ACV Auctions Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights:

• Growth: Solid execution in dealer wholesale, record quarters for ACV Transport and Capital, and strong adoption of value-added dealer solutions. Leveraged AI across products, including condition-adjusted pricing guidance in the marketplace and tailored buying experiences.
• Innovation: Utilized machine learning to fuse inspection and market data for real-time pricing. Expanding competitive edge with AI-driven next-generation products like Virtual Lift 2.0 and Project Viper. Launched greenfield remarketing center in Houston for commercial wholesale strategy.
• Financials: Q2 revenue was $194 million, growing 21% year-over-year. Adjusted EBITDA was $19 million, at the midpoint of guidance, with margin improving 520 basis points year-over-year.

Segment Performance:

• Auction & Assurance: Represented 57% of total revenue, growing 20% year-over-year. This included 13% unit growth and an Auction & Assurance ARPU of $523, which grew 6%.
• Marketplace Services: Comprised 39% of total revenue, growing 25% year-over-year, driven by record revenue for ACV Transport and ACV Capital.
• SaaS and Data Services: Made up 4% of total revenue, flat year-over-year.
• ACV Transport: Had record quarterly revenue and transports delivery, with revenue margin expanding 370 basis points year-over-year.
• ACV Capital: Achieved over 60% revenue growth in Q2, marking the third consecutive quarter of accelerated growth.
• ClearCar: Had over 1,600 active rooftops, with success in supply-constrained markets.
• ACV MAX: Saw 50% bookings growth compared to 2024, driven by competitive displacements.

Guidance:

• Trimmed 2025 revenue guidance by $5 million at midpoint to $765M-$775M, expecting 20-22% year-over-year growth.
• Maintained adjusted EBITDA guidance midpoint $68M-$72M.
• Q3 2025 revenue expected $198M-$203M (16-18% year-over-year growth), adjusted EBITDA $18M-$20M.

Risks:

• Macro-economic crosscurrents and uncertainty in tariffs affecting new car sales and used car demand.
• Trade retention rates impacting wholesale volumes and conversion rates.
• Seasonal patterns and market fluctuations affecting wholesale price appreciation.

Question and Answer: Q: Could you parse out the 500 bps unit growth headwind and differentiate between retention rates and conversion rates?

A: George Chamoun stated it's two separate things. Dealers keeping more inventory is a broader industry challenge, while the conversion rate headwind was a short-term issue related to sell-through rates. Bill Zerella explained the math behind the 500 basis point headwind due to lower conversion rates than expected.

Q: Talk about competitive dynamics and macro vs. competitive ratios.

A: George Chamoun said trends were in line with industry, with conversion rates coming down consistently across competitors.

Q: Discuss progress on pricing engine and new tech products.

A: George Chamoun mentioned the guarantee offering for sellers and progress in pricing accuracy. Will Gildea was told about the no reserve sale growing and future plans for retail pricing prediction with AI.

Q: Amazon partnership and geographic expansion of AI tools.

A: George Chamoun stated contributions from new initiatives like Project Viper would be small this year, and Amazon partnership contributions aren't baked into forecasts.

Q: Deceleration in growth relative to industry and commercial unit contribution.

A: George Chamoun emphasized continued ability to grow share, and Bill Zerella provided context on market compares and modeling. George added commercial efforts were early, with first car sold at greenfield location in Houston.

Q: Resource allocation and EBITDA management.

A: George Chamoun discussed prioritization of product and tech spend, inspector hiring, and sales team size. Bill Zerella highlighted ongoing operational optimization.

Q: Dealer conversations on value prop and ClearCar go-to-market.

A: George Chamoun mentioned record bookings for ACV MAX and ClearCar making strides in supply-constrained markets.

Q: Revenue guidance adjustment and pricing outlook.

A: Bill Zerella explained revenue guidance trim due to macro crosscurrents, and George Chamoun stated pricing is adjusted based on volume and product mix.

Q: Organic growth excluding acquisitions and commercial location build-out.

A: Bill Zerella said an acquisition last year added ~1% to dealer unit growth. George Chamoun talked about focus on greenfield locations, with first in Houston and second planned for Q1 2026.

Q: 2026 milestones and operational efficiency.

A: George Chamoun mentioned expected healthier market in 2026 with off-lease inventory returning. Bill Zerella noted ongoing operational efficiency efforts across the company, but no specific initiatives called out.