OPENLANE, Inc.

Good day, and welcome to the Openlanes first quarter 2025 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a 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 the touch-tone phone. To withdraw your question, please press star, then two. Please note that this event is being recorded. I would now like to turn the conference over to Jared Harnish. Please go ahead.

Thank you, Operator. Good afternoon, everyone. Welcome to OpenLane's first quarter 2025 earnings call. With me today are Peter Kelly, CEO of OpenLane, and Ryan Miller, OpenLane's Vice President of Finance for the Marketplace business. 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 other 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 the SEC rules, will be discussed on this call. Reconciliations of GAAP to non-GAAP measures are provided in our earnings material and available in the investor relations section of our website. With that, I'll turn the call over to Peter. Peter?

Thank you, Jared, and good afternoon, everyone. I'm pleased to be here today to share OpenLane's strong results from the first quarter. I'll start with a few highlights, but spend the majority of my time discussing our strategy and our perspectives on the overall market environment, including tariffs. But first, I hope you saw our recent announcement naming Brad Herring as our new Executive Vice President and Chief Financial Officer. I look forward to welcoming Brad to our team later this month. Today, the financial portion of our call will be led by Ryan Miller, OpenLane's Vice President of Finance for the marketplace business. Turning to the quarter, OpenLane delivered a very strong start to 2025, building on our positive momentum and delivering record performance in many areas, particularly within the marketplace business. It's clear that the open lane brand is becoming more differentiated and valued in the eyes of our expanding customer base. And the strong scalability characteristics of our asset light digital operating model are increasingly apparent in our financial results. During the first quarter, we grew consolidated revenue by 7% and delivered $83 million in adjusted EBITDA. Both achieved against a prior year that included contributions from the automotive keys business that we divested during the fourth quarter of last year. We also generated $123 million in cash flow from operations. In the marketplace segment, while commercial vehicle volumes were down as expected, we increased our dealer-to-dealer volumes by 15% year-over-year, the second straight quarter of double-digit growth. This resulted in solid growth in auction fee revenue and adjusted EBITDA. Our finance segment also had a great quarter, growing total loan transaction units, holding the loan loss rate to 1.5%, which is the lowest since Q4 of 2022, and increasing adjusted EBITDA by 15% over the prior year. So, in summary, OpenLane is advancing our strategy with focus and with precision and producing positive, consistent results. And despite the current noise in the market, I remain confident in OpenLane's positioning for long-term growth and our ability to deliver sustained shareholder value. As a signal of that confidence, the OpenLand Board of Directors has replaced our prior $100 million share repurchase authorization with a new larger $250 million authorization that will extend through the end of 2026. With that, let me turn to our strategy and how we are positioning OpenLand for the future. As a reminder, 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, by delivering the best marketplace, expanding to more buyers and more sellers, and offering the most diverse commercial and dealer inventory available. Second, by delivering the best technology, 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 and making open lane the most preferred marketplace. So let's start with more detail on the marketplace. While overall volumes were slightly down, this was entirely attributed to the decline in commercial off-lease volume that we've discussed during previous calls. The Q1 decline in off-lease volume was in line with our expectations, and we still anticipate those volumes to recover beginning in 2026. I won't repeat all of my commentary from prior calls, other than to reinforce that OpenLane remains the clear market leader in the commercial office space, representing the majority of OEM and financial institution programs across North America. When the commercial volumes return in 2026 and beyond, OpenLane is best positioned to capture that opportunity, given our longstanding customer relationships, our deep system integrations, and the tailwinds generated from continued migration from physical to digital channels. And with new lease originations up for the eighth straight quarter in Q1, this will be another positive tailwind for OpenLane's longer-term growth opportunity. In dealer-to-dealer, I was very encouraged by our strong results, which were broad-based and included volume growth contributions from the United States, Canada, and Europe. This growth was primarily driven by solid gains in new buyer and new seller participation in the marketplace. The investments we've made over the last several years to promote the OpenLane brand, attract new buyers and sellers, increase our share, and bring a differentiated offering to the market are clearly delivering results. This was particularly true in the U.S. marketplace, where we had the best dealer-to-dealer quarter since the divestiture of the U.S. physical auction business. We beat all previous daily, weekly, monthly, and quarterly sales records, recorded the highest number of unique visitors to OpenLane.com, and achieved double-digit growth in dealer inspections and listings, total new dealer registrations, and total active buyers and sellers. We also drove double-digit sales growth from several of the top major public dealer groups, a testament to our focus and success growing wallet share with the country's largest franchise dealers. We did see some increased dealer volumes and demand in late March carrying into early Q2 after the tariffs were announced, and I'll speak more to that in a few minutes. But I want to stress that OpenLane's strong first quarter performance was defined well before those announcements and included monthly year-over-year dealer growth throughout the entire quarter. And based on our analysis of industry data for dealer-to-dealer, we outperformed the physical auction industry during this heightened period, as well as for the full quarter. In fact, our year-over-year dealer volumes grew at nearly double the rate of the broader industry, and we gained market share. I think this is very compelling evidence that OpenLane's advantages in terms of speed, ease, and better outcomes are resonating with customers and gaining traction across our markets. Also, our data indicates that in Q1, approximately 30% of the US dealer-to-dealer market was digital, with 70% still physical, meaning there is potential for significant share gains as more and more of this volume moves to digital, where OpenLane is a leader. So from a marketplace perspective, the TAM and thereby OpenLane's opportunity remains very large. We are driving the secular ship from physical to digital in dealer to dealer, and we are well prepared for the commercial off-lease return in 2026 and beyond. Ultimately, this scale and diversity