ACV Auctions Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the ACV fourth quarter and full year 2021 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 for Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for joining ACV's conference call to discuss our fourth quarter and full year 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 uncertainty. and involve factors that could cause actual results to differ materially from those expressed or implied by such statements. A discussion of the risks and uncertainties related to our business can be found in our SEC filings and in today's press release, both of which can be found on our investor relations website. During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is provided in today's earnings material, which can also be found on our investor relations 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 reflecting on ACV's first calendar year as a public company, which was capped off by strong performance in the fourth quarter. In 2021, we transacted nearly $8 billion of GMV on our marketplace. which is 140% year-over-year growth, and pretty incredible when you consider ACV launched just six years ago. As I will discuss in more detail later, the automotive industry continues to experience competing cross-currents with increased vehicle values while also resulting in less ecosystem supply. Despite these cross-currents, we delivered over $350 million of revenue and over 70% growth, well above the targets we provided during our IPO last March. This was accomplished by having the broadest and most differentiated digital solutions in the market that are being delivered by the best team, enabling ACV to expand our dealer network and gain market share. As Bill will cover in more detail later, our plan for 2022 is to continue investing in driving strong revenue growth. further differentiating our digital solutions, and scaling our operations, all while delivering an adjusted EBITDA margin 600 basis points higher than our IPO model. We remain committed to achieving adjusted EBITDA breakeven exiting 2023, and we are excited to share details on our 2026 financial targets at our Analyst Day on March 1st. With that, let me turn to fourth quarter highlights on slide three. As you can see, our market momentum continued in the fourth quarter, where we transacted $2.5 billion of GMV, growth of nearly 170% year over year. We sold 139,000 vehicles on our digital marketplace, a 35% increase year over year, and an increase of over 80% on a two-year basis. We delivered a record $100 million of revenue in the quarter, an important milestone for the ACV team, which was 86% year-over-year growth. Our revenue outperformance can be attributed to three factors. First, we executed in our playbook to grow market share by attracting new dealers into our ecosystem and expanding dealer wallet share. Second, ARPU benefited from a higher mix of newer vehicles and strong used vehicle prices. And third, high attach rates of our value-added services. Overall, we're very pleased with strong execution by the ACV team and continued customer adoption of our growing suite of services. 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, TAM and product expansion, and operating scale. Let me begin with marketplace growth. On slide five, let's cover more details on the quarter. We transacted 139,000 units in Q4, which was 35% growth year-over-year, and an 84% when compared with Q4 19. For the full year, we transacted over 560,000 units, representing 43% growth year over year and 132% growth compared to 2019. The positive market trends I referenced earlier related to vehicle values helped contribute to fourth quarter GMV growth of 170% year over year. Consistent with trends during the first three quarters of 2021, vehicle mix on our marketplace moved up market in Q4. In fact, since last year, the percentage of vehicles valued over $15,000 doubled to nearly 40% in 2021. While elevated vehicle values may normalize over time, we believe this higher mix of newer vehicles in ACV's marketplace is sustainable, resulting in long-term tailwind for ARPU. Moving to slide six, we thought it would be helpful again this quarter to provide some context on the dealer wholesale market in relation to the broader automotive market. As I mentioned earlier, this is a case of competing cross-currents. The two charts in the top row highlight trends in the used vehicle market. Sales of used vehicles remain elevated, nearly 70% above pre-COVID levels, reflecting strong consumer demand and strong retail values. The chart on the right shows how this demand and environment translated to historically high prices for wholesale vehicles. Strong demand and pricing have been nice tailwinds for ACV, which you saw reflected in record-level ARPU last year. The two charts on the bottom highlight the trends for new vehicles, which continue to paint a very different picture. The semiconductor chip shortages and other automotive supply chain issues resulted in a steep decline in new vehicle sales. The latest SAR reading of around 13 million units is down 30% from pre-COVID levels. In days, supply of light vehicles at franchise dealerships contracted to around 22 days versus historical levels in the 60s. As a reminder, this supply picture matters to ACV because consumer trade-ins for new vehicles are a critical input into the dealer wholesale market. historically representing a significant portion of the annual supply. With new inventories at such acute levels, the volume of trades entering the wholesale market has declined, resulting in a temporary contraction in the market we serve. We continue to believe it's temporary because the chip supply picture will no doubt improve in the coming quarters. And given the investments we're making in both territory expansion and our differentiated product suite, ACV is very well positioned to benefit from the resulting recovery in the wholesale