Shares of ACV Auctions (ACVA 2.09%) soared Thursday after the online wholesale vehicle marketplace operator posted strong results for its fourth quarter despite challenging conditions in the used car industry. Investors also liked the company's guidance.
As a result, ACV stock finished the session up by 17.2%.
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ACV revs higher
Revenue in the quarter jumped 21% to $118.4 million, which matched the consensus estimate. Management said the company continued to gain market share even as dealer inventories were low, and it saw promising trends in new vehicle production and retail sales going forward.
Revenues from the company's core marketplace and service segment rose 23% to $104 million even as marketplace gross merchandise volume (GMV) was up just 6% to $1.8 billion and marketplace units sold rose 15% to 143,999. That reflects both that wholesale prices fell and the company's take rate moved higher, which supported its expanding margins.
On the bottom line, ACV's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss narrowed from $13 million in Q4 2022 to $5 million, and its generally accepted accounting principles (GAAP) loss per share also improved from $0.16 in the prior-year period to $0.14, which beat estimates by a penny.
"Our strong market position and competitive moat resulted in continued market share gains and accelerated revenue growth in the quarter," said CEO George Chamoun.
What's next for ACV
Chamoun also expressed optimism for 2024. "We expect market headwinds to ease resulting in modest growth in dealer wholesale industry volumes," he said.
For 2024, ACV expects revenue growth to accelerate to between 27% and 30% from just 14% in 2023, giving it a top line of between $610 million and $625 million. That range was well ahead of analysts' consensus estimate of $581.1 million. Management also expects the company to turn profitable this year with a slight profit on an adjusted basis.
With accelerating revenue growth and an increasing market share, it's clear that ACV Auctions is moving in the right direction. It's not surprising that investors rewarded it for its latest round of results.
