ACV Auctions Inc. Q1 FY2026 Earnings Call

Greetings, and welcome to the ACV Q1 2026 Earnings Conference Call Webcast. Operator provided instructions. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Tim Fox, Vice President, Investor Relations. Tim, please go ahead.

Good afternoon, and thank you for joining ACV's conference call to discuss our first 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 be discussing 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 first 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 strong financial results, we made significant progress in our three key objectives. First, we continue to gain market share and expand our dealer partner network to a new record. The combination of expanding 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. Third, we're gaining traction with our emerging growth initiatives, including the initial launch of VIPER and expanding our TAM into commercial wholesale. While there are cross currents in the broader macro environment, ACV remains focused on delivering double-digit revenue growth and increased adjusted EBITDA while continuing to invest 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. The dealer wholesale market was impacted by severe weather during the quarter, resulting in a mid-single-digit decline in dealer wholesale volumes. Despite these headwinds, Q1 revenue was $204 million and grew 12% year-over-year. Even with weather impacts, our market share gains accelerated throughout the quarter, selling 213,000 vehicles, exceeding a difficult comparison in Q1 2025. Next, on Slide 5. Today's discussion will focus on the pillars of our strategy to maximize long-term shareholder value, 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 continue to drive strong growth within more established regions, where network effects are driving significant market share. In order to broaden our regional growth performance, we are investing in additional field capacity to accelerate the number and frequency of dealer visits. We are pleased to see early returns on this investment, which resulted in another record number of buyers and sellers transacting on our marketplace. We also continue to enhance our marketplace experience to drive growth and deliver value to our dealer and commercial partners. We are leveraging machine learning that combines inspection data and dynamic 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 in 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 guarantee 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 Q1 with 18% revenue growth and over 120,000 transports delivered. By leveraging AI to optimize transport pricing, we continue to drive growth and operating efficiency. Despite the sharp increase in diesel fuel during the quarter, transport revenue margin remained in line with our midterm target in the low 20s. Lastly, on transport, our off-platform service continues to gain traction from our dealer partners, creating additional growth opportunities. ACV Capital also delivered strong revenue performance with 30% year-over-year growth in Q1. Last quarter, we highlighted ACV Capital's expanded go-to-market strategy while also driving process enhancements to manage portfolio risk. Our Q1 results demonstrate continued strong execution by 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 next-gen products. ClearCar and ACV MAX are adding value to our dealer partners, while also contributing to our wholesale market share gains. We are enabling our dealer partners to more intelligently optimize inventory, automate vehicle selling and buying and strengthen their ability to source more vehicles from consumers. The VIPER early access program is gaining momentum and receiving very positive feedback from major dealer groups across the country. Within minutes of driving through VIPER, our industry-leading inspection data and vehicle pricing capabilities enable dealers to unlock consumer vehicle acquisition at scale in the service lanes and seamlessly identify service upsell opportunities. We are on track to grow VIPER's footprint in the coming quarters, offering a VIPER bundle with wholesale to create a powerful new lever to drive unit growth and expand our network. In addition to leveraging AI across our product suite, we have experienced strong adoption of AI tools across a range of operating groups, including our product and development teams, where we are gaining meaningful velocity and efficiency. As such, we have even more confidence in delivering our differentiated product road map to support our growth objectives. Next, on Slide 10. I'll wrap up the growth section with our commercial wholesale strategy. As a reminder, commercial wholesale is a large adjacent market, made up of four segments with both upstream and downstream opportunities. Our team has made significant progress on the next phase of our software build, and we believe this new digital model and end-to-end experience will transform commercial vehicle remarketing. Our differentiated offering is attracting some of the largest commercial consignors, and we have recently engaged with over a dozen accounts across major captives, banks, fleet companies and auto finance providers. Our strategy is familiar. First land commercial accounts and then expand over time, earning wallet share as we prove our results. Commercial TAM provides another exciting growth lever for ACV, and we are confident that we can deliver wholesale volumes that support our midterm financial targets. With that, I will hand over to Bill and take you through our financial results and how we're driving growth at scale.

