ACV Auctions Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the ACV first quarter 2021 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the call will be open for questions. I would now like to turn the call over to Tim Fox, ACV's Vice President of Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for joining ACV's conference call to discuss our second quarter 2021 financial results. With me on the call today are George Shimon, Chief Executive Officer, and Bill Zarella, Chief Financial Officer. Before we get started, please note that today's comments include forward-looking statements, including statements regarding future financial guidance. These forward-looking statements are subject to risks and uncertainties and involve factors that could cause actual results to differ materially from those expressed or implied by such statements. The discussion of the risks and uncertainties related to our business is contained in our quarterly report on Form 10-Q for the three months ended June 30th, 2021, that will be filed with the SEC following this earnings call. Also during this call, we may present both GAAP and non-GAAP financial measures. Reconciliations to the most direct comparable GAAP financial measures are available in our earnings release, which we issued a short time ago. The earnings release is available on the investor relations page of our website and is included as an exhibit in the form 8K furnished to the SEC. Finally, we will be referencing our earnings presentation today, which you can find posted on our IR website. And with that, let me turn the call over to George.

Thanks, Tim. Good afternoon, everyone, and thank you for joining us. Let me begin by thanking the ACV team for continuing to deliver superior value to our growing dealer network, which resulted in record second quarter results. I would also like to welcome our newest team members from Max Digital. We're excited to have you on board and look forward to working together as we deliver best-in-class data and digital technology to the dealer community. Turning to slide three, I'll begin with highlights of our second quarter then share some perspectives on the automotive market. As you can see, our momentum continued in the second quarter, where we transacted $2.1 billion of GMV and over 150,000 vehicles sold on our digital marketplace, both of which were records for ACV. In fact, we transacted more GMV in Q2 than we did during all of 2019. and we delivered very strong revenue of $97 million, representing 117% year-over-year growth. Our strong top-line performance can be attributed to three factors. First, we continue to execute on our proven playbook to grow market share by attracting new dealers into our ecosystem and by capturing additional wallet share within our existing dealership network. Second, Historically high used vehicle values, along with historically low retail inventories, resulted in record quarterly GMV and ARPU, and also drove elevated conversion on our marketplace. And third, adoption of our value-added services accelerated quarter over quarter and was well above our expectations. Simply put, strong execution by the ACV team along with continued customer adoption of ACV's suite of offerings and favorable market conditions, yielded truly impressive financial results. Turning now to the broader market backdrop, we have clearly been operating in unchartered territory over the past year on both the demand side and supply side of the automotive market. And these market dynamics contributed to record financial performance in the second quarter for ACV. As a reminder, in our first quarter earnings call, we provided an outlook for the balance of 2021 that assumed a more normalized environment, particularly around used vehicle values. I think it's fair to say that our timing was off by a few months, but the market is indeed turning. Wholesale vehicle prices, after peaking in early June, started to decline in July and continue to soften. which has been well documented by the industry data providers. The other half of the equation is supply. Last quarter, we also discussed how the lack of new car inventory due to chip shortages and other supply chain headwinds could factor in our 2021 performance in the second half of the year. In Q2, automotive franchise dealers generally had enough supply to support strong retail performance. However, there's an emerging view that the third quarter or perhaps fourth quarter could be the low watermark for retail supply. Of course, these market dynamics are transient. In fact, most industry participants see the new vehicle supply challenge recovering in early 2022, which would be a tailwind for trade-in volumes and benefit our wholesale supply. Ultimately, this is great news for ACB. A more normalized pricing environment allows buyers and sellers expectations to converge. More supply coming into the market feeds the top of the funnel, which in turn drives higher volumes in our marketplace. It will take a few quarters for these market dislocations to settle out. But in the meantime, we continue to execute on our plan and take market share. As Bill will discuss in more detail, we have again increased our outlook for the year. and are now expecting to deliver approximately 60% revenue growth for the full year. For context, this is a full 20 points higher than our outlook at the beginning of 2021. To frame the rest of our discussion today, we will focus on the three top-level elements of our strategy to drive long-term shareholder value, marketplace growth, CAM and product expansion, and operating scale. Let me begin with marketplace growth. Turning to slide five, we transacted 153,000 units in Q2, which was 74% growth year over year and 19% growth quarter over quarter. Due to the impact of COVID-19 on our Q2 2020 financial results, we included a comparison to Q2 2019, which, as you can see, was very strong at 174% growth. As I mentioned earlier, Our unit growth was driven by continued market share gains, as measured by the number of new dealers transacting on our marketplace and by increased wallet share from existing dealers. In fact, we added more sellers to our platform in the first half of 2021 than all of 2020. Unit growth also benefited from very strong customer conversion on our marketplace, which was driven by the low supply environment I spoke about earlier. As expected, we did see conversion begin to normalize in July as market participants began to adjust to declining wholesale values. The record GMV transacted in Q2 was a tailwind for ARPU, reaching a new high. GMV per unit of 13,900 increased around 90% year-over-year, which reflects