ACV Auctions Inc. (ACVA) Q4 2025 Earnings Report, Transcript and Summary

Greetings, and welcome to the ACV Q4 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tim Fox, Vice President of Investor Relations. Thank you. You may begin.

Good afternoon, and thank you for joining ACV's conference call to discuss our fourth quarter and full year 2025 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. And with that, let me turn the call over to George.

Thanks, Tim. Good afternoon, everyone, and thank you for joining us today. We are pleased with the ACV team's execution in Q4, delivering revenue at the high end of guidance and adjusted EBITDA above the high end. Our performance was driven by solid execution in our dealer wholesale business despite challenging market conditions as we continue to gain market share, expand our dealer partner network and drive adoption of our value-added dealer solutions. And again, ACV Transport and Capital delivered strong revenue performance. We also executed on our product road map to further differentiate ACV's marketplace experience, support our commercial wholesale strategy and expand our TAM. Turning to 2026. We are expecting revenue growth in the low double digits and adjusted EBITDA growth of approximately 28%, which includes additional growth investments to support our medium-term financial targets. 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. Q4 revenue was $184 million, growth of 15% year-over-year, and we sold 193,000 vehicles. For the full year, we delivered 19% revenue growth and grew units by over 86,000 or 12% year-over-year. And adjusted EBITDA grew by over 100%, demonstrating the scale in our model. Next on Slide 5, we'll again focus our discussion around the 3 pillars of our strategy to maximize long-term shareholder value: growth, innovation and scale. I'll begin with growth. On Slide 7, we highlight how ACV is leveraging AI to attract new buyers and sellers, increase penetration and wallet share and gain traction with large dealer groups. Let's begin with our marketplace. Our highly accurate condition-adjusted pricing guidance enables sellers to set more informed reserve prices. Flexible auction durations and scheduling allow dealers to customize their marketplace experience. Given the challenging market conditions in Q4, dealers increasingly leaned into ACV's technology. For buyers in our marketplace, we tailor their experience across buyer personas and optimize the bidding process by providing AI-enabled recommendations informed by dealer preferences and current market factors. These investments and our leading marketplace experience were key to growing our dealer network in 2025, with 15,000 unique sellers and over 22,000 unique buyers transacting with ACV. Our franchise rooftop penetration achieved a new milestone, reaching 35% during the year. And our major account team delivered impressive results with a 300 basis point increase in rooftop penetration. Next, on Slide 8, I'll provide some highlights on our data services. Market traction for ClearCar remains strong, especially for ClearCar service that enables dealers to seamlessly produce consumer appraisals and offers from their service lanes. ClearCar is also an effective lever to increase wholesale wallet share and attract new dealers to our marketplace. During 2025, existing dealers that launched ClearCar increased their wholesale volumes of ACV by over 50% after going live. We're also seeing early momentum with our strategy to bundle ACV Max with wholesale. A recent cohort of new ACV Max dealers increased their wholesale vehicle sales on our marketplace by an average of 40% within 1 quarter of launching Max. Our strategy to offer a broader set of value-added solutions is creating another growth lever for ACV. Again, this quarter, we're excited to share feedback from one of our dealer partners, the Hendrick Automotive Group, which is using ACV's full suite of offerings. We posted a video on our IR website, highlighting the significant value they're deriving from ACV solutions. Turning to Slide 9. From a geographic perspective, we continue to drive strong growth within our more established regions, where network effects are driving significant market share. At the same time, our footprint has expanded across the country as highlighted in these 4 regions, which delivered strong year-over-year unit growth in Q4. As we discussed in our Q3 call, there are certain emerging regions where we are increasing our territory manager and VCI footprint to drive accelerated growth. These efforts began in Q4 and will continue during 2026, and we are confident in the medium-term growth outlook for these markets. Turning to Slide 10. Let's review our marketplace service offering. Beginning with ACV transportation. The transport team had strong execution in Q4 with 20% revenue growth and 110,000 transports delivered. AI optimized pricing continues to drive strong growth and operating efficiency. Revenue margin has already achieved our midterm target in the low 20s. And our off-platform transportation service continues to gain traction from our dealer partners, creating additional growth opportunities. Last, I'll wrap up the growth section on Slide 11 with ACV capital highlights. ACV Capital delivered strong revenue performance, with 48% year-over-year growth in Q4 despite actively lowering our exposure to higher risk customer segments. The ACV Capital team implemented new growth strategies while driving process enhancements to mitigate portfolio risk. As such, we are confident that ACV Capital will remain an important value-added service for our dealers and a long-term growth opportunity. Next on Slide 12. I'll address the second element of our strategy to drive long-term