=chunk) IPO Proceeds (March 2021) | Item | Amount (Millions) | | :------------------------------------ | :---------------- | | Gross Proceeds from Class A IPO | $413.8 | | Underwriting Discounts & Commissions | ($24.8) | | Net Offering Expenses | ($3.9) | | **Net Proceeds to Company** | **$385.0** | - In **November 2021**, **182,813 shares** of Class A common stock were issued as consideration for the TruePartners USA LLC acquisition, exempt from registration[201](index=201&type=chunk) [Item 6. [Reserved]](index=44&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=45&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section reviews ACV Auctions' financial performance, highlighting growth in its digital marketplace and data services, and the impact of COVID-19 [Overview](index=45&type=section&id=Overview) ACV Auctions aims to be the most trusted and efficient digital marketplace for used vehicles, providing transparent data and technology-enabled services - ACV Auctions aims to be the most trusted and efficient digital marketplace for used vehicles, providing transparent data and technology-enabled services to dealers and commercial partners[206](index=206&type=chunk)[207](index=207&type=chunk) - Revenue is primarily generated from auction and ancillary fees on successful marketplace transactions, with additional revenue from data services (**True360**, **MAX Digital**) and short-term inventory financing[208](index=208&type=chunk)[209](index=209&type=chunk) Financial Performance (2021 vs. 2020) | Metric | 2021 | 2020 | | :------------------ | :--------------- | :--------------- | | Revenue | $358.4 million | $208.4 million | | Net Loss | $(78.2) million | $(41.0) million | | Adjusted EBITDA | $(44.1) million | $(30.8) million | [Impact of COVID-19 on Our Business](index=46&type=section&id=Impact%20of%20COVID-19%20on%20Our%20Business) COVID-19 initially disrupted operations but later drove increased demand for used vehicles and a shift to digital transactions - COVID-19 initially caused significant disruption to customer operations and a sharp decline in wholesale transaction demand in **March-April 2020**[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk) - Marketplace activity rebounded strongly from **May 2020**, driven by increased demand for used vehicles, higher valuations, and a shift to digital transactions as traditional auctions faced disruptions[214](index=214&type=chunk) - The semiconductor supply shortage and COVID-related production disruptions continued to impact supply and demand into **2021**, leading to short-term volatility and historic lows in dealer inventories by **Q4 2021**[215](index=215&type=chunk)[216](index=216&type=chunk) [Key Operating and Financial Metrics](index=47&type=section&id=Key%20Operating%20and%20Financial%20Metrics) Key operating metrics show significant growth in Marketplace Units, GMV, buyers, and sellers, alongside increased Adjusted EBITDA losses Key Operating and Financial Metrics (2021 vs. 2020) | Metric | 2021 | 2020 | YoY Change | | :------------------ | :--------------- | :--------------- | :--------- | | Marketplace Units | 560,959 | 391,466 | +43.3% | | Marketplace GMV | $7.9 billion | $3.3 billion | +139.4% | | Marketplace Buyers | 14,064 | 12,373 | +13.7% | | Marketplace Sellers | 9,025 | 7,152 | +26.2% | | Adjusted EBITDA | $(44.1) million | $(30.8) million | -43.2% | - Marketplace Units (vehicles transacted) are a key indicator of growth potential, driving revenue from auction and ancillary fees[219](index=219&type=chunk) - Marketplace GMV (total dollar value of vehicles transacted) indicates marketplace success and business health, but future GMV could decline if used vehicle values normalize, even with unit growth[220](index=220&type=chunk) - Growth in Marketplace Buyers and Sellers is driven by the value proposition of ACV's offerings and sales/marketing efforts, promoting a vibrant marketplace[223](index=223&type=chunk) - Adjusted EBITDA is a non-GAAP measure used to assess operating performance, expected to fluctuate in the near term due to investments but improve long-term with scale[224](index=224&type=chunk) [Factors Affecting Our Performance](index=48&type=section&id=Factors%20Affecting%20Our%20Performance) Performance is driven by increasing marketplace units, growing customer share, adding new buyers/sellers, and expanding value-added services - Key performance drivers include increasing Marketplace Units, growing the share of wholesale transactions from existing customers, and adding new Marketplace Buyers and Sellers[226](index=226&type=chunk)[227](index=227&type=chunk)[229](index=229&type=chunk) - Success depends on growing awareness for ACV's offerings and brand through trusted supply, deepening relationships with partners, driving customer loyalty, and targeted marketing[231](index=231&type=chunk)[232](index=232&type=chunk) - Growing value-added and data services (e.g., ACV Transportation, ACV Capital, **True360 Reports**, **MAX Digital**) is crucial for enhancing the platform and