May 10, 2023 - 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, 2023


☐	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 3, 2023, there were 129,596,430 shares of the registrant's Class A common stock, and 30,138,376 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	3
	Condensed Consolidated Statements of Comprehensive Loss	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31

PART II.	OTHER INFORMATION	32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
Signatures		35

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 and our ability to meet previously announced earnings guidance;

•

our ability to effectively manage our growth and expand our business;

•

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;

•

the effects of macroeconomic conditions on our business;

•

our reliance on key personnel and our ability to identify, recruit and retain skilled personnel, especially as we establish new offerings;

•

our ability to compete effectively with existing competitors and new market entrants;

•

our ability to obtain, maintain, protect and enforce our intellectual property rights and any costs associated therewith;

•

our ability to predict, prepare and respond to new kinds of technology innovations, market developments and changing customer needs;

•

our ability to expand internationally;

•

our ability to identify and complete acquisitions that complement and expand our reach and platform;

•

our decision to not declare or pay dividends for the foreseeable future;

•

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 (the "SEC"), webcasts, press releases and conference calls.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

ACV AUCTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except share data)


	Three months ended March 31,
	2023			2022
Revenue:
Marketplace and service revenue	$	104,863		$	88,347
Customer assurance revenue		14,763			14,718
Total revenue		119,626			103,065
Operating expenses:
Marketplace and service cost of revenue (excluding depreciation & amortization)		47,575			47,252
Customer assurance cost of revenue (excluding depreciation & amortization)		12,143			13,636
Operations and technology		35,660			32,829
Selling, general, and administrative		41,797			36,052
Depreciation and amortization		3,285			2,385
Total operating expenses		140,460			132,154
Loss from operations		(20,834	)		(29,089	)
Other income (expense):
Interest income		3,296			44
Interest expense		(315	)		(210	)
Total other income (expense)		2,981			(166	)
Loss before income taxes		(17,853	)		(29,255	)
Provision for income taxes		347			240
Net loss	$	(18,200	)	$	(29,495	)
Weighted-average shares - basic and diluted		158,694,919			156,104,971
Net loss per share - basic and diluted	$	(0.11	)	$	(0.19	)

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,
	2023			2022
Net loss	$	(18,200	)	$	(29,495	)
Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale securities		1,000			(73	)
Foreign currency translation gain (loss)		244			31
Comprehensive loss	$	(16,956	)	$	(29,537	)

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, 2023			December 31, 2022
Assets
Current Assets :
Cash and cash equivalents	$	317,149		$	280,752
Marketable securities		208,708			215,926
Trade receivables (net of allowance of $4,371 and $4,860)		189,167			168,732
Finance receivables (net of allowance of $2,256 and $2,275)		104,305			78,047
Other current assets		11,916			11,317
Total current assets		831,245			754,774
Property and equipment (net of accumulated depreciation of $7,635 and $6,986)		5,558			5,710
Goodwill		91,995			91,755
Acquired intangible assets (net of amortization of $13,190 and $11,990)		18,194			19,291
Internal-use software costs (net of amortization of $8,368 and $6,930)		42,285			36,992
Other assets		5,870			6,400
Total assets		995,147			914,922
Liabilities and Stockholders' Equity
Current Liabilities :
Accounts payable		387,745			323,661
Accrued payroll		10,215			10,052
Accrued other liabilities		15,406			14,504
Total current liabilities		413,366			348,217
Long-term debt		95,500			75,500
Other long-term liabilities		5,375			5,481
Total liabilities	$	514,241		$	429,198
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, 2023 and December 31, 2022, respectively		-			-
Common stock - Class A; $0.001 par value; 2,000,000,000 shares authorized; 128,854,443 and 121,214,275 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		129			121
Common Stock - Class B; $0.001 par value; 160,000,000 shares authorized; 30,275,430 and 37,241,952 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		30			37
Additional paid-in capital		848,832			836,695
Accumulated deficit		(365,554	)		(347,354	)
Accumulated other comprehensive loss		(2,531	)		(3,775	)
Total stockholders' equity		480,906			485,724
Total liabilities and stockholders' equity	$	995,147		$	914,922

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

ACV AUCTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(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, 2022		121,214,275	$	121		37,241,952		$	37		$	836,695		$	(347,354	)	$	(3,775	)	$	485,724
Conversion of Class B common stock to Class A common stock		7,042,121		7		(7,042,121	)		(7	)											-
Net loss															(18,200	)					(18,200	)
Other comprehensive income (loss)																		1,244			1,244
Stock-based compensation												14,859									14,859
Exercise of common stock options		181,284		-								898									898
Vested restricted stock units		416,763		1		75,599			-			(3,620	)								(3,619	)
Balance as of March 31, 2023		128,854,443	$	129		30,275,430		$	30		$	848,832		$	(365,554	)	$	(2,531	)	$	480,906


