OPENLANE, Inc.

Good day and welcome to the open lane third quarter 2024 earnings call. All participants will be in a listen only mode. Should you need assistance, please signal conference specialist 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 telephone keypad. 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. Itinu Oreleru. Please go ahead, ma'am.

Thanks, Chuck. Good afternoon, everyone. Welcome to OpenLane's third quarter 2024 earnings call. With me today are Peter Kelly, CEO of OpenLane, and Bradley Kea, GDP and CFO of OpenLane. Our remarks today include forward-looking statements within the meaning of the Private Securities Litigations Reform Act of 1995. Such forward-looking statements involve risks and uncertainties that may cause our actual results or performance to differ materially from such statements. 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 SEC rules will be discussed on this call. Reconciliations of gap to non-gap measures are provided in our earnings materials and available in the investor relations section of our website. With that, I'll turn the call over to Peter. Peter.

Thank you, Atunu, and good afternoon, everybody. I'm pleased to be here today to share OpenLane's strong third quarter results. I will start with some high-level details around our performance, our strategy, and our outlook for the future. And then I'll turn the call over to Brad Lakia to provide additional detail on our financial and operating metrics. OpenLane had a very positive third quarter. On a consolidated basis, we increased revenue and delivered 75 million in adjusted EBITDA, representing a 10% increase over the prior year. And year to date, we've generated $260 million in cash from operations. Similar to Q1 and Q2, I'm very pleased that these Q3 results reflect a significantly improved performance in the OpenLane marketplace segment. On 6% volume growth, the marketplace grew revenue and gross profit while delivering 36 million in adjusted EBITDA. That was a 34% increase over the third quarter of last year. And this is now the third straight quarter where our marketplace segment has contributed nearly 50% of our consolidated adjusted EBITDA, and that's up from an average of around 39% for the same three quarters last year. AFC was again a strong contributor in the third quarter, generating approximately $39 million of adjusted EBITDA, while reducing SG&A costs and effectively managing risk across that portfolio. These third quarter results clearly demonstrate our ability to generate profitable growth and the strong scalability characteristics of our asset-light digital model. I also believe our results reflect how customers increasingly view and value our differentiated offerings. OpenLane is a true market leader in technology, and we're seeing the positive results of the strategic investments we're making in innovation, in people, and in the customer experience. All of this fuels my optimism for our long-term growth in volume, market share, and profitability. So let me turn to our strategy and how we plan to build on this positive momentum. As I've previously said, our strategy for growth is anchored in our purpose, which is to make wholesale easy so our customers can be more successful. And we're making wholesale easy by focusing on three enabling priorities. First is by delivering the best marketplace, expanding to more buyers and more sellers, and offering the most diverse inventory available. Second, by delivering the best technologies, innovative products and services that help our customers make informed decisions and achieve better outcomes. And third, by delivering the best customer experience, keeping our marketplace fast, fair, and transparent, making it easy for customers to transact, and making OpenLane the most preferred and the most utilized marketplace. So let me detail about how we're advancing each of these and how they're positioning us for the future. And I'll begin with creating the best marketplace. Openlanes' third quarter marked the sixth consecutive quarter of year-on-year growth in our marketplace segment, with positive contributions from our US, Canadian, and European marketplaces. During the quarter, we increased the number of vehicles offered and sold, delivering growth with both commercial and dealer-owned vehicles. Our marketplace facilitated a gross merchandise value of nearly $7 billion, which was a 12% increase over the same quarter last year. We also increased our marketplace participation. delivering one of our strongest new dealer recruitment quarters since 2021, as well as double-digit increase in unique buyers transacting on our platform. All of these points to the strength of our offering, the vibrancy of the OpenLane marketplace, and the value that OpenLane delivers in terms of speed of sale, high conversion rates, low selling costs, and excellent financial outcomes for our customers. Focusing on dealer volumes, We are clearly seeing the power of open lanes network effect, and my optimism remains as strong as ever around our longer-term growth opportunity in the dealer space. During the quarter, we grew our dealer volumes by 3%, representing a significant improvement versus the first half of this year. Momentum also increased over the course of the quarter, and that gives me increased optimism for trajectory in the fourth quarter and into next year. We attribute much of this to the scaling of our marketplace, our accelerated brand and digital marketing efforts, and our go-to-market investments. which are generating increased participation from franchise and independent dealers, both as sellers and as buyers in our marketplace. And we're also seeing customers continue to gravitate towards digital. When comparing the most recent four quarters to the preceding four quarters, we believe our dealer volume growth is outpacing and taking market share from physical auctions. And there is still a very large addressable market for us to capture. In terms of commercial off-lease volumes, Open Lane remains a clear market leader. and I was pleased to see our commercial volumes growing in the third quarter. We have discussed on prior calls that the low level of leases written in late 2021 and 2022 are a headwind to off-lease volumes in the second half of this year and in 2025, and that off-lease volumes will not maturely grow until 2026 and beyond. Given that background, I'm pleased with how our off-lease volumes held up in Q3. I was also pleased to see industry new vehicle sales increase and lease originations increase for the sixth straight quarter, which will be a positive for OpenLane when those leases mature. OpenLane remains well positioned with commercial sellers, delivering faster speed of sale, higher conversion, lower costs, and better financial outcomes. In fact, one of our commercial sellers is now converting nearly 95% of their inventory in OpenLane. And