10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

u

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-40256

 

ACV Auctions Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-2415221

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

640 Ellicott Street, #321

Buffalo, New York

14203

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (800) 553-4070

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class A common stock, par value $0.001 per share

 

ACVA

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of August 3, 2022, there were 115,198,004 shares of the registrant's Class A common stock, and 42,482,431 shares of Class B common stock, each with a par value of $0.001, outstanding.

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

 

 

Condensed Consolidated Statements of Operations

4

 

Condensed Consolidated Statements of Comprehensive Loss

5

 

Condensed Consolidated Balance Sheets

6

 

Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit)

7

 

Condensed Consolidated Statements of Cash Flows

9

 

Notes to Unaudited Condensed Consolidated Financial Statements

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

45

Item 4.

Controls and Procedures

45

 

 

 

PART II.

OTHER INFORMATION

46

Item 1.

Legal Proceedings

46

Item 1A.

Risk Factors

46

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

73

Item 3.

Defaults Upon Senior Securities

73

Item 4.

Mine Safety Disclosures

73

Item 5.

Other Information

73

Item 6.

Exhibits

74

Signatures

76

 

 


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

 

our expectations regarding our revenue, operating expenses and other operating results, including our key metrics;
our ability to effectively manage our growth;
our ability to grow the number of Marketplace Participants on our platform;
our ability to acquire new customers and successfully retain existing customers and capture a greater share of wholesale transactions from our existing customers;
our ability to increase usage of our platform and generate revenue from our value-added services;
anticipated trends, growth rates, and challenges in our business and in the markets in which we operate;
our ability to achieve or sustain our profitability;
future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements;
the costs and success of our marketing efforts, and our ability to promote our brand;
our reliance on key personnel and our ability to identify, recruit and retain skilled personnel;
our ability to obtain, maintain, protect and enforce our intellectual property rights and any costs associated therewith;
the effect of the global economy and COVID-19 or other public health crises on our business
our ability to compete effectively with existing competitors and new market entrants;
our ability to expand internationally;
our ability to identify and complete acquisitions that complement and expand our reach and platform;
our ability to comply or remain in compliance with laws and regulations that currently apply or become applicable to our business in the United States and other jurisdictions where we elect to do business; and
the growth rates of the markets in which we compete.

 

You should not rely on forward-looking statements as predictions of future events. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described under the header “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained herein. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

 

 

1


 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

 

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made, and we undertake no obligation to update them to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.

 

Unless the context otherwise indicates, references in this report to the terms “ACV Auctions,” “ACV,” “the Company,” “we,” “our” and “us” refer to ACV Auctions Inc. and its subsidiaries.

 

We may announce material business and financial information to our investors using our investor relations website (www.investors.acvauto.com). We therefore encourage investors and others interested in ACV to review the information that we make available on our website, in addition to following our filings with the Securities and Exchange Commission, webcasts, press releases and conference calls.

 

 

2


 

SUMMARY RISK FACTORS

 

Investing in our Class A Common Stock involves numerous risks, including the risks described in “Part II—Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q. Below are some of our principal risks, any one of which could materially adversely affect our business, financial condition, results of operations and prospects

Our recent, rapid growth may not be indicative of our future growth.
We have a history of operating losses and we may not achieve or maintain profitability in the future.
We have a limited operating history, and our future results of operations may fluctuate significantly due to a wide range of factors, which makes it difficult to forecast our future results of operations.
Our ability to expand our products and services may be limited, which could negatively impact our growth rate, revenue and financial performance.
We participate in a highly competitive industry, and pressure from existing and new companies may adversely affect our business and results of operations.
Our business is sensitive to changes in the prices of used vehicles.
Decreases in the supply of used vehicles coming to the wholesale market may impact sales volumes, which may adversely affect our revenue and profitability.
The loss of sellers could adversely affect our results of operations and financial position, and an inability to increase our sources of vehicle supply could adversely affect our growth rates.
We may experience seasonal and other fluctuations in our quarterly results of operations, which may not fully reflect the underlying performance of our business.
Prospective purchasers of vehicles may choose not to shop online, which would prevent us from growing our business.
Failure to properly and accurately inspect the condition of vehicles sold through our marketplace, or to deal effectively with fraudulent activities on our platform, could harm our business.
General business and economic conditions, and risks related to the larger automotive ecosystem, including customer demand, could reduce auto sales and profitability, which may harm our business.
Our operations and employees face risks related to health crises, such as the ongoing COVID-19 pandemic, that could adversely affect our financial condition and operating results.
We may not properly leverage or make the appropriate investment in technology advancements, which could result in the loss of any sustainable competitive advantage in products, services and processes.
We rely on third-party technology and information systems to complete critical business functions and such reliance may negatively impact our business.
A significant disruption in service of, or other performance or reliability issues with, our platform could damage our reputation and result in a loss of customers, which could harm our brand or our business.
Failure to adequately obtain, maintain, protect and enforce our intellectual property rights, including our technology and confidential information, could harm our business.
We operate in highly regulated industries and either are or may be subject to a wide range of federal, state and local laws and regulations and our failure to comply with these laws and regulations may force us to change our operations or harm our business.
We are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our Class A common stock.