Thanks, George, and thank you for joining us today. ACV's first quarter results reinforce our commitment to deliver profitable growth while investing to drive dealer wholesale market share gains and to support key growth initiatives. Before we jump into the details, I'd like to highlight that as we scale our growth initiatives, our financial model will evolve based on revenue mix, which we believe will allow us to deliver improved unit economics over time than previously anticipated. On Slide 12, let's begin with a brief recap of our first quarter results. Revenue of $204 million was at the high end of guidance and grew 12% year-over-year compared to very strong results in Q1 '25. Adjusted EBITDA of $17 million exceeded the high end of guidance and grew 23% year-on-year, reflecting strong unit economics and expense discipline. Finally, non-GAAP net income of $7 million was at the high end of our guidance range. Next, on Slide 13, let's review additional revenue details. Auction insurance revenue was 57% of total revenue and grew 9% year-over-year against a tough comparison of 28% growth in Q1 '25. This performance reflects 3% unit growth in the context of a 5% decline in the dealer wholesale market while also facing a tough comparison of 19% unit growth in Q1 '25. Auction insurance ARPU of $542 grew 6% year-over-year and 3% quarter-over-quarter. Marketplace services revenue was 39% of total revenue and grew 19% year-over-year, reflecting continued strong performance for ACV Transport and ACV Capital. Lastly, our SaaS and data services products comprised 4% of total revenue with growth declining modestly year-over-year as high single-digit ACV MAX revenue growth was offset by modest declines in our legacy stand-alone inspection services. Next, I'll review Q1 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 in our marketplace, which more than doubled year-over-year. While no reserve sales typically have modestly higher costs than stand-alone auction sales, they drive strong blended conversion rates, improved marketplace liquidity and importantly, are accretive to adjusted EBITDA. In fact, adjusted EBITDA per unit increased 20% year-over-year in Q1. 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 8%, which is a decline from 12% in 2025. As a reminder, our 2026 OpEx includes approximately $11 million in 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 Q1 with $341 million in cash and cash equivalents and $200 million of debt. Note that our cash balance includes $230 million of marketplace float. In the figure on the right, we highlight our solid operating cash flow, which reflects adjusted EBITDA growth and margin expansion. We're also pleased to announce today that ACV's Board of Directors has authorized a share repurchase program of up to $100 million. In the coming days, the company plans to enter into an accelerated share repurchase program to repurchase an aggregate of $50 million of our common stock. Turning to guidance on Slide 17. We are reaffirming our 2026 revenue and adjusted EBITDA guidance despite the uncertain macroeconomic backdrop and our updated view that the dealer wholesale market will decline in the mid-single digits this year. Now for the details. Second quarter revenue is expected to be $213 million to $217 million, growth of 10% to 12%. Adjusted EBITDA is expected to be $18 million to $20 million, reflecting an 8% to 9% 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 28% year-over-year. We're expecting 2026 cost of revenue as a percentage of revenue to be modestly higher than in 2025. Lastly, we are expecting non-GAAP OpEx, excluding cost of revenue, to grow approximately 8% year-over-year. With that, let me turn it back to George.

Thanks, Bill. Before we take your questions, I will summarize. We are pleased with our Q1 execution while navigating through challenging market conditions. We continue addressing these market challenges by enhancing our technology and operating models, ultimately making us even 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 road map powered by ACV AI to further differentiate ACV and drive operating efficiencies. 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. With that, I'll turn the call over to the operator to begin the Q&A.

Operator provided instructions. Our first question is coming from Bob Labick from CJS Securities.

I just want to — part of your growth strategy you've talked about is filling out your territory managers and VCIs and you started, I guess, kind of in Q4 of last year reignited. Maybe talk a little bit about your progress in finding and hiring good candidates because we noticed that both operations and technology and SG&A grew less than sales in the quarter. I was kind of expecting those lines depending on where those hires fall to pick up a little bit. How is that progress going? What are you learning and what's out there?

Yes, certainly. I'll start, and then I'll let Bill sort of chime in. We're making great progress. We've hired some exceptional teammates. I joined several of the new territory manager classes. We bring them here at headquarters. I'm really happy with the talent. The talent comes across not only from an auction background, but also really knowing dealer systems, either former GMs, used car managers — just really strong talent. I've been really happy with the talent that we've brought in thus far. That's one on the sales for the territory manager side. In addition, from an inspector side, we've really stepped up our game where you have to go through several tests to become an ACV inspector. We really go through the gating process. So not only are we getting great talent that's going to help us inspect cars, but also hit our other goals as it relates to arbitration and everything else being in line. We've really done a great job of hiring and training so far. Phil, do you want to chime in?

