ACV Auctions(ACVA) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q2 2024 grew 29% year-over-year to $161 million, exceeding the high-end of guidance [8][21] - Adjusted EBITDA increased 65% sequentially, resulting in a 700 basis point year-over-year improvement in adjusted EBITDA margin [7][21] - Non-GAAP net income was at the midpoint of guidance with a margin increase of approximately 300 basis points year-over-year [22] Business Line Data and Key Metrics Changes - Auction and assurance revenue accounted for 57% of total revenue, growing 33% year-over-year, with unit growth of 22% [23] - Marketplace services revenue represented 38% of total revenue, increasing by 30% year-over-year, driven by strong ACV Transport performance [23] - SaaS and data services products comprised 5% of total revenue, returning to positive growth [24] Market Data and Key Metrics Changes - New retail sales were flat year-over-year due to the CDK outage, while used retail sales declined approximately 5% year-over-year [9][10] - Used vehicle inventory levels have recovered from historical lows but remain about 20% below normal [10] - The trade to wholesale mix showed a slight uptick, indicating dealers are beginning to wholesale more vehicles [11] Company Strategy and Development Direction - The company focuses on three pillars for long-term shareholder value: growth, innovation, and scale [9] - The strategy includes expanding the addressable market and enhancing product offerings, particularly in the commercial sector [39][41] - The company aims to achieve adjusted EBITDA profitability in 2024 while maintaining a disciplined approach to expenses [28][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the automotive market's recovery, citing normalization of new vehicle inventories and increased OEM incentives [10][11] - The company anticipates modest recovery in the dealer wholesale market in the second half of 2024 [28] - Management remains cautious about macroeconomic factors but is encouraged by strong performance in July and early August [27][63] Other Important Information - The company ended Q2 with$ 273 million in cash and cash equivalents, with $110 million of debt on its revolver [26] - The company is piloting a new offering for financing consumer source vehicles and dealer trade-ins [13][57] Q&A Session Summary Question: What signs of progress are seen in the market? - Management noted that new vehicle inventory is normalizing and OEMs are increasing incentives, which are positive signals for the market recovery [34] Question: Can you discuss the commercial opportunity and acquisition landscape? - Management highlighted progress in integrating with AutoIMS and expanding locations for commercial operations, aiming for at least 40 locations [39][41] Question: What was the impact of the CDK outage on revenue or EBITDA? - The estimated impact was over$ 600,000 of EBITDA and over $1 million of revenue, but the company still had a strong quarter [46][47] Question: How does the company view competitive intensity? - Management stated that while there are strong competitors, the competitive nature has not changed significantly, and the company continues to perform well [60] Question: What investments are needed to reach targets? - Management indicated that investments in commercial strategy and M&A will impact incremental EBITDA margins, but they expect to deliver about 40% of every incremental dollar of revenue down to EBITDA [66]