ACV Announces Third Quarter 2023 Results

Delivers Strong Revenue with Adjusted EBITDA Ahead of Guidance
Raises 2023 Guidance

• Third quarter revenue of $119 million, up 13% year over year
• Third quarter GAAP net income (loss) of ($18) million
• Third quarter Adjusted EBITDA of ($4) million
• Updating 2023 guidance:
  • Revenue of $479 million to $483 million, growth of 14% to 15% YoY
  • GAAP net income (loss) of ($75) to ($77) million
  • Adjusted EBITDA of ($20) million to ($22) million
    

BUFFALO, N.Y., Nov. 06, 2023 (GLOBE NEWSWIRE) -- ACV (Nasdaq: ACVA), a leading digital automotive marketplace and data services partner for dealers and commercial clients, today reported results for its third quarter ended September 30, 2023.

“We are very pleased with our strong third quarter results, with revenue at the high-end of our guidance range, along with year-over-year margin expansion, resulting in Adjusted EBITDA exceeding our guidance range,” said George Chamoun, CEO of ACV.

“Dealer wholesale volumes remain constrained relative to historical levels, however new vehicle production and retail sales are improving, which are key factors supporting a wholesale market recovery. Our strong market position and competitive moat resulted in continued market share gains and accelerated revenue growth in the quarter. We launched new technology solutions that expand our addressable market and drive operating efficiency, which we achieved while increasing margins,” continued Chamoun.

“We have again raised full-year guidance reflecting our strong third quarter performance. We believe ACV remains well positioned to deliver sustainable growth as end-markets further recover, while also continuing to scale our business model,” concluded Chamoun.  

Third Quarter 2023 Highlights

• Revenue of $119 million, an increase of 13% year over year
• Marketplace and Service Revenue of $105 million, an increase of 15% year over year
• Marketplace GMV of $2.1 billion, consistent with the third quarter of 2022
• Marketplace Units of 150,057, an increase of 13% year over year
• Adjusted EBITDA of ($4) million, compared to Adjusted EBITDA of ($12) million in the third quarter of 2022
  

Fourth Quarter and Full-Year 2023 Guidance

Based on information as of today, ACV is providing the following guidance:

• Fourth Quarter of 2023:
  • Total revenue of $116 to $120 million, an increase of 18% to 23% year over year
  • GAAP net income (loss) of ($24) to ($26) million
  • Non-GAAP net income (loss) of ($8) to ($10) million
  • Adjusted EBITDA of ($7) to ($9) million
• Full-Year 2023:
  • Total revenue of $479 to $483 million, an increase of 14% to 15% year over year
    
  • GAAP net income (loss) of ($75) to ($77) million
  • Non-GAAP net income (loss) of ($17) to ($19) million
  • Adjusted EBITDA of ($20) to ($22) million
    

Our financial guidance includes the following assumptions:

• Vehicle supply remains lower than historical levels, but we believe it will improve as new vehicle production and inventory continue to recover.  
• We are expecting conversion rates and wholesale price depreciation to follow normal seasonal patterns for the balance of the year.
• Fourth quarter non-GAAP net income (loss) guidance excludes approximately $15 million of stock-based compensation expense and approximately $2 million of intangible amortization.
• Full-year non-GAAP net income (loss) guidance excludes approximately $51 million of stock-based compensation expense and $6 million of intangible amortization.

ACV’s Third Quarter Results Conference Call

ACV will host a conference call and live webcast today, November 6, 2023, at 5:00 p.m. ET to discuss the financial results. To access the live conference call, please pre-register using this link. Registrants will receive confirmation with dial-in details. A live webcast and replay of the call will be available on the Company’s investor relations website at https://investors.acvauto.com/. Participants are encouraged to join the webcast unless asking a question.

About ACV Auctions

ACV is on a mission to transform the automotive industry by building the most trusted and efficient digital marketplace and data solutions for sourcing, selling and managing used vehicles with transparency and comprehensive insights that were once unimaginable. ACV offerings include ACV Auctions, ACV Transportation, ACV Capital, MAX Digital, True360, and ClearCar.

For more information about ACV, visit www.acvauto.com.

Information About Non-GAAP Financial Measures

ACV provides supplemental non-GAAP financial measures to its financial results. We use these non-GAAP financial measures, and we believe that they assist our investors to make period-to-period comparisons of our operating performance because they provide a view of our operating results without items that are not, in our view, indicative of our operating results. These non-GAAP financial measures should not be construed as an alternative to GAAP results as the items excluded from the non-GAAP financial measures often have a material impact on our operating results, certain of those items are recurring, and others often recur. Management uses, and investors should consider, our non-GAAP financial measures only in conjunction with our GAAP results.

