Q2 2024 OPENLANE Inc Earnings Call

August 7, 2024

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 specialist by pressing the star key followed by zero.

Operator: 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 the 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 touch-tone 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. Itinu Orvalaru, Head of Investor Relations. Please go ahead, ma'am. MS.

Unknown Executive: Good day and welcome to the Open Lane, 2nd 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.

Unknown Executive: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch tone phone. And to withdraw your question, please press star, then two.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone.

Withdraw your question. Please press Star then two.

Unknown Executive: Please note this event is being recorded.

Speaker Change: Note. This event is being recorded I would now like to turn the conference over to MS. <unk> <unk> head of Investor Relations. Please go ahead ma'am.

Itunu Orelaru: I would now like to turn the conference over to Miss Itunu Orelaru. Head of Investor Relations, please go ahead, ma'am.

Itinu Orvalaru: Good afternoon, everyone. Welcome to Open Lane's second quarter 2024 earnings call. With me today are Peter Kelly, CEO of Open Lane, and Brad Lakhia, EVP and CFO of Open Lane. Our remarks today may 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 statements. Factors that could cause such differences include those discussed in our press release issued today and in our SEC filings.

Speaker Change: Good afternoon, everyone. Welcome to open late in second quarter 2024 earnings call with me today are Peter Kelly CEO of open Lane, and Bradley Kim EVP and CFO of open Lane.

Itunu Orelaru: Good afternoon, everyone.

Itunu Orelaru: Welcome to Open Lane, 2nd quarter, 2024, earnings call. With me today are Peter Kelly, CEO of Open Lane, and Brad Lakhia, EVP and CFO of Open Lane. 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 defer materially from such statements. Factors that could cause such differences include those discussed in our press release issue today and in our SSE filings. 13 non-GAAP financial measures as defined under the SEC rules will be discussed on our call.

Speaker Change: Our remarks today include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Such forward looking statements involve risks and uncertainties that may cause 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 the night SEC filings.

Itinu Orvalaru: 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 section of our website. With that, I'll turn the call over to Peter.

Speaker Change: non-GAAP financial measures as defined under SEC rules will be discussed on alcohol.

Itunu Orelaru: Reconciliation of gap to non-gap measures are provided in our earnings materials and available in the Investor Relations sections of our website.

Speaker Change: Cancellations of GAAP to non-GAAP 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.

Peter Kelly: With that, I'll turn the call over to Peter. Peter.

Peter Kelly: 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 Open Lane story. Turning to our results, Open Lane's continued focus on execution and profitable growth led to positive results in the second quarter.

Peter Kelly: 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 Open Lane. 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 open lane story. Turning to our results, open lanes continue to focus on execution and profitable growth, led to positive results in the 2nd quarter. We grew our volumes, and on a consolidated basis, we grew revenue and delivered 71 million of adjusts, but not.

Peter: Thank you with two new and good afternoon, everyone.

Peter: Before I get started I just wanted to formally welcome the two new to the role of head of Investor Relations for open Lane.

Peter: We're delighted to have the two new and our 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 open Lane story.

Peter: Turning to our results openly and continued focus on execution and profitable growth led to positive results in the second quarter.

Peter Kelly: 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.

Peter: We grew our volumes and on a consolidated basis, we grew revenue and delivered $71 million of adjusted EBITDA.

Peter Kelly: 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 of 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 contributes 33 million in adjusted EBITDA, which includes the 2 million DST charge and represents 46% of open lanes' total adjusted EBITDA. AFC was again a strong contributor, growing loan unit volumes and generating approximately $39 million of adjusted EBITDA in the 2nd quarter.

Peter: Which was negatively impacted by a $2 million charge for the newly enacted Canada. The digital services tax or D. S Chi, which Brad will discuss in more detail later year.

Brad: Year to date, we've also generated $138 million in cash flow from operations.

Speaker Change: Similar to Q1 I'm very pleased that these results reflect a significantly improved performance in the open led marketplace.

Peter