November 10, 2021 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

Form: 10-Q

Documents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

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 September 30, 2021


☐	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.

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 November 3, 2021, there were 93,285,078 shares of the registrant's Class A common stock, and 62,290,000 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 Income (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	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

PART II.	OTHER INFORMATION	38
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 3.	Defaults Upon Senior Securities	64
Item 4.	Mine Safety Disclosures	64
Item 5.	Other Information	64
Item 6.	Exhibits	65
Signatures		67

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 COVID-19, including variants of COVID-19 or other public health crises on our business and the global economy;



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.

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.

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.



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.



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.



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 previously identified a material weakness in our internal control over financial reporting, and if we are unable to achieve and maintain effective internal control over financial reporting, the accuracy and timing of our financial reporting may be adversely affected.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

ACV AUCTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in thousands, except per share data)


	For the three months ended September 30,						For the nine months ended September 30,
	2021			2020			2021			2020
Revenue:
Marketplace and service revenue	$	79,306		$	56,367		$	221,632		$	129,273
Customer assurance revenue		12,492			11,093			36,626			25,321
Total revenue		91,798			67,460			258,258			154,594
Operating expenses:
Marketplace and service cost of revenue (excluding depreciation & amortization)		41,547			25,064			113,844			61,994
Customer assurance cost of revenue (excluding depreciation & amortization)		12,371			8,765			32,886			20,699
Operations and technology		26,395			16,792			71,489			47,613
Selling, general, and administrative		33,787			11,639			85,275			48,601
Depreciation and amortization		2,348			1,665			5,877			4,337
Total operating expenses		116,448			63,925			309,371			183,244
Income (loss) from operations		(24,650	)		3,535			(51,113	)		(28,650	)
Other income (expense):
Interest income		29			69			100			719
Interest expense		(121	)		(159	)		(582	)		(450	)
Total other income (expense)		(92	)		(90	)		(482	)		269
Income (loss) before income taxes		(24,742	)		3,445			(51,595	)		(28,381	)
Provision for income taxes		61			286			275			381
Net income (loss)	$	(24,803	)	$	3,159		$	(51,870	)	$	(28,762	)
Weighted-average shares
Basic		155,037,911			21,742,708			115,075,030			21,437,785
Diluted		155,037,911			139,240,687			115,075,030			21,437,785
Net earnings (loss) per share
Basic		(0.16	)		0.15			(0.45	)		(1.34	)
Diluted		(0.16	)		0.02			(0.45	)		(1.34	)

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

ACV AUCTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(in thousands)


	For the three months ended September 30,					For the nine months ended September 30,
	2021			2020		2021			2020
Net income (loss)	$	(24,803	)	$	3,159	$	(51,870	)	$	(28,762	)
Other comprehensive income (loss):
Foreign currency translation (loss) gain		(51	)		1		25			(6	)
Comprehensive income (loss)	$	(24,854	)	$	3,160	$	(51,845	)	$	(28,768	)

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

ACV AUCTIONS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in thousands, except share data)


