ACV Auctions Inc. (ACVA) 2026 Q2 法說會逐字稿

Greetings. Welcome to the ACV Q2 2026 earnings conference call.

(Operator Instructions) Please note: This conference is being recorded.

I will now turn the conference over to Tim Fox, Vice President of Investor Relations. Thank you, Tim. You may begin.

Good afternoon and thank you for joining ACV's conference call to discuss our second-quarter 2026 financial results.

With me on the call today are George Chamoun, Chief Executive Officer; and Bill Zerella, Chief Financial Officer.

Before we get started, please note that today's comments include forward-looking statements, including statements regarding future financial guidance.

These forward-looking statements are subject to risks and uncertainties, and involve factors that could cause actual results to differ materially from those expressed or implied by such statements.

A discussion of the risks and uncertainties related to our business can be found in our SEC filings and in today's press release, both of which can be found on our Investor Relations website.

During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is provided in today's earnings materials, which can also be found on our Investor Relations website.

With that, let me turn the call over to George.

Thanks, Tim. Good afternoon, everyone, and thank you for joining us.

We are very pleased with our second-quarter performance and execution, while facing a challenging market environment. We delivered record revenue, with adjusted EBITDA exceeding the high end of guidance. In addition to solid financial results, we made significant progress on our three key objectives.

First, we continue to gain market share and expand our dealer-partner network to a new record. The combination of increasing our field capacity and penetration of our no-reserve offering contributed to our growth.

Second, we had another strong quarter of performance in ACV Transport and ACV Capital, along with growing adoption of our value-added dealer solutions.

And third, we are gaining traction with our emerging growth initiatives, including very strong demand for VIPER and momentum in the commercial-wholesale segment.

While macro headwinds caused conversion rates to compress below expectations in June and July, we believe conditions will begin to stabilize and remain committed to delivering double-digit revenue growth and increased adjusted EBITDA, while investing in our exciting growth objectives.

We're confident that executing on this profitable growth strategy will create significant long-term shareholder value.

With that, let's turn to a recap of our results on slide 4. We delivered another record revenue quarter, with growth of 10%, despite continuing headwinds in the dealer-wholesale market, with volumes contracting approximately 6% year over year. And we continue to gain market share, selling 211,000 vehicles in the quarter.

Next, on slide 5, we focus on the pillars of our strategy to maximize long-term shareholder value by delivering innovation that is driving growth and scale.

I will begin with growth. On slide 7, I will highlight our growth initiatives in dealer wholesale. As we discussed last quarter, we are investing in additional field capacity to broaden our regional-growth performance, which resulted in a record number of dealer visits, inspections, and dealers transacting on our marketplace.

We expect that these investments, along with improving conversion rates, will yield accelerated unit growth in the coming quarters.

We also continue to leverage machine learning, combining inspection data and market data to provide real-time pricing.

Our platform powers ACV guarantees to sellers and delivers no-reserve auctions to buyers. This offering remains the fastest-growing channel on our marketplace that benefits sellers, buyers, and ACV.

We're removing seller-market risk, accelerating bidder engagement, and increasing buyer satisfaction, while delivering 100% conversion rate. We're confident our guaranteed offering will continue to be a key driver of market-share gains.

Turning to slide 8, let's review our Marketplace Services offerings. The Transport team had strong execution in Q2, with 19% revenue growth and 125,000 transports delivered. By leveraging AI to optimize Transport pricing, we continue to drive strong growth and operating efficiency.

And despite the increase in diesel fuel during the quarter, the team executed incredibly well, delivering a Transport revenue margin and attach rate that remained in line with our midterm target.

Lastly, our off-platform Transport service continues to gain traction from our dealer-partners, creating additional growth opportunities.

ACV Capital also delivered strong performance, with attach rates reaching a new record in the high-teens. Our expanded go-to-market strategy, new product offerings, and process enhancements to manage portfolio risk resulted in another strong quarter for the ACV Capital team.

On slide 9, we highlight how we're further differentiating ACV and creating additional growth opportunities with our suite of AI-driven products.

ClearCar and ACV Max are adding tremendous value to our dealer-partners and also contributing to our wholesale market-share gains.

By enabling our dealer-partners to optimize inventory and automate vehicle selling and buying, we strengthen their ability to source more vehicles from consumers.

As a result, our top 100 ClearCar customers doubled the volume of quarterly wholesale transactions on ACV after launching ClearCar.

While ClearCar has proven to be a highly effective sourcing tool for our dealer-partners, while increasing wholesale volumes on ACV, we are confident that VIPER delivers even more value through a powerful suite of ACV-enabled solutions.

We have received very positive feedback during our successful early-access beta program and are pleased that today marks the official launch of commercial availability for VIPER.

We are already engaged with half of the top 50 dealer groups in the country and our pipeline continues to grow.

Through VIPER, our industry-leading inspection data and vehicle-pricing capabilities enables dealers to unlock consumer-vehicle acquisition at scale in the service lane and seamlessly identify service-upsell opportunities.