shareholder value innovation. Turning to Slide 13. Let's go deeper into how we are leveraging ACV AI to drive growth and to deliver value to our dealer and commercial partners. Using machine learning, we combine inspection data and dynamic market data to provide real-time pricing for every vehicle within ACV's pricing platform. For example, we are leveraging our pricing platform to offer ACV guarantee to sellers and deliver no reserve auction to buyers. This offering remains the fastest-growing channel in our marketplace. We are pleased to see ACV guarantee mix increase to 19% in Q4. As a reminder, our guaranteed sale is highly differentiated offering that benefits buyers sellers and ACV by accelerating bidder engagement, increasing buyer satisfaction, removing seller market risk while delivering 100% conversion rate. We're confident our guarantee offering will be another key driver of market share gains. On Slide 14, we highlight how we are further differentiating ACV in the market with AI-driven next-gen products like Viper and Virtual Lift. We are extending our industry-leading inspection technology, vehicle data and pricing capabilities to dealers looking to unlock consumer vehicle acquisition at scale in their service line. At the recent NADA Industry Conference, we announced the next wave of availability for the Viper Early Access Program and dealer reception was tremendous. We're excited to kick off the commercial launch of Viper with select dealer partners, providing them with unique and scalable consumer sourcing platform. It will expand our TAM at a rooftop level by tapping into the large peer-to-peer segment and by leveraging pricing models that bundle Viper with wholesale we're creating a powerful new lever to drive wallet share expansion and unit growth. Wrapping up on innovation. Let's turn to our commercial wholesale strategy on Slide 15. We are pleased to see the initial range of capabilities developed over the past year, powering our first greenfield remarketing center in Houston. Our team has been in active conversations with commercial customers to deepen our understanding of their requirements for the next phase of our software build. We believe this new digital model and end-to-end experience will transform commercial vehicle remarketing, and we also look forward to launching an additional greenfield location in Chicago this year. 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, and thank you for joining us today. We are pleased with our Q4 financial performance with revenue at the high end of our guidance range and adjusted EBITDA exceeding the range. On Slide 17, let's begin with a brief recap of our fourth quarter results. Revenue of $184 million, grew 15% year-over-year compared to very strong results in Q4 '24. Adjusted EBITDA of $8 million grew 36% year-over-year, reflecting strong expense discipline. Finally, non-GAAP net loss of $1 million was favorable relative to our guidance range. Next, on Slide 18, let's review additional revenue details. Auction assurance revenue was 55% of total revenue and grew 11% year-over-year against a very tough comparison of 40% growth in Q4 '24. This performance reflects 5% unit growth which also faced a tough comparison of 27% growth in Q4 '24. Auction and assurance ARPU of $528 grew 6% year-over-year and 4% quarter-over-quarter. Marketplace Services revenue was 39% of total revenue and grew 23% year-over-year, reflecting continued strong performance for ACV Transport and ACV Capital. Lastly, our SaaS and data services products comprised 5% of total revenue with year-over-year growth accelerating to 8%. Next, I'll review Q4 costs on Slide 19. Non-GAAP cost of revenue as a percentage of revenue increased approximately 400 basis points year-over-year. The increase was primarily driven by higher arbitration costs as expected within a specific cohort of customers. Recall that our Q4 guidance assumed arbitration costs would remain elevated in the quarter, but that trend would normalize in 2026 following mitigation steps we implemented. These steps are already showing positive returns in early 2026. Non-GAAP operating expense, excluding cost of revenue as a percentage of revenue decreased approximately 400 basis points year-over-year reflecting operating leverage in our model. Moving to Slide 20, I'll frame our investment strategy as we drive profitable growth. In 2026, we expect OpEx growth of approximately 9%, which is a decline from 12% in 2025. Note that 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 21. We ended Q4 with $270 million in cash and cash equivalents and $190 million of debt. Note that our cash balance includes $171 million of marketplace flow. In the figure on the right, we highlight our solid operating cash flow, which reflects adjusted EBITDA growth and margin expansion. Now turning to guidance on Slide 22. First quarter revenue is expected to be $200 million to $204 million, growth of 9% to 12%. Adjusted EBITDA is expected to be $14 million to $16 million, reflecting a 7% to 8% margin. 2026 revenue is expected to be $845 million to $855 million, growth of 11% to 13%. Note that full year revenue guidance assumes that our go-to-market investments will drive slightly higher growth in the second half of the year. 2026 adjusted EBITDA is expected to be $73 million to $77 million, growth of approximately 28% year-over-year. We are expecting non-GAAP OpEx, excluding cost of revenue to grow approximately 9% year-over-year. Now with that, let me turn it back to George.

Thanks, Bill. Before we take your questions, I will summarize. We are pleased with our Q4 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 Instructions] Our first question comes from the line of Andrew Boone with Citizens Bank.