Non-GAAP Financial Measures

Adjusted EBITDA is a financial measure that is not presented in accordance with GAAP. We believe that Adjusted EBITDA, when taken together with our financial results presented in accordance with GAAP, provides meaningful supplemental information regarding our operating performance and facilitates internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of Adjusted EBITDA is helpful to our investors as it is a measure used by management in assessing the health of our business, determining incentive compensation and evaluating our operating performance, as well as for internal planning and forecasting purposes.

We define Adjusted EBITDA as net loss, adjusted to exclude: depreciation and amortization; stock-based compensation expense; interest (income) expense; provision for income taxes; other (income) expense, net; and other one-time non-recurring items of a material nature, when applicable, such as acquisition-related and restructuring expenses.

Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Some of the limitations include that (1) it does not properly reflect capital commitments to be paid in the future; (2) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures; (3) it does not consider the impact of stock-based compensation expense, (4) it does not reflect other non-operating income or expenses, including interest income and expense, (5) it does not consider the impact of any contingent consideration liability valuation adjustments, (6) it does not reflect tax payments that may represent a reduction in cash available to us, and (7) it does not reflect other one-time, non-recurring items of a material nature, when applicable, such as acquisition-related and restructuring expenses. In addition, our use of Adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate Adjusted EBITDA in the same manner, limiting its usefulness as a comparative measure.

Non-GAAP net income (loss), a financial measure that is not presented in accordance with GAAP, provides investors with additional useful information to measure operating performance and current and future liquidity when taken together with our financial results presented in accordance with GAAP. By providing this information, we believe management and the users of the financial statements are better able to understand the financial results of what we consider to be our organic, continuing operations.

We define non-GAAP net income (loss) as net income (loss), adjusted to exclude: stock-based compensation expense, amortization of acquired intangible assets, and other one-time, non-recurring items of a material nature, when applicable, such as acquisition-related and restructuring expenses.

In the calculation of non-GAAP net income (loss), we exclude stock-based compensation expense because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact our non-cash expense. We believe that providing non-GAAP financial measures that exclude stock-based compensation expense allows for more meaningful comparisons between our operating results from period to period.

We exclude amortization of acquired intangible assets from the calculation of non-GAAP net income (loss). We believe that excluding the impact of amortization of acquired intangible assets allows for more meaningful comparisons between operating results from period to period as the underlying intangible assets are valued at the time of acquisition and are amortized over several years after the acquisition.

We exclude contingent consideration liability valuation adjustments associated with the purchase consideration of transactions accounted for as business combinations. We also exclude certain other one-time, non-recurring items of a material nature, when applicable, such as acquisition-related and restructuring expenses, because we do not consider such amounts to be part of our ongoing operations nor are they comparable to prior period nor predictive of future results.

Non-GAAP net income (loss) is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Some of these limitations include that: (1) it does not consider the impact of stock-based compensation expense; (2) although amortization is a non-cash charge, the underlying assets may need to be replaced and non-GAAP net income (loss) does not reflect these capital expenditures; (3) it does not consider the impact of any contingent consideration liability valuation adjustments; and (4) it does not consider the impact of other one-time charges, such as acquisition-related and restructuring expenses, which could be material to the results of our operations. In addition, our use of non-GAAP net income (loss) may not be comparable to similarly titled measures of other companies because they may not calculate non-GAAP net income (loss) in the same manner, limiting its usefulness as a comparative measure.

Information About Operating and Financial Metrics

We regularly monitor the following operating and financial metrics in order to measure our current performance and estimate our future performance. Our key operating and financial metrics may be calculated in a manner different than similar business metrics used by other companies.

Operating and Financial Metrics

Marketplace GMV - Marketplace GMV is primarily driven by the volume and dollar value of Marketplace Units transacted on our digital marketplace. We believe that Marketplace GMV acts as an indicator of the success of our marketplace, signaling satisfaction of dealers and buyers on our marketplace, and the health, scale, and growth of our business. We define Marketplace GMV as the total dollar value of vehicles transacted through our digital marketplace within the applicable period, excluding any auction and ancillary fees.

Marketplace Units - Marketplace Units is a key indicator of our potential for growth in Marketplace GMV and revenue. It demonstrates the overall engagement of our customers on the ACV platform, the vibrancy of our digital marketplace and our market share of wholesale transactions in the United States. We define Marketplace Units as the number of vehicles transacted on our marketplace within the applicable period. Marketplace Units transacted includes any vehicle that successfully reaches sold status, even if the auction is subsequently unwound, meaning the buyer or seller does not complete the transaction. These instances have been immaterial to date. Marketplace Units excludes vehicles that were inspected by ACV, but not sold on our digital marketplace. Marketplace Units have increased over time as we have expanded our territory coverage, added new dealer partners and increased our share of wholesale transactions from existing customers.