driving revenue[233](index=233&type=chunk) - Continued investment in growth (sales, marketing, technology) is expected to increase operating expenses, potentially delaying profitability in the near term[235](index=235&type=chunk) - Performance is significantly affected by used car demand, which has been impacted by the semiconductor shortage and new car supply constraints, leading to short-term volatility[236](index=236&type=chunk) [Components of Results of Operations](index=50&type=section&id=Components%20of%20Results%20of%20Operations) Revenue primarily stems from Marketplace and Service fees and Customer Assurance, while operating expenses cover various operational costs - Revenue is primarily from Marketplace and Service (auction and ancillary fees, transportation, data services) and Customer Assurance (**Go Green** and other price guarantees)[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk) - Operating expenses include Marketplace and Service Cost of Revenue (third-party transportation, inspection costs), Customer Assurance Cost of Revenue (claims against guarantees), Operations and Technology (inspections, processing, product/engineering), Selling, General and Administrative (sales, marketing, legal, HR), and Depreciation and Amortization[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk) - Other income (expense) primarily consists of interest income and expense, while Provision for Income Taxes covers U.S. federal, state, and foreign income taxes[247](index=247&type=chunk)[248](index=248&type=chunk) [Results of Operations](index=52&type=section&id=Results%20of%20Operations) ACV experienced substantial revenue growth in **2021**, primarily from marketplace and service fees, but also incurred increased operating expenses, resulting in continued net losses Consolidated Statements of Operations (2021 vs. 2020) | Metric | 2021 (in thousands) | 2020 (in thousands) | YoY Change (thousands) | % Change | | :---------------------------------------------- | :------------------ | :------------------ | :--------------------- | :------- | | **Revenue:** | | | | | | Marketplace and service revenue | $308,350 | $173,120 | $135,230 | 78% | | Customer assurance revenue | $50,085 | $35,237 | $14,848 | 42% | | **Total Revenue** | **$358,435** | **$208,357** | **$150,078** | **72%** | | **Operating Expenses:** | | | | | | Marketplace and service cost of revenue | $159,405 | $83,553 | $75,852 | 91% | | Customer assurance cost of revenue | $45,348 | $29,496 | $15,852 | 54% | | Operations and technology | $101,056 | $64,998 | $36,058 | 55% | | Selling, general, and administrative | $121,167 | $64,882 | $56,285 | 87% | | Depreciation and amortization | $8,264 | $6,075 | $2,189 | 36% | | **Total Operating Expenses** | **$435,240** | **$249,004** | **$186,236** | **75%** | | **Loss from Operations** | **$(76,805)** | **$(40,647)** | **-$(36,158)** | **-89%** | | **Net Loss** | **$(78,182)** | **$(41,021)** | **-$(37,161)** | **-91%** | - Marketplace and service revenue increased by **78%** YoY, driven by higher auction marketplace revenue and increased transportation, data, and other service revenue, correlating with higher per unit GMV and buyer fee increases in **December 2021**[257](index=257&type=chunk)[258](index=258&type=chunk) - Customer assurance revenue increased by **42%** YoY, primarily from **Go Green** assurance offerings, due to increased sales unit volume and market penetration, partially offset by a decline in fair value per assurance[260](index=260&type=chunk) - Operating expenses saw significant increases across all categories, notably Marketplace and Service Cost of Revenue (**+91%**), Operations and Technology (**+55%**), and Selling, General, and Administrative (**+87%**), primarily due to increased sales volume, headcount, and technology investments[261](index=261&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk) [Non-GAAP Financial Measures](index=56&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted EBITDA is a non-GAAP measure used to assess operating performance, expected to fluctuate in the near term due to investments - Adjusted EBITDA is a non-GAAP financial measure used by management to assess operating performance and leverage, excluding depreciation, stock-based compensation, interest, other income/expense, and taxes[271](index=271&type=chunk)[272](index=272&type=chunk) - Adjusted EBITDA is expected to fluctuate in the near term due to business investments but improve long-term with scale and operating efficiencies[224](index=224&type=chunk) Adjusted EBITDA Reconciliation (2021 vs. 2020) | Metric | 2021 (in thousands) | 2020 (in thousands) | | :----------------------------------- | :------------------ | :------------------ | | Net income (loss) | $(78,182) | $(41,021) | | Depreciation and amortization | $8,753 | $7,244 | | Stock-based compensation | $23,692 | $5,705 | | Interest (income) expense | $653 | $(115) | | Provision for income taxes | $724 | $489 | | Other (income) expense, net | $223 | $(3,054) | | **Adjusted