I would love to just double-click in terms of 4Q '25 units sold. We've seen this deceleration. Can you just help us understand whether that's competitive pressure, the market macro, anything you want to call out in terms of highlighting 4Q results? And then I'd love to ask about MAX. It sounds like you guys are seeing real results in terms of better integrating with dealers to just drive more volume. Can you help us understand what's the road map to drive better MAX adoption more broadly?

Yes. Andrew, when you look at Q4, first, we delivered, as you can see on our revenue expectations. I think we had a really -- we had a strong quarter from a revenue perspective. For the year, we grew units 12%. So that was solid. And when you look at the Q4 compare, it was a tougher compare. But what we're doing about creating more growth of things we've talked about. We're adding more inspectors out in the field. So we'll start to see that benefit throughout this year. That's one area we're adding. We also talked about investing in a few more of the regions where we are adding additional territory managers, Andrew, so we talked about that in the call. And then we also talked about our differentiation with our product like MAX that you brought up. But I do want to actually bring up the real the backdrop here on dealer wholesale is growing from the physical auction. Still 70% of the business out there is happening at physical auction. So the broader need is still just to bring more and more business being had at physical auctions over to digital, which between our differentiated offerings is starting to happen more and more. On your second question on MAX, we are really starting to scale that business where it's now being connected more to wholesale. For some of the rooftops, we added an additional offering that puts a guarantee on units. So not only are we providing pricing guidance, but we'll put a guarantee, and we're starting to scale that with additional rooftops. So we look forward to scaling MAX additionally throughout the year.

Our next question comes from the line of Rajat Gupta with JPMorgan.

I had a question just following up on the previous one. It looks like your 2026 guidance, it does not assume much of a change in overall market share growth versus what you saw in recent quarters. despite your incremental margins moving lower versus where you were last year. I'm curious why that would be the case. And if there are like any onetime investments maybe Viper and other initiatives around commercial that might be causing the incremental margin to slow down? I mean, just helping it just seems a little counterintuitive to look at incremental margin driving versus market share not accelerating. If you could clarify that? And then I have a quick follow-up.

Yes. certainly, Rajat. Yes. So the -- I'll start and then Bill can chime in. Two of the investments we're making at least two, and Bill can chime in with the additional is what we made with the infield, which are additional inspectors. We're hiring some additional territory managers, as I mentioned a few minutes ago. So that's one area of additional expense and Bill could kind of go a little deeper. And second is, yes, we're starting to invest in the Viper rollout. So that's also part of the numbers. So we believe Rajat, as we're making these investments throughout the year, we'll start to see more of an impact towards the back half of the year because obviously it takes a little time to get these things going. But Bill, maybe you can chime in some more of this.

Yes. So Rajat, just to go through the numbers again. So the incremental spend that we've baked into our guidance for this year in terms of those go-to-market investments is approximately $11 million. If you look at our incrementals, excluding that, they would have actually grown 500 bps year-on-year from 25% to 30%. So that's number one, just to ensure you got the right numbers, right? And as George said, at this point, it's early in the year, we're making these investments, obviously, with the objective of driving more share gains. But we're pretty conservative at this point in terms of what we're going to bake into our guidance until we start to see these investments pay off over time.

Understood. So the market share, essentially implying higher market share acceleration in the later in the year, assuming these investments bear some fruit, right?

Yes. There's -- we're assuming a slight increase in the second half of the year versus the first half. But again, we're taking a more conservative perspective at this point until we start to see this play out over time.

Understood. And just a quick follow-up, a little more high-level question. Could you maybe comfort investors around just the risk of AI to the business. I mean, clearly, there seems to be a lot of interpretation around. Anything you can help just provide more clarity around that? What differentiates APV, what differentiates our business model. Is there a risk? Is there a benefit from AI? Maybe if you could just dig a little deeper into that and just how you're thinking about that?

Yes. I mean, the irony, Rajat, is we are that disruptor. We are the AI disruptor in this category. So we are that company that is aiming to change automotive for the better. We're the company who's trying to help a traditional retailer like a franchise dealer, as cars drive through a service drive, take pictures and videos and predict the retail price within a $38 that it's going to sell for and estimate wholesale value within $100 to a point where we'll guarantee it. We're the ones making predictions on what types of inventory they should be buying and selling. We're adding new capabilities throughout the year that we believe will help franchise dealers become more efficient and actually need less people. So we're huge fans of what you can do with AI. We are aiming to be that disruptor. We're aiming to be the one that helps really franchise dealers modernize their use of these tools. We're integrating with a lot of different vendors. So it's not like we're picking 1 widget or 1 thing. We're integrating with all the CRMs and all the DMS solutions regardless of what tech stack the dealer chooses. So yes, we should be 1 of the beneficiaries of the speed that you're hearing from investors is that all industries will change, AI will change every single industry. This will be one of them, and we should benefit from that.

