OPENLANE, Inc.

Good day and welcome to the Open Lane Second Quarter 2024 Earnings Call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ms. Ekanu Orbelaru Head of Investor Relations. Please go ahead, ma'am.

Good afternoon, everyone. Welcome to OpenLane's second quarter 2024 earnings call. With me today are Peter Kelly, CEO of OpenLane, and Bradley Kia, EVP and CFO of OpenLane. Our remarks today include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risk and uncertainties that may cause our actual results or performance to differ materially from such segments. Factors that could cause such differences include those discussed in our press release issued today and in our SEC filings. Certain non-GAAP financial measures as defined under the SEC rules will be discussed on our call. Reconciliations of GAAP to non-GAAP measures are provided in our earnings materials and available in the investor relations sections of our website. With that, I'll turn the call over to Peter. Peter?

Thank you, Atunu, and good afternoon, everyone. Before I get started, I just wanted to formally welcome Atunu to the role of Head of Investor Relations for OpenLane. We're delighted to have Atunu and her deep financial expertise on the team, and I know she is looking forward to working with all of you as we communicate our results, our strategy, and the OpenLane story. Turning to our results, OpenLane's continued focus on execution and profitable growth led to positive results in the second quarter. We grew our volumes, and on a consolidated basis, we grew revenue and delivered $71 million of adjusted EBITDA, which was negatively impacted by a $2 million charge for the newly enacted Canada Digital Services Tax, or DST, which Brad will discuss in more detail later. Year-to-date, we have also generated $138 million in cash flow from operations. Similar to Q1, I'm very pleased that these results reflect a significantly improved performance in the open-lane marketplace. On 7% volume growth, the marketplace business contributed $33 million in adjusted EBITDA, which includes the $2 million DST charge and represents 46% of OpenLane's total adjusted EBITDA. AFC was again a strong contributor, growing loan unit volumes and generating approximately $39 million of adjusted EBITDA in the second quarter. I believe the consistent track record of performance we delivered in the first half of 2024 clearly demonstrates the power of our differentiated offering and the strong scalability characteristics of our company. We are accelerating innovation, improving the customer experience, and making wholesale easy for our customers. The combination of these factors positions us very well to continue gaining share and deliver even stronger financial results in the future. So let me turn to our strategy and how we plan to build on this positive momentum. OpenLane remains highly focused on growth. We are a leaner, more agile company than ever before, and I believe this enables us to grow our volumes, our market share, and financial results simultaneously. As I previously said, our strategy for growth is anchored in our purpose, to make wholesale easy so our customers can be more successful, and guided by our vision to build the world's greatest digital marketplace for used vehicles. Our pursuit of these goals and Open Lane's acceleration of profitable growth is enabled by three core strategic advantages. First, are expanding volume and share in both the commercial and dealer segments. Second, the opportunities enabled by our asset-light digital model. And third, our focus on the customer experience. Let me address each of these individually, and I'll start with volume growth and share. In the second quarter, OpenLane grew its marketplace volumes by 7%, despite headwinds from the CDK ransomware attack that negatively impacted our volumes in the quarter by approximately 6,000 vehicles. and without which our year-on-year volume growth would have been approximately 9%. We also increased our growth merchandise value by 6% to nearly $7 billion. This marks the fifth consecutive quarter with year-on-year growth in the marketplace segment. And similar to the first quarter, this volume growth was again driven primarily by our U.S. marketplace. Our open-lane branded marketplace has been live for just over a year in Canada and approximately eight months in the U.S. and Europe. The positive feedback we continue to receive and the results we are delivering in the months since that launch give me increased confidence in the strength of our platform, and that confidence is fueling increased investments in both technology and people that I will discuss later in my remarks. In terms of commercial off-lease volumes, OpenLane remains a clear market leader, and our commercial and off-lease volumes are up meaningfully in both the United States and Canada during the quarter. We increased commercial vehicles offered for sale and also unique buyers who purchased that off-lease inventory during the quarter. This is exactly the network effect we aimed for when consolidating our commercial and dealer marketplaces into open lane. As I mentioned last quarter, commercial off-lease supply remains well below pre-pandemic levels and will likely remain under pressure over the next several quarters given the low level of leases written in 2021 and 2022. However, we are seeing the off-lease equity gap continue to narrow. This results in a higher percentage of maturing off-lease vehicles being returned by lessees and a lower percentage of those vehicles being purchased by the grounding dealer. To the extent that this trend continues, it will result in a higher percentage of off-lease maturities entering the remarketing funnel and flowing deeper into the funnel, both of which are positive for open lane. Also, new vehicle sales continue to increase and the volume of new lease originations increased for the fifth straight quarter. OpenIN will be the primary and earliest beneficiary of these future volumes as those leases mature. And then finally, many of our commercial customers have expressed a desire to continue selling more and more of their inventory online. So we're leveraging our deep data insights and technology to design new programs that support this trend and a more digital future for our customers. Switching to dealer volumes, I am equally optimistic about our opportunities for growth in this segment. There remains a large addressable market, particularly with dealers still using physical auctions or wholesalers. Our platform is faster, easier, and more convenient. It has significantly lower cost of sale