ACV Auctions Inc.

everyone, and welcome to today's ACV third quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one on your telephone key. You may withdraw yourself from the queue by pressing star and two. Please note, this call is being recorded. Lastly, if you should require operator assistance during your conference today, please press star zero. It is now my pleasure to turn the conference over to Vice President of Investor Relations, Tim Fox. Please go ahead.

Good afternoon, and thank you for joining ACV's conference call to discuss our third quarter 2024 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 on 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 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, and thank you for joining us. We're very pleased with our third quarter performance. We delivered another quarter of record revenue and adjusted EBITDA. both exceeding the high end of guidance. The ACV team drove strong market share gains in our core dealer wholesale business, along with record performance for ACV transport and capital. Our growing suite of dealer solutions continue to gain market traction, and we progress on our tech roadmap to address the commercial wholesale market. Based on our strong Q3 performance, we are raising full-year guidance reflecting our commitment to drive top line growth, expand margins, and deliver our first year of adjusted EBITDA profitability. We're confident that executing on this profitable growth strategy will create significant long-term shareholder value. With that, let's turn to a recap of third quarter results on slide four. Revenue of $171 million grew 44% year over year. we sold 198,000 vehicles, a year-over-year increase of 32%, reflecting strong listings growth and conversion rates, as well as solid execution across our remarketing centers. GMV increased 17% year-over-year, driven by strong unit growth, which more than offset a 12% decline in GMV per unit. Next on slide five. Today's discussion will focus on the three pillars of our strategy to maximize long-term shareholder value, growth, innovation, and scale. I will begin with growth. Turning to slide seven, I'll start with observations about the automotive market as context for dealer wholesale volumes. On the retail front, sales were fairly muted in Q3. New retail sales increased 1% year over year. while used retail sales were flat. Importantly, new vehicle inventories have recovered to historical levels, and OEMs are increasing incentives, which should support retail sales returning to more normalized levels in the near future. In terms of used vehicles, inventories have started to recover from the 2023 historical lows. However, they remain 25% below normal exiting the quarter. used vehicle shortages continue to be a material headwind for the dealer wholesale market, as dealers retain a higher percentage of trades for retail. However, we did see another modest uptick in the trade to wholesale mix in Q3, and we expect the mix to normalize over the next few years as used vehicle inventory recovers. As expected, wholesale price depreciation returned to more normalized patterns in Q3, conversion rates were strong and above historical Q3 averages, driven in part by favorable market conditions and from our innovative marketplace investments driving dealer engagement. On balance, we're encouraged to see pockets of improvements within the broader automotive market. Moving to slide eight, let's cover highlights on our value-added services, beginning with AC transportation. The transportation team delivered record revenue in Q3, with 108,000 deliveries in the quarter. AI-optimized pricing achieved 95% lane coverage again last quarter. By leveraging AI, our team delivered 27% volume growth while driving operating efficiency. Revenue margin of 20% was also a record, expanding 170 basis points year over year. and exceeding our mid-term target of high team margins. Lastly, our off-platform transportation service is gaining traction with our dealer partners. We're in early stages, but excited to deliver new value-added services that create long-term growth, accelerate network density, and deepen carrier relationships. Turning to slide nine, the ACB capital team again delivered solid growth while managing risk in an environment that continues to be challenging for independent dealers. As we highlighted last quarter, the capital team is piloting a new offering that provides financing for consumer source vehicles and dealer trade-ins that are sold retail or wholesale on ACV's marketplace. We are uniquely positioned to bundle ClearCar with ACV Capital to support dealer sourcing strategies. We look forward to updating you on this new offering in the coming quarters. Next, I'll address the second element of our strategy to drive long-term shareholder value, innovation. Turning to slide 11, our investments and marketplace engagement continue to pay dividends. As I mentioned earlier, Q3 conversion rates were strong. Along with favorable market conditions, conversion rates benefited from features like advanced search, vehicle merchandising, AI-enabled pricing, and flexible auction formats, which deliver a best-in-class buying experience on our marketplace. Our commercial tech investments are progressing well. Recall that our initial focus is integrating with AutoIMS and delivering marketplace enhancements to support commercial consigners. Furthermore, these key initiatives will support platform standardization across our remarketing centers. The new ACV Max suite continues to gain traction in the market, including a recent win of a regional Texas dealer group and a growing pipeline of new prospects. Max is proving to be a valuable solution to create cross-sell opportunities for ACV's core wholesale offerings. we're excited to roll out new bundled offerings that focus on both expanding the ACV Max footprint while driving additional wholesale market share. Our objective is align the interests of our dealer partners and ACV. Finally, in the dealer self-infection category, demand for ACV's vehicle appraisal technology is growing across a number of use cases. Dealers are appraising trades and vehicles sourced through digital channels, and making offers to consumers in their service drives. Across these use cases, accurate pricing is a critical success factor. Our appraisal solutions incorporate AI imaging for damage detection and real-time localized pricing that is condition enhanced based on millions of inspections in our data mode. It's still early days in this category. but we believe self-inspection can unlock a number of long-term growth opportunities, including TAM expansion. Let's turn to slide 12 to highlight one of our fastest-growing consumer self-inspection solutions, ClearCar. Market traction of ClearCar remains strong, and our team is targeting to have over 1,000 dealers live by year-end. ClearCar provides us with another avenue to grow wholesale wallet share and deepen our strategic partnership across their retail and wholesale operations. And like ACB Max, Clearcar is also driving new customer acquisition, including some of the largest dealer groups in the country. Our teams will be working to grow wholesale wallet share with these new dealer partners over time. Again, this quarter, we're excited to share feedback from one of our dealer partners, Ernie Mesa, the number one Volkswagen dealership in San Diego, which is using Clearcar and our marketplace. We posted a video on our IR website featuring their team describing the significant value they're deriving from ACV solutions. It's another great opportunity to hear directly from a dealer partner. To wrap up on innovation, ACB is delivering industry-leading technology to our dealer partners and to our own operations, driving both growth and scale. We look forward to sharing more progress with you next quarter. With that, let me hand it over to Bill to take you through our financial results and how we're driving growth and scale.