ACV Auctions taught a lot of people in Buffalo about go-public events earlier this year, especially when you have skin in the game.
The company’s performance on the public markets has been a seminar of its own.
Share prices of the Buffalo-based firm didn’t move much three months ago, despite strong growth in revenue and the number of vehicles sold on its platform. The company raised its overall outlook for the year as well, with full-year revenue outlook rising from $307 million-$313 million to $332 million-$338 million.
It’s still all about the future – a tech-enabled firm racing to capture marketshare amidst heavy competition.
ACV debuted on the NASDAQ stock exchange at $25 per share. Share prices are now hovering in the $20 range.
As ACV (NASDAQ: ACVA) gets set to post its third-quarter results this evening, it’s another chance to tell the story not just about the company’s recent past but also where it’s going.
These are the storylines worth monitoring.
Performance against challenges
One of the near-term headwinds facing ACV Auctions is its place amid broader challenges in the automotive industry. As manufacturing challenges sent fewer vehicles to the lots, dealers were more likely to hold cars rather than sell them wholesale.
“We're modeling that our new car dealers, which is where the majority of our supply comes from, are going to have a low amount of supply and therefore a low amount of trades,” Chamoun told investors in August about the upcoming quarter.
Amidst a favorable business environment last quarter, ACV posted a 74% year-over-year increase in vehicles sold on its platform in the second quarter.
The company sold 118,373 cars through its platform in the third quarter of 2020. How much growth did it achieve in a more challenging environment?
The bigger picture
For ACV, quarter-over-quarter fluctuations in vehicles sold will be subject to the market dynamics explained above. But the long-term success of its marketplace is all about growing the number of dealers on the platform. The company is investing heavily on expanding its footprint, with nationwide coverage expected by year’s end.
Anecdotally, ACV executives mentioned strong marketshare growth several times in the call three months ago.
“We will come back over the next few quarters and I'm very confident to say, we'll have reached full coverage coast to coast,” Chamoun said. ACV will “have the territory managers out there in the field to reach out to all the franchise dealers from a supply perspective and these other products.”
When the market normalizes in 2022, as Chamoun said is the general expectation, ACV wants to be there to capitalize.
ACV (more than just) Auctions
ACV has invested heavily in ancillary services, both through acquisitions and its own product offerings, as a way to help its clients efficiently buy and sell cars. Last quarter, Chamoun said that its transportation division “has expanded significantly over the past year and it’s been a key enabler of attracting new buyers to the platform.” He said ACV Capital, which offers short-term inventory financing, “has been gaining a lot of momentum.” He said newly acquired MAX Digital complements existing ACV services through "pricing guidance, merchandising and inventory management products create data driven insights.”
“I think it's clear that we have created some exciting new avenues of long-term growth for ACV by leveraging our powerful data capabilities, expanding features across our technology platform and driving adoption across our growing suite of digital solutions,” Chamoun said. “We believe this idea of not only being a great marketplace but having this end-to-end platform of services is going extremely well.”
A full quarter later, Chamoun will get another chance to explain the totality of ACV’s vision.
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