I guess, the interpretation is that there might be a new start-up or a young company that can do what you're doing in a much easier fashion, in a much simpler fashion, maybe providing that inspection capability to the dealers directly or the pricing capabilities. Is there anything you can do to protect your position? Or do you even see that as something realistic or practical?

Yes. I think -- look, I think investors should do their homework. They should watch the video we posted regarding what we do for the largest private automotive company in the country, post in our Hendrick Automotive, watch that video, see what we're doing. They should do the research we're doing for some of the public automotive groups who speak very highly about the way ACV is doing for them. I think when you do your homework, you'll see we're not just predicting numbers. We're predicting them to the point where we can back them and guarantee them. So yes, there could be start-ups that emerge in this category, but I think they'd have to raise hundreds of millions of dollars, if not billions. So then have the balance sheet and the data which would be very difficult to do, where we've inspected over 1 million cars a year that we know all these scratches, all these dents. We've now earned the credibility to be part of the workflow for all these dealer groups. So I could see why in other industries that they would be concerned. But in this one, Rajat, we are that disruptor.

Our next question comes from the line of Ron Josey with Citi.

George, I wanted to ask about conversion rates. I'm just wondering if they return back to normal seasonality in the quarter after some sort of ups and downs last year and then thoughts on conversion rates in the '26. And then maybe bigger picture, when we look at the unit growth improvements across the Carolinas, South Florida, South California to East Texas, remind us what led to the outsized growth here and sort of what this means going forward?

Yes, certainly, Ron. On the first point, our conversion rate for Q4 was up year-over-year, where most of our competitors were flagged out. So we did see a year-over-year improvement in conversion rate. And we saw that, I think the overall improvement where our no reserve sale is doing this -- what we refer to our investors as the guarantee offering. We give the guarantee to the seller, the buyer gets a no reserve offering where they can bid without a reserve. It's really helping not only differentiate ACV, but delivering a better buying experience, a better seller experience. So we did see a conversion rate. Obviously, Q4 is always tougher on conversion rates, but we're executing well. And we actually do see our overall, our guarantee and no reserve offering continue to grow. This quarter, it started out we're already in the 20% range of our total units now selling, and we're seeing more and more of our customers start to adopt the product. So one, I would say conversion rate, I believe, we're starting to become some of the best in the industry. And we did also to help on conversion rates. We were harder on sellers who were giving us overpriced cars. We did get rid of a few sellers. We implemented more policies to make sure it's a better buyer experience. So we're being more and more prudent on not just chasing units, but making sure we're building the best experience. So we started to really sort of manage the marketplace with stricter rules. And that's really coming out. I think we're seeing higher buyer NPS as it relates to the sell-through at rate conversion rate, probably than I've seen in several years. So we're seeing some confidence from buyers coming back on conversion rate. So that was a long-winded conversion.

Yes. And then, Ron, just to put a finer point on the numbers. So sell-through in Q4 was up 150 bps year-on-year, which, for us, as we think about our business and kind of the trends that we can hopefully drive going forward, that can, over time, become more and more material.

And then on your second question, what did we do differently? We brought -- I'd like to give you an example of Carolina is we took a very strong performer of ours that was in the New York metro area, who is a territory manager, we promoted him to a regional director down to Carolina. So we brought somebody that really do the ACV model. He then worked with the local territory managers. We also, I believe, added an additional territory manager in this region. We hired additional inspectors. And we really just doubled down. Strong execution. They really know how to present our differentiated offering. So yes, I would say that market, Carolinas took us a little bit longer than we would like to grow. But now it's growing. And we've got strong talent there. They've got great momentum, and we feel really good about it. The same story with South Florida. Our team down there is just a great team. they keep differentiating the ACV offering, whether it be the guaranteed sale. They're also 1 of the ones that are starting to leverage our inspector teammates to go out and help on the buying activity on the demand side, sort of leveraging our inspector base not only listings, but just getting out into the field more, both sellers and buyers. So that leader down there, I met with him last week, is doing a fantastic job of just building out South Florida. So yes, we're really showing that region by region. We got more work to do over here, but I'm really, really excited to see where we've got the right talent. We've got the right folks out there, we're starting to take share at healthy rates.

Our next question comes from the line of Bob Labick with CJS Securities.

I wanted to ask about Viper, you talked about rolling out this year. You talked about a lot of dealer interest at recent shows and stuff. Have you said -- I guess, when will it be in the field? But more importantly, what are the keys you're watching for in your launch once you get it out there before you decide to do maybe a more widespread rollout.