EBITDA** | **$(44,137)** | **$(30,752)** | [Liquidity and Capital Resources](index=57&type=section&id=Liquidity%20and%20Capital%20Resources) ACV's liquidity is strong, with substantial cash and marketable securities, primarily from IPO proceeds, deemed sufficient for future needs - ACV's primary liquidity sources are marketplace revenue, debt facilities, and equity sales, including **$388.9 million** net proceeds from the **March 2021** IPO[275](index=275&type=chunk) - As of **December 31, 2021**, the company had **$566.0 million** in cash and cash equivalents and **$13.8 million** in marketable securities, deemed sufficient for at least the next **12 months** and long-term needs[276](index=276&type=chunk) - Future capital requirements depend on sales volume, marketing expansion, development efforts, and potential acquisitions. The company may seek additional financing if needed[276](index=276&type=chunk) - Working capital is significantly bolstered by 'marketplace float,' where receivables are settled faster than payables[280](index=280&type=chunk) [Our Debt Arrangements](index=58&type=section&id=Our%20Debt%20Arrangements) ACV maintains two revolving credit facilities, a **$50.0 million 2019 Revolver** and a **$160.0 million 2021 Revolver** - ACV has a **$50.0 million 2019 Revolver** (secured by receivables, LIBOR + **3.75%**, matures **June 2024**) and a **$160.0 million 2021 Revolver** (secured by company assets, LIBOR + **2.75%**, matures **August 2026**)[281](index=281&type=chunk)[282](index=282&type=chunk)[283](index=283&type=chunk) - As of **December 31, 2021**, **$0.5 million** was drawn under the **2019 Revolver**, and a **$1.1 million** letter of credit was outstanding under the **2021 Revolver**, with no other amounts drawn[284](index=284&type=chunk) - The company was in compliance with all applicable financial and non-financial covenants for both revolving credit facilities as of **December 31, 2021**[284](index=284&type=chunk) [Cash Flows from Operating, Investing, and Financing Activities](index=59&type=section&id=Cash%20Flows%20from%20Operating%2C%20Investing%2C%20and%20Financing%20Activities) Cash flows reflect significant increases from operating and financing activities, offset by increased investing activities Summary of Cash Flows (2021 vs. 2020) | Cash Flow Activity | 2021 (in thousands) | 2020 (in thousands) | | :------------------------------ | :------------------ | :------------------ | | Net cash provided by (used in) operating activities | $85,290 | $10,368 | | Net cash provided by (used in) investing activities | $(129,266) | $(19,673) | | Net cash provided by (used in) financing activities | $376,245 | $60,755 | | **Net increase in cash and equivalents** | **$332,269** | **$51,450** | - Net cash from operating activities increased significantly in **2021** to **$85.3 million** (from **$10.4 million** in 2020), primarily driven by a **$119.2 million** increase in marketplace float[288](index=288&type=chunk)[289](index=289&type=chunk)[290](index=290&type=chunk) - Net cash used in investing activities increased to **$129.3 million** in **2021** (from **$19.7 million** in 2020), mainly due to **$59.0 million** in business acquisitions, a **$31.7 million** increase in finance receivables, and **$13.8 million** in marketable securities purchases[291](index=291&type=chunk) - Net cash from financing activities was **$376.2 million** in **2021**, primarily from IPO proceeds, offset by debt repayments and RSU tax withholdings[292](index=292&type=chunk) [Acquisitions](index=60&type=section&id=Acquisitions) ACV completed several acquisitions, including ASI Services in **Q2 2020** and **Max Digital** in **Q3 2021**, expanding its offerings - In **Q2 2020**, ACV acquired assets from ASI Services LLC for **$11.2 million**, expanding inspection services for off-lease vehicles[293](index=293&type=chunk) - In **Q3 2021**, ACV acquired **Max Digital** LLC for approximately **$61.4 million**, expanding its product offerings with an inventory management system leveraging predictive analytics[294](index=294&type=chunk) - Other business combinations in **2021** totaled approximately **$6.9 million**, further enhancing service offerings[295](index=295&type=chunk) [Seasonality](index=60&type=section&id=Seasonality) Vehicle sales typically peak in late **Q1** and early **Q2**, with lowest volumes in **Q4**, influenced by various market factors - Vehicle sales typically peak late in **Q1** and early **Q2**, with lowest volumes in **Q4**, influenced by holidays, weather, retail market seasonality, and tax returns[237](index=237&type=chunk)[296](index=296&type=chunk) - Used vehicle pricing depreciates faster in the last two quarters and slower in the first two quarters of each year[237](index=237&type=chunk) - Due to rapid growth, ACV's sales patterns have not fully reflected general seasonality but are expected to normalize as the business matures[237](index=237&type=chunk) [Critical Accounting Estimates](index=60&type=section&id=Critical%20Accounting%20Estimates) Revenue