Prospectus Summary
PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our Class A common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” and our consolidated financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise requires, all references in this prospectus to “ACV Auctions,” “ACV,” the “company,” “we,” “our,” “us” or similar terms refer to ACV Auctions Inc. and its subsidiaries.Our Mission
Our mission is to build and enable the most trusted and efficient digital marketplaces for buying and selling used vehicles with transparency and comprehensive data that was previously unimaginable.
Our Company
We provide a vibrant digital marketplace for wholesale vehicle transactions and data services that offer transparent and accurate vehicle information to our customers. Our platform leverages data insights and technology to power our digital marketplace and data services, enabling our dealers and commercial partners to buy, sell, and value vehicles with confidence and efficiency. We strive to solve the challenges that the used automotive industry has faced for generations and provide powerful technology-enabled capabilities to our dealers and commercial partners who fulfill a critical role in the automotive ecosystem. Since inception, we have facilitated over 750,000 wholesale transactions between over 21,000 of our dealers and commercial partners. We help dealers source and manage inventory and accurately price their vehicles as well as process payments, transfer titles and manage arbitrations, and finance and transport vehicles. Our platform encompasses:
The U.S. automotive market is a large and complex industry with an estimated 78 million units sold in 2019, generating approximately $1.7 trillion in sales between retail and wholesale markets. Our primary business focuses on the wholesale market, a key channel for used inventory acquisition and disposition for dealers and commercial consignors. In the wholesale market, there are an estimated 22 million used vehicles that are bought and sold annually, generating over $230 billion in sales and representing approximately 14% of the total U.S. automotive market and approximately 27% of all units sold. There are approximately 9 million dealer wholesale units that are transacted in the wholesale marketplace annually.1 We believe there are an additional approximately 5 million dealer wholesale units in the market that are transacted annually outside of established wholesale channels through direct dealer-to-dealer sales. There are also approximately 8 million units in the commercial wholesale market, sourced mainly through off-rental, off-lease, and repossessions.2 Traditional auctions play a major role in the wholesale market, which we estimate account for 50% of wholesale transactions, while the remaining transactions are completed directly or through an intermediary outside of a traditional auction.3 Even though many aspects of the automotive industry, such as retail sales and marketing, have adapted to embrace digitization, the wholesale market has been slower to transition and continues to be characterized by significant time wasted, high costs, limited vehicle and condition data, and distrust among buyers and sellers.
We power our marketplace with technology-driven products and value-added services that address the entire transaction journey, ranging from pre-inspection scheduling to post-auction services including title transferability verification, payment processing, financing, and transportation, and facilitate transactions both on and off our marketplace. Our comprehensive suite of services include ACV Transportation, ACV Capital, and our Go Green assurance, which help create a seamless and frictionless buying and selling experience for our customers to further enhance our digital marketplace. We also provide data services to our customers for use outside of our marketplace. Our True360 Reports are used by dealers and commercial partners to provide transparent vehicle information to potential buyers, including dealers as well as consumers. We believe the data and technology services enabled by our platform can bring value to the entire automotive industry and transform both wholesale and retail markets.
Our platform benefits from a virtuous cycle driven by our scaled, digital marketplace and the data and technology we leverage every day. More buyers and sellers engaging on our marketplace drives greater liquidity and greater vehicle selection, which leads to an overall better marketplace experience. This leads to greater scale, driving more vehicle and market data that helps grow our data and technology moat. As we collect more vehicle and market data, we are able to provide greater efficiency to buyers and sellers through more products, which in turn drives greater marketplace supply and scale. For example, our data and technology enables economies of scale that improve our value-added transportation and financing services. As we continue to grow and offer more comprehensive and efficient services, our customers can further benefit from a more streamlined, simple, and consistent experience across the full used vehicle lifecycle. These reinforcing flywheel effects continuously improve our scaled, digital marketplace, and data and technology and data for our customers, resulting in growth for our platform.
Since first going live with our offering in 2015, we have expanded from our first territory in Buffalo, New York to 125 territories, covering a substantial majority of all dealer locations within the continental United States. For the year ended December 31, 2020, 391,466 Marketplace Units were sold on our marketplace, representing a total Marketplace GMV of $3.3 billion, up 62.1% and 86.2%, respectively, from the same period in 2019. We generate revenue from auction fees charged to customers for transacting on our digital marketplace and we also generate revenue from the sale of value-added and data services such as ACV Transportation, ACV Capital, Go Green assurance, and True360 Reports. Because our definition of Marketplace Units does not include vehicles inspected but not sold on our digital marketplace, Marketplace GMV does not represent revenue earned by us. For the year ended December 31, 2020, we generated revenue of $208.4 million, up 95.0% from the same period in
2019, a net loss of $41.0 million and Adjusted EBITDA of $(30.8) million compared to a net loss of $77.2 million and Adjusted EBITDA of $(76.4) million for the same period in 2019. We continue to invest in growth to scale our company responsibly and drive towards profitability. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating and Financial Metrics” for additional information on Marketplace Units, Marketplace GMV, and Adjusted EBITDA.
