November 9, 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 September 30, 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 November 3, 2022, there were 117,668,921 shares of the registrant's Class A common stock, and 40,545,814 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	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	42

PART II.	OTHER INFORMATION	43
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	70
Item 3.	Defaults Upon Senior Securities	70
Item 4.	Mine Safety Disclosures	70
Item 5.	Other Information	70
Item 6.	Exhibits	71
Signatures		73

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.

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.

•

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 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.

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 September 30,						Nine months ended September 30,
	2022			2021			2022			2021
Revenue:
Marketplace and service revenue	$	90,852		$	79,306		$	276,951		$	221,632
Customer assurance revenue		14,567			12,492			46,605			36,626
Total revenue		105,419			91,798			323,556			258,258
Operating expenses:
Marketplace and service cost of revenue (excluding depreciation & amortization)		46,255			41,547			143,400			113,844
Customer assurance cost of revenue (excluding depreciation & amortization)		12,221			12,371			40,432			32,886
Operations and technology		34,328			26,395			103,877			71,489
Selling, general, and administrative		34,701			33,787			106,897			85,275
Depreciation and amortization		3,004			2,348			7,868			5,877
Total operating expenses		130,509			116,448			402,474			309,371
Loss from operations		(25,090	)		(24,650	)		(78,918	)		(51,113	)
Other income (expense):
Interest income		1,936			29			2,618			100
Interest expense		(235	)		(121	)		(683	)		(582	)
Total other income (expense)		1,701			(92	)		1,935			(482	)
Loss before income taxes		(23,389	)		(24,742	)		(76,983	)		(51,595	)
Provision for income taxes		279			61			695			275
Net loss	$	(23,668	)	$	(24,803	)	$	(77,678	)	$	(51,870	)
Weighted-average shares - basic and diluted		157,264,153			155,037,911			156,747,507			115,075,030
Net loss per share - basic and diluted	$	(0.15	)	$	(0.16	)	$	(0.50	)	$	(0.45	)

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 September 30,						Nine months ended September 30,
	2022			2021			2022			2021
Net loss	$	(23,668	)	$	(24,803	)	$	(77,678	)	$	(51,870	)
Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale securities		(1,810	)		-			(2,920	)		-
Foreign currency translation (loss) gain		(1,004	)		(51	)		(2,513	)		25
Comprehensive loss	$	(26,482	)	$	(24,854	)	$	(83,111	)	$	(51,845	)

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, 2022			December 31, 2021
Assets
Current Assets :
Cash and cash equivalents	$	294,775		$	565,994
Marketable securities		207,561			13,765
Trade receivables (net of allowance of $4,396 and $3,724)		153,405			222,753
Finance receivables (net of allowance of $1,349 and $636)		74,257			44,278
Other current assets		15,534			10,623
Total current assets		745,532			857,413
Property and equipment (net of accumulated depreciation of $6,389 and $4,636)		5,784			4,916
Goodwill		89,893			78,839
Acquired intangible assets (net of amortization of $10,742 and $7,070)		19,981			18,130
Capitalized software (net of amortization of $5,671 and $3,857)		31,788			17,844
Operating lease right-of-use assets		4,775			3,264
Other assets		2,121			2,554
Total assets		899,874			982,960
Liabilities and Stockholders' Equity
Current Liabilities :
Accounts payable		298,686			395,972
Accrued payroll		11,973			11,961
Accrued other liabilities		10,091			9,806
Deferred revenue		3,314			4,317
Operating lease liabilities		1,411			1,306
Total current liabilities		325,475			423,362
Long-term operating lease liabilities		3,565			2,049
Long-term debt		70,500			500
Other long-term liabilities		1,596			952
Total liabilities	$	401,136		$	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 September 30, 2022 and December 31, 2021, respectively		-			-
Common Stock - Class A; $0.001 par value; 2,000,000,000 shares authorized; 117,400,800 and 106,420,843 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		117			106
Common Stock - Class B; $0.001 par value; 160,000,000 shares authorized; 40,494,190 and 49,661,126 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		40			50
Additional paid-in capital		826,893			801,142
Accumulated deficit		(322,839	)		(245,161	)
Accumulated other comprehensive loss		(5,473	)		(40	)
Total stockholders' equity		498,738			556,097
Total liabilities and stockholders' equity	$	899,874		$	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)


	Three Months Ended September 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, June 30, 2022		114,933,675	$	115		42,613,583		$	42		$	817,338		$	(299,171	)	$	(2,659	)	$	515,665
Conversion of Class B common stock to Class A common stock		2,198,667		2		(2,198,667	)		(2	)											-
Net loss															(23,668	)					(23,668	)
Other comprehensive loss																		(2,814	)		(2,814	)
Stock-based compensation												10,242									10,242
Exercise of common stock options		138,033		-								239									239
Vested restricted stock units		130,057		-		79,274			-			(926	)								(926	)
Issuance of shares for employee stock purchase plan		368		-								-									-
Balance as of September 30, 2022		117,400,800	$	117		40,494,190		$	40		$	826,893		$	(322,839	)	$	(5,473	)	$	498,738


	Nine Months Ended September 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		9,246,210		10		(9,246,210	)		(10	)											-
Net loss															(77,678	)					(77,678	)
Other comprehensive loss																		(5,433	)		(5,433	)
Stock-based compensation												27,285									27,285
Exercise of common stock options		579,455		-								998									998
Vested restricted stock units		404,871		-		79,274			-			(3,461	)								(3,461	)
Escrowed shares		620,877		1								(1	)								-
Issuance of shares for employee stock purchase plan		128,544		-								930									930
Balance as of September 30, 2022		117,400,800	$	117		40,494,190		$	40		$	826,893		$	(322,839	)	$	(5,473	)	$	498,738

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

Three months ended September 30, 2021

Common Stock Class A

Common Stock Class B

Accumulated

Additional

Other

Total

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company