We are also on track to integrate with the leading dealer-software vendors to create a truly seamless experience in dealership-service lines.

We remain on track to grow VIPER's footprint in coming quarters, offering a VIPER bundle with wholesale to create a powerful new lever to drive unit growth and expand our network.

In addition, we have also started to leverage VIPER for vehicle inspections at our remarketing centers. While it's still early, we are confident that this solution will be an additional lever to drive improved unit economics.

Lastly, as we highlighted in recent quarters, the internal adoption of AI tools across ACV has enabled us to gain meaningful velocity and efficiency. As such, we have even more confidence in delivering our differentiated product roadmap to support our growth objectives.

Next, on slide 10, I'll wrap up the growth section with our commercial-wholesale strategy, a large adjacent market, with both upstream and downstream opportunities.

Our team has made significant progress on our software platform, and we believe this new digital model, an end-to-end experience, will transform commercial-vehicle remarketing.

Our differentiated offering is attracting large commercial consignors. We recently began remarketing vehicles from a top 5 fleet consignor and are in the final stages of securing a second large-scale consignor.

We're also integrating with a large captive finance off-lease company and adding another top 4 rental-car consigner to our marketplace.

The commercial segment provides another exciting growth lever for ACV, and we are confident that we can accelerate wholesale volumes in the coming quarters.

With that, I'll hand over to Bill to take you through our financial results and how we're driving growth at scale.

Thanks, George. Thank you for joining us today.

ACV's second-quarter results reinforce our commitment to deliver profitable growth, while investing to drive dealer-wholesale market-share gains and to support key growth initiatives.

On slide 12, let's begin with a brief recap of our second-quarter results. Revenue of $214 million was within our guidance range and grew 10% year over year compared to strong results in Q2 '25.

Adjusted EBITDA of 21 million exceeded the high end of guidance, reflecting strong unit economics and expense discipline. Finally, non-GAAP net income of 10 million was at the high end of our guidance range.

Next, on slide 13, let's review additional revenue details. Auction & Assurance revenue was 55% of total revenue and grew 6% year over year against a tough comparison of 20% growth in Q2 '25. This performance reflects approximately flat unit growth in the context of a 6% decline in the dealer-wholesale market. Auction & Assurance ARPU of $554 grew 6% year over year.

Marketplace Services revenue was 41% of total revenue and grew 17% year over year, reflecting continued strong performance for ACV Transport and ACV Capital.

Lastly, our SaaS & Data Services products comprise 4% of total revenue, with growth of 3% year over year, driven by further adoption of ACV Max.

Next, I'll review Q2 costs on slide 14. Non-GAAP cost of revenue as a percentage of revenue increased approximately 300 basis points year over year. The increase was primarily driven by a higher mix of no-reserve sales on our marketplace.

As a reminder: No-reserve sales typically have modestly higher costs than standard auction sales. However, they drive strong blended conversion rates, improved marketplace liquidity, and, importantly, are accretive to adjusted EBITDA.

In fact, we delivered record adjusted EBITDA per unit, increasing 11% year over year in Q2. Furthermore, our two most profitable regions continue to expand EBITDA per unit, with our most profitable region delivering over $300 per unit.

Non-GAAP operating expense, excluding cost of revenue as a percentage of revenue, decreased approximately 300 basis points year over year, reflecting operating leverage in our model, while continuing to invest in key growth initiatives.

Moving to slide 15, I'll frame our investment strategy, as we drive profitable growth. In 2026, we expect OpEx growth of approximately 6%, which is a decline from 12% in 2025.

As a reminder: Our 2026 OpEx includes additional go-to-market spending to support regional-growth objectives.

Even with these growth investments, adjusted EBITDA margin is expected to increase by approximately 100 basis points year over year.

Next, I will highlight our strong capital structure on slide 16. We ended Q2 with $242 million in cash and cash equivalents and $205 million in debt.

Note that our cash balance includes $175 million of marketplace flow and reflects the $50 million accelerated share-repurchase program we announced last quarter.

In terms of operating cash flow, the year-on-year decline for the first half of 2026 was primarily driven by the change in marketplace flow.

The amount of float on our balance sheet will continue to fluctuate meaningfully, based on business trends in the final two weeks of each quarter, which has a corresponding impact on operating cash flow.

Looking forward, we are expecting to generate positive operating cash flow in the back half of the year, reflecting continued adjusted EBITDA growth and margin expansion.

Turning to guidance on slide 17, we are reaffirming our 2026 revenue and adjusted EBITDA guidance, despite uncertain macroeconomic conditions, and our expectation that the dealer-wholesale market will begin to stabilize in the back half of this year.

Now, for the details, third-quarter revenue is expected to be $219 million to $225 million, growth of 10% to 13%. Adjusted EBITDA is expected to be $21 million to $24 million, reflecting a 10% to 11% margin.

