ACV Auctions Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the ACV first quarter conference call. During today's presentation, all parties will be in an 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 Investment Relations. Please go ahead.

Good afternoon, everyone, and thank you for joining ACB's conference call to discuss our first quarter 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. A discussion of the risks and uncertainties related to our business can be found in our SEC filings and in today's press release, which can be found on our investor relations website. During this call, we will discuss both GAAP and non-GAAP financial measures. The reconciliation of GAAP to non-GAAP financial measures is provided in today's earnings materials, 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. Thank you for joining us. ACV delivered solid top-line results above our guidance range, despite the persistent supply constraints weighing on the automotive industry and softening retail demand for used vehicles. We delivered EBITDA within our guidance range while continuing to invest in key growth expansion and technology initiatives. We continue to broaden and deepen our relationships with our dealer partners who underpin our long-term growth opportunity. Automotive dealers face the macro challenges I referenced earlier, but they have proven to be resilient and are a critical part of the automotive ecosystem. Dealers have also embraced digital transformation NACE CV is increasingly well-positioned to enable them to improve their ability to source, manage, and sell vehicles with greater transparency and efficiency. With that, let me turn to the first quarter highlights on slide four. Our market momentum continued in the first quarter with a revenue of 103 million, growth 49% year-over-year. We transacted $2.4 billion of GMV growth of 83% year-over-year. We sold 140,000 vehicles in our digital marketplace, a 9% increase year-over-year, and an increase of 70% on a two-year basis. Overall, we are very pleased with strong execution by the ACV team and continued customer adoption of our growing suite of services. Turning to slide five, to frame the rest of our discussion today, we will focus on the three pillars of our strategy to drive long-term shareholder value, growth, innovation, and scale. I will begin with growth. Moving to slide seven, given the continued headwinds facing the automotive industry, we are providing context on the dealer wholesale market in relation to the broader automotive retail market. First, to understand the demand side of our market, we provided data overall used car transactions, and wholesale pricing trends. As you can see in the chart on the left, retail sales of used vehicles in Q1 experienced a seasonal, sequential improvement over Q4, but was down about 10% year-over-year versus very strong performance in Q1 2021. Consumer demand for used vehicles is a key driver of wholesale demand and supply. because consumers purchasing a used vehicle typically have a trade-in. The chart on the right illustrates how the modified consumer demand in Q1 impacted wholesale prices. After experiencing historically high wholesale prices throughout 2021, prices declined during the first quarter, which does not mirror typical seasonal historical patterns. As I will describe in more detail later, this price deflation resulted in compression to conversion rates across the industry, as dealers increasingly became more price sensitive while buying vehicles in the wholesale market. Now, turning to slide eight, let's look at the supply picture. New vehicle sales remained well below historical averages and were down about 16% year-over-year in Q1 due to the ongoing supply challenges impacting vehicle production. This is reflected in the chart on the right, which shows that supply of light vehicles at franchise dealerships remains historically low. New vehicle supply is important to our business because consumer trade-ins for new purchases are a significant input into the wholesale market. With new vehicle inventories at these acute levels, the volume of trades entering the wholesale market has declined, resulting in a near-term contraction in the market we serve. While the exact timing for supply to return to historic metrics may be unclear, what is clear is that our ongoing investment in growth and differentiated products positions ACV to benefit from the resulting recovery in the wholesale market. So, what gives us confidence in our strong market position? On slide nine, we provided additional insight into our business. The chart in the left shows quarterly listings in our marketplace. Think of listings as a measure of dealer growth and marketplace adoption. As you can see, listings have grown consistently quarter over quarter, with a notable exception at the beginning of the pandemic, Q2 2020. Listings growth moderated in the second half of 21, and supply pressure has mounted in the industry. However, Q1 2022, listings recovered nicely, growing 37% year over year. reflecting strong execution on territory expansion, dealer penetration, and wallet share growth, including higher price segment of vehicles. This is also a reflection of the changing sentiment, as dealers are increasingly becoming more willing to wholesale vehicles. In the figure on the right, we've provided the quarterly variance of the marketplace conversion. There are three key takeaways here. First, pre-COVID, you can see that conversion rates in our marketplace were quite consistent, varying just a few percentage points from the average. Second, once COVID hit, conversion rates significantly increased, driven by the supply, demand, wholesale pricing factors I covered earlier. And third, as I mentioned, vehicle prices began to decline in Q1-22, resulting in incrementally cautious buying behavior and further softening of conversion rates back to normal pre-COVID levels. For context, the year-over-year change in conversion rates in Q1-22 was a 30,000-unit headwind versus Q1-21. We believe conversion rates on our platform will increase in the future as we continue to invest in our data products to help dealers manage price expectations. Obviously, the historically high conversion rates we in the industry experienced last year benefited the macro environment. but it's important context when assessing our year-over-year unit growth. Turning to slide 10, you can see that units grew 9% year-over-year, compared to 