of inventory of buyers and sellers will power the future of our marketplace and serve as a core differentiator for OpenLane. Another core differentiator is our technology. where we focused on making the buying and selling experience faster, smarter, easier, and more transparent for our customers. We are self-funding our innovation agenda, and our platform consolidation efforts have enabled a rapid acceleration of new products, features, and functionality across all of OpenLane. On the last call, I spoke to the launch of our one app in the U.S., and I'm pleased to say it is achieving all of its intended goals. We are already enrolling crossover private label franchise buyers into our open marketplace, through a process that formerly took five to eight days, but can now be completed in just minutes. At the same time, our independent buyer base is increasingly purchasing commercial vehicles that flow from the private label sites directly into the open marketplace. We are also very active on the innovation front in Canada. Our Canadian Open Lane Pro subscription programs are gaining momentum as we enhance them with additional data insights and new exclusive pro-only features. These programs increase the stickiness of our marketplace with customers and also expand our revenue streams. And just last week, we launched our tariff filter technology that allows Canadian dealers to quickly and easily search, filter, and bid on tariff-exempt automobiles. And then finally, all of these things combined are helping us deliver an improved customer experience. As I've said before, OpenLane is a digital marketplace in a relationship business. And the relationships that our customers have with our people and our products are critical to our long-term success. And I was very pleased to see that in Q1, all open lane transactional NPS scores improved compared to one year ago, and now sit squarely in the great to excellent range across all geographies. Based on these results and on the positive feedback we're getting from dealers, we are continuing to invest in our sales, marketing, call center, logistics, arbitrations and title teams, to keep making wholesale easy for our customers. I'd also like to spend a few moments on AFC, where we posted another very solid quarter, growing total loan transaction volumes, reducing SG&A costs, controlling the loan loss rates, and contributing double-digit year-on-year growth in adjusted EBITDA. AFC is a high-performing business with a leading market position. It is a broad, loyal customer base, a healthy mix of both fee and interest revenue, and best-in-class risk management program. And it continues to deliver superior performance on core specialty finance metrics of net interest margin, return on assets, and return on equity. But one of AFC's greatest contributions to OpenLane is its synergistic connection with the marketplace, strategies we have been advancing over the past several quarters. AFC's local presence and trusted reputation with dealers makes it an easy introduction point into the OpenLane marketplace, and well-positioned to cross-pollinate dealer registrations. Additionally, every time an independent dealer pays off an AFC loan, we have an opportunity to offer them another vehicle for their inventory via the OpenLane Marketplace. So we continue to integrate these two business units and our expanding customer bases to help further accelerate our growth. So in summary, our Q1 results build on OpenLane's consistent pattern of growth and financial performance. They set new records for our overall performance and clearly demonstrate the strong scalability characteristics of our asset-light digital model. We are executing well in our strategy and investing in solutions that delight our customers and make wholesale easy. All of this fuels my optimism for our long-term growth in volume, market share, and profitability. I'd now like to discuss tariffs and their potential impact on the automotive wholesale market. I won't detail the tariffs specifically, as they have been covered extensively in the press. And I'm not going to speculate too much on the what-ifs, given the many outstanding questions and unknowns. But I am confident in OpenLane's ability to navigate this uncertainty. And at this point, there is nothing we have heard or analyzed that causes us to adjust our 2025 guidance. We were pleased with last week's announcement regarding some degree of tariff relief for automotive manufacturers. We're also mindful that these or other new tariffs could be announced, increased, decreased, paused or rescinded at any time. So we continue to operate under the assumption that some tariffs will remain in effect, and we're actively planning for multiple scenarios to ensure that we are prepared for a range of possible outcomes. Overall, we view the potential impacts of tariffs as a mix of both positives and negatives. On the near-term positive side, if demand stays high and prices increase, this could benefit OpenLane through higher volumes and fees in the marketplace. and more revenue and interest with lower loan losses at AFC. However, if North American new car supply is meaningfully disrupted, the longer-term impact on vehicles traded in, new lease originations, and the volatility of used vehicle values could create headwinds for the entire industry. To be clear, these are things that could happen, but for the most part, they have not yet happened. So we are monitoring all of this very closely and in close communication with our customers to understand their approach. and to stay true to our purpose of making our customers more successful. For OpenLane, we are operating with discipline, and there are many compelling factors that position us well to continue advancing our strategy for growth, a strategy that is clearly resonating with our customers. First, we are more asset-light than we were in 2020, without the cost overhang of U.S. physical auctions and with very little debt. Our platform consolidation work has made us more agile, And we can quickly respond to changing environments and deploy new solutions for our customers more effectively. Our technology is a competitive differentiator, and we will continue to invest in innovation. We are generating very strong cash flows from operations. We have a strong management team with a proven ability to adapt and lead change while keeping our plan, our strategy, and our company moving forward. So once again, we are mindful of the increased uncertainty that exists compared to 90 days ago, and we'll need to see what ultimately remains in place. But considering all of these factors and what we know today, we are maintaining our 2025 adjusted EBITDA guidance of $290 to $310 million. Further details for these guidance metrics are available in our earnings release published earlier today. Looking ahead, I remain very confident that OpenLane will be able to adapt, react, and succeed in this environment. That confidence and my confidence in OpenLane's ability to invest in growth, execute our strategy, and deliver shareholder value is shared by our management team, by our employees, and also by our board of directors. And again, the board has authorized a $250 million share repurchase authorization that will extend through the end of 2026 as a signal of that confidence. So with that, I'll turn things over to Ryan Miller before we go to Q&A. Ryan?