	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

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,
	2023			2022
Cash Flows from Operating Activities
Net income (loss)	$	(18,200	)	$	(29,495	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		3,392			2,515
Stock-based compensation expense, net of amounts capitalized		11,505			7,549
Provision for bad debt		2,176			1,793
Other non-cash, net		(302	)		659
Changes in operating assets and liabilities, net of effects from purchases of businesses:
Trade receivables		(21,487	)		(6,603	)
Other operating assets		(841	)		(5,433	)
Accounts payable		62,761			(7,526	)
Other operating liabilities		3,976			5,085
Net cash provided by (used in) operating activities		42,980			(31,456	)
Cash Flows from Investing Activities
Net increase in finance receivables		(27,407	)		(19,420	)
Purchases of property and equipment		(266	)		(748	)
Capitalization of software costs		(4,943	)		(3,942	)
Purchases of marketable securities		(35,602	)		(7,411	)
Maturities and redemptions of marketable securities		41,950			-
Sales of marketable securities		2,402			-
Acquisition of businesses (net of cash acquired)		-			(18,913	)
Net cash provided by (used in) investing activities		(23,866	)		(50,434	)
Cash Flows from Financing Activities
Proceeds from long term debt		95,000			60,000
Payments towards long term debt		(75,000	)		-
Proceeds from exercise of stock options		899			411
Payment of RSU tax withholdings in exchange for common shares surrendered by RSU holders		(3,619	)		(1,274	)
Net cash provided by (used in) financing activities		17,280			59,137
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		3			8
Net increase (decrease) in cash, cash equivalents, and restricted cash		36,397			(22,745	)
Cash, cash equivalents, and restricted cash, beginning of period		280,752			565,994
Cash, cash equivalents, and restricted cash, end of period	$	317,149		$	543,249
Supplemental disclosure of cash flow information
Non-cash investing and financing activities:
Stock-based compensation included in capitalized software development costs	$	696		$	375
Purchase of property and equipment and internal use software in accounts payable	$	2,553		$	1,064

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

ACV AUCTIONS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Nature of Business and Summary of Significant Accounting Policies

Nature of Business – The Company operates in one industry segment, providing a digital wholesale auction marketplace (the “Marketplace”) to facilitate business-to-business used vehicle sales between a selling dealership (“Seller”) and a buying dealership (“Buyer”). Customers using the Marketplace are licensed automotive dealerships or other commercial automotive enterprises. At the election of the customer purchasing a vehicle, the Company can arrange third-party transportation services for the delivery of the purchased vehicle through its wholly owned subsidiary, ACV Transportation LLC. The Company can also provide the customer financing for the purchased vehicle through its wholly owned subsidiary, ACV Capital LLC. ACV also provides data services that offer insights into the condition and value of used vehicles for transactions both on and off the Company's Marketplace, which help dealerships, their end customers, and commercial partners make more informed decisions to transact with confidence and efficiency. Customers using data services are licensed automotive dealerships or other commercial automotive enterprises. All services are provided in the United States and certain data services are also provided internationally. Services are supported by the Company’s operations which are in the United States, Canada and France.

Basis of Consolidation – The condensed consolidated financial statements include the accounts of ACV Auctions Inc. and all of its controlled subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Basis of Preparation – The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission ("SEC"). The Company has condensed or omitted certain information and notes normally included in complete annual financial statements prepared in accordance with GAAP. These financial statements have been prepared on the same basis as the Company's annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company's financial information. The unaudited interim condensed consolidated financial statements should therefore be read in conjunction with the audited consolidated financial statements and accompanying notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 1, 2023 (the "Annual Report"). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Financial Instruments

The following is a summary of available-for-sale financial instruments, as of March 31, 2023 and December 31, 2022, respectively (in thousands):


	March 31, 2023
	Amortized Cost		Unrealized Gain		Unrealized Losses			Fair Value
Cash equivalents:
Corporate securities (1)	$	504	$	-	$	(1	)	$	503
U.S. treasury and agency securities		1,509		6		-			1,515
Total Cash equivalents		2,013		6	$	(1	)		2,018
Marketable securities:
Corporate securities (1)		175,709		260		(1,720	)		174,249
U.S. treasury and agency securities		34,469		69		(79	)		34,459
Total Marketable securities	$	210,178	$	329	$	(1,799	)	$	208,708
(1) Comprised primarily of corporate bonds and commercial paper

December 31, 2022

Amortized Cost

Unrealized Gain

Unrealized Losses

Fair Value

Marketable securities:

Corporate securities (1)

184,321

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company