ACV Auctions Inc.

Greetings and welcome to the ACV second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Tim Fox, Vice President of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining ACV's conference call to discuss our second quarter 2025 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, 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 team's execution in the second quarter, delivering revenue and adjusted EBITDA within our guidance range, despite challenging market conditions in the back half of the quarter. Record revenue and continued cost discipline resulted in adjusted EBITDA margins more than doubling year over year, underscoring the scale in our business model. Our results were driven by three key factors. First, solid execution in our dealer wholesale business. We continue to gain market share and expand our dealer partner network by delivering a highly differentiated marketplace experience. Second, we had another record quarter for ACV Transport and ACV Capital, along with strong adoption of our value-added dealer solutions. And third, we further executed on an exciting product roadmap for our dealer and commercial partners, expanding our TAM and growing our competitive moat. As Bill will detail later, we've updated our 2025 revenue guidance, reflect ongoing cross-currents in the broader macro environment and are still expecting to deliver strong top-line growth of at least 20% year-over-year. Furthermore, we have maintained the midpoint of adjusted EBITDA guidance, reflecting our commitment to deliver significant margin expansion 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. 2-2 revenue was $194 million and grew 21% year-over-year. We sold 210,000 vehicles, which was 13% year-over-year growth, despite the sharp market deceleration throughout the quarter. Next, on slide five, we will again focus our discussion around the three pillars of our strategy to maximize long-term shareholder value, growth, innovation, and scale. I'll begin with growth. On slide seven, we highlight how ACV is leveraging AI across our suite of solutions, beginning with our marketplace. We provide dealers with highly accurate, condition-adjusted pricing guidance. enabling them to set attractive reserve prices, which increases buyer engagement and conversion. Seller experience is further enhanced with flexible auction durations and scheduling. And our new in-auction tool allows sellers to set their own start price for each vehicle and remove the reserve price, which also drives buyer engagement and conversion. On the demand side, The buying experience is tailored across buyer personas, and we're optimizing the bidding experience by providing AI-enabled recommendations informed by dealer preferences and current market factors. Turning to slide eight, let's review our marketplace service offerings, beginning with ACV Transportation. The transportation team had another quarter of strong execution, setting records for both quarterly revenue and transports delivered. AI-optimized pricing continues to drive strong growth and operating efficiency. Revenue margin expanded 370 basis points year-over-year in Q2 and was in line with our mid-term targets in the low 20s. Lastly, our off-platform transportation service continues to gain traction from our dealer partners. These new value-added services increase transport network densities and create additional long-term growth vectors. Turning to slide nine, the ACV Capital team also delivered very strong results with over 60% revenue growth in Q2. This was the third quarter in a row of accelerated growth, which supports our confidence that we continue to scale ACV Capital 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 helping them buy vehicles from consumers, creating additional growth levers for our business. Lastly, I'll wrap up the growth section on slide 10 with data service highlights. Market traction for ClearCar remains strong, with over 1,600 active rooftops as of Q2. ClearCar's service which enables dealers to provide instant appraisals and offers to consumers in their service lanes, is particularly attractive in the current supply-constrained market. One proof point is our success with a top-five dealer group that has deployed clear car service at over 150 rooftops with plans to expand nationally this year. The ACVMAX team delivered another strong quarter, reflecting the investment we've made to advance its features. Through Q2, bookings were up 50% compared to 2024, driven by a number of large competitive displacements. Our strategy to bundle data services with ACV wholesale is gaining traction, creating another exciting long-term growth lever for ACV. Again this quarter, we're excited to share feedback from one of our dealer partners, Mercedes-Benz of Bakersfield, California. which is using ACV's full suite of offerings. We posted a video on our IR website highlighting the significant value they're deriving from ACV solutions. Next, on slide 11, I'll address the second element of our strategy to drive long-term shareholder value, innovation. Turning to slide 12, let's go deeper into how we leverage ACV AI across our products, services, and operations. Using machine learning, we are fusing inspection and dynamic market data to provide pricing for every vehicle in real time within ACV's pricing platform. A great example is ACV Guaranty, one of the fastest growing channels on our marketplace, accounting for over 15% of units sold exiting Q2. Our Guaranty sales accelerate better engagement remove market risk for our sellers, and deliver a 100% conversion rate. We're confident this highly differentiated offering will be another key lever in driving market share gains while maintaining attractive unit economics. We are expanding our competitive edge with AI-driven next generation products like Virtual Lift 2.0 and Project Viper. On slide 13, we highlight these next generation products in action at one of our dealer partners. We kicked off several pilots in Q2 and feedback has been very positive. Today, our dealer partners have run over 10,000 vehicles through Viper. We're leveraging this data to fine tune our hardware and software as we expand our pilots over the next few quarters. We believe we're on track for commercial launch for both Project Viper and Virtual Lift 2.0 in 2026. On slide 14, we highlight another growth lever powered by ACV AI. Our AI-backed platform is capable of processing trade-ins at scale with repeatable guaranteed pricing in under a second. We're taking pricing and guarantee capabilities on our marketplace and by our e-commerce partners directly now to our dealer partners. We currently have five of the top ten dealership groups in the U.S. leveraging our pricing data to appraise trade-ins and acquire vehicles from consumers. Think of this as pricing as a service, which is another high-margin revenue stream to support our growth objectives while expanding our relationship with these major dealer groups. Wrapping up on innovation, let's cover our commercial wholesale strategy on slide 15. With our initial commercial platform nearing completion, we are excited to announce the upcoming opening of our first Greenfield Remarketing Center, located in Houston, Texas. Our commercial platform includes capabilities to receive assignments from Auto-IMS, conduct commercial inspections, create work orders, and repair estimates. and receive consignor approvals. We will leverage our technology by opening up additional greenfield locations to address the large commercial TAM, providing another long-term growth lever for ACV. With that, let me hand it over to Bill to take you through our financial results and how we're driving growth at scale.