We continue to expect 2026 revenue of $845 million to $855 million, growth of 11% to 13%. Note that full-year revenue guidance assumes that our go-to-market investments are expected to drive modestly higher growth in the second half of the year.

We continue to expect 2026 adjusted EBITDA to be $73 million to $77 million, growth of approximately 27% year over year.

We are expecting 2026 cost of revenue as a percentage of revenue to be modestly higher than in 2025,, more than offset by OpEx efficiencies.

Lastly, we are expecting non-GAAP OpEx, excluding cost of revenue, to grow approximately 6% year over year, as we continue to drive further cost optimizations.

With that, let me turn it back to George.

Thanks, Bill.

Turning to slide 18, I will summarize, we are pleased with our Q2 execution, delivering record adjusted EBITDA of $21 million, while navigating through challenging market conditions.

We continue to enhance our technology and operating models, ultimately making us more resilient. We are attracting new dealer and commercial partners to our marketplace, and expanding our addressable market, which positions ACV for attractive growth, as market conditions improve.

We are delivering on an exciting product roadmap, powered by ACV AI, to further differentiate ACV and drive operating efficiencies.

With VIPER now available and our commercial offering ready, we are entering an exciting new phase of growth.

We are focused on achieving strong adjusted EBITDA growth and delivering on our midterm targets that we believe will drive significant shareholder value. We are committed to achieving these results, while building a world-class team to deliver on our goals.

Before we begin the Q&A session, I would like to thank Bill for his partnership and the contributions he's made during his tenure as CFO.

He has been instrumental in our evolution, supporting the company through its IPO and scaling ACV into the industry leader we are today. We wish him the best in his next chapter.

I'm also very pleased to welcome Tim into his new role of CFO. Tim is exceptionally well suited, bringing proven financial acumen and a deep understanding of ACV strategy, operations, and growth opportunities.

He has played a pivotal role in shaping our financial strategy and communicating our vision to the investment community. We are confident he is the right leader to help advance our strategy to create value for shareholders.

In turn, I'll turn it over to Tim so he can share closing thoughts.

Thank you, George.

Look, I'm very honored to be named CFO and to continue working with you and the ACV leadership team to further propel our growth trajectory and build on a really strong foundation.

There's really four key themes that I'd like to stress. One, our business model continues to deliver, with adjusted EBITDA per unit setting a new record in the quarter.

Secondly, our new field investments are beginning to pay dividends. If we look at the five emerging regions where we've leaned in mostly on go-to-market capacity, we delivered mid-teens unit growth in the second quarter. It's starting to really pay off.

Thirdly, VIPER is at an exciting inflection point, as we begin to secure commercial agreements and scale production to support strong growth in 2027.

And lastly, our differentiated commercial strategy is gaining real traction with major commercial consignors, and we're confident it will be another meaningful growth driver, going forward.

And lastly, of course, I'm supported by an incredible team here at ACV and look forward to executing on our strategy.

With that, I'll turn the call over to the operator to begin our Q&A session.

Thank you. We will now be conducting a question-and-answer session.

(Operator Instructions)

Rajat Gupta, JP Morgan.

Great. Thanks for taking the questions. I want to wish Bill the best of luck and also congratulate Tim on the appointment. I look forward to working with you more closely.

So maybe just on the quarter, it looks like you beat EBITDA numbers slightly. You're reiterating the four-year EBITDA guidance, revenue guidance, but OpEx was lowered.

I'm curious if you could help understand the moving pieces there. It implied gross margins are trending lower. Maybe, if you could help clarify that and then, I'll like a quick follow-up. Thanks.

Sure. I'll start and then, I'll -- Tim chime in a little bit more.

Really, we're really showing commitment to hitting our EBIT numbers, regardless of all the macro challenges, regardless of whatever is going on.

We mentioned that there was a different conversion rates. But even with some of these challenges, you're just seeing strong execution.

And we've been really informing our investors that revenue margin has changed a little bit over time, but EBIT is growing.

And I think, also, Bill shared on the call that, in our largest regions, we hit all-time highs and EBITDA per unit so very strong business model, very strong management, from an overall OpEx perspective.

You are starting to see AI help us become more efficient so lots of benefits over here.

But, Tim, any more -- you want to chime in?

I think that covers it. We mentioned revenue margin is compressing a little bit more than we originally thought, but that's being more than offset by OpEx efficiencies.

And given the current market headwinds, we really just want to be prudent about our cost structure and continue to drive the focus on adjusted EBITDA expansion.

Got it. Yeah. I just wanted to follow-up on that philosophy. I know, George, we had this conversation, like, a few quarters ago on an earnings call around this philosophy on EBITDA versus maybe going for growth.

You clearly have a competitor who's scaling pretty rapidly. It's a big time. Why wouldn't you prefer to accelerate some of the investments around go-to-market to maybe just target growth a little more aggressively?

And just on a related point, would the company still be open to partnering with a strategic partner in order to maybe just help accelerate those investments, if that is a philosophy you're leading with to expect EBITDA, right now? Thanks.