	September 30, 2021			December 31, 2020
Assets
Current Assets :
Cash and cash equivalents	$	601,651		$	233,725
Trade receivables (net of allowance of $3,034 and $2,093)		215,645			104,138
Finance receivables (net of allowance of $266 and $40)		35,074			8,501
Other current assets		12,375			8,041
Total current assets		864,745			354,405
Property and equipment (net of accumulated depreciation of $4,053 and $2,439)		5,162			4,912
Goodwill		69,938			21,820
Acquired intangible assets (net of amortization of $5,874 and $3,059)		21,476			11,491
Internal-use software costs (net of amortization of $3,270 and $1,963)		14,868			7,775
Operating lease right-of-use assets		1,458			2,000
Other assets		2,613			2,147
Total assets		980,260			404,550
Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit)
Current Liabilities :
Accounts payable		376,305			151,967
Accrued payroll		12,985			8,109
Accrued other liabilities		6,180			4,375
Deferred revenue		4,380			1,504
Operating lease liabilities		807			746
Total current liabilities		400,657			166,701
Long-term operating lease liabilities		710			1,323
Long-term debt		500			4,832
Other long-term liabilities		2,342			5,054
Total liabilities	$	404,209		$	177,910
Commitments and Contingencies (Note 3)
Convertible Preferred Stock :
Convertible preferred stock; $0.001 par value; 0 and 230,538,501 shares authorized; 0 and 115,269,221 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		-			366,332
Stockholders' Equity (Deficit) :
Preferred Stock; $0.001 par value; 20,000,000 and 0 shares authorized; 0 and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		-			-
Common stock; $0.001 par value; 0 and 311,100,000 shares authorized; 0 and 22,331,842 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		-			22
Common stock - Class A; $0.001 par value; 2,000,000,000 and 0 shares authorized; 90,158,968 and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		90			-
Common Stock - Class B; $0.001 par value; 160,000,000 and 0 shares authorized; 65,187,200 and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		65			-
Additional paid-in capital		794,777			27,322
Accumulated deficit		(218,849	)		(166,979	)
Accumulated other comprehensive loss		(32	)		(57	)
Total stockholders' equity (deficit)		576,051			(139,692	)
Total liabilities, convertible preferred stock and stockholders' equity (deficit)	$	980,260		$	404,550

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

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 September 30, 2021
	Common Stock Class A				Common Stock Class B												Accumulated			Total
											Additional						Other			Stockholders'
			Par					Par			Paid-In			Accumulated			Comprehensive			Equity
	Shares		Value		Shares			Value			Capital			Deficit			Loss			(Deficit)
Balance, June 30, 2021		40,225,160	$	40		114,445,042		$	114		$	785,875		$	(194,046	)	$	19		$	592,002
Other offering costs in connection with initial public offering												24									24
Issuance of common stock from the exercise of stock options		554,283		1					-			420									421
Stock-based compensation												9,787									9,787
Issuance of common stock for vested restricted stock units		121,657		-								(1,329	)								(1,329	)
Conversion of Class B common stock to Class A common stock		49,257,842		49		(49,257,842	)		(49	)											-
Other comprehensive income (loss)																		(51	)		(51	)
Net loss															(24,803	)					(24,803	)
Balance as of September 30, 2021		90,158,942	$	90		65,187,200		$	65		$	794,777		$	(218,849	)	$	(32	)	$	576,051


	Nine months ended September 30, 2021
	Convertible Preferred Stock						Common Stock						Common Stock Class A				Common Stock Class B												Accumulated			Total
																							Additional						Other			Stockholders'
										Par					Par					Par			Paid-In			Accumulated			Comprehensive			Equity
	Shares			Amount			Shares			Value			Shares		Value		Shares			Value			Capital			Deficit			Loss			(Deficit)
Balance, December 31, 2020		115,269,221		$	366,332			22,331,842		$	22			-	$	-		-		$	-		$	27,322		$	(166,979	)	$	(57	)	$	(139,692	)
Issuance of common stock in connection with initial public offering, net of underwriting discounts and commissions and other offering costs														16,550,000		17								385,051									385,068
Issuance of common stock from the exercise of stock options								375,971			-			694,736		1		2,715			-			1,094									1,095
Stock-based compensation																								16,422									16,422
Issuance of common stock for vested restricted stock units														121,657		0								(1,329	)								(1,329	)
Conversion of redeemable convertible preferred stock to Class B common stock in connection with initial public offering		(115,269,221	)	$	(366,332	)												115,269,221			115			366,217									366,332
Sale of Class B common stock to underwriters														2,482,500		2		(2,482,500	)		(2	)											-
Reclassification of common stock to Class B common stock								(22,707,813	)		(22	)						22,707,813			22												-
Conversion of Class B common stock to Class A common stock														70,310,049		70		(70,310,049	)		(70	)											-
Other comprehensive income																														25			25
Net loss																											(51,870	)					(51,870	)
Balance as of September 30, 2021		-		$	-			-		$	-			90,158,942	$	90		65,187,200		$	65		$	794,777		$	(218,849	)	$	(32	)	$	576,051

Three months ended September 30, 2020

Convertible Preferred Stock

Common Stock

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company