Yes. All I would add, Bob, is you're also seeing the benefit of some operating efficiencies as well, which flows through our operations costs. But we are continuing to add to George's point, VCIs. We're also making sure that we have the right inspectors in the right territories to ensure that we have the best quality out there as well in terms of our conditional reports. I think we're making good progress. We're pretty happy with how things are moving ahead.

Then just obviously, you talked about overall market being down 5% or whatever mid-single digits in the first quarter and a similar outlook for the year. How does this impact kind of go-to-market strategy and your growth at finding new rooftops versus growing share at existing dealers? It's obviously kind of a tough market. Does that impact how you go about driving growth? Or talk about that a little bit?

Yes. Certainly, Bob. One data point is we had the most dealer visits between our territory managers and VCIs of a number of different rooftops last month than we've ever had as a company. That goes to your point of if there are fewer cars available at certain rooftops we need to go find another dealership down the road to do business. One, not only did we have record-breaking sellers and buyers, but we also had a record number of new visits. Really getting out there, getting the ACV name out there. That would be step one. I would call that blocking and tackling. Two is really what you hear us doing on this innovation of ACV AI and bringing out our products from ClearCar to VIPER, you'll start to hear more and more about how we're making incredible progress. What that does is dealers are going to know ACV in a whole other way, because if we help them go buy anywhere between 10 and 100 cars a month from their service drive and from their local consumers, then we're not just a competitor to the local auction. We're really an incredible partner to that dealership. We're both moving forward from blocking and tackling and just showing up more and more, giving ourselves the opportunity as we grow our footprint of talented people across the country, but also this differentiated way, leading with ACV AI.

Next question is coming from Rajat Gupta from JPMorgan.

I had a question on just the first quarter growth rate. It looks like industry conversion trends were pretty strong in March, also a little better than seasonal given strong expectations around tax season. In the past, when we've had these brief periods of very strong conversion, you tend to demonstrate higher share gains. I'm curious, it felt like numbers came in in line with what you had guided. I'm curious, was there something that was coming in the way of those typical share gains that you would see in strong conversion periods? I have a quick follow-up.

Yes, Rajat, as we mentioned on the call, it definitely didn't help that the Northeast, where we have our largest markets, had the most significant weather impact. That didn't help. Now other parts of the country, like, for example, Texas and the Carolinas grew 15% year-over-year and Southern California grew 24% year-over-year. We had different results across the country depending upon where weather was impacted. I would give that as a little bit of color of difference; our team in the Northeast still did a fantastic job, but they were just impacted the most. So I would say different results across the country based on factors outside of our control. That would be number one. I would say with that, Rajat, you're really starting to see that there's all this other great execution going on. You're starting to see the opportunity for us to differentiate, like I mentioned with Bob's question, so I'm feeling really good that we weathered a quarter where weather was pretty impacted and still not only hit our numbers, but exceeded some expectations.

Yes. I would add, Rajat, because you were asking about the month of March. Actually, our conversion rate in the month of March was 1,000 basis points above what it was for the entire quarter of Q4. We did see a significant improvement in conversion rates. If you do some of the simple math in terms of our growth in March vis-a-vis what the market did, we basically got back to, call it, 10% or so. It's not an exact science, obviously, but a roughly 10% share gain when you do that same math. We did see some acceleration going into March ending the quarter.

The fact that you reiterated your full-year outlook despite just lowering the industry outlook number, so where are you seeing that additional traction? Is it something to do with some of these commercial engagements that you're having? Is it just maybe how March and the exit rate is turning out on conversion? Just curious if you could unpack that.

Yes. Certainly, Rajat. We're feeling very comfortable with keeping our objectives for the year, even though the market itself is likely several hundred basis points worse than we were expecting from an overall market perspective. Why do I feel comfortable? One, us growing the footprint in the field — that's working. Two, this differentiated offering on ACV AI broadly with VIPER and ClearCar and with others — it's working. Three, our commercial focus and the fact that we've got literally over a dozen different major commercial accounts who've raised their hand and said, hey, we'd like to work with ACV, whether it be upstream, pure digital or downstream at one of our greenfields, we feel good about that. We feel good about this year, even though the market conditions are likely going to be a little bit worse than we originally projected.

Next question is coming from Andrew Boone from Citizens.

I'd love to hear a little bit more about what you guys are doing in terms of the VIPER rollout. How are those conversations with dealers going? Then what should our expectations be for 2026?