 

3


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

ACV AUCTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in thousands, except per share data)

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Marketplace and service revenue

$

97,752

 

 

$

83,934

 

 

$

186,099

 

 

$

142,326

 

Customer assurance revenue

 

17,320

 

 

 

13,440

 

 

 

32,038

 

 

 

24,134

 

Total revenue

 

115,072

 

 

 

97,374

 

 

 

218,137

 

 

 

166,460

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Marketplace and service cost of revenue (excluding
   depreciation & amortization)

 

49,893

 

 

 

42,788

 

 

 

97,145

 

 

 

72,297

 

Customer assurance cost of revenue (excluding
   depreciation & amortization)

 

14,575

 

 

 

11,129

 

 

 

28,211

 

 

 

20,515

 

Operations and technology

 

36,720

 

 

 

23,513

 

 

 

69,549

 

 

 

45,104

 

Selling, general, and administrative

 

36,144

 

 

 

27,513

 

 

 

72,196

 

 

 

51,478

 

Depreciation and amortization

 

2,479

 

 

 

1,761

 

 

 

4,864

 

 

 

3,529

 

Total operating expenses

 

139,811

 

 

 

106,704

 

 

 

271,965

 

 

 

192,923

 

Loss from operations

 

(24,739

)

 

 

(9,330

)

 

 

(53,828

)

 

 

(26,463

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

638

 

 

 

45

 

 

 

682

 

 

 

71

 

Interest expense

 

(238

)

 

 

(251

)

 

 

(448

)

 

 

(461

)

Total other income (expense)

 

400

 

 

 

(206

)

 

 

234

 

 

 

(390

)

Loss before income taxes

 

(24,339

)

 

 

(9,536

)

 

 

(53,594

)

 

 

(26,853

)

Provision for income taxes

 

176

 

 

 

156

 

 

 

416

 

 

 

214

 

Net loss

$

(24,515

)

 

$

(9,692

)

 

$

(54,010

)

 

$

(27,067

)

Weighted-average shares - basic and diluted

 

156,703,734

 

 

 

154,572,225

 

 

 

156,484,903

 

 

 

94,762,407

 

Net loss per share - basic and diluted

$

(0.16

)

 

$

(0.06

)

 

$

(0.35

)

 

$

(0.29

)

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


 

ACV AUCTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)

(in thousands)

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net loss

$

(24,515

)

 

$

(9,692

)

 

$

(54,010

)

 

$

(27,067

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gains (losses) on available-for-sale securities

 

(1,037

)

 

 

-

 

 

 

(1,110

)

 

 

-

 

Foreign currency translation (loss) gain

 

(1,540

)

 

 

26

 

 

 

(1,509

)

 

 

76

 

Comprehensive loss

$

(27,092

)

 

$

(9,666

)

 

$

(56,629

)

 

$

(26,991

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


 

ACV AUCTIONS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands, except share data)

 

 

 

June 30,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current Assets :

 

 

 

 

 

 

Cash and cash equivalents

 

$

303,942

 

 

$

565,994

 

Marketable securities

 

 

207,978

 

 

 

13,765

 

Trade receivables (net of allowance of $4,266 and $3,724)

 

 

225,856

 

 

 

222,753

 

Finance receivables (net of allowance of $971 and $636)

 

 

77,289

 

 

 

44,278

 

Other current assets

 

 

11,514

 

 

 

10,623

 

 Total current assets

 

 

826,579

 

 

 

857,413

 

Property and equipment (net of accumulated depreciation of $5,793 and $4,636)

 

 

5,620

 

 

 

4,916

 

Goodwill

 

 

90,681

 

 

 

78,839

 

Acquired intangible assets (net of amortization of $9,593 and $7,070)

 

 

21,211

 

 

 

18,130

 

Capitalized software (net of amortization of $5,006 and $3,837)

 

 

25,738

 

 

 

17,844

 

Operating lease right-of-use assets

 

 

5,292

 

 

 

3,264

 

Other assets

 

 

2,332

 

 

 

2,554

 

Total assets

 

 

977,453

 

 

 

982,960

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current Liabilities :

 

 

 

 

 

 

Accounts payable

 

 

356,490

 

 

 

395,972

 

Accrued payroll

 

 

12,002

 

 

 

11,961

 

Accrued other liabilities

 

 

10,786

 

 

 

9,806

 

Deferred revenue

 

 

5,067

 

 

 

4,317

 

Operating lease liabilities

 

 

1,515

 

 

 

1,306

 

 Total current liabilities

 

 

385,860

 

 

 

423,362

 

Long-term operating lease liabilities

 

 

3,958

 

 

 

2,049

 

