Online used car auction platform ACV Auctions (NASDAQ:ACVA) reported Q2 CY2024 results exceeding Wall Street analysts' expectations, with revenue up 29.3% year on year to $160.6 million. Guidance for next quarter's revenue was also better than expected at $160 million at the midpoint, 1.3% above analysts' estimates. It made a GAAP loss of $0.10 per share, down from its loss of $0.10 per share in the same quarter last year.
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ACV Auctions (ACVA) Q2 CY2024 Highlights:
- Revenue: $160.6 million vs analyst estimates of $156.3 million (2.8% beat)
- EPS: -$0.10 vs analyst expectations of -$0.11 (in line)
- Revenue Guidance for Q3 CY2024 is $160 million at the midpoint, above analyst estimates of $158 million
- The company slightly lifted its revenue guidance for the full year from $617.5 million to $620 million at the midpoint
- EBITDA Margin: 4.4%, up from -2.8% in the same quarter last year
- Free Cash Flow was -$4.62 million, down from $34.39 million in the previous quarter
- Marketplace Units: 186,526, up 33,378 year on year
- Market Capitalization: $2.49 billion
“We are very pleased with our second quarter results, delivering revenue above the high-end of our guidance range, continued margin expansion, and strong sequential growth in Adjusted EBITDA,” said George Chamoun, CEO of ACV.
Founded in 2014, ACV Auctions (NASDAQ:ACVA) is an online auction marketplace for car dealers and wholesalers to buy and sell used cars.
Online Marketplace
Marketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission-paying sellers, generating flywheel scale effects that feed back into further customer acquisition.
Sales Growth
ACV Auctions's revenue growth over the last three years has been strong, averaging 25.9% annually. This quarter, ACV Auctions beat analysts' estimates and reported solid 29.3% year-on-year revenue growth.
Guidance for the next quarter indicates ACV Auctions is expecting revenue to grow 34.4% year on year to $160 million, improving from the 12.9% year-on-year increase it recorded in the comparable quarter last year. Ahead of the earnings results, analysts were projecting sales to grow 28.8% over the next 12 months.
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Usage Growth
As an online marketplace, ACV Auctions generates revenue growth by increasing both the number of units on its platform and the average order size in dollars.
Over the last two years, ACV Auctions's units sold, a key performance metric for the company, grew 7.7% annually to 186,526. This is decent growth for a consumer internet company.
In Q2, ACV Auctions added 33,378 units sold, translating into 21.8% year-on-year growth.
Revenue Per Unit
Average revenue per unit (ARPU) is a critical metric to track for consumer internet businesses like ACV Auctions because it measures how much the company earns in transaction fees from each unit. Furthermore, ARPU gives us unique insights as it's a function of a user's average order size and ACV Auctions's take rate, or "cut", on each order.
ACV Auctions's ARPU growth has been decent over the last two years, averaging 7.3%. The company's ability to increase prices while growing its units sold demonstrates the value of its platform. This quarter, ARPU grew 6.2% year on year to $861.13 per unit.
Key Takeaways from ACV Auctions's Q2 Results
It was great to see ACV Auctions increase its number of units this quarter. We were also glad it produced solid revenue growth. That the company lifted full year revenue guidance was a positive read for demand trends. Overall, this quarter was mixed but with some key positives. The stock remained flat at $14.85 immediately following the results.
So should you invest in ACV Auctions right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.