Where we're at is, the hardware, the software and the AI capabilities all just came together. Over the last few months, both at ACV and in the majority of our initial rollouts, the dealers are ecstatic. You'll see one of these on a podcast next week with a large dealer group where they're going to articulate how incredible this is helping them in their service drive. This opportunity right now is that hardware works, software works, the AI works. We can see a scratch, we can see a dent. We can see tire tread depth. We can see whether or not there's an oil leak. We can see whether or not the undercarriage has an issue. Our AI can see what it needs to see. The next step is to really scale this. This year won't be the scale year. This year, we're only rolling out about 150 of these between now and the end of the year. I think, Andrew, it's very simple. This year, we don't want to get over our skis too fast. We want to make sure we can deliver them, install them and support them. We really want to go into early next year scaling the production of VIPER and proving out the whole thing. We're feeling really good about it. The other part of this, while we're proving out the hardware, scale and production, is these integrations going on. We've got integrations going with the companies that power the back end of dealerships within the service drive, names you probably have heard of, who are the back-end service drive software platforms. We're doing those integrations now so that the data from VIPER seamlessly goes right into the back-end systems of dealerships. This year will be about getting this ready to really scale for next year. The most important thing, if I'm thinking as an investor, is the product works. The feedback we're getting is incredible.

Then one of the key trends that we're just hearing across all companies this quarter is AI efficiency. Can you talk about that both with inspectors and whether there's a step function change in terms of what they can do in the field? Then also internally within corporate, what are you guys seeing there in terms of increased efficiency given the gains in technology?

I'll start and then one of my colleagues can chime in with more specifics. Specifically on our inspectors, we're looking at the time to inspect both pre- and post-VIPER; they are two different worlds. Pre-VIPER we've been meaningfully reducing time. For certain types of cars, like a cleaner vehicle, we're now under 10 minutes. The worst vehicles are also now under 15 minutes, whereas previously vehicles were taking us about 30 minutes on average. We've got two different price buckets of cars now that are about half the time as it used to be. The middle area still needs more work to become more efficient on cars that have more issues. We're making good progress and leveraging AI to get our team more efficient. Once VIPER rolls out, I think our inspectors will spend 10 to 15 minutes per car, any car. It will be massively efficient. They'll basically check for frame damage and a few other things and then launch the car. Next year, we could see breakthrough, unbelievable improvements in efficiency, but we have more work to do to make that happen. Internally, from a tech perspective, other efficiencies — the amount of production I'm seeing from our engineering and product team, leveraging platforms like LLMs and other tools, it's just incredible. We've pulled in priorities that were planned for later this year into earlier quarters. We're seeing substantial increases in per-person output. With the development of these tools this year, it's been a breakthrough for many tech companies, and I couldn't be prouder of what the team is doing.

I would also add that we just signed a major enterprise agreement with one of the largest providers of large language models. That approach will not just extend to engineering, but other operational activities. We're kind of in the early days. We're just getting started. Frankly, we think there's a huge opportunity, which a lot of companies are seeing as well.

Next question is coming from Naved Khan from B. Riley Securities.

Just a couple of questions from me. One is, I think you lowered your outlook for the industry to negative 5% for the full year. You're reiterating your own guidance. I'm just wondering what kind of unit growth are you embedding in that? Are you still thinking about high single-digit unit volume growth? Maybe as a part of that, we've heard some commentary from others about off-lease volume coming back and such. Even with all of these factors, how do you kind of still think about the negative 5%? The second question I had is around pricing. Do you have any — are you contemplating any price increase? Or have you already rolled out one? What are you seeing out there with respect to similar moves from competitors?

I'll start and then Bill can chime in. When you think about the outlook for the year, it's better to be prudent with all the macro conditions. I think many of you have heard from franchise dealerships about where they are with retail as well as some of the OEMs. Keep in mind that trade-ins at dealerships create the majority of the wholesale. To your point, as off-lease comes back, that could benefit and mitigate some dealer wholesale challenges. It could. I don't want to bank on that yet. I hope it does. Our thought right now is to assume the year stays kind of the way it is right now, with these broader macro challenges and make that assumption. I hope you're right that off-lease and some of these other things could contribute because with those cars coming in, the dealer might wholesale more cars. That's a good point and I hope you're right. We're just not going to plan for it. Then as it relates to price increases, as you know, we do some minor price increases every year to account for inflation and other costs. We've always kind of done that. Bill, anything you want to add?