recognition, general guarantees, stock-based compensation, internal-use software, and goodwill impairment are critical accounting estimates - Revenue recognition involves significant judgment in determining performance obligations, principal vs. agent roles, and allocating transaction prices based on stand-alone selling prices[298](index=298&type=chunk)[299](index=299&type=chunk) - General guarantees, including vehicle condition guarantees (**Go Green**) and other price guarantees, are accounted for under ASC 460, with fair value estimated based on historical results and qualitative factors[301](index=301&type=chunk)[302](index=302&type=chunk) - Stock-based compensation is measured at fair value using the Black-Scholes model, requiring subjective assumptions for expected term, risk-free interest rate, expected volatility, and dividend rate[303](index=303&type=chunk)[304](index=304&type=chunk) - Internal-use software costs are capitalized during development and amortized straight-line over an estimated useful life of **three years**[306](index=306&type=chunk) - Goodwill is not amortized but tested for impairment annually (or more frequently if indicators exist) as a singular reporting unit, using qualitative and quantitative assessments[307](index=307&type=chunk)[308](index=308&type=chunk) [Recently Adopted Accounting Pronouncements](index=63&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) ACV early adopted ASU **2019-12** on **January 1, 2021**, with no material impact, and is evaluating ASU **2016-13** for **January 1, 2023** adoption - ACV early adopted ASU **2019-12** (Simplifying the Accounting for Income Taxes) on **January 1, 2021**, on a prospective basis, with no material impact[375](index=375&type=chunk) - The company is currently evaluating the impact of ASU **2016-13** (Measurement of Credit Losses on Financial Instruments), which is required for adoption on **January 1, 2023**[375](index=375&type=chunk) [Emerging Growth Company Status](index=63&type=section&id=Emerging%20Growth%20Company%20Status) ACV is an 'emerging growth company,' allowing it to use an extended transition period for new accounting standards - ACV is an 'emerging growth company' under the JOBS Act, allowing it to use an extended transition period for complying with new or revised accounting standards, adopting them when private companies do[311](index=311&type=chunk)[340](index=340&type=chunk) - This election means ACV's financial statements may not be comparable to other public companies that comply with public company effective dates for new standards[340](index=340&type=chunk) - ACV's mission is to build a trusted and efficient digital marketplace for used vehicles, offering data services and leveraging technology to empower dealers and commercial partners[206](index=206&type=chunk)[207](index=207&type=chunk) - COVID-19 initially disrupted operations in **March-April 2020**, but subsequently drove increased demand for online transactions, leading to a strong rebound in marketplace activity and higher used vehicle valuations[211](index=211&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk) Key Operating and Financial Metrics (2021 vs. 2020) | Metric | 2021 | 2020 | Change | % Change | | :------------------ | :--------------- | :--------------- | :--------------- | :------- | | Marketplace Units | 560,959 | 391,466 | +169,493 | +43.3% | | Marketplace GMV | $7.9 billion | $3.3 billion | +$4.6 billion | +139.4% | | Marketplace Buyers | 14,064 | 12,373 | +1,691 | +13.7% | | Marketplace Sellers | 9,025 | 7,152 | +1,873 | +26.2% | | Revenue | $358.4 million | $208.4 million | +$150.0 million | +72.0% | | Net Loss | $(78.2) million | $(41.0) million | -$(37.2) million | -90.7% | | Adjusted EBITDA | $(44.1) million | $(30.8) million | -$(13.3) million | -43.2% | - The company's liquidity is strong, with **$566.0 million** in cash and cash equivalents as of **December 31, 2021**, largely due to **$385.0 million** in net proceeds from its **March 2021** IPO[275](index=275&type=chunk)[276](index=276&type=chunk) - ACV completed significant acquisitions, including **Max Digital** in **Q3 2021** for **$61.4 million** (expanding inventory management software) and ASI Services in **Q2 2020** for **$11.2 million** (enhancing inspection services)[293](index=293&type=chunk)[294](index=294&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=64&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) ACV Auctions Inc. is exposed to market risk primarily from fluctuations in interest rates - ACV's primary market risk exposure is from interest rate fluctuations[313](index=313&type=chunk) - As of **December 31, 2021**, the company had **$566.0 million** in cash and cash equivalents (short-term interest-bearing investments) and **$0.5 million** in variable-rate borrowings (indexed to LIBOR or a replacement rate)[314](index=314&type=chunk) - A hypothetical **10% change** in interest rates is not expected to have a material impact on the consolidated financial