and generates better outcomes. And it provides buyers and sellers access to a national dealer base that we continue to expand. Similar to the first quarter, total wholesale industry dealer volumes declined in the U.S. and to an even greater degree in Canada. Open lanes dealer volumes aligned with those trends. However... I was pleased to see that the year-over-year gap narrowed as the quarter progressed, and I'm optimistic for the second half of this year. Many of the market fundamentals that drive dealer volumes are also improving. New vehicle inventory is returning to pre-pandemic levels, wholesale prices are declining, and this is improving vehicle affordability for consumers. Those factors should contribute to increased trade-ins and more used vehicle transactions, which would be very positive for OpenLane. So in summary, OpenLane is well positioned with both commercial and dealer customers. The market fundamentals are trending in our favor, and there's growing evidence that having all of the buyers, all of the sellers, and all of the cars all in one place creates a more active and vibrant marketplace. Shifting to the opportunities enabled by our asset-like digital model, I also believe we're accelerating growth through our differentiated core technology and our deep pipeline of innovation. Let me give you a few examples. I'll start with vehicle inspections. Last quarter, we announced our Visual Boost AI technology that provides buyers access to an AI-powered inspection visualization on every dealer vehicle listed in our marketplace. This quarter, we are enhancing our differentiated inspection capabilities with the release of CodeBoost IQ. CodeBoost IQ aggregates over a million OBD2 scans that we've captured through our data-rich service networks, and follows those codes through pre and post transaction. This allows us to accurately predict which codes indicate the highest probability of issues or repairs, or which codes may lead to an arbitration. We then simplify that intelligence into easy to understand alert banners at the top of each inspection report, which helps buyers make faster and better informed bidding and buying decisions. So between Visual Boost AI and CodeBoost IQ, we are providing comprehensive, industry-leading condition data on every dealer vehicle, inside and out. Next, I'd also like to provide you with a brief update on our Absolute Sale feature in the U.S. marketplace. As discussed on the last call, Absolute Sale allows sellers to easily indicate their full commitment to selling a vehicle. It significantly increases buyer engagement, generates better price outcomes, and increases the velocity of sale. Dealer adoption continues to grow, and Absolute Sale represents a growing share of OpenLane's overall marketplace transactions in the United States. Building on that momentum, last week we launched Automated Absolute Sale. This major enhancement allows sellers to set and forget Absolute Sale triggers right at the time of listing the vehicle and lets our technology do the rest and finalize the sale. Our Absolute Sale success metrics are improving week by week, and we look forward to sharing additional detail on this and our other emerging innovations over the months to come. And then finally, let me turn to our third growth driver, improving the customer experience. During the quarter, we comprehensively remapped many of the customer journeys, identifying hundreds of customer touchpoints from awareness to registration to transaction and post-sale activities. The opportunities identified are being prioritized and operationalized in the business. For example, with tens of thousands of dealer and off-lease exclusive listings together on OpenLane, we are making it faster and easier for dealers to find the right cars for their lots. Through customer interviews, our own marketplace data, and agile product development, we completely redesigned our marketplace search functionality during the second quarter. And these new filters and capabilities are already receiving positive feedback from our customers. This is just one example from our broad portfolio of CX initiatives that I believe will help make OpenLane the most preferred platform for buyers and sellers. So together, our commercial and dealer segment positioning, our speed to innovation, and our focus on the customer experience are differentiating OpenLane from our competition and driving meaningful, scalable growth. In the second quarter, our marketplace volume increased by 24,000 vehicles versus the prior year, or 7%. And this helped drive the meaningful marketplace adjusted EBITDA contribution. As I mentioned earlier, these results give me a lot of optimism and confidence in our future. And with that confidence, we are doubling down on our strategy and our investments. During the quarter, we began executing a multi-channel plan to further accelerate growth. We are funneling additional SG&A savings into technology investments across our platform, new products and features, and greater ease of use for our customers. And because we know this remains a relationship business, we're also investing in our customer-facing team. During the quarter, we made significant investments in staffing and resources, hiring new sales leaders into underserved markets and supplementing teams in existing markets where we see opportunity to gain share. And we've already started to see some early wins here in the third quarter. Before I hand it over to Brad, I want to reinforce that OpenLane is gaining positive momentum. I believe we have only scratched the surface of what this company is capable of delivering. And our key strengths in terms of our value proposition for investors and our ability to deliver stockholder value remain compelling. OpenLane is an asset-like digital marketplace leader for wholesale used vehicles. There is a large addressable market in North America and Europe, and we're well positioned to capture the opportunities to grow both dealer and commercial volumes. Our brand and platform consolidation efforts are enabling us to accelerate innovation and product development. Our focus on operational efficiency, which I now believe to be part of the fabric and culture of this company, gives us the financial headroom to invest in innovation without sacrificing financial results. We're cash flow positive with a strong balance sheet. and we believe our business has the capability to generate meaningful earnings growth over the next several years. With that, I'll hand it over to Brad for a deeper discussion into our operational and financial metrics for the quarter. Brad?