ACV Auctions Inc. Q2 FY2026 earnings call

Overall Q2 Performance

• Delivered record total revenue of $214 million (10% YoY growth) and adjusted EBITDA of $21 million, which exceeded the high end of guidance, against a 6% year-over-year contraction in the overall dealer wholesale market
• Sold 211,000 vehicles in the quarter, expanded the dealer partner network to a new record, and gained overall market share
• Record adjusted EBITDA per unit, up 11% year-over-year, with the most profitable region delivering over $300 EBITDA per unit

Core Wholesale Marketplace Growth

• Increased field capacity to drive regional growth, resulting in record dealer visits, vehicle inspections, and transacting dealers
• No-reserve guaranteed auctions remain the fastest growing channel, delivering 100% conversion, removing seller risk, increasing bidder engagement, and driving market share gains; no-reserve sales made up the mid-20% of total units in Q2, with a long-term expected mix around 30% or higher
• Real-time pricing powered by machine learning and inspection data strengthens ACV's value proposition for both buyers and sellers

AI-Powered Product Innovation

• AI tools drive internal operating efficiency across the business, enabling more efficient software development and overall cost discipline
• Existing AI products Clearcar and ACV Max drive dealer retention and wholesale volume growth: top 100 Clearcar customers doubled their quarterly ACV wholesale volume after adoption, helping dealers source more vehicles from consumers
• VIPER, an AI-powered in-dealership vehicle inspection and acquisition solution, officially launched commercially after a successful beta. Half of the top 50 U.S. dealer groups are already engaged, with a target of over 100 units deployed in 2026 and over 500 units (potentially up to 1,000) targeted for 2027. The solution enables dealers to appraise all consumer vehicles in the service lane, identify service upsell opportunities, and deliver more incremental wholesale volume

Adjacent Growth Initiatives

• Commercial wholesale vehicle remarketing, a large adjacent market, has gained meaningful traction: the full software platform is now live, with partnerships secured with a top 5 fleet consignor, integration in progress with a large captive finance off-lease company, and addition of another top 4 rental car consignor to the platform. A new commercial remarketing center in Chicago will open within 30 days, following the successful opening of the Houston center. Meaningful volume contribution from commercial is expected starting in Q4 2026
• CFO transition: outgoing CFO Bill Zerella was recognized for his contributions, and Tim Fox (former VP of IR) was appointed as new CFO, with deep existing knowledge of ACV's strategy and operations

1. Auction and assurance: Revenue contributed 55% of total Q2 2026 revenue, growing 6% year-over-year. ARPU for this segment was $554, also growing 6% year-over-year, with roughly flat unit volume against a 6% industry contraction.
2. Marketplace services: Revenue contributed 41% of total Q2 2026 revenue, growing 17% year-over-year, driven by strong performance from ACV Transport and ACV Capital. ACV Transport delivered 19% revenue growth with 125,000 transports completed, and maintained target margin and attach rates despite higher diesel prices. ACV Capital reached a new record attach rate in the high teens, with strong portfolio risk management.
3. SaaS and data services: Revenue contributed 4% of total Q2 2026 revenue, growing 3% year-over-year, driven by further adoption of ACV Max.

• Management reaffirms full year 2026 guidance, maintaining revenue guidance at 845 to 855 million (11% to 13% year-over-year growth), and adjusted EBITDA guidance at 73 to 77 million, despite macro uncertainty
• Q3 2026 guidance: revenue expected to be 219 to 225 million, representing 10% to 13% year-over-year growth; adjusted EBITDA expected to be 21 to 24 million, representing a 10% to 11% margin
• Full year 2026 operating expense growth is expected to be approximately 6%, down from 12% in 2025. This includes $10 million in incremental go-to-market investment for 2026 to expand field capacity
• Even with 2026 growth investments, full year 2026 adjusted EBITDA margin is expected to increase approximately 100 basis points year-over-year
• Positive operating cash flow is expected in the back half of 2026, driven by adjusted EBITDA growth and margin expansion
• Management expects accelerated unit growth in the back half of 2026 as conversion rates stabilize following recent macro dislocation

• Ongoing macroeconomic headwinds have caused price dislocation between used vehicle sellers and buyers, leading to a 300 to 350 basis point contraction in conversion rates in Q2 2026, with a 600 basis point negative impact on overall unit growth; industry wholesale volume was down 6% in Q2 and 8% in July 2026
• No-reserve sales, the fastest growing channel, have modestly higher costs than standard auction sales, which contributed to a 300 basis point year-over-year increase in non-GAAP cost of revenue as a percentage of total revenue
• Higher diesel prices in Q2 created margin pressure for the ACV Transport segment, though management offset this through AI-powered pricing adjustments and met margin targets
• Float balance fluctuations impact quarterly operating cash flow, leading to a year-over-year decline in H1 2026 operating cash flow

Q: The company maintained full-year 2026 EBITDA guidance after lowering expected operating expense growth, even with gross margin trending lower. What is driving this balancing of targets, and why not accelerate go-to-market investment more aggressively to target higher growth? / A: While gross margins have compressed more than originally expected due to the higher mix of no-reserve sales, this compression is more than offset by operating expense efficiencies driven by AI adoption across the business. The company is still expanding field capacity: it expects 15% to 20% more salespeople and more inspectors by the end of 2026, with mid-teens unit growth already achieved in the five emerging regions where it has leaned in on investment. The company is prioritizing disciplined adjusted EBITDA expansion amid current market headwinds, and declined to comment on potential strategic partnerships on this call.

Q: What caused the recent conversion rate compression, when will stabilization occur, and what is attracting large commercial consignors to ACV's platform? / A: Conversion declined due to a temporary price dislocation: as used car values fall, sellers are asking prices higher than buyers are willing to pay. This is a recurring dynamic that typically self-corrects within 1-2 months, as dealers face floor plan costs and need to sell vehicles regardless of market conditions. ACV hit its listing forecast in the quarter with a record number of sellers and buyers, so top-of-funnel momentum remains strong. For commercial, the full software platform is now live, with a unique upstream inspection integration that allows commercial consignors to inspect vehicles at fleet locations without downstream transport. Large consignors (including top fleet and rental car companies) have begun onboarding, with meaningful volume contribution expected in Q4 2026.

Q: How does ACV balance capital allocation between returning capital to shareholders and investing in growth initiatives? / A: ACV maintains a strong liquidity position, with ~$242 million in cash after completing the $50 million accelerated share repurchase program. The company has the right balance of investment: it is investing $10 million in 2026 to expand field capacity, and AI efficiency allows it to fund this investment while still hitting adjusted EBITDA targets and repurchasing undervalued stock. Incremental EBITDA margins will expand meaningfully in 2027, as most of the 2026 investments in field capacity, VIPER, and commercial software are completed, enabling operating leverage.

Q: Can you confirm the 2027 VIPER deployment target, explain the business model, and outline investment needed to scale to that target? / A: The 500 to 1,000 unit 2027 target is an early range based on current strong demand, not a finalized plan; commercial availability just launched, and demand could hit the upper end of the range. Most dealers order one unit per rooftop, though some large groups are ordering multiple units per location. The business model lets dealers choose between a higher subscription fee or a lower fee paired with a wholesale volume commitment to ACV, aligning both parties' incentives. VIPER solves dealers' core problem of sourcing more consumer vehicles, which positions ACV to capture incremental long-term wholesale volume.