many customers have commented to me that OpenLane is bringing them a substantial premium to the vehicles that they're selling at physical auction. So in summary, OpenLane is focused on leveraging the combined power of our growing dealer base with their strong relationships and market position with commercial customers. And both customer sets will benefit from greater exposure, integration, and interaction through the OpenLane marketplace. The second way we're making wholesale easy is by leveraging our asset light digital model to deliver what we believe is the best, most innovative technology available. In the United States, we've spoken on previous calls about our investments in condition reports through industry first offerings like Visual Boost AI and CodeBoost IQ. We are committed to providing comprehensive condition data on every vehicle offered for sale. We're also seeing the momentum build around our absolute sale feature. About half of the dealer transactions in our US marketplace are now sold through an absolute sale. And on average, sellers who launch a vehicle into an absolute sale receive almost $700 in incremental bids after they activate this feature. That's a powerful figure that continues to increase. In Canada, we're enriching the data we provide to buyers and sellers, deploying AI-powered vehicle recommendations and expanding our self-service offerings to enhance the overall buying and selling experience. In Europe, we recently received the Fleet Europe Remarketing Innovation Award for our Open Lane Sell offering, which gives sellers more control and the ability to customize their selling experience in real time. And for our commercial customers, we are deepening the integrations between our private label programs and their backend financial and operational systems. Already this year, we have deployed 65 major enhancements and over 2,700 other improvements to help commercial customers prepare for a more digital future and create an even closer connection with their franchise dealer networks. And then finally, let me turn to how we're making wholesale easy by providing an exceptional customer experience. During the quarter, I had the opportunity to spend significant time with many OpenLand customers. I came away from those meetings with a strong conviction that our customers are increasingly looking to a digital future, in terms of how they sell and source their inventory, and also in terms of how they connect with their retail customers. It's also clear to me that OpenLane's customers value relationships and that OpenLane is a valued business partner. So we're investing in those relationships and focusing on delivering real value through technologies that are highly sophisticated, but also very easy to use. We are integrating AI into our operational processes and service workflows to help reduce administrative tasks and to resolve customer issues more quickly and consistently. Also during the third quarter, we launched a standardized transactional net promoter score or NPS system across our US, Canadian, and European marketplaces. The early results and feedback we're getting from dealers range from good to grace to excellence, depending on the platform. And some of the consistent positives cited by our customers include the ease of use, the appreciation of the great new features and functionality, as well as our highly responsive customer support teams. So we are committed to delivering a positive data-driven and high touch customer experience. And I believe this will be a competitive difference here for OpenLane and a core driver of our future growth. I'd like to spend a few moments on AFC. While Brad will provide some additional detail in a few moments, we will be hosting an investor update on November 19th to provide additional disclosures and metrics that most finance related businesses share with their investors. AFC is a strong, high-performing business with a leading market position, and it is a valuable asset to OpenLane. It helps attract, enroll, and engage dealers on the OpenLane marketplace, and it generates strong adjusted EBITDA on cash that can be reinvested in the business. We believe that the enhanced information will improve our investors' understanding of this business, will better highlight AFC's leading financial performance metrics, and ultimately allow investors to more accurately value AFC. Among others, the performance metrics we will highlight will include AFC's leading return on equity, return on assets, and the strength of AFC high mix of fee income and strong net interest margins. These leading performance indicators are driven by AFC's strong market share, its exceptional customer service, and its competitively differentiated underwriting and risk management processes. So we look forward to sharing all of that information with you later this month. So to close out my comments on the quarter, I just want to reinforce that OpenLane is very well positioned in the market and that our differentiated offerings are gaining momentum and customer loyalty. The third quarter represented another positive step on what I believe is a much more consistent track record of performance. And our results reinforce our key value proposition for investors, that OpenLane is an asset-light digital marketplace leader for wholesale used vehicles, that there is a large addressable market in North America and in Europe, and we're well positioned to capture the opportunities to grow both dealer and commercial volumes. It's clear that our brand and platform consolidation efforts over the past 24 months are now enabling us to accelerate innovation and product development. Our focus on operational efficiency has also given us the financial headroom to invest in that innovation while also improving our financial results. We are cash flow positive with a strong balance sheet, and we believe that our business has the capability to deliver meaningful earnings growth over the next several years. So that concludes my remarks regarding the third quarter. But before I turn the call over to Brad Lakia, I have one other announcement, and that is that Brad will be leaving OpenLane to pursue another opportunity. Brad will remain at the company through the end of February to assist in finalizing our 2024 fourth quarter and year end results, and also to help ensure a smooth transition. We have already initiated a national search for a new CFO. We have a very strong bench strength and institutional knowledge across our finance areas and teams. And we also have a very solid foundation of cost management, capital allocation, and investing in innovation. These are all areas that Brad helps enhance during his time here at OpenLane. So I let Brad provide any additional context that he'd like to offer up before he covers our financial results. And I will keep you all updated and informed when a successor has been named. Brad.