Yes. Thanks, Bob. So we are -- our #1 priority with Viper in these initial rollouts is really to help ensure the dealers going to be able to leverage us to acquire more vehicles. We think about dealers -- when dealers optimizing their revenue is all about the top of the funnel, sourcing more cars. If they can source more cars, then they can optimize and decide which cars should they be retailing, which car should they wholesale. So these initial customers primarily have ACV MAX as their inventory management system. Our goal is to get them to buy more cars. So think a dealer buying 30, 40, 50, 70 plus cars, what they call off the curve or off street primarily from their service drive. So that's a key KPI is helping them buy more cars. Some of the dealers we're talking to have very large goals. Bill and I actually met with one of them last week, and the General Manager of that store was a dealer who said he'd like to buy 100 and what was the number.

He wants to retail 100 more used cars a month which means he's probably going to buy more like 125 to 130. And retail the ones that he wants to keep.

So as the example, Bob, of here's a dealer who just got Viper, and those are the words of a specific dealer. And so we're site because here's a simple math, they buy more cars, they're going to wholesale more. The more they buy, they're going to keep the best 60% to 70% for retail. And then they'll end up wholesaling somewhere around 30% to 40% of these cars. And so think about it as TAM expansion for us at a rooftop level. So you'll see cars that either would have want peer-to-peer or cars that would have went to one of the large big-box type companies will now get purchased by that dealership. So said another way, we think some of the best-run dealerships in the country are going to be dealers that have Viper. And if we could turn that rooftop into one of the best-run dealerships in the country, right? Then there's a bigger -- even a bigger reason to be working with ACV in the ACV portfolio.

Okay. That's exciting. So I can't wait to watch that as it rolls out. And then you gave us a few stats on ACV price guarantee of 19% in the quarter and ticking up already for no reserve auctions and percent of volume. Is there a natural level or a goal for that or a level that it can't go above? Or how do you think about the progression in the no reserve auctions in the percent of volume that could be?

I think if we could see our no reserve sales being -- that won't -- I don't know what it will hit this year, but I think if it could hit mid-20-ish percent range this year, I'd be ecstatic, maybe higher, who knows. But it's really -- we're not saying every single car should run no reserve, right? If you look at some vehicles, like a frontline vehicle, a dealer just running it for 24 hours on our platform. We're not seeing every single car needs to run that way. But there is a halo that's happening on ACV's marketplace right now because the more cars that are running no reserve, buyers are showing up. We're still now -- I think I mentioned in a prior call that we've got 9.8 bidders per car, I think we're now at over 10 bidders per car. So that keeps climbing, where we've got tremendous bid activity. That's on average because there are some parts that might have 20 or more bidders per vehicle. So we've got great bid activity. It's allowing us to have our data science and predictions are getting better and better. Rajat asked the question earlier about AI. I mean when you think about the ultimate sort of machine learning, AI predictor is not just using third-party data out there in the Internet. But this is our data where we can put a number on a car, measure it of how well we execute. And then to have the bidirectional integration with the DMS, where we know what dealers are retailing the cars for. We're in a really unique spot. So we're really pleased with where we're at today with our guarantee offering and how it's producing these sort of no reserve opportunities for buyers.

Our next question comes from the line of Chris Pierce with Needham & Company.

Just to -- I just want to understand -- I may not have the math right, but if I look at just pure auction recognized revenue per unit, it's in line with Q3. And on the prior call, you talked about incentivizing sellers, power sellers and people to try to price guarantee, should we -- and I know that incentivizing power cells has sort of been a longstanding industry dynamic. Should we think about that for you guys as something that's not temporary and that's sort of going to be sort of like the new normal as industry competitive levels change? Or like if I reading into something? I just want to get your thoughts on that.

Yes. I think that's a good point, Chris. We're -- revenue per unit in Q4 was healthy to your point. And I don't think you should think of it as temporary. We're not that worried about competition, where we think revenue per unit is going to like fall. Bill might be able to add little more color here. But I think that's a really good point. We're -- we did want to bring up to investors in the last earnings call that we didn't want our investors -- I'm mean analysts like significantly increasing ARPU over the next year to give us that ability, as you said, to reinvest. But having said that, you -- but I don't anticipate ARPU to go down meaningfully. But Bill, maybe there's more you can chime in here.

Yes. So Chris, just to look at the numbers. So in Q3, our auction and insurance ARPU declined slightly from $5.23 in Q2 to $5.08. and then it bounced back up in Q4 to $5.28. So what's baked into our modeling going forward and incorporate into our guidance is an assumption that, that $528 pretty much is flat to maybe up very modestly in Q4 -- I'm sorry, in 2026. So that's kind of the modeling that we've baked into our financials in terms of what we're giving you guys for the year. So we'll see how it goes, but it's going to hold up probably slightly better than we previously were modeling on our last call.