Yes. I think -- Rajat, thanks for asking -- this might help clarify: We are hiring pretty maturely on the field, from a sales perspective. We have a number of roles open. We've been hiring throughout the year.

And Tim shared in his remarks that, in a handful of our regions, we really grew well year over year. So we look at the overall expense envelope. We will have more salespeople across ACV out in the field selling.

We're probably somewhere in the nature of -- let me see the quick math -- 15% to 20%, at least, more salespeople by the end of the year, maybe even a little bit higher than that.

So there will be more people out there selling. There will be more inspectors out there in the market -- hitting the market. So year over year, you'll see increase in inspectors. You'll see an increase in salespeople.

But in other parts of the organization, we've needed a little bit less folks on some of the other roles here. So what you saw here on our overall expense, we are a lot more efficient leveraging AI. We are a lot more efficient in building software. We are seeing us just be, overall, leveraging the benefits of scale.

But, yes, to your point, we are definitely leaning in more on the sales between now and the end of the year. We do think we will have -- our unit number will look better in the back half of the year is our beliefs. And we're out there going to execute on that.

On your other point, I think talking about strategic partners and things like that on a public call -- I don't think this is the right time for that. But we had -- yeah, no comment on that.

But I would say on these other efforts, we're out there. We're feeling very good about these incremental investments we're making in the field.

If you go to our website right now, you'll see we're out there recruiting for a bunch of roles. And so far, so good.

Understood. Great. Thanks for all the color. Good luck. I'll get back in queue.

Thank you.

Thanks, Rajat.

Bob Labick, CJS Securities.

(technical difficulty) --

Can you hear me? Sorry.

We can hear you now, Bob.

Yeah.

Okay. Super sorry about that. I'm not in my office so I'm clearly confused here. Anyway, congrats to Tim and Bill. It's been a real pleasure working with you so good luck, going forward. I appreciate you guys taking this call for my questions.

I wanted to dig in on the last topic we were just talking about, the number of VCIs and territory managers added. You talked about, by year end, you'll 15% to 20% more [TMs]. You'll be adding the inspectors, as well.

Where do you stand -- walk us through the ramp for these people; like, how much of the benefit has been seen, so far? Or when does that benefit of this hiring show up in the numbers, not the P&L, not their costs, but in the sales numbers and in the units and things like that?

Yeah. Thanks, Bob. I'll try to go a little bit deeper into this since we've had multiple questions.

So one is, we're doubling down by not only having our traditional territory-manager role, but we're also adding in very focused sales executives who are just opening up new rooftops.

We found that as an additional area of need. As we grow out there in the field, many of our territory managers who are selling 500 to 1,000 cars a month.

Well, they end up, at the end of the day, spending a lot of their time farming and a little bit less hunting. So we did some work across the country, opening up some sales roles. And we're finding that to be a help.

So the role of the territory manager, the role of these new sales executives, collectively, are getting us more touch points with dealers. And between the two of them, the expansion of the two, we believe we're going to have a back half of the year that's going to give us the growth that we need.

So was there a second question there?

Yeah. Just to follow-up and put that final point -- just to reiterate a comment I made towards the end of the prepared remarks, Bob, we talked earlier in the year about basically five or six emerging regions that we needed to get a little bit more field capacity out there, including VCIs.

And so what I shared was that, in five of these regions where we really leaned in quite a bit on go-to-market investment, we had mid-teens growth. Now, granted, some of them are on the smaller side of the region, but some of them are still growing at a really, really nice pace. We had one that grew in the [30%s]. So I'd say it's starting to show up in, certainly, some of these emerging regions.

We are clearly expecting it to pick up in the third quarter and then, the fourth quarter, as you can infer from our guidance. So that's really a back-half story -- and certainly into '27.

Okay. Great. And then, just as it relates to the VIPER roll-out, can you remind us your goal for where you'll end this year with units out there?

And then, really, the bigger point is the acceleration in '27 and if you're set to bring that on and if there's any goals for the number of units that will be rolled out in '27?

Yeah. Certainly. So the feedback has been tremendous. We mentioned on the call that, of the top 50 dealer groups, over 50% of them today are in some type of significant conversation with us or either already ordered VIPER or about to order VIPER.

So we're feeling really good about the pipeline developing. What we said on prior calls is that we are building over 100 of them this year, and we're starting to deploy those units.

Some dealer groups have ordered seven. Some dealer groups have ordered 20. Like, they're all different stages of ordering VIPER.

The business model is both a subscription model and, also, a commitment for wholesale, where they start to commit to selling some wholesale volume with ACV. So there's two benefits of the business model.

Next year, although it's obviously a little early now, but I would say, our goals are over 500 units next year. I don't know. It could be significantly more than that, but it's still early. I would say it's going to be a big number for us.

Well, with the amount of enthusiasm we have right now, I don't know if it could be 1,000 units. Who knows? But it's going to be over 500. It's going to be out there.

