ACV Auctions Inc. 2026 Q2 Earnings Call

Good afternoon. 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 Transportation and ACV Capital, along with growing adoption of our value-added dealer solutions. 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 are 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. We continued 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 are removing seller market risk, accelerating bidder engagement, and increasing buyer satisfaction while delivering 100% conversion rate. We are confident our guaranteed offering will continue to be a key driver of market share gains. Turning to slide 8, let's review our marketplace service 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. 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 are 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 lanes. 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 is 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 will 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 and 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 five fleet consignor and are in the final stages of securing a second large-scale consignor. We are also integrating with a large captive finance off-lease company and adding another top four rental car consignor 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 will hand over to Bill to take you through our financial results and how we are driving growth at scale.

Thanks, George, and 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 us 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 EBIT 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 us review additional revenue details. Auction and 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 and 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 Transportation and ACV Capital. Lastly, our SaaS and data services products comprised 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 continued 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.