Forward-Looking Statements

This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements concerning our financial guidance for the second quarter of 2023 and the full year of 2023. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. You should not rely on forward-looking statements as predictions of future events.

The forward-looking statements contained in this presentation are based on ACV’s current assumptions, expectations and beliefs and are subject to substantial risks, uncertainties and changes in circumstances that may cause ACV’s actual results, performance or achievements to differ materially from those expressed or implied in any forward-looking statement. These risks and uncertainties include, but are not limited to: (1) our history of operating losses; (2) our limited operating history; (3) our ability to effectively manage our growth; (4) our ability to grow the number of participants on our platform; (5) general market, political, economic, and business conditions; (6) our ability to acquire new customers and successfully retain existing customers; (7) our ability to effectively develop and expand our sales and marketing capabilities; (8) breaches in our security measures, unauthorized access to our platform, our data, or our customers’ or other users’ personal data; (9) risk of interruptions or performance problems associated with our products and platform capabilities; (10) our ability to adapt and respond to rapidly changing technology or customer needs; (11) our ability to compete effectively with existing competitors and new market entrants; (12) our ability to comply or remain in compliance with laws and regulations that currently apply or become applicable to our business in the United States and other jurisdictions where we elect to do business; (13) the impact that economic conditions could have on our or our customers’ businesses, financial condition and results of operations; and (14) the impact of such economic conditions in the wholesale dealer market included in our guidance for the fourth quarter of 2023 and full year 2023, and the related impact on the performance of our marketplace and our operating expenses, stock-based compensation expense and intangible amortization. These and other risks and uncertainties are more fully described in our filings with the Securities and Exchange Commission (“SEC”), including in the section entitled “Risk Factors” in our Form 10-K for the year ended December 31, 2022, filed with the SEC on March 1, 2023 and quarterly reports on Form 10-Q. Additional information will be made available in other filings and reports that we may file from time to time with the SEC. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, we cannot guarantee future results, levels of activity, performance, achievements, or events and circumstances reflected in the forward-looking statements will occur. The forward-looking statements made in this presentation relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this presentation to reflect events or circumstances after the date of this presentation or to reflect new information or the occurrence of unanticipated events, except as required by law.

Investor Contact:
Tim Fox
tfox@acvauctions.com

Media Contact:
Maura Duggan
mduggan@acvauctions.com

ACV AUCTIONS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data)
	Three months ended September 30,								Nine months ended September 30,
	2023				2022				2023				2022
Revenue:
Marketplace and service revenue	$	104,537			$	90,852			$	318,760			$	276,951
Customer assurance revenue		14,477				14,567				44,097				46,605
Total revenue		119,014				105,419				362,857				323,556
Operating expenses:
Marketplace and service cost of revenue (excluding depreciation & amortization)		47,928				46,255				145,732				143,400
Customer assurance cost of revenue (excluding depreciation & amortization)		12,464				12,221				38,081				40,432
Operations and technology		35,132				34,328				106,180				103,877
Selling, general, and administrative		40,797				34,701				123,689				106,897
Depreciation and amortization		4,980				3,004				12,086				7,868
Total operating expenses		141,301				130,509				425,768				402,474
Loss from operations		(22,287	)			(25,090	)			(62,911	)			(78,918	)
Other income (expense):
Interest income		4,489				1,936				12,505				2,618
Interest expense		(439	)			(235	)			(1,205	)			(683	)
Total other income (expense)		4,050				1,701				11,300				1,935
Loss before income taxes		(18,237	)			(23,389	)			(51,611	)			(76,983	)
(Benefit from) Provision for income taxes		1				279				409				695
Net loss	$	(18,238	)		$	(23,668	)		$	(52,020	)		$	(77,678	)
Weighted-average shares - basic and diluted		160,427,987				157,264,153				159,541,286				156,747,507
Net loss per share - basic and diluted	$	(0.11	)		$	(0.15	)		$	(0.33	)		$	(0.50	)