We're going to listen to our customers. And if they want us to build a lot of these, which it looks like they do, we're just going to build -- go out there, be the leader of the category overnight.

Sounds great. Thank you very much.

Andrew Boone, Citizens.

Thanks so much for taking the questions.

I wanted to talk about macro and just the conversion-rate issues that you guys saw in the quarter. Can you unpack that?

And then, just be very specific about the stabilization that you guys talked about for the guidance for the back half, is that an improvement from current levels? Or what exactly does stabilization mean?

And then, on the commercial opportunity, it would be great to just understand what you guys are seeing today? What is attracting new large consignors to the marketplace? And what has to take place for this to be a larger portion of the business on a go-forward basis? Thank you.

Yeah. First, on the price disconnect between sellers and buyers -- what was it? 500 basis points or 600 basis points?

600 basis points impact on unit growth.

600 basis points impact. So why would this happen is, many of you read that used-car values continue to go down. And as these used-car values go down, sellers are asking for more than the buyers are willing to pay.

But this dislocation is not new to us. We've seen it in the past. It's typically temporary. And I'll tell you why we believe it's temporary.

Dealers aren't here to collect cars in their lots. These values are going down. They're paying floor-plan fees. And they got to sell these cars.

So we do think there will be a shift back to wholesale and being serious about wholesaling these vehicles. So we feel good that we're out there. We're reaching all-time highs -- the number of dealers we're out inspecting cars with, number of sellers, number of touch points.

So we really had the listings number, coming into the last quarter. We would just have a little bit higher conversion rate. We would all then -- jumping up and down. And this usually corrects itself.

Any more, Tim, you want to add in?

Yeah. Just to emphasize the point about listings, we actually nailed the forecast with listings, which, in this market, is a real testament to the team -- the growing team out there -- the value that we're bringing.

We did mention we have record number of sellers and buyers. So that top-of-funnel momentum has been great, and it's very important.

You get about a 300 basis points to 350 basis points contraction in the conversion rate for the quarter. Unfortunately, it has a pretty dramatic effect on units.

But, again, as George said, we've seen this playbook before. It's going to be temporary. It's self-correcting over a month or two, typically. And so we do expect that the market will be better, certainly, from a conversion rate perspective.

And from a year-over-year growth perspective, the comps actually get a little bit easier in the back half so whether they're flat to maybe just slightly down, but definitely better than we saw -- in June, was down [6]. July just came out, that was down [8].

Can you double down on that? That's dealer wholesale.

Dealer wholesale, right.

Yeah. So this is Tim speaking to third-party data from NAAA, which said dealer wholesale was down 8%.

In July, yeah. So I think these are direct reflection of that price dislocation out there.

But we do certainly expect the market to be, at least, supportive in the back half and not be a continued headwind like this.

Anything on commercial?

Oh, right, the other question. Commercial has been very exciting. I should have led that question.

We've had a great few months in commercial. We've got some of the largest fleet companies starting to sell cars. At least, two of the big guys are starting to sell cars on our platform, which is very exciting.

But important vehicles because the buyers love these cars, great diversification of our marketplace. So we've had further momentum in the repo category; further momentum across the board, both upstream and downstream.

So what am I threading here, Tim?

I'd say that we are expecting, to your question about growth, commercial volumes to begin to contribute it more meaningfully in the back half, particularly in the fourth quarter.

But the software release they've been hearing us talking about for too many quarters is now live and out there operationalizing. And we're selling cars so this really unique integration we've done with AutoIMS, where we can inspect the car upstream at a fleet location.

We've heard me talk about assessing what type of reconditioning needs to be done or not with that vehicle. It's a very unique integration we've done.

We can now go upstream to a fleet location, inspect the car, not even have to send it downstream. That software now works. We're out there and leveraging it for the first time over the last -- this, really, past period. So we're feeling really good about it.

And then, also, another important milestone is, we're opening up our second greenfield Chicago over the next 30 days. So we're very excited.

As you know, we've opened up one in Houston. And now, this one, we're opening up in Chicago. Great market opportunity. Looking forward to expanding both our upstream and downstream opportunities.

Eric Sheridan, Goldman Sachs.

Thanks for taking the question, and I'll echo the thanks for everything for Bill. And congrats, Tim, on the new role. Look forward to keep working with you with the new responsibilities.

I'll to ask a capital-allocation question. Bill's gotten too used to me asking it over the years. You've been returning capital, but you're also trying to grow the business and, especially, the mix of value-added services.

How are you guys thinking about the various return profiles of returning capital against where the stock is today, as opposed to the potential return profile that presents itself over maybe a longer-duration period of time, if you continue to invest in the business and keep driving some of the key platform initiatives, especially value-added services, forward, and just how you think about striking that right balance in the years ahead?

Thanks so much, guys.

Tim or George, you want me to take this one?

Why don't you start since he asked you and then, Tim can chime in, sure.

Yes. And thanks, Eric.