Yes. What I would just say is that what you saw in Q1 was our ARPU grew 6% year-over-year. That's a reasonable expectation for the full year, up in a similar fashion on a percentage basis. That's the ARPU side. You also asked about unit growth. We don't guide to unit growth specifically. All we've said is that what we expect and what we baked into our guidance is an assumption that over time, we will improve our share gains, and unit growth versus whatever the market is doing. That's what's baked into our numbers. Hopefully, that gives you some sense in terms of how to model it.

Next question is coming from John Healy from Northcoast Research.

George, I just wanted to ask about the opportunity set with the commercial consignors. I think you mentioned the 12 a couple of times in the call. What's the line of sight to activity with those folks yet? Is that something that we could see before the end of the year? Or is this much more like a 2027 story for you guys? Obviously, that's a lot of interest. What would be an acceptable batting average, do you think, for capturing maybe some of that business in terms of rooftops or just hats with those folks?

Yes. Maybe I'll give you a little more color. If I separate the upstream versus downstream activity, the upstream being pure digital where you don't need land — the fact that we've already gone live with one of the top four national rental car companies, and we're going live with our second rental car company either later this quarter or early Q3 shows that of the four large rental companies, the fact that we're working with two out of the four is meaningful. We're definitely starting here. We're starting to make progress. We've got two of the larger fleet companies who have done small tests with us. The small tests have gone extremely well, where they've been able to get results that were as good or better than any of the physical auctions they work with. We're moving from test to certain regional deployments with them. These are companies who will give us business. I was sincere when I said land and expand earlier. First is the land, get the contract done, which is what we're doing with a few of these guys where we just got the contract done. They'll start to give us some regional business to prove we can do more, which we will. Then we'll start to show that in certain regions across the country that we have the best remarketing platform. Downstream, we've got two auto finance repo-type customers, one that should go live in the next 30 to 60 days. They'll start giving us, say, 20 to 50 cars a week, show this thing works, prove that we can ground the vehicles and do light recon — for example, put in a battery — which allows us to go out there, show it works and then start scaling it. This year is about getting these guys under contract and showing results in one region, then expanding to additional regions across the country.

Then, Bill, just one follow-up. I think one of the comments you made was that March was like a 10% growth rate. I just wanted to make sure I was hearing that sound bite right because I'm sure folks will focus very much on that exit March data point. I just want to make sure we understood it.

Sure. What I was implying was growth versus market. We're in the context of Q1 where the market was declining. When we looked at the math in terms of our absolute unit growth in March versus what we understood the market did, we can get closer to share gains that would be in the 10% range, give or take. It's never an exact science, of course, but that's the point. I don't want to imply that our growth was actually 10% in absolute terms. It's really about our growth vis-a-vis whatever the market is doing.

Next question is coming from John Babcock from Barclays.

Just a quick follow-up on the commercial side of things. You talked about traction with the rental car companies and also on the fleet side of things. Are you making traction with captive finance companies and banks as well? Or is it really too early to say on that front?

We have made some progress. On off-lease cars, we do have a couple of OEMs we're in significant conversation with about giving us a window to sell some of their cars. I don't have those signed, which is why I didn't broadcast it. Usually, when I talk about things, it's signed and ready to deploy. I don't want to jinx us. We have another major OEM where we're integrated into their flow, but we're not yet auctioning cars. We're getting there. We are starting to win some business throughout the year on the captive side. On banks and repos, we are doing business with somewhere around 30% of banks today from one of our acquisitions. We really have some of those relationships, and now it's about scaling them into other locations like Houston or Chicago. We inherited some relationships and need to expand them.

Then next question on the share repurchase side of things. It's not a small amount of repurchases. I was wondering if you could talk about the decision to do shareholder return at this point as opposed to investing back in the business and trying to maybe push harder on the growth side.

We felt this was a reasonable size for a buyback, and that it's a good ROI for our shareholders based on our views of future opportunities. We talked a lot about a bunch of those today and previously. We thought it was appropriate based on the amount of liquidity we had. We have $341 million of cash and marketable securities on the balance sheet. We're leaning in with a $50 million ASR. We think it's a good use of capital. We're still expecting to generate free cash flow this year and expect that to grow over time. We think it's the right time and place to launch a buyback.