ACV AUCTIONS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except share data)
		September 30, 2023				December 31, 2022
Assets
Current Assets :
Cash and cash equivalents		$	226,236			$	280,752
Marketable securities			224,010				215,926
Trade receivables (net of allowance of $3,356 and $4,860)			168,796				168,732
Finance receivables (net of allowance of $2,673 and $2,275)			105,832				78,047
Other current assets			16,859				11,317
Total current assets			741,733				754,774
Property and equipment (net of accumulated depreciation of $4,519 and $6,986)			5,167				5,710
Goodwill			117,830				91,755
Acquired intangible assets (net of amortization of $15,686 and $11,990)			21,457				19,291
Capitalized software (net of amortization of $12,797 and $6,930)			52,745				36,992
Other assets			20,152				6,400
Total assets			959,084				914,922
Liabilities and Stockholders' Equity
Current Liabilities :
Accounts payable			338,137				323,661
Accrued payroll			12,369				10,052
Accrued other liabilities			16,861				14,504
Total current liabilities			367,367				348,217
Long-term debt			105,000				75,500
Other long-term liabilities			19,619				5,481
Total liabilities			491,986				429,198
Commitments and Contingencies
Stockholders' Equity :
Preferred Stock; $0.001 par value; 20,000,000 shares authorized; 0 and 0 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively			-				-
Common Stock - Class A; $0.001 par value; 2,000,000,000 shares authorized; 135,757,008 and 121,214,275 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively			136				121
Common Stock - Class B; $0.001 par value; 160,000,000 shares authorized;    25,210,995 and 37,241,952 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively			25				37
Additional paid-in capital			869,962				836,695
Accumulated deficit			(399,374	)			(347,354	)
Accumulated other comprehensive loss			(3,651	)			(3,775	)
Total stockholders' equity			467,098				485,724
Total liabilities and stockholders' equity		$	959,084			$	914,922

ACV AUCTIONS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
		Nine months ended September 30,
		2023				2022
Cash Flows from Operating Activities
Net income (loss)		$	(52,020	)		$	(77,678	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization			12,407				8,210
Stock-based compensation expense, net of amounts capitalized			36,262				25,887
Provision for bad debt			8,530				7,101
Other non-cash, net			(772	)			325
Changes in operating assets and liabilities, net of effects from purchases of businesses:
Trade receivables			10,990				64,326
Other operating assets			(5,266	)			(4,385	)
Accounts payable			(2,543	)			(98,385	)
Other operating liabilities			1,023				(710	)
Net cash provided by (used in) operating activities			8,611				(75,309	)
Cash Flows from Investing Activities
Net increase in finance receivables			(30,991	)			(32,131	)
Purchases of property and equipment			(1,518	)			(2,652	)
Capitalization of software costs			(19,319	)			(14,145	)
Purchases of marketable securities			(116,036	)			(217,706	)
Maturities and redemptions of marketable securities			107,690				21,216
Sales of marketable securities			2,649				-
Acquisition of businesses (net of cash acquired)			(28,649	)			(18,913	)
Net cash provided by (used in) investing activities			(86,174	)			(264,331	)
Cash Flows from Financing Activities
Proceeds from long term debt			305,000				200,000
Payments towards long term debt			(275,500	)			(130,000	)
Proceeds from exercise of stock options			3,576				999
Payment of RSU tax withholdings in exchange for common shares surrendered by RSU holders			(11,280	)			(3,475	)
Proceeds from employee stock purchase plan			1,330				930
Other financing activities			(74	)			-
Net cash provided by (used in) financing activities			23,052				68,454
Effect of exchange rate changes on cash, cash equivalents, and restricted cash			(5	)			(33	)
Net increase (decrease) in cash, cash equivalents, and restricted cash			(54,516	)			(271,219	)
Cash, cash equivalents, and restricted cash, beginning of period			280,752				565,994
Cash, cash equivalents, and restricted cash, end of period		$	226,236			$	294,775

The following table presents a reconciliation of non-GAAP net income (loss) to net income (loss), the most directly comparable financial measure stated in accordance with GAAP, for the periods presented:

	Three months ended September 30,								Nine months ended September 30,
	2023				2022				2023				2022
Net income (loss)	$	(18,238	)		$	(23,668	)		$	(52,020	)		$	(77,678	)
Stock-based compensation		12,855				9,594				36,262				25,887
Amortization of acquired intangible assets		1,301				1,189				3,742				3,718
Amortization of capitalized stock-based compensation		509				147				1,034				310
Acquisition-related costs		88				-				611				-
Contingent losses (gains)		-				-				-				200
Other		378				469				378				469
Non-GAAP Net income (loss)	$	(3,107	)		$	(12,269	)		$	(9,993	)		$	(47,094	)

The following table presents a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable financial measure stated in accordance with GAAP, for the periods presented:

	Three months ended September 30,								Nine months ended September 30,
	2023				2022				2023				2022
Adjusted EBITDA Reconciliation
Net income (loss)	$	(18,238	)		$	(23,668	)		$	(52,020	)		$	(77,678	)
Depreciation and amortization		5,087				3,110				12,407				8,211
Stock-based compensation		12,855				9,594				36,262				25,887
Interest (income) expense		(4,050	)			(1,701	)			(11,300	)			(1,935	)
Provision for income taxes		1				279				409				695
Acquisition-related costs		88				-				611				-
Other (income) expense, net		564				542				782				941
Adjusted EBITDA	$	(3,693	)		$	(11,844	)		$	(12,849	)		$	(43,879	)