So look, we still have a really strong liquidity position. We had about $250 million in the bank at the end of the quarter, and that's after dispersing the $50 million for the ASR, which we're progressing on.

So the way we think about this is, we are continuing to invest in the business. We think it's the right level of investment.

As George mentioned, we're starting to get much more efficient on the OpEx side. And that's why we exceeded the high end of our EBITDA guidance for the quarter, despite being towards the lower end for revenue.

So we think we've got the right balance in place. The company is continually looking to make sure we maximize our investments as needed to drive share gains and unit growth.

And as Tim said, that is starting to show up in a number of regions, where we can already start to see some of that improvement in unit volume. So I think we've got the right balance today.

But, at the same time, we made a decision to buy back some stock because we thought the company was undervalued and wanted to take advantage of that, and put more shares back into the treasury.

So I don't know, George or Tim, if you want to add something to that.

No. I think that covers that. Maybe just one point about incremental margins, where, obviously, the incremental margin profile, EBITDA margin for this year is basically flattish. That's really reflecting that [$10 million] of the investment into the field capacity.

Pro forma that out, incremental margins would have been around 30%, from an EBITDA perspective. We do expect to start driving much more material incremental margins heading into 2027.

There's a lot of investment being done this year. VIPER investment will continue, but plowing a lot of investment there.

The commercial software, as George mentioned, is largely complete, from an upstream perspective. So we've got a lot of opportunity for leverage in this business, going forward.

Chris Pierce, Needham & Company.

Hey, guys. Good afternoon. If I just look at the model, I just want to understand, if we look at Marketplace Services revenue per unit -- it's very possible I'm doing the math wrong but it seems like there was a hefty jump up there.

Is that just increased Transport penetration and increased Capital penetration? Or was there something else, like pricing, actually, within the quarter there?

Yeah. I think one is, Chris, as we've talked about in the past that we've had -- we've been very successful in time, getting a great take rate for Transport, consistently growing over the years.

There's a big reason why to take ACV Transport. The buyers not only get a commitment on when vehicles are delivered, which is a huge advantage, but, also, they get additional days for arbitration and other rights. So taking ACV Transport has been a great advantage.

ACV Capital, we also mentioned on a call that the actual take rate of ACV Capital has gone up. We've done a great job of both growing ACV Capital from a take-rate perspective but also being disciplined on our approach of really backing the right dealers and having all the right process behind the scenes.

So both teams -- and one more thing on Transport is ARPU did increase in the quarter. As you know, diesel prices did go up. And I don't think everyone in the industry necessarily did as well as we did on being disciplined on how do you handle the price changes and still hitting your margin objectives.

But with the use of AI and, really, an incredible team here, we were able to absorb the challenges with diesel prices changing, make sure we're charging the right amount for a move.

So I would ,say all in all, just incredible execution, both on the Transport team and the Capital team.

Okay. Perfect. Thank you. And then, the 6% OpEx growth, the new guidance there, should we expect that to be higher than 2027 because of all these hirings you're making in ops and tech and that -- or SG&A, and that this year you're able to squeeze down expenses because of the hiring that's happened midway through the year and you'll have a larger expense base next year, on top of the additional hiring you're doing right now?

Or how do you balance that?

I think more to come is a new norm, but I would say, AI efficiency here is significant. And we can have a larger sales team, field team, while also having additional efficiency across the broader base of ACV.

So if you think about in context, there's several thousand teammates here across the board in a lot of different roles. We had several parts of our company that, as we've grown, we haven't had to hire additional folks because of the use of technology, because of the leveraging of AI.

So Chris, I think more to come, but, generally, I would say that's -- you're starting to see the new norm of a much more effective company really not needing as much personnel, as we're growing.

Okay, And then, just one last one point, (inaudible) -- I know we used to talk about the SaaS & Data business more and ACV Max and things like that, but it seems like VIPER is still on the spotlight.

Should we think about that inventory-management system and helping dealers what to source, how much to pay for it? Is that still -- is that less of a priority? Is that a space that's getting more crowded and lead gen players try to get into that space? I just want to take your temperature there.

Yeah. Chris, I'll answer that in two ways.

One, please, everyone, watch the video that Tim posted and the team posted. It's a recent dealer in the Brooklyn area who has one of the more successful dealership; like, one of these malls where you have a bunch of rooftops. You got to watch this.

And what's fascinating about how he articulates on how and why he's using ClearCar; how and why he's using ACV Max; and then, why VIPER just doubles down on that more.

And when you look at how exciting this is, he talks about how the only way for him to get to his objectives of selling a one-to-one new-to-use ratio is to effectually be able to appraise every vehicle so really listen in to the words he's talking about on this video, how he's leveraging now VIPER to operationalize what he was already using ClearCar for.

We also mentioned on the call that our top 100 customers using ClearCar have doubled their wholesale volume in ACV. So basically, we started to think about why it's a win-win.

