May 11, 2022 - 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 March 31, 2022


☐	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 May 4, 2022, there were 112,868,576 shares of the registrant's Class A common stock, and 44,447,723 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	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36

PART II.	OTHER INFORMATION	37
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
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 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 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.

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 March 31,
	2022			2021
Revenue:
Marketplace and service revenue	$	88,347		$	58,392
Customer assurance revenue		14,718			10,694
Total revenue		103,065			69,086
Operating expenses:
Marketplace and service cost of revenue (excluding depreciation & amortization)		47,252			29,509
Customer assurance cost of revenue (excluding depreciation & amortization)		13,636			9,386
Operations and technology		32,829			21,591
Selling, general, and administrative		36,052			23,965
Depreciation and amortization		2,385			1,768
Total operating expenses		132,154			86,219
Loss from operations		(29,089	)		(17,133	)
Other income (expense):
Interest income		44			26
Interest expense		(210	)		(210	)
Total other income (expense)		(166	)		(184	)
Loss before income taxes		(29,255	)		(17,317	)
Provision for income taxes		240			58
Net loss	$	(29,495	)	$	(17,375	)
Weighted-average shares - basic and diluted		156,104,971			34,288,035
Net loss per share - basic and diluted	$	(0.19	)	$	(0.51	)

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

ACV AUCTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)

(in thousands)


	Three months ended March 31,
	2022			2021
Net loss	$	(29,495	)	$	(17,375	)
Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale securities		(73	)		-
Foreign currency translation (loss) gain		31			50
Comprehensive loss	$	(29,537	)	$	(17,325	)

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)


	March 31, 2022			December 31, 2021
Assets
Current Assets :
Cash and cash equivalents	$	543,249		$	565,994
Marketable securities		21,081			13,765
Trade receivables (net of allowance of $3,528 and $3,724)		228,133			222,753
Finance receivables (net of allowance of $704 and $636)		63,291			44,278
Other current assets		16,792			10,623
Total current assets		872,546			857,413
Property and equipment (net of accumulated depreciation of $5,200 and $4,636)		5,579			4,916
Goodwill		97,388			78,839
Acquired intangible assets (net of amortization of $8,299 and $7,070)		16,901			18,130
Internal-use software costs (net of amortization of $4,270 and $3,837)		21,571			17,844
Operating lease right-of-use assets		2,955			3,264
Other assets		2,404			2,554
Total assets		1,019,344			982,960
Liabilities and Stockholders' Equity
Current Liabilities :
Accounts payable		389,232			395,972
Accrued payroll		11,310			11,961
Accrued other liabilities		14,878			9,806
Deferred revenue		5,331			4,317
Operating lease liabilities		1,393			1,306
Total current liabilities		422,144			423,362
Long-term operating lease liabilities		1,702			2,049
Long-term debt		60,500			500
Other long-term liabilities		1,376			952
Total liabilities	$	485,722		$	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 March 31, 2022 and December 31, 2021, respectively		-			-
Common stock - Class A; $0.001 par value; 2,000,000,000 shares authorized; 111,040,170 and 106,420,843 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		111			106
Common Stock - Class B; $0.001 par value; 160,000,000 shares authorized; 46,010,678 and 49,661,126 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		46			50
Additional paid-in capital		808,203			801,142
Accumulated deficit		(274,656	)		(245,161	)
Accumulated other comprehensive loss		(82	)		(40	)
Total stockholders' equity		533,622			556,097
Total liabilities and stockholders' equity	$	1,019,344		$	982,960

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)


	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		3,650,448		4		(3,650,448	)		(4	)											-
Net loss															(29,495	)					(29,495	)
Other comprehensive income (loss)																		(42	)		(42	)
Stock-based compensation												7,924									7,924
Exercise of common stock options		197,527		-								411									411
Vested restricted stock units		150,475		-								(1,273	)								(1,273	)
Escrowed shares		620,877		1								(1	)								-
Balance as of March 31, 2022		111,040,170	$	111		46,010,678		$	46		$	808,203		$	(274,656	)	$	(82	)	$	533,622


	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								385,001								385,018
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	)										0
Reclassification of common stock to class B common stock								(22,707,813	)		(22	)						22,707,813			22											0
Net Loss																										(17,375	)					(17,375	)
Other comprehensive income																													50			50
Stock-based compensation																								2,867								2,867
Exercise of common stock options								375,971			-							119			-			549								549
Balance as of March 31, 2021		-		$	-			-		$	-			19,032,500	$	19		135,494,653		$	135		$	781,956	$	(184,354	)	$	(7	)	$	597,749

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

ACV AUCTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)


	Three months ended March 31,
	2022			2021
Cash Flows from Operating Activities
Net income (loss)	$	(29,495	)	$	(17,375	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		2,515			1,891
Stock-based compensation expense, net of amounts capitalized		7,549			2,867
Provision for bad debt		1,793			777
Other non-cash, net		659			162
Changes in operating assets and liabilities, net of effects from purchases of businesses:
Trade receivables		(6,603	)		(85,136	)
Other current assets		(5,356	)		(4,805	)
Accounts payable		(7,526	)		138,430
Accrued payroll		(1,057	)		3,750
Accrued other liabilities		5,042			3,078
Deferred revenue		1,001			2,281
Other long-term liabilities		99			80
Other assets		(77	)		(136	)
Net cash provided by (used in) operating activities		(31,456	)		45,864
Cash Flows from Investing Activities
Net increase in finance receivables		(19,420	)		(7,570	)
Purchases of property and equipment		(748	)		(692	)
Capitalization of software costs		(3,942	)		(2,296	)
Purchases of marketable securities		(7,411	)		-
Acquisition of businesses (net of cash acquired)		(18,913	)		-
Net cash provided by (used in) investing activities		(50,434	)		(10,558	)
Cash Flows from Financing Activities
Proceeds from issuance of common stock in connection with initial public offering, net of underwriting discounts and commissions and other offering costs		-			388,359
Proceeds from long term debt		60,000			1,750
Proceeds from exercise of stock options		411			548
Payment of RSU tax withholdings in exchange for common shares surrendered by RSU holders		(1,274	)		-
Net

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company