Next question today is coming from Jeff Lick from Stephens.

I was wondering if you can expand on John's questions on commercial. Just curious where you're at now in terms of the stand-alone sites or the greenfield sites. I think you had ten and you opened a greenfield and maybe there was another. Then also just curious if you could talk about with the wins with the commercial consignors, maybe elaborate which ones are true digital versus where you're actually using the real estate?

I covered that a few minutes ago, but I'll repeat. Separating upstream versus downstream, when I mentioned we're working with one and now we believe the second rental car company, I was referring to upstream without land. I also mentioned a couple of fleet companies that didn't require land. Regarding downstream locations, we're doing business with about 30% of the commercial consignors today at one of our existing locations and it's about bringing them to our new locations. We have one open and one about to open. We're making great progress.

Yes, but you didn't say sometimes companies can do digital and sometimes they require real estate. That's why I was curious about how many real estate sites you have, physical sites now?

More to come on this.

Next question is coming from Glenn Shell from Raymond James.

Congrats on the great quarter. You said VIPER is enabling a huge breakthrough next year. Is the VCI investment cycle to support VIPER deployment or just more general growth? What should we expect for the future pace of VCI investment as VIPER reaches scale?

Yes, great question. Our VCIs are being trained for multiple ways of helping us scale the business. One is inspecting vehicles for wholesale, their primary task. Second, when there is an arbitration, we used to send the car to a local facility to verify and it would cost us money every time. Now our inspectors are being trained to re-inspect the car for arbitration, which helps us get higher customer satisfaction because we get to the cars faster. Third, we use our inspectors for auditing ACV Capital. On VIPER, our last two installs were done with our ACV inspectors — no R&D team member had to fly out from headquarters. The box arrived and our local inspectors were able to assemble it and have the system running within a few hours. I'm proud of our inspection team. We have colleagues across the country who are trained in multiple tasks; many are former mechanics and are very handy. We're fortunate to have teammates who can support whatever task they're doing that day.

I would add in terms of scaling that workforce, we indicated previously that we were going to add 100 inspectors to the team this year. We're a little more than halfway there in terms of adding people. That was more of a one-time upscaling of our team in the field. Don't look at this as a recurring need going forward. That's $11 million plus adding some territory managers and other go-to-market resources. That's what's baked into our guidance this year. In terms of going forward, we'll provide more detail next year and beyond as we get closer to 2027.

Specifically on VIPER, how many VIPERs are deployed so far? How many are you installing per month at this point to get to that breakthrough next year? Then how big is the backlog of dealers who are asking for this?

We have about 18 live. We have around 75 dealers waiting or more. We're going to build another 60 to 70 more. We do have a backlog we are prioritizing. We're prioritizing by dealer groups: a major dealer group might get two or three this year, not the five or ten they ask for. That's how we're spreading deployments. Next year is the scale year and we'll be building several per month, but I'm not ready to provide that exact run rate yet.

Next question is coming from Gary Prestopino from Barrington Research.

George, I'm interested, you mentioned you're doing integrations with VIPER into the dealer service system. What does the dealer specifically do with that data? I assume at VIPER at the point of service the technician can see the value of the car and make a pitch to the owner, hey, you can get a good value for this and trade it in and buy something, or maybe I'm wrong. Is the dealer taking that data and using it for future leads with their current clients?

Great question. There are companies that power service department workflows and CRMs. When a car goes through VIPER, we produce an extensive vehicle profile: every angle, tire treads, undercarriage and predictive insights about typical defects and expected issues. We're working on additional IP for next year. Step one was building the product; step two is integrating it into the dealer system so this becomes a scalable process. At the day of service, the consumer might be told two tires need replacement, it will cost $800, and by the way, it might be time to buy a new car. Dealers vary in how they use this information. Some put it into their CRM and BDC processes to create leads; some use staff to follow up; others use automated follow-up tools. We're preparing integrations so the data flows into dealerships' existing systems and becomes an actionable lead. At our best-performing dealerships, we're seeing conversion rates where 5 to 9 out of 100 repair orders convert to a consumer selling their car, which is substantial when you consider the scale of service orders across dealerships. That's why dealers are pushing us to scale VIPER quickly.

We've reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Great. Thank you, operator. Everybody, thank you for joining us this evening. We look forward to seeing you on the conference circuit this quarter. Again, thanks for your interest in ACV. Have a great evening.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.