They're buying more cars from consumers. And if we can get 10 incremental or pick a number more wholesale cars per month because of this product suite -- we've already seen this with ClearCar so we're very confident that the bundling and the integration of Max, ClearCar, and VIPER, together, offers tremendous value.

We have hardware companies we compete with. They don't have this benefit. We have software companies we compete with. They don't have this benefit.

Unless you have this total package, you can't appraise cars quickly on the fly and do the things you're going to hear about in this video. So we'll keep sharing with investors what we're up to.

But if you think about the new ACV, this is not just ACV as a wholesale company, a standalone one-trick-shop here. This is going to be the leading AI automotive company in the world. That's what we're going for.

And when you watch these videos and you hear it from the voice of the customer, you can see that we are way ahead of competition on helping them leverage AI, streamline buying cars out of their service drive, have the right inventory, and, at the end of the day, make the right decision.

So, yeah, we feel very good in where we're at.

I'm glad I asked. Thank you for that. I appreciate it. Good luck. Happy trails, Tim.

Naved Khan, B Riley Securities.

Great. Hi. Thank you for taking the question. This is Ryan Powell, on for Naved. Wanted to ask a couple on VIPER.

First off, congrats on the launch of commercial availability. So of adopting dealers, to date, how has usage trended? And we understand there are multiple benefits outside just units, but any insight into how many incremental vehicles dealers are acquiring per month with VIPER?

And then, also, second, the share of dealers that are opting for the wholesale commitments versus paying the flat fee?

Yeah. Certainly. So the types of things we're hearing from dealers are, one -- and you'll see this in the video -- they're going from appraising some of the vehicles that come to their rooftop to appraising all the vehicles. So that's one theme. That's a huge difference.

Some of the feedback we've heard, our dealers are buying 20 more cars a month. One told us 50 more cars a month. So these are big numbers. They start acquiring 20, 30, 40, 50 more cars a month from consumers.

There's one or two that are saying even bigger numbers. I don't want to put that out in the ecosystem yet because, just, we'll see what the average ends up being.

So one, yes, dealers are buying more cars. And what else they're seeing is they're also catching potential issues. Some of the other customer testimonials you'll see out there, dealers found issues on the undercarriage or on other related issues, where they would have bought a car for the wrong amount of money because of issues with the vehicle so catching issues,

Starting to upsell consumers on opportunities within their service department, like, for example, a car may need tires, they no longer need a human to go around and actually measure the tires, we can automatically detect if the vehicle needs tires so starting to do those opportunities.

So all in all, dealers are seeing this prove out. What they're asking for, which we also mentioned on the call, is better integrations with the third parties.

And what you'll hear is -- and what we're hearing directly is -- there are a handful of vendors who run the service-department software for the dealers. Those vendors are all key integrations. These are companies like myKaarma, Techeon, and others.

We have integrations going on with several of these vendors. They don't want VIPER just running independently. They want it to be totally seamless. And we are in process with just about almost all of the leading software vendors today.

So getting those done between now and the end of the year will be the key to us seeing many hundreds of these being delivered next year, and that's what we're working on.

Thank you. And then, I had a follow-up on no-reserve sales. I'm not sure if I heard a portion of sales that were guaranteed.

Wondering if you could quantify that and then, also, potential long-term mix. Thank you.

Yes. We grew no reserve quarter over quarter. We've been growing it recently well. What you saw is, the overall units that were sold in the no reserve were in the mid-20% range so growing it well.

We see this, probably at the long-term, somewhere around 30% of our overall units, could be more. But somewhere in that range, you'll see no reserve continue to go up over the next few years -- is the thought process here -- and continue to be a differentiator.

Great. Thanks for the color, George.

Of course.

John Babcock, Barclays.

Thanks for taking my questions. Just, first of all, are you able to quantify the impact of the higher diesel cost in the quarter, recognizing it was offset by pricing?

(multiple speakers) -- or we can follow-up with you on that. I'd to unpack that for you.

Okay. And then, second, just on the rental car side of things because you did talk about adding some or potentially adding some business here, I was just wondering how we should think about quantifying that on a go-forward basis.

I don't know the extent to which it's meaningful or not meaningful, but any commentary there would be useful.

At this point, first and foremost is we've got agreements with most of the top rental car companies. We're starting to sell units. We're starting to sell units, both upstream and downstream.

So you look at this as step 1 of the process is live. We're doing these iterations. We're starting to become another strong partner for the rental-car companies, but I don't have any numbers to share at this time.

But I'm happy that we're getting these agreements in place. I'm happy we're starting to sell cars with most of the leading rental-car companies.

Okay, And then, just my last question, I was wondering if you might be able to provide a number around how much you're investing on go-to-market spending this year.

I recognize the efficiencies that you're trying to gather through on the OpEx side of things, but that might be a useful number, I think, for all of us.

Yeah. John, think in terms of around $10 million for the full year on various go-to-market roles, including VCIs and some of the sales roles that George was highlighting earlier.

Jeff Lick, Stephens, Inc.

Thanks for taking my question. Bill, best of luck in your new role. And Tim, congrats very much.