market. Turning to slide seven. Let me put a finer point on the supply dynamics in the market. Based on our proprietary analysis, we estimate that the U.S. dealer wholesale market contracted 12% quarter over quarter in Q4. and contracted about 5% from Q4 2020. Despite these transient supply headwinds, we continue to gain market share and attract new dealers to our marketplace. Given our 35% year-over-year unit growth in Q4 2021 and our estimate that the market contracted 5%, this implies ACV gained 40% share year-over-year. For all of 2021, we believe that the US dealer wholesale market grew modestly at about 5%, with the growth benefiting from a strong first half compared to 2020, where COVID had a significant impact. As such, we believe that ACV gained 38% market share in 2021. The takeaway here is that while our industry is facing temporary supply constraints, ACV is gaining market share, attracting new dealers at an impressive pace, and delivering strong revenue growth. Next on slide eight, we are pleased with the progress our ACV team made on territory expansion, and we are now positioned to engage with nearly all franchise dealers in the U.S. Following each territory launch, we execute our proven go-to-market playbook by growing our inspection team, attracting dealers to the marketplace, and creating the powerful network effect that we've proven across the country. Moving on to slide nine. Auction marketplace revenue growth was 73% year-over-year, and nearly 200% growth versus Q4 2019. Full-year auction marketplace revenue of $164 million was up 66% year-over-year, driven primarily by 43% unit growth. and to a lesser extent, higher ARPU during the year. Turning now to slide 10. Over the last few quarters, I've highlighted our consumer sourcing offering, live appraisal, that contributed to our strong unit growth in 2021. We were an early mover in this category, enabling our dealers to offer their customers a unique and effective way to sell their vehicles on ACV's marketplace. Live appraisals gained significant market traction, delivering over $200 million of GMV in Q4 alone. Live appraisal is being leveraged by dealers across the country, with sales in 48 states last year. We continue to invest in this category and look forward to detailing our vision to further penetrate this large market opportunity at our upcoming analyst. Let me turn to the second element of our strategy, to drive long-term shareholder value, TAM and product expansion. Moving to slide 12, let's touch on two offerings that are creating incremental growth levers, starting first with programmatic buying. We are very excited about the market traction of our programmatic buying offerings. It's still early days. But this innovative way of enabling dealers to engage with our marketplace already contributed to a mid single-digit percentage of units in Q4. Our buying API is live with dealers who have technology platforms that integrate directly with ACV's real-time APIs to generate bids in our marketplace. We're engaging with a diverse set of customers that include large dealers, rental car companies, and a leading specialty auto parts supplier. In addition, our new programmatic buying user experience launched in Q4. This offering enables the rest of our dealer partners to leverage programmatic buying on our marketplace by creating inventory wish lists to automatically source their inventory needs. These programmatic buying capabilities, together with our nationwide inspection team, enables ACV to offer a highly efficient and trusted experience which we believe delivers superior results for our dealer partners. Moving to our private marketplace offering. Recall that this private auction platform leverages ACV's open marketplace technology to enable large dealer groups to optimize intra-group trades. Private Marketplaces provides ACV with another avenue to engage with the largest dealer groups in the country. who collectively own about 6,000 rooftops across the U.S. We are seeing strong initial demand and look forward to updating you on the adoption of private marketplaces in the coming quarters. Moving to slide 13, we are very excited about the market traction we're seeing with our max digital SaaS and data offerings. MaxDigital's pricing guidance, merchandising, and inventory management products are a natural complement to ACV's data services that together create exciting growth synergies. In fact, the MaxDigital pipeline has grown by over 150% since the acquisition closed last July. We look forward to sharing updates on ACV's broader vehicle intelligence strategy at our Analyst Day. Turning to slide 14, let me wrap up this section with an update on our value-added services. We are making significant investments in the technology and resources to scale ACV transportation and ACV capital. These investments are driving strong top-line growth by delivering highly differentiated services to the market, while also creating efficiencies for both our partners and for ACV. ACV Transport continues to be a key enabler of attracting new buyers to the platform. Our growing carrier partner network and fast cycle times resulted in attach rates exceeding 50% in Q4. This is a full year ahead of our original plans. A huge shout out to the ACV Transportation team for achieving this milestone in such short order. ACV Capital continues to gain traction in the market And like our transport business, it's tracking ahead of the milestones built into our long-term targets. Capital attach rates reach the mid-single digits in Q4, with 200% loan volume growth year over year. The new finance offerings we launched last June are translating into strong revenue per loan growth. We continue to be excited about the revenue and margin opportunities for our capital business as this business scales in the coming years. With that, let me hand it over to Bill to take you through our financial results and how we're driving growth at scale.