ACV Auctions aims to balance a growth mindset with a clear path to profitability.
That was one of CEO George Chamoun's opening statements during the company’s Nov. 9 third quarter earnings call. The Buffalo company hit $105 million in revenue in Q3 2022, a 15% year-over-year increase.
ACV’s business continues to surround its flagship online marketplace for automotive dealers with other products and services. Given the auto industry’s market conditions, however, the company lowered its 2022 end-of-year projections from $427 million to $432 million, which was predicted in August, to $421 million to $424 million.
The business also tweaked its expected 2022 adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) from a loss of $57 million to $59 million projected in the Q2 earnings report to a loss of $59 million to $61 million. EBITDA is a standard tool for measuring corporate profits.
ACV’s shares remain significantly lower than its $25 IPO in March 2021, decreasing to below $7 this week, just as low as Business First reported the stock price in August.
ACV’s response to market conditions
The company’s franchise dealership penetration increased to 33% across the U.S. But with dealerships generally selling fewer cars, ACV’s marketplace units dipped from 141,000 in Q3 2021 to 133,000 in Q3 2022.
Marketplace units are the number of vehicles transacted on ACV’s digital marketplace, according to an earnings press release.
With the state of the economy and auto industry plus inflationary costs, ACV has increased its pricing twice over the past 14 months. The latest bump was a few weeks ago, meaning it didn’t impact Q3 but could affect Q4, according to Bill Zerella, ACV chief financial officer.
The company has also worked to alleviate operating costs.
2022's total operating expenses are 24% of year-over-year growth. That’s an improvement from 56% of year-over-year growth in 2021, according to the earnings call presentation.
Chamoun said ACV is positioned for strong growth when market conditions improve.
“We feel good,” he said on the earnings call. “We’re being disciplined.”