I just want to drill down on the conversion issue. You talked about the listings being there but, like, a 600 bps spread. I'm just curious if you can kind of drill into, is it the seller that's pricing too high, the buyer being a little stingy?

And to the extent units don't sell and you have a listing, presumably, if it's not selling in your marketplace at that price, it's probably not going to sell on anyone else's, but where are these units going? Are you able to track it to maybe help you out with how to fix the conversion issue?

Yeah. We have ACV Max, which is a subset of dealers. So we see how many cars dealers are wholesaling, how many they're listing.

You, also, can tell how many of them -- are they really serious about wholesaling or they are still debating between wholesaling and retailing.

So I've also seen that with dealers, over the past few weeks -- that they're taking our advice more often; meaning, the sellers. So I'm starting to see that dealers are starting to change.

It's something that we've seen over time. And we're not the only ones that's reported this. Black Book has reported this. NAAA has reported this. So we're not the only ones.

But at the end of the day, you do need to consult the dealers on helping them understand that used-car values have gone down and continue to go down.

But, again, we've seen this before. I hate talking about it, but it is what it is. It's -- we've seen this. You go out there. You lean in. And my team is out there leaning in educating dealers. And then, it typically, over the course of a few months, addresses itself.

And then, a follow-up on the five markets or the five or six markets that are seeing mid-teens growth, I wonder maybe if you could just elaborate on what you're seeing there that you might be able to apply elsewhere?

Are some of these just smaller markets so it's the law of smaller numbers putting up a big percent? Or what are some of the things you're learning in these five markets that are seeing the growth that you could apply to some of your other markets?

Yeah, Jeff. It's Tim. So I'd say that there are several markets that are a little bit smaller so it's the law of small numbers.

There are actually a couple of markets here that are decent size, but we still think of them as emerging markets.

At the end of the day, it's about getting in front of dealers. It's about pitching the story, building relationships, test driving the platform, showing the value that we can deliver.

And frankly, we just need to get more bodies in the field. And dealer visits were another record in the quarter. So there's still some ramping of that capacity that we'll see into Q3, into Q4, but very pleased with the progress there.

Great. Thanks very much. Look forward to catching up later.

Josh Beck, Raymond James.

Great. Thanks. This is Glenn Schell, on for Josh Beck. And I'll just keep it at one question.

First, congrats, Tim. And Bill, we'll miss you.

But confirming that I heard correctly that you intend to build 500 to 1,000 units of VIPER in 2027, is that supposed to be one VIPER per rooftop?

And then, what is that going to take to scale production and how much investment is required to hit that 1,000 units next year?

Yeah. So just to be clear, I first said 500 and then, I think I also said, it could be 1,000. But my simple answer is, we haven't done next year's plan yet. Like, we're still working it.

The demand is high. I think that, at this point -- I'm looking around the room, right, in my team -- I think the demand could be over 500 units already.

But we're still a little bit early. My team has told me that the demand could be as much as 1,000. But we don't have -- just so I'm clear -- 500 to 1,000 folks, rooftops, right now, that are ready to sign a contract.

This is early in the process. We just announced general availability today. I do want to try to answer some of these questions, instead of just saying no answer, but there's tremendous enthusiasm so trying to give you all a range.

And then, your other question is, could there be more than one per rooftop? There is one of the top 10 dealer groups that has ordered number of VIPER. And they're actually doing two per rooftop so I haven't seen that as often. Another top 5 dealer group is doing one per rooftop, thus far. And it's going to do around 20 of them.

So we're not yet seeing a theme of whether there's going to be two or one per or rooftop. We're seeing a -- part of this is you first got to get out of your beta period, which we just did, and get to, really, commercial availability. We just started to put these contracts in front of customers. We're seeing fantastic feedback.

And then, on pricing and business model, it's up to the dealer if they're going to pay a larger subscription or give us more wholesale cars. And so the pricing for their subscription goes down, as they wholesale more cars with us. So it's a total win-win for both companies.

But you got to all think about this. We are solving their number 1 problem, which is sourcing more cars. So when you hear us so enthusiastic, right now; and you hear the customers so enthusiastic, it's because we're not just solving a little pain point, like, who's my auction? That's just one pain point.

This is, how am I going to source more cars, as the world has changed? And that's a huge problem for these dealers.

So we are positioned extremely well to go out there and add value to these dealers, and I think we will be rewarded by -- today, we are the largest dealer digital-wholesale market. I think not only will we remain, but it's going to give us an opportunity to add more value than anyone else.

Okay. Super helpful. Thank you.

Thank you.

Thank you.

We have reached the end of our question-and-answer session.

I would now like to turn the floor back over to Tim Fox for closing comments.

Thank you, Dylan. Thanks, everybody, for joining and all the kind words on the call today.

We look forward to engaging with you on the conference circuit, hopefully, this quarter.

Again, I really appreciate your support and interest in ACV.

I hope everybody has a great evening. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.