Our Industry
Our Opportunity
There are an estimated 22 million wholesale units that are transacted in the United States. Based on our average fee per unit sold in 2020 of $494, we estimate there is a total addressable market opportunity of $10.7 billion for our core auction marketplace offering, including transportation services. We believe that our digital marketplace addresses the limitations of traditional and hybrid auctions, and enables us to be successful in attracting dealers and commercial partners, including those who have historically not relied on auctions for inventory management.
We have built a robust digital marketplace and data-driven platform that can also address similar dealer challenges across the global wholesale market. While we are currently focused on the U.S. used vehicle market, which represents 36% of the global market,8 we believe the international opportunity is at least as large.
As we continue to scale our platform and invest in our business, we expect that our total addressable market will expand with the additional value-added marketplace and data services we provide to dealers and commercial partners. For example, in 2019, there were approximately 29 million vehicles sold by dealers to consumers,9 and we believe this represents a significant opportunity for our True360 Reports.
We are actively assessing opportunities to expand internationally and various expansion modes, including organic growth, partnerships and acquisitions. We are initially focused on expansion into Canada, but we plan to assess global expansion opportunities in the future. Based on our international strategy and our research into the Canadian market, we believe we may enter Canada in 2022 or possibly earlier. However, we intend to selectively evaluate potential opportunities for international expansion and cannot make any assurances as to timing. International expansion will come with various corresponding challenges, including new competitors and additional regulatory and legal obligations. International expansion will necessitate that we invest in additional sales, engineering, and administrative personnel, as well as incur additional costs associated with new compliance burdens.
Dealer Challenges
Independent and franchise dealers fulfill a critical role in the automotive industry ecosystem and are the main source of used vehicles for the retail and wholesale markets. Dealers bring ease and convenience to the consumer vehicle buying process, including local availability of vehicles, servicing, and financing. Dealers face a significant number of pain points that oftentimes challenge their ability to run their businesses efficiently and profitably.
Inefficiencies in the Traditional and Hybrid Auction Processes
Difficulty Effectively Sourcing and Selling Inventory
Inability to Fully Assess Vehicle Condition
Lack of Pricing Guidance
Our Platform
Our platform leverages data and technology to power our digital marketplace and data services, enabling our dealers and commercial partners to buy, sell, and value vehicles with confidence and efficiency. Our digital marketplace offerings include our core auction offering and value-added services, ACV Transportation, ACV Capital, and our Go Green assurance. Our data services provide insights into the condition and value of used vehicles for transactions both on and off our marketplace. Our data and technology platform includes inspection, vehicle intelligence, marketplace enablement, and operations automation.
Digital Marketplace
Data Services
Data and Technology
Value Proposition to Our Customers
Our competitive advantages are driven by our ability to enable trust, transparency, and confidence in an industry that has historically lacked these qualities. Our aim is to provide a streamlined, simple and consistent experience for our customers so they are able to shift their focus to the upstream parts of their businesses that matter most.
We Provide Unbiased Accuracy and Transparency
We Provide a Quick and Efficient Channel for Sourcing and Selling Inventory
We Hold Ourselves Accountable and Responsible
We Drive Deeper Insights through Data Aggregation to Value Vehicles Better and Optimize our Marketplace Experience
We Provide a Holistic Solution for Wholesale Vehicle Acquisition and Disposition
We Supplement Our Digital Platform with Dedicated Account Management and Customer Service
Why We Win
leadership team is composed of seasoned executives with demonstrated track records of scaling businesses across auto, consumer, and marketplace companies.
Our Growth Strategies
Competition
We mainly compete with large, national offline vehicle auction companies, such as Manheim, a subsidiary of Cox Enterprises, Inc., and KAR Auction Services. The offline vehicle auction market in North America is largely consolidated, with Manheim and KAR Auction Services serving as large players in the market, accounting for an estimated 70% of the wholesale auction market. Both of these traditional offline vehicle auction companies are expanding into the online channel and have launched online auctions in connection with their physical auctions. We also compete with a number of smaller digital auction companies, as well as smaller chains of auctions and independent auctions.
Risk Factors Summary
We have a limited operating history, and have experienced net losses in each annual period since inception. We are not certain whether or when we will achieve or maintain profitability in the future. Our future success depends on our ability to compete successfully and to successfully adapt to
industry changes over time. For these and other reasons described more fully in the section titled “Risk Factors” below, we may not be able to realize the full benefits of our strengths or be able to successfully execute all or part of our strategy. Accordingly, before investing in our Class A common stock, you should consider our prospects in light of the costs, uncertainties and difficulties frequently encountered by companies in a similar stage of development or industry as ours. Some of the more significant challenges include the following:
Corporate Information
We were incorporated in Delaware in December 2014. Our principal executive offices are located at 640 Ellicott Street, #321, Buffalo, New York 14203, and our telephone number is (800) 553-4070. Our website address is www.acvauctions.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider information on our website to be part of this prospectus.
Implications of Being an Emerging Growth Company
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We may take advantage of certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm under Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and any golden parachute payments. We may take advantage of these exemptions for up to five years or until we are no longer an emerging growth company, whichever is earlier. In addition, the JOBS Act provides that an “emerging growth company” can delay adopting new or revised accounting standards until those standards apply to private companies. We have elected to use the extended transition period under the JOBS Act. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.