ACV Auctions updates 2025 guidance, targets 19% revenue growth and over 100% adjusted EBITDA increase amid market headwinds

Earnings Call Insights: ACV Auctions Inc. (ACVA) Q3 2025

MANAGEMENT VIEW

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CEO George Chamoun opened by stating ACV delivered record revenue in Q3 despite challenging market conditions, led by strong execution in the dealer wholesale business, expanded dealer network, and value-added solutions. ACV Transport and Capital also delivered record revenue. Chamoun highlighted, "we have updated our 2025 guidance to reflect continuing crosscurrents in the broader macro environment, while still expecting to deliver strong top line growth of 19% year-over-year. Furthermore, we expect to deliver strong adjusted EBITDA growth of over 100% while continuing to invest in our long-term growth objectives."

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Chamoun detailed marketplace milestones: "In Q3, we achieved new quarterly milestones with over 10,000 sellers and 14,000 buyers transacting in our marketplace. Our franchise rooftop penetration also achieved a new milestone, reaching 35% in the quarter."

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ACV’s AI-enabled solutions drove growth and market share gains, with geographic expansion showing "unit growth exceeded 20% in Q3" in Southern California and the Midwest. The company is enhancing field engagement in certain emerging regions.

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ClearCar and ACV MAX products saw increased adoption, with ClearCar customers raising wholesale volume by over 30%, and a recent cohort of ACV MAX dealers increasing wholesale sales by 40% after launch.

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AI-driven products like Project Viper and Virtual Lift 2.0 have inspected over 60,000 vehicles in pilot programs, with commercial launches planned for 2026. The Houston remarketing center completed its soft launch, and more locations are planned.

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CFO William Zerella stated, "Revenue of $200 million grew 16% year-over-year and was at the midpoint of our guidance range, despite market headwinds in the last 2 months of the quarter. Adjusted EBITDA of $19 million was at the midpoint of guidance, with margins improving 280 basis points year-over-year."

OUTLOOK

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ACV revised its Q4 guidance, expecting revenue of $180 million to $184 million, and adjusted EBITDA of $5 million to $7 million, citing "the dealer wholesale market to decline in the mid-single digits in Q4, which is more than previously anticipated."

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Full-year 2025 revenue guidance was updated to $756 million to $760 million, representing 19% growth, and adjusted EBITDA to $56 million to $58 million, or about 100% growth.

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Initial 2026 planning assumes the dealer wholesale market will be flat, with field engagement enhancements and new innovations expected to support further market share gains.

FINANCIAL RESULTS

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Q3 revenue was $200 million, up 16% year-over-year. Adjusted EBITDA reached $19 million. Non-GAAP net income was $11 million. Auction and Assurance revenue was 56% of total and grew 10% year-over-year, while Marketplace Services revenue was 40% of total and grew 28% year-over-year.

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Adjusted EBITDA included a $7.6 million class action settlement benefit, almost entirely offset by $7 million in ACV Capital reserves. Adjusted EBITDA excludes $18.7 million of operating expenses related to the Tricolor bankruptcy.

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Non-GAAP cost of revenue as a percentage of revenue decreased 100 basis points year-over-year, benefiting from the lawsuit credit. Excluding this, cost of revenue would have increased by 300 basis points due to higher arbitration costs.

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ACV ended Q3 with $316 million in cash and cash equivalents and $220 million of debt.

Q&A

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Christopher Pierce, Needham & Company, asked if the dealer wholesale market had changed structurally and about competitive dynamics. Chamoun responded, "I don't think we should assume that there's a long-term structural change... it'd be way too early to say with all the macro events that the dealer market has structurally changed," and pointed to significant quarter-over-quarter unit growth and market share gains despite challenges.

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Rajat Gupta, JPMorgan, inquired about ARPU moderation and market share expectations. Chamoun explained the company is using targeted regional pricing to gain share in emerging markets and expects ARPU to rise in Q4. Zerella added, "Q3 of this year was our biggest quarter of the year...again, we had record revenue in Q3 and record volume for the full year."

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Bob Labick, CJS Securities, questioned ARPU trends as dealers retain higher-value cars. Chamoun advised, "I would just not have ARPU going up materially next year or at all," and discussed conversion rates normalizing as macro factors stabilize.

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Andrew Boone, Citizens, asked about ACV Capital’s risk management. Zerella explained reserve increases due to a large bankruptcy and stated the historical loss rate assumption remains unchanged, with controls being strengthened for future scaling.

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Naved Khan, B. Riley Securities, asked about commercial volume through AutoIMS and pricing competition. Chamoun indicated commercial will remain a smaller portion in 2025, but foundational investments are underway for long-term growth, and that buy fees generally increase annually across competitors.

SENTIMENT ANALYSIS

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Analysts’ tone was neutral to slightly cautious, with recurring questions about market normalization, pricing, and ARPU stability. Concerns centered on competitive dynamics, ARPU trends, and ACV Capital risk management.

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Management maintained a confident yet measured tone, emphasizing resilience in challenging conditions and focus on long-term growth, while acknowledging headwinds and adjusting forecasts accordingly. Chamoun said, “We are quickly overcoming these market challenges by continuing to enhance our technology and operating models, ultimately making us even more resilient.”

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Compared to the previous quarter, both management and analysts shifted from discussing potential upside and market recovery to acknowledging persisting headwinds and focusing on risk mitigation, operational discipline, and prudent guidance.

QUARTER-OVER-QUARTER COMPARISON

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Guidance for full-year revenue was reduced from $765 million–$775 million in Q2 to $756 million–$760 million in Q3, reflecting a more conservative outlook amid market weakness.

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Adjusted EBITDA guidance was lowered from $68 million–$72 million to $56 million–$58 million, as macro pressures and higher arbitration costs were incorporated.

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Management shifted from highlighting double-digit market share targets to a more cautious stance, assuming a flat dealer wholesale market for 2026.

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Analyst focus moved from growth acceleration and product innovation to near-term profitability, ARPU trends, risk management, and operational adjustments.

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Management’s confidence remained, but language became more prudent, with explicit acknowledgment of uncertainties and a need for operational rigor.

RISKS AND CONCERNS

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Management cited challenging market conditions, above-normal vehicle price depreciation, and continued market deceleration affecting volumes and conversion rates.

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Elevated arbitration costs impacted margins, and are expected to remain high in Q4.

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ACV Capital’s exposure to a customer bankruptcy led to significant reserves and a more cautious approach to lending in the near term.

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Management is enhancing field engagement and internal controls, and expects cost normalization and operational improvements in 2026.

FINAL TAKEAWAY

ACV Auctions delivered record revenue and continued market share gains in Q3 2025, but faced headwinds from market deceleration, elevated costs, and a customer bankruptcy. Management responded by revising guidance for Q4 and full-year 2025, focusing on prudent risk management, operational improvements, and strategic investments in AI-driven solutions and commercial expansion. While near-term challenges persist, leadership emphasized a resilient business model, robust liquidity, and ongoing innovation to support long-term growth and shareholder value.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/acva/earnings/transcripts]

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