ACV Auctions(ACVA) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Q2 revenue was $194 million, representing a 21% year-over-year growth, with 210,000 vehicles sold, marking a 13% increase despite market deceleration [7][19] - Adjusted EBITDA was $19 million, at the midpoint of guidance, with a margin improvement of 520 basis points year-over-year [20] - Non-GAAP net income was also at the midpoint of guidance, with a margin increase of 430 basis points year-over-year [20] Business Line Data and Key Metrics Changes - Auction and assurance revenue accounted for 57% of total revenue, growing 20% year-over-year, reflecting 13% unit growth and an average revenue per unit (ARPU) of $523, which grew 6% [20] - Marketplace services revenue comprised 39% of total revenue, growing 25% year-over-year, driven by record revenue for ACV Transport and ACV Capital [21] - SaaS and data services products made up 4% of total revenue, with revenue approximately flat year-over-year [21] Market Data and Key Metrics Changes - The company observed a 300 basis point year-over-year increase in trade retention rates, indicating dealers are keeping more vehicles for retail purposes [87] - The overall market conditions are expected to be flat to slightly down for the full year, influenced by macroeconomic factors [65][87] Company Strategy and Development Direction - The company is focused on three pillars: growth, innovation, and scale, leveraging AI across its suite of solutions to enhance dealer experiences and optimize pricing [8][14] - The company is expanding its total addressable market (TAM) and competitive moat through innovative product offerings and partnerships, including a new commercial platform [17][28] - The strategy includes maintaining adjusted EBITDA guidance while investing in long-term growth objectives, with a commitment to significant margin expansion [6][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving strong top-line growth of at least 20% year-over-year despite ongoing macroeconomic challenges [5][25] - The company trimmed its 2025 revenue guidance by $5 million at the midpoint, now expecting revenue in the range of $765 million to $775 million [25][102] - Management noted that conversion rates improved in July, indicating a potential recovery in market conditions [24][38] Other Important Information - The company ended Q2 with $305 million in cash and cash equivalents and marketable securities, alongside $187 million of debt [23] - The company is excited about the upcoming launch of its first greenfield location in Houston, Texas, as part of its commercial platform strategy [17][116] Q&A Session Summary Question: Clarification on unit growth headwind - Management clarified that the 500 basis point unit growth headwind was due to lower conversion rates than anticipated, not solely due to higher retention rates [31][34] Question: Competitive dynamics in the marketplace - Management indicated that the slight dip in conversion rates was consistent across the industry, with both macroeconomic factors and company initiatives contributing to the trends [37][39] Question: Progress on pricing engine and auction liquidity - Management reported significant progress in their pricing engine, with guaranteed sales accounting for 15% of units sold by the end of Q2, indicating strong auction liquidity [44][47] Question: Outlook on Amazon partnership and AI solutions - Management stated that while they are investing in partnerships and AI solutions, they do not expect material contributions to revenue this year, focusing instead on long-term benefits [55][57] Question: Organic growth rate excluding acquisitions - Management noted that the recent acquisition contributed about 1% to dealer unit growth in the quarter, with organic growth remaining strong [114] Question: Commercial opportunities and greenfield locations - Management expressed excitement about their greenfield strategy, with plans for additional locations and a focus on organic growth rather than acquisitions [116][120]