55% unit growth Q1-22, and 70% unit growth on a two-year basis. And despite softening wholesale prices, GMV grew 83% to $2.4 billion, resulting from a broader mix of vehicles on our marketplace. Moving on to slide 11. Based on our internal analysis, we estimate that the U.S. wholesale TAM from retail dealers was flattish quarter over quarter, but contracted around 18% year over year. So despite ongoing industry headwinds, we continue to access it, gain market share, and attract new dealers to our marketplace. Given our 9% year over year unit growth in Q1, and an estimated market contraction of 18 percent. This would imply ACV grew market share by 27 percent year-over-year. Next, I would like to wrap up the growth section with highlights on our value-added services. We continue to invest in the technology and resources that 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 efficiency for both our partners and for ACV. On slide 12, you can see that ACV transportation continues to deliver strong results and remains a key enabler for attracting new buyers to the platform. Our growing carrier partner network and fast cycle times resulted in attach rates once again exceeding 50% in Q1, with the number of transfers growing 45% year over year. In Q1, over 50% of our transports were automatically dispatched, which drove more efficiency in our transport operations. We also just recently launched the ACB Carrier Transportation App, which is a digital tool for carriers to efficiently manage their vehicle pickups and deliveries. Technologies like Auto Dispatch and the Carrier App help attract new carriers to our transport marketplace and drive efficiencies. which is an important element of ACV's overall margin expansion strategy. Turning now to slide 13, we are pleased with the execution in our ACV capital business. Attached rights and capital have more than doubled year over year, resulting in 140% loan volume growth. The increased mix of higher-priced vehicles transacted in our marketplace, along with new ACV capital offerings, resulted in a 50% increase in revenue per loan in C1. We are also investing in the technology powering our capital business to drive adoption and improve dealer engagement, which we believe will drive additional wallet share. The new ACV Capital Online portal equips dealers with a seamless post-auction financing solution. This enhanced platform aligns with ACV's commitment to leveraging technology to deliver easy-to-use solutions and transparency to our dealer partners, and will further enable ATV Capital to be an important growth and profit driver going forward. Turning to the second element of our strategy to drive long-term shareholder value, innovation. Now to slide 15. I would like to highlight the innovations we're delivering to enable our dealer partners to drive consumer-sourced inventory. Five Appraisal was our first offering in this category. that contributed to our strong unit growth in 21 and continues to be a unique and effective way for consumers to sell their vehicles on the ACV's marketplace through our dealer partners. Live appraisal once again contributed a high single-digit percentage for our units in Q1-22. The live appraisal is just the beginning. With the acquisitions of Driveably, Monk, and Max Digital, we are able to create a more comprehensive solution for our dealers on the consumer acquisition front, which we believe will increase our wallet share of dealer wholesale. Driverly provides a seamless consumer buying experience and is powered by the ACV pricing engine, which is our condition-adjusted machine learning model for vehicle evaluation. This integrated appraisal tool provides an end-to-end experience for selling a consumer's car. Our ability to deliver trusted vehicle evaluation because of our expansive proprietary data, enables dealers to provide attractive offers to their consumers, which means sourcing for more customers for the dealership, which in turn drives more wholesale supply. We also plan to leverage Monk's AI-driven imaging technology to enable consumers to do a self-inspection right from their own mobile device, which will further inform the price dealers can offer consumers. We are in the early stages of launching dealers on this new platform, and we are very excited about consumer sourcing and attractive TAM expansion and wallet share opportunity for ACB. Moving to slide 16, we are very pleased with the market traction we're seeing with our Max Digital SaaS and data-enabled offerings, and the synergies created by the ACB Max combination. Why is the combination so powerful? Max has a significant volume of data and suite of services from its long history in retail automotive. ACV has amassed a huge volume of data in wholesale automotive. Merging all that data and intelligence together creates insights for our dealers. It will help power both Max and all ACV products. Leveraging our growing moat of dealer retail and wholesale data we can make recommendations that are localized and personalized for a particular dealer. The ability to drive dealer-specific insights is key as it drives better outcomes for both the retail and wholesale side of the business. Moving to slide 17, I am pleased to share an update to our advanced buyer tools, including the previously shared programmatic buying capabilities. We are about to increase our go-to-market presence including the introduction of a brand initiative. These tools will now be offered under the brand SAM, an acronym for Smart Acquisition Manager. Thanks to SAM, buying an ACV has never been easier. By creating specific and relevant notifications, as well as powering intelligent auto bidding, SAM brings broad and persistent demand to the platform. complementing our marketplace in driving price realization and conversion for our sellers. And SAM also informs our algorithms and pricing engine to help dealers understand vehicle pricing. SAM is already contributing over 5% of our quarterly unit volume, and we believe it will be a big growth driver for us as we expand its use cases and capabilities. Simply put, Every dealer needs SAM. So to wrap up on innovation, we are very excited about our growing suite of data-enabled solutions and technology roadmaps that expands our competitive moat, creates even more value for our dealer partners, and drives sustainable long-term growth. With that, let me hand it over to Bill to take you through our financial results and how we're driving growth at scale.