ACV Auctions Inc.

Good day and welcome to the ACV Q1 2025 Earnings Conference Call. All participants will be in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press the star key and then zero on your telephone keypad. Please note that this event is being recorded. I would now like to turn the conference over to Tim Fox of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining ACB's conference call to discuss our first quarter 2025 financial results. With me on the call today are George Simone, 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, 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 are very pleased with our first quarter performance, which again demonstrated strong execution by the ACV team. We delivered record revenue with strong margin expansion. resulting in adjusted EBITDA exceeding the high end of guidance. Our results were driven by three key factors. First, strong execution in our dealer wholesale business. We continue to gain market share and expand our dealer partner network with our highly differentiated marketplace experience. Second, we had a record performance in ACB transport and capital. with strong adoption of our value-added dealer solutions. And third, we continue to execute on an exciting product roadmap for our dealer and commercial partners, expanding our TAM and growing our competitive moat. While there are evolving cross-currents in the broader macro environment, ACV remains focused on delivering strong top-line growth and meaningful increased adjusted EBITDA while continuing to invest in our long-term growth objectives. 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 our results on slide four. Q1 revenue was $183 million and grew 25% year-over-year. we sold 208,000 vehicles, which was 19% year-over-year growth, despite very soft market conditions in February. Unit growth was driven by continued market share gains and solid execution at our remarketing centers, and a dealer wholesale market that grew in the low single digits. Next on slide five, today's discussion we'll focus on the three pillars of our strategy to maximize long-term shareholder value, growth, innovation, and scale. I'll begin with growth. Turning to slide seven, I'll frame our growth discussion around ATV's core product offerings, wholesale marketplace, marketplace services, and data services. Let's begin with our wholesale marketplace on slide eight. At our March Analyst Day, we highlighted how ACV is leveraging AI across our entire suite of solutions. On our marketplace, AI is enabling us to provide our dealer partners highly accurate wholesale and retail pricing guidance. This guidance is based on condition-enhanced pricing enabled by industry-leading inspection capabilities that is highly differentiated in the market. We are enhancing the seller experience by offering flexible auction durations and auction scheduling. We also launched our first seller in auction tool, allowing sellers to remove reserve prices mid auction, driving buyer engagement and conversion. On the demand side, the buying experience is now tailored across buying personas, from smaller independent dealers to large volume franchise dealers. We've improved discoverability, and search refinement through advanced saved searches and notifications. And we're taking friction out of the buying experience by making AI-enabled recommendations informed by dealer preferences and current market factors. Turning to slide nine, let's review our marketplace service offerings, beginning with ACV Transportation. The transportation team continued its strong execution in Q1. setting records for both quarterly revenue and transports delivered. AI-optimized pricing is driving both strong growth and operating efficiency. Revenue margin expanded 460 basis points year-over-year in Q1 and was in line with our midterm targets in the low 20s. Lastly, our off-platform transportation service continues to gain early traction from our dealer partners. These new value-added services accelerate our transport network densities and create additional long-term growth factors. Turning to slide 10, the ACB Capital team also delivered strong results with over 30% revenue growth in Q1. This was the second quarter in a row of accelerated growth, which supports our confidence that we can continue to accelerate ACB Capital growth while managing risk. The ACV Capital team is expanding its TAM by delivering new value-added offerings to our dealers, including off-platform transactions such as buying vehicles from consumers, creating additional growth levers for our business. Lastly, I'll wrap up the growth section on slide 11 with data service highlights. Market traction for ClearCar remains strong with over 200 rooftops launched in Q1. We're also seeing growing interest in ClearCar service, This offering enables our dealer partners to acquire vehicles from consumers by leveraging their service lanes for instant appraisals and offers. The ACV Max team delivered very strong results in Q1, reflecting the investments made in a host of new features and platform scalability. Bookings were at the highest level in five quarters, driven by a number of large dealer groups that would like ACV to displace the incumbent IMS providers. Our strategy to begin bundling data services with ACV wholesale is starting to pay dividends, and we believe this new strategy is another exciting long-term growth lever for ACV. Again this quarter, we're excited to share feedback from one of our dealer partners, the Nilo Company, a dealership group based in Sacramento, which is using ACV's full suite of offerings. 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. Next, on slide 12, I'll address the second element of our strategy to drive long-term shareholder value, innovation. Turning to slide 13, I'll go a bit deeper in how we're leveraging ACV AI across our products. services, and operations. As we discussed at our analyst day, technologies like machine learning and large language models are advancing at a rapid pace, and ACV is uniquely positioned to transform how decisions are made in automotive. It all starts with consistent data capture, which is underpinned by our BCIs in the field creating a large moat of curated data. We're now also putting our hardware, diagnostic tools, and damage detection algorithms into the hands of our customers. And with ClearCar's AI-guided image capture, we're putting self-inspection into the hands of dealer customers. Using machine learning, we're taking data fusion and processing to the next level. providing pricing for every vehicle in real time within ACV's pricing platform. We are consolidating data into structured, AI-powered guidance to provide context-driven dealer decisions. Take, for example, ACV Guarantees, which is one of the fastest-growing channels in our marketplace. Guaranteed vehicles are launched in a no-reserve auction format, which typically generates a five-fold increase in bidder engagement. Guarantees also remove market risk and pass the upside to our sellers with 100% conversion rate. Finally, with Virtual Lift 2.0 and Project Viper, we are expanding our competitive edge in AI-driven products by putting the powerful combination of ACV's hardware and software technology into the operational workflow of every vehicle. Stay tuned for more details in coming quarters as we ramp our dealer pilots through 2025. On slide 14, we highlight another growth lever powered by ACB AI. Our AI-backed platform is capable of processing trade-ins at scale with repeatable, guaranteed pricing in under a second. We are taking the guaranteed capabilities from our marketplace and extending that same power for e-commerce partners and piloting these capabilities with OEMs looking for a scalable upstream trading platform. Wrapping up on innovation, I will touch on our commercial investments. It all starts with integrations that feed into our digital-first marketplace. we have established an extensible ingestion architecture that enables us to work with a host of service providers in a standardized way. The next major capability is damage estimation at the panel and part level, which is powered by observations from our inspection platform. This gives us a robust tool that can be used for recon estimates, which is a critical part of the commercial workflow. Finally, We are in the later stages of our commercial platform development, and we are slated to power our first greenfield remarketing center in the second half of 2025. The commercial platform will include capabilities from inspection to work order creation, repair estimation, consignor approval, reporting, and more. We're excited to begin leveraging these technologies to address the large commercial TAM. providing another long-term growth lever for ACB. With that, let me hand it over to Bill to take you through our financial results and how we're driving growth at scale.