Long-term debt

 

 

70,500

 

 

 

500

 

Other long-term liabilities

 

 

1,470

 

 

 

952

 

Total liabilities

 

$

461,788

 

 

$

426,863

 

Commitments and Contingencies (Note 5)

 

 

 

 

 

 

Stockholders' Equity :

 

 

 

 

 

 

Preferred Stock; $0.001 par value; 20,000,000 shares authorized;
   
0 and 0 shares issued and outstanding at June 30, 2022
   and December 31, 2021, respectively

 

 

-

 

 

 

-

 

Common Stock - Class A; $0.001 par value; 2,000,000,000 shares authorized;
   
114,933,675 and 106,420,843 shares issued and outstanding at June 30, 2022
   and December 31, 2021, respectively

 

 

115

 

 

 

106

 

Common Stock - Class B; $0.001 par value; 160,000,000 shares authorized;
   
42,613,583 and 49,661,126 shares issued and outstanding at June 30, 2022
   and December 31, 2021, respectively

 

 

42

 

 

 

50

 

Additional paid-in capital

 

 

817,338

 

 

 

801,142

 

Accumulated deficit

 

 

(299,171

)

 

 

(245,161

)

Accumulated other comprehensive loss

 

 

(2,659

)

 

 

(40

)

Total stockholders' equity

 

 

515,665

 

 

 

556,097

 

Total liabilities and stockholders' equity

 

$

977,453

 

 

$

982,960

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


 

ACV AUCTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND

STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited)

(in thousands, except share data)

 

 

 

Three Months Ended June 30, 2022

 

 

 

Common Stock Class A

 

 

Common Stock Class B

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

 

 

 

Par

 

 

 

 

 

Par

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance, March 31, 2022

 

 

111,040,170

 

 

$

111

 

 

 

46,010,678

 

 

$

46

 

 

$

808,203

 

 

$

(274,656

)

 

$

(82

)

 

$

533,622

 

Conversion of Class B common
    stock to Class A common
    stock

 

 

3,397,095

 

 

 

4

 

 

 

(3,397,095

)

 

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

-

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(24,515

)

 

 

 

 

 

(24,515

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,577

)

 

 

(2,577

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,119

 

 

 

 

 

 

 

 

 

9,119

 

Exercise of common stock options

 

 

243,895

 

 

 

-

 

 

 

 

 

 

 

 

 

348

 

 

 

 

 

 

 

 

 

348

 

Vested restricted stock units

 

 

124,339

 

 

 

-

 

 

 

 

 

 

 

 

 

(1,262

)

 

 

 

 

 

 

 

 

(1,262

)

Issuance of shares for employee
     stock purchase plan

 

 

128,176

 

 

 

-

 

 

 

 

 

 

 

 

 

930

 

 

 

 

 

 

 

 

 

930

 

Balance as of June 30, 2022

 

 

114,933,675

 

 

$

115

 

 

 

42,613,583

 

 

$

42

 

 

$

817,338

 

 

$

(299,171

)

 

$

(2,659

)

 

$

515,665

 

 

 

 

Six Months Ended June 30, 2022

 

 

 

Common Stock Class A

 

 

Common Stock Class B

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

 

 

 

Par

 

 

 

 

 

Par

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance, December 31, 2021

 

 

106,420,843

 

 

$

106

 

 

 

49,661,126

 

 

 

50

 

 

$

801,142

 

 

$

(245,161

)

 

$

(40

)

 

$

556,097

 

Conversion of Class B common
    stock to Class A common
    stock

 

 

7,047,543

 

 

 

8

 

 

 

(7,047,543

)

 

 

(8

)

 

 

 

 

 

 

 

 

 

 

 

-

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(54,010

)

 

 

 

 

 

(54,010

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,619

)

 

 

(2,619

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,043

 

 

 

 

 

 

 

 

 

17,043

 

Exercise of common stock options

 

 

441,422

 

 

 

-

 

 

 

 

 

 

 

 

 

759

 

 

 

 

 

 

 

 

 

759

 

Vested restricted stock units

 

 

274,814

 

 

 

-

 

 

 

 

 

 

 

 

 

(2,535

)

 

 

 

 

 

 

 

 

(2,535

)

Escrowed shares

 

 

620,877

 

 

 

1

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

-

 

Issuance of shares for employee
     stock purchase plan

 

 

128,176

 

 

 

-

 

 

 

 

 

 

 

 

 

930

 

 

 

 

 

 

 

 

 

930

 

Balance as of June 30, 2022

 

 

114,933,675

 

 

$

115

 

 

 

42,613,583

 

 

$

42

 

 

$

817,338

 

 

$

(299,171

)

 

$

(2,659

)

 

$

515,665

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

7


 

 

 

Three Months Ended June 30, 2021

 

 

 

Common Stock Class A

 

 

Common Stock Class B

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

 

 

 

Par

 

 

 

 

 

Par

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'