Okay. And then just on competitive dynamics broadly, I can't speak for all investors, but I feel like there was a school of thought that if we look back 2 years ago, wholesale was going digital, and it was going to be a winner take most market. Would you push back that on maybe investor sentiment changing or the industry sentiment changing that wholesale is could go digital, but it will be a duopoly type market, and that will naturally be buffers for each other's growth and comps will play a role and things like that? Like I guess, when you look at the industry 3 to 5 years from now, do you have a different projection than you did maybe 18 months ago?

So I think at the end of the day, we're going to focus on being the leader. I believe we are still the dealer wholesale leader. We put on -- how many units last year I said in the call, 86,000 units. I don't believe anybody else put on 86,000 dealer wholesale units last year. And that -- and when you think about our differentiator, we're at -- we're not only in the wholesale category. We're helping dealers create their business better. I really recommend as folks are thinking about this like not only watching the video, but talking to our end customers. People were working with are happy with our wholesale results. What they're really saying is ACV is helping us run our business better. Go back to Rajat's question about AI changing industries like automotive. And I think investors should be worried that AI will change industries. I think that is a legitimate worry. We're doing that in this industry, we're helping dealers execute better. Now is there still a way to go where physical auctions are still the majority of the cars sold? Yes. And we will continue to grow. Now is there also some I would say, credit to also -- it may not winner take all. It could be a -- there could be a couple of winners in this category. I think there's truth of that too. So I think we're going to be the leader. I believe we're going to have the most differentiated offering. And I believe there's also room for others because at the end of the day, there's only 30-ish percent of the industry right now that's moved to digital.

Our next question comes from the line of Eric Sheridan with Goldman Sachs.

Maybe two, if I could. Given some of the moves you made to expand footprint through 2025, how should we be thinking about investments to deepen that footprint reach in 2026 as a driver of growth? And how that fits into your broader strategic priorities? That would be number one. And any update on Project Viper. I don't think I saw anything in the prepared remarks or anything on the call so far. I just wanted to get a quick update on the technology side from Project Viper and how to think about that rollout as we get deeper into '26 as well?

Yes, certainly, Eric. So we are hiring away on the inspectors. I think between the next couple of months, we've got between this month, next month, I think we've got like 30 people in training right now. So we're hiring, we're training. We will hit our inspector number goals I'm hoping by Q3, which incorporates both the hiring and training to really get the national footprint I'd like in place right now. So you will see us just continually executing in that regard to increase our opportunity of going out and inspecting more cars and growing our footprint across the country. So it will take us several quarters to both get the hiring and training in place. But I'd like to get this national footprint, the way I would like it to be from the talent and inspecting more cars a day. My goal is to get most of this in place but, I would say, by the end of Q3. It's sort of my goal. It's an aggressive goal, but we're working hard. So that's on the -- like how to think about the talent and hiring and training because obviously, it's not just hiring, but it's also training and getting all the people in the right places. And then second, your question on Viper, we are just -- we're -- we've done 2 things. One is we're starting to implement somewhere around -- it's about 5 to 10 Vipers a month right now. We're in the early days, Eric, we're out putting somewhere, I think, around 5 to 10 a month over the next -- throughout the year. Think about these as the early dealers that are our dealers who are helping us not only integrate with the other third-party vendors. So think about like CRM companies, DMS, like the various vendors, but also helping us nail down a few of the other requirements. So our goal is to put somewhere north of 100 of these out in the field, maybe as close as 200, so think like 100 to 200 of these. We've got at least 200 hand-raisers, probably more than that of dealers saying they want it right now. I don't think we'll get them all out this year. We'll see. So that will be getting them all live, making sure the product is accomplishing objective number one, which is helping them buy more cars. Objective number two, helping them have retail photos faster on their websites, which helps them retail cars faster and objective #3, which is on their service revenue, helping them dealers, for example, we're predicting tire depth at a pretty incredible, like my team is saying 90% confidence, higher than 90% confidence on tire depth. So think about cars going through and the dealer can now upsell tires to consumers as they're coming through. And it's also a way to help value the vehicle. So whether it's selling more cars, buying more cars or their service revenue going up, those are the 3 key things we're watching. Our goal is to start scaling this early next year, where once we've proved our -- we feel really, really good. We just don't want to go build 100 of these a month right now or some significant number. And then we find out we wanted to speak something, we just wanted to change something. And so the thought is be prudent. As you know, we do move fast, but we are pretty prudent over here, make sure we feel like everything is going in the right direction. And then early in the year really start to scale this thing where throughout the year, we'll also start taking orders.

