ACV Auctions(ACVA) - 2023 Q1 - Earnings Call Transcript

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]