ACV Auctions(US:ACVA)2023-08-06 16:00Financial Performance - For the three and six months ended June 30, 2023, the company sold 153,148 and 304,711 Marketplace Units, resulting in a Marketplace Gross Merchandise Value (GMV) of $2.5 billion and $4.9 billion, representing a decrease of 10% and 5% from the same periods in 2022[82]. - Revenue for the three and six months ended June 30, 2023, was $124.2 million and $243.8 million, reflecting an increase of 8% and 12% respectively compared to the same periods in 2022[82]. - The company reported a net loss of $15.6 million and $33.8 million for the three and six months ended June 30, 2023, compared to a net loss of $24.5 million and $54.0 million for the same periods in 2022[82]. - Adjusted EBITDA for the three and six months ended June 30, 2023, was $(3.5) million and $(9.2) million, an improvement from $(14.1) million and $(32.0) million for the same periods in 2022[82]. - Total revenue for the first half of 2023 reached $243,843,000, compared to $218,137,000 in the same period of 2022[120]. - Marketplace and service revenue for the three months ended June 30, 2023, increased to $109.36 million from $97.75 million, representing a 12% year-over-year growth[124]. - Marketplace and service revenue for the six months ended June 30, 2023, increased to $214.2 million from $186.1 million, a 15% increase year-over-year[139]. Operating Expenses - Operating expenses for Q2 2023 totaled $144,007,000, up from $139,811,000 in Q2 2022[120]. - The company expects operating expenses to increase in absolute dollars as it scales its business and introduces new products and services[112]. - Selling, general, and administrative expenses rose to $41.18 million from $36.14 million, an increase of 14% driven by higher personnel-related costs[131]. - Selling, general, and administrative expenses increased to $82.9 million from $72.2 million, a 15% increase, driven by higher personnel-related costs[146]. Cash Flow and Liquidity - Cash and cash equivalents as of June 30, 2023, totaled $271.9 million, with marketable securities amounting to $228.4 million, indicating sufficient liquidity for at least the next 12 months[164]. - Net cash provided by operating activities for the six months ended June 30, 2023, was $23.4 million, a significant improvement compared to a net cash used of $(72.6) million in the same period of 2022[176]. - The company experienced a decrease in accounts receivable by $27.1 million during the six months ended June 30, 2023, contributing to improved cash flow[176]. - As of June 30, 2023, the company had cash and cash equivalents totaling $271.9 million, consisting of interest-bearing investments with maturities of three months or less[187]. Interest and Debt - Interest income for Q2 2023 was $4,720,000, significantly higher than $638,000 in Q2 2022[120]. - Interest income surged to $8.0 million from $0.7 million, a 1075% increase, due to higher average balances of marketable securities and interest rates[149]. - Interest expense increased to $(0.45) million from $(0.24) million, reflecting an 89% rise due to increased borrowings[135]. - Interest expense increased to $0.8 million from $0.4 million, a 71% rise, attributed to increased borrowings[149]. - As of June 30, 2023, $105.0 million was drawn under the 2021 Revolver, with an outstanding letter of credit of $1.6 million[171]. - The 2021 Revolver has a maturity date of August 24, 2026, and includes financial covenants requiring maintenance of minimum liquidity levels[170]. Market Strategy and Growth - The company aims to increase Marketplace Units, which are critical for revenue growth, by enhancing the transparency and efficiency of its digital marketplace[92]. - The company plans to grow its share of wholesale transactions from existing customers, focusing on increasing engagement and spend on its platform[93]. - The company intends to add new Marketplace Buyers and Sellers to drive liquidity and vehicle selection, thereby improving marketplace attractiveness[94]. - The company is investing in growth, anticipating increased operating expenses to support sales, marketing, and technology development[100]. - The demand for used vehicles remains strong, which has positively impacted the company's growth in recent years[101]. - The company is focused on driving customer adoption of existing value-added and data services, as well as introducing new products to enhance its platform[99]. Revenue Breakdown - Marketplace and service revenue for Q2 2023 was $109,360,000, representing 88% of total revenue, an increase from $97,752,000 (85%) in Q2 2022[120]. - Customer assurance revenue for Q2 2023 was $14,857,000, accounting for 12% of total revenue, down from $17,320,000 (15%) in Q2 2022[120]. - Customer assurance revenue decreased to $14.86 million from $17.32 million, a decline of 14% primarily due to lower Go Green assurance revenue[126]. - Total auction marketplace revenue increased to $54.6 million from $48.1 million, contributing to overall revenue growth[124]. - Auction marketplace revenue rose to $108.5 million from $92.0 million, while other marketplace revenue increased to $89.2 million from $77.8 million[139]. - Customer assurance revenue decreased to $29.6 million from $32.0 million, an 8% decline, primarily due to a decrease in Go Green assurance revenue[141]. Cost Management - Marketplace and service cost of revenue for Q2 2023 was $50,229,000, which is 40% of total revenue, compared to 43% in Q2 2022[120]. - The percentage of marketplace and service costs of revenue decreased to 40% from 43% year-over-year, indicating improved cost management[127]. - Marketplace and service cost of revenue (excluding depreciation & amortization) was $50.23 million, up from $49.89 million, reflecting a 1% increase[127]. - Marketplace and service cost of revenue for the six months ended June 30, 2023, was $97.8 million, a slight increase of 1% from $97.1 million in the prior year[142]. Depreciation and Amortization - Depreciation and amortization increased to $3.82 million from $2.48 million, a significant rise of 54% due to amortization of internal-use software costs[132]. - Depreciation and amortization expenses rose to $7.1 million from $4.9 million, a 46% increase, primarily due to amortization of internal-use software costs[147]. Taxation - The effective tax rate for the six months ended June 30, 2023, was approximately 1%, consistent with the prior year[150]. COVID-19 and Supply Chain Impact - The company continues to monitor the impact of COVID-19 and supply chain issues on its operations and market conditions[106].