both higher vehicle values and an increased mix of frontline vehicles transacting on our marketplace. While elevated vehicle values are transient, a sustained mix of frontline vehicles on our marketplace could be a nice long-term tailwind for ARPA. Moving on to slide six, we continue to make great progress towards our territory coverage goal of 160 by year-end. This will be about a 30% increase in our footprint since the beginning of the year and will position us to engage with nearly all the franchise dealers in the U.S. We have continued to attract great talent across our organization with some pretty ambitious 2021 goals. To put this in perspective, we ended Q2 with nearly 1,700 ACV teammates, effectively doubling our size over the past two years. Turning to slide seven, one of our largest teams at ACV is our vehicle inspectors. This team has grown threefold over the past two years, supporting ACV's hyper-growth while delivering highly differentiated services to our dealer network. And with increased territory density, along with new technology investments, we're beginning to scale this business, which is a key element of driving long-term operating leverage in our model. Moving on to slide 8, you can see that our strong unit growth and increased ARPU yielded nearly 100% auction marketplace revenue growth and greater than 270% growth versus Q2 2019. Turning to slide 9. I'd like to highlight one of our offerings contributing to the strong unit growth. In this case, through consumer sourcing. You've been hearing a lot lately about direct consumer sourcing in automotive. ACV was an early mover in the category with our live appraisal offering. We enable our dealers to offer consumers an efficient and effective way to sell their vehicles in ACV's marketplace. We inspect these vehicles at dealer locations or in a consumer's driveway. and deliver a real-time market-based offer based on what dealers are willing to pay. Live appraisals has grown significantly in recent quarters. In Q2, year-over-year unit volume grew more than 150% and accounted for a high single-digit percentage of our total volume. And we plan to expand our offerings to help our dealers compete for consumer-sourced inventories. Let me pivot to our second element of our strategy, to drive long-term shareholder value, TAM and product expansion. Moving to slide 11, I would like to highlight another feature ACV launched that enables highly efficient vehicle sourcing for our dealers through programmatic buying. We have invested in two flavors of programmatic buying. Our buying API enables dealers who have their own technology platform or centralized buying centers to integrate into our real-time APIs to bid on vehicles on our marketplace based on their inventory wishlist, all without human intervention. Our second offering currently in beta is our buying matrix, which enables dealers who don't have their own automatic bidding capabilities to create inventory wishlists within ACV's user experience, including vehicle type, condition, pricing, and location parameters to fill their inventory needs automatically. Marrying these programmatic buying capabilities with our nationwide inspection team enables us to offer both a highly efficient and trusted experience, which we believe will deliver better results for our dealer partners. Turning to slide 12, I would like to remind you about how our marketplace, data, and technology combine to power significant network effects. As more marketplace participants join our platform, we can provide greater liquidity and a better experience, leading to greater scale. This in turn enables us to collect more vehicle and market data, bringing greater efficiency and more products. These reinforcing file effects continuously improve our digital marketplace and improve our data services for our customers. Ultimately, this drives greater liquidity greater scale, and greater efficiency, which is demonstrated in our attractive unit economics. An exciting new addition to our data and technology capabilities is our acquisition of Max Digital. Moving to slide 13, I'd like to touch on some key points about the Max Digital acquisition. Core to ACV's mission is our ability to provide automotive dealers with technology platforms and solutions to compete in a market that is rapidly shifting to digital. Max Digital is a leading provider of SaaS-based automotive data and software solutions that provides dealers with unparalleled capabilities to source and sell wholesale and retail vehicles. Max Digital's pricing guidance, merchandising, and inventory management products create data-driven insights that complement ACV's current data services, resulting in exciting growth synergies. These synergies include cross-selling Max Digital's products into ACV's customer base and driving additional marketplace volume by arming dealers with tools to price and sell their wholesale and retail inventory more effectively. For example, ACV's pricing engine will be tied directly into Max's tools helping dealers more effectively buy and sell used vehicles. This is just one example of many exciting opportunities our teams are exploring, and we look forward to sharing updates going forward. Moving to slide 14, let me wrap up this section with an update on our value-added services. We had an excellent quarter for both ACV Transportation and ACV Capital. Our transport business has expanded significantly over the past year and has been a key enabler of attracting new buyers to the platform. Our expanded carrier partner network and fast cycle times resulted in attach rates of around 45% in Q2, well above the mid-30s attach rates achieved in 2020. The number of transports more than doubled year over year to around 70,000 in Q2. ACB Capital, which is still in its early days, has been gaining a lot of momentum in the markets, Attached rates approached the mid-single digits in Q2, with loan volume improving greater than 30% quarter over quarter. We also saw a material increase in revenue per loan following the launch of our new finance offerings in early June. It should be noted that ACB Transport and ACB Capital are tracking ahead of our milestones in achieving our long-term targets. In summary, as it relates to our TAM and product expansion strategies, I think it's clear that we have created some exciting new avenues of long-term growth for ACV by leveraging our powerful data capabilities, expanding features across our technology platform, and driving adoption across our growing suite of digital solutions. With that, let me hand it over to Bill to take you through our financial results and how we're driving growth at scale.