statements[314](index=314&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=64&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents ACV Auctions Inc.'s audited consolidated financial statements for **2021**, **2020**, and **2019**, along with extensive accompanying notes [Notes to Consolidated Financial Statements](index=71&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide extensive disclosures on ACV's business, accounting policies, equity structure, and details of business acquisitions - ACV operates in a single reporting segment, providing a digital wholesale auction marketplace and data services for business-to-business used vehicle sales[334](index=334&type=chunk)[341](index=341&type=chunk) - The IPO in **March 2021** resulted in **$388.9 million** net proceeds and the conversion of all outstanding convertible preferred stock into Class B common stock, establishing a dual-class structure[337](index=337&type=chunk)[407](index=407&type=chunk)[408](index=408&type=chunk) - Key accounting estimates include allowance for doubtful receivables, fair value of guarantees, impairment of goodwill, stock-based awards, and income taxes[336](index=336&type=chunk) - The company holds marketable securities (commercial paper, corporate bonds, U.S. treasury securities) totaling **$13.765 million** as of **December 31, 2021**, primarily due within **one year**[378](index=378&type=chunk)[379](index=379&type=chunk) - Goodwill increased to **$78.8 million** in **2021** (from **$21.8 million** in 2020) due to acquisition activity, with acquired intangible assets (customer relationships, developed technology) totaling **$18.1 million**[452](index=452&type=chunk)[454](index=454&type=chunk) - In **February 2022**, ACV acquired Monk S.A.S. for approximately **$19.0 million** cash, further expanding its position in the used vehicle industry[461](index=461&type=chunk) - The section includes audited consolidated financial statements for **2021**, **2020**, and **2019**, along with the Independent Registered Public Accounting Firm's report[315](index=315&type=chunk)[317](index=317&type=chunk) Consolidated Statements of Operations (2021, 2020, 2019) | Metric | 2021 (in thousands) | 2020 (in thousands) | 2019 (in thousands) | | :---------------------------------------------- | :------------------ | :------------------ | :------------------ | | Total Revenue | $358,435 | $208,357 | $106,847 | | Total Operating Expenses | $435,240 | $249,004 | $186,129 | | Loss from Operations | $(76,805) | $(40,647) | $(79,282) | | Net Loss | $(78,182) | $(41,021) | $(77,216) | | Net Loss per Share - Basic and Diluted | $(0.62) | $(1.90) | $(4.20) | Consolidated Balance Sheets (as of Dec 31, 2021 vs. 2020) | Asset/Liability | Dec 31, 2021 (in thousands) | Dec 31, 2020 (in thousands) | | :------------------------------ | :-------------------------- | :-------------------------- | | Cash and cash equivalents | $565,994 | $233,725 | | Total current assets | $857,413 | $354,405 | | Total assets | $982,960 | $404,550 | | Accounts payable | $395,972 | $151,967 | | Total current liabilities | $423,362 | $166,701 | | Total liabilities | $426,863 | $177,910 | | Total stockholders' equity (deficit) | $556,097 | $(139,692) | Consolidated Statements of Cash Flows (2021, 2020, 2019) | Cash Flow Activity | 2021 (in thousands) | 2020 (in thousands) | 2019 (in thousands) | | :------------------------------ | :------------------ | :------------------ | :------------------ | | Net cash provided by (used in) operating activities | $85,290 | $10,368 | $(72,460) | | Net cash provided by (used in) investing activities | $(129,266) | $(19,673) | $(24,681) | | Net cash provided by (used in) financing activities | $376,245 | $60,755 | $161,526 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $332,269 | $51,450 | $64,385 | | Cash, cash equivalents, and restricted cash, end of period | $565,994 | $233,725 | $182,275 | [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=96&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There are no changes in or disagreements with accountants on accounting and financial disclosure to report [Item 9A. Controls and Procedures](index=96&type=section&id=Item%209A.%20Controls%20and%20Procedures) ACV Auctions' management evaluated its disclosure controls and procedures as effective, noting inherent limitations of control systems [Evaluation of Disclosure Controls and Procedures](index=96&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of **December 31, 2021** - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of **December 31, 2021**[463](index=463&type=chunk) [Management's Annual Report on Internal Control Over Financial Reporting](index=96&type=section&id=Management%27s%20Annual%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) This 10-K does not include a management report or auditor attestation on internal control due to a transition period - This 10-K does not include a management report or auditor attestation report on internal control over financial reporting due to a transition period for newly public companies[464](index=464&type=chunk) [Changes in Internal Control Over Financial Reporting](index=96&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No material changes in internal control over financial reporting were identified during the period covered by this report - No material changes in internal control over financial reporting were identified during the period covered by this report[465](index=465&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=96&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) Management acknowledges that controls provide reasonable assurance but have inherent limitations, meaning they may not prevent all errors - Management believes controls provide reasonable assurance but acknowledge inherent limitations, meaning they may not prevent or detect all errors and fraud[466](index=466&type=chunk) - As of **December 31, 2021**, ACV's disclosure controls and procedures were evaluated as effective at the reasonable assurance level by management, including the CEO and CFO[463](index=463&type=chunk) - The company is in a transition period for Section 404 of the Sarbanes-Oxley Act, thus management's assessment and auditor attestation report on internal control over financial reporting are not included in this 10-K[464](index=464&type=chunk) - Management acknowledges that all control systems have inherent limitations and can only provide reasonable assurance, not absolute, that objectives are met and errors/fraud are prevented or detected[466](index=466&type=chunk) [Item 9B. Other Information](index=96&type=section&id=Item%209B.%20Other%20Information) This item is not applicable and contains no other information [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=96&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable and contains no disclosure regarding foreign jurisdictions that prevent inspections PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=98&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's **2022** Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the **2022** Annual Meeting of Stockholders Proxy Statement[469](index=469&type=chunk) [Item 11. Executive Compensation](index=98&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's **2022** Annual Meeting of Stockholders Proxy Statement - Information on executive compensation is incorporated by reference from the **2022** Annual Meeting of Stockholders Proxy Statement[470](index=470&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=98&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the company's **2022** Proxy Statement - Information on security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from the **2022** Annual Meeting of Stockholders Proxy Statement[471](index=471&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=98&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships and related transactions, and director independence, is incorporated by reference from the company's **2022** Proxy Statement - Information on certain relationships and related transactions, and director independence, is incorporated by reference from the **2022** Annual Meeting of Stockholders Proxy Statement[472](index=472&type=chunk) [Item 14. Principal Accounting Fees and Services](index=98&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's **2022** Annual Meeting of Stockholders Proxy Statement - Information on principal accounting fees and services is incorporated by reference from the **2022** Annual Meeting of Stockholders Proxy Statement[473](index=473&type=chunk) PART IV [Item 15. Exhibits, Financial Statement Schedules](index=99&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the report, including financial statements, schedules, and an extensive Exhibit Index - The section includes an Index to Consolidated Financial Statements, comprising the auditor's report and various financial statements for **2019-2021**[474](index=474&type=chunk) - Financial Statement Schedules are omitted as required information is included in the consolidated financial statements or notes[474](index=474&type=chunk) - An Exhibit Index provides a detailed list of corporate documents, including the Amended and Restated Certificate of Incorporation, Bylaws, Equity Incentive Plans, Lease Agreements, and various certifications[476](index=476&type=chunk)[477](index=477&type=chunk) [Item 16. Form 10-K Summary](index=101&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item indicates that no Form 10-K Summary is provided [SIGNATURES](index=102&type=section&id=SIGNATURES) The report is duly signed on behalf of ACV Auctions Inc. by its Chief Executive Officer and Chief Financial Officer, along with other directors - The Annual Report on Form 10-K is signed by George Chamoun (CEO) and William Zerella (CFO), and other directors, on **February 23, 2022**[481](index=481&type=chunk)[483](index=483&type=chunk) - A Power of Attorney grants George Chamoun and William Zerella authority to sign and file amendments to the report[482](index=482&type=chunk)