Eric, it's Bill. So just -- again, just going through the math. So we already talked about the $11 million incremental investment on the go-to-market side. So the incremental investment on the Viper side that's primarily going to flow through our financials as CapEx since we capitalize these units and then amortize those costs over a subscription period. That's also another high single-digit NIMs. So call it approaching $20 million of incremental investment for those 2 initiatives combined.

And then more to come on the business model on future calls, but think subscription but also tying back to wholesale. And that will be an opportunity for us to both help the dealer achieve their objectives, but also us drive our wholesale, our wallet share and rooftops working with us.

Our next question comes from the line of Naved Khan with B. Riley Securities.

So George, maybe just looking back at your commentary in November. I think when you're talk -- thinking about 2026 back then, you said it's prudent to probably assume that wholesale market stays flat in 2026. And now we are in Feb 2026, anything that might have changed in terms of your thinking about the market for this year versus maybe about 3 months ago? So that's my first question. And then the second question is around arbitration expense. And just wondering what are the kind of drivers here to get this thing down. Is this really more of a function of price volatility? And as that comes down, you expect it to come down? Or you did do some cleanups. So I was just trying to understand the drivers there. And any color there would be helpful.

Yes, certainly. On your first question on market. As of right now, we're not changing our perspective of dealer wholesale being flat for the year. But obviously, a very good question. In January, according to NAAA, dealer wholesale was down by 6.5%. So you saw January was -- the market was down. Obviously, there was a lot of weather February, there was also -- there's been some weather, obviously. So I think too early to say it will be down for the whole year. And I think there's enough things going on in the industry between what can happen with the tax refunds and look at when you generally think about the benefits right now of buying a used car from a tax perspective, there's benefit. There's going to be enough benefits on the used car side. There's going to be supply benefits of off-lease coming and dealers are going to buy a lot of these cars. So as of right now, even though I would say the year started out with dealer wholesale being down, I would -- we are still thinking that it will be a flattish year. And your second question arbitration, a very good question. We feel really good about where our arbitration is in Q1 and where we're going into the year. We did really -- we moved out some bad actors on the platform in this November and December of last year. And we started to really just covering the platform better. And that's really playing out well. I think it's also the ACV brand. We're not letting folks take advantage of this anymore, starting to get out there. And I wish I would have just done the sooner, but I think as leaders, you just -- you kind of -- as you're growing these businesses, you sometimes are just chasing a little bit. And I'm really proud of the team. Really, really proud of the team. We executed extremely well in Q4. We are going into the year, I'm seeing MPS, I'm seeing buyer satisfaction, I'm seeing on the seller side and the buyer side, more and more accountability. So yes -- and plus our technology is getting better. Another thing, Rajat mentioned about like using AI. We're starting to use AI to figure out what's going on with sellers and buyers and other types of things. So all in all, I'm proud of how the team is executing on arbitration.

And one other item I would add to what George indicated is with all the inspectors that we're adding that we've already had and we'll continue this year, we're also going to leverage that increased inspector head count out there to also validate certain arbitration claims. So that will kind of give us another opportunity to ensure that we're paying out when it makes sense to pay out based on validated claims.

Yes. This is something we recently started piloting and having the additional headcount really helps because we right now send these cars to some type of local dealership. And we found really, it's been very helpful to go put our own eyes on the car. So yes, as Bill mentioned, it will be another positive way of us managing arbitration and allows us to handle these claims faster. It's not us only having -- it becomes for the good actors, a better process because now we can send our person out there to validate the arbitration.

Our next question comes from the line of Jeff Lick with Stephens.

I got kind of a series of questions around helping dealers run their business better. They're all kind of related. Firstly, could you maybe talk a little -- dig a little deeper on the usage, the early returns on using Viper to boost service attachment and upsell in the service lane? And then along with that, if you guys do a scan, do you own the data? Or does the dealer own the data? Or did you guys both have access to it? And then I was wondering if you also elaborate into -- I know you guys are doing some kind of private label auctions or intra-dealer auctions with different groups using your data. Just kind of wondering if you could talk about those things.

Yes. We've been starting to scale our service drive acquisition, both pre-Viper and now starting to leverage Viper as well. But we're -- Jeff, we've got roof taps buying, I would say, anywhere between 4 and 1 as high as 10% of all ROs, repair orders, service orders coming through their service drive. So these are unbelievable numbers. So I think on a rooftop basis, this could be anywhere between 40 and 100 cars a month. Bill and I met with one the other day that was already buying, what did you say 75...

No, he's already you're already buying over 150 a month.

A month. So we're seeing some -- we're already starting to see, Jeff. Now we've got to scale it. I think like we got to go from like dozens of rooftops to like thousands, but where ACV is in place and where the dealer takes our best practices, our numbers are like off the chart. But we've got to get more rooftops doing it. And so ClearCar by itself meant the dealers left go around, they got to do the yes, no question, which, by the way, only takes a few minutes. So I would like to see more and more of them using it. And we now in parallel for a few rooftops, again, early stage, we'll actually put a guarantee on the cars. That's not helpful because one of the negatives we're finding is even with all of our tech, they still only go put offers on the ones they really want to buy, which is not good for them or us. So now that we -- and some pilots actually put a guarantee. Now they don't feel like they're taking a risk buying a car, they had no business buying. And so that's also being helpful. So we got to take this from dozens of rooftops to hundreds to thousands of rooftops. But great thing what I found in my entire career, I remember when we were selling a few hundred cars a month at ACV auctions, and we told the world we're going to go out there and disrupt dealer wholesale. Probably a lot of people thought we're crazy. And I'm sure those folks who are saying, you're going to do all this with AI, it sounds a little crazy. But once you could do it with dozens, you can do it with hundreds, you could do it with thousands. And I've seen that throughout my entire career. So that was your question one. Your question two on data at the dealers' data at the end of the day, and then we have the right to use the data in an aggregated methodology. I don't really want to speak any more to that on a public call like this, but it's a win-win on how we're respectful about their data, but then how we could use the data for doing the things we're talking about, like we're talking about today, pricing predictions, things like that. So we have a very senior team from a legal and data perspective here and doing it for 10 years. And so we've been able to do this in a way that's both positive for the dealers and us.

Do you see eventually the ability to charge kind of non-volume contingent recurring revenue, maybe charge more for helping the dealer run their business better and not necessarily tying that to auction volume?

They will be both. So the way the model works and I was trying not to talk about the models today, that's really for middle of this year. But at a really high level, the way it will work is the dealer will pay several thousand bucks a month. I won't say the numbers just yet, just so no one is modeling it yet. And then there'll be a rebate. So if we don't get the wholesale volume that we'd like to get, then they'll just pay us a healthy number. Because by the way, that's still a win-win. So if they end up just being a high, high SaaS revenue account for us, and that's what they decide. Let's just say that dealer happens to own a physical auction as an example, right? There's a couple of dealers here that across the country own physical auctions. So look, we have a great model. Well, we're going to charge them. It's still fantastic, but it would be a more significant subscription revenue. So yes, it will be a win-win, whether we get the wholesale volumes, which we think the wholesale volumes per rooftop will be -- could add TAM expansion that could be 20%, 30%, maybe more than the typical rooftop. So we're pretty excited about it.

And our next question comes from the line of Gary Prestopino with Barrington Research.

George, I had a couple. I got a question on guarantees and I had a question on Viper. So with the guarantee, once it hits the reserve, do you start to see an influx of increased bidding. Does it kind of work like some of these classic car meta auctions where once the reserve comes off, the price goes up precipitously.

Yes, Gary. That's exactly the way this world operates. Dealers that are bidding on cars want to know a car is for sale. And when they know a car is for sell, they'll invest at the time. They don't want to go bid on car after car and waste their time. And we believe the ACV no-reserve sale. Look, pretend that's its own auction, as though the rest of ACV doesn't exist. As though the rest of the industry doesn't even exist. While our no reserve sales going on, we believe we have the highest bid activity in the industry. And so Gary, yes, you're seeing exactly that because dealers are willing to invest their time as they know the top bidder is going to get the car.

Okay. And then on Viper, I realize it's real early in the gains there. But what does your system do? Or how are the dealers getting over the reticence of the individual that owns the car to really trust the data to trust what's being spit out by the dealership. There's always an inherent conflict of interest there, right?

Yes. Good point, Gary. I think you're really bringing up that between AI and machine learning, we need the customers who appreciate and trust, right, the system. The good news is we've been out showing the end results of our data profile. And when you look at the last few months, and the last few quarters, our retail prediction of what a car and sell for in the next 30 days. Most recent results was within $38. So that's not me just saying, "Hey, this should work someday." This is saying, our prediction of what the car is going to sell. We're not -- won't always -- even within $100, even within $200, that's incredible. So Gary, we're not just -- we didn't just build a hardware unit here and say, okay, go learn. We've been learning through ACV Max. We've been learning through ACV auctions. Our wholesale predictions are within $100. So when you have this ability to walk in there with hardware that you've already been learning, you've already been proving, it allows us to have more credibility to do what you're asking, which is how do we change their process to trust it because we are walking in. Now will there still be a transitory process to get trust, of course. But at least we're walking in to this opportunity with a lot of credibility.

So Simon, I think we're at the end of the call. So from here, I'll just say thank you for joining us tonight. We hope to see you on the conference circuit over this next quarter. And again, thank you for your interest in ACV, and everybody, have a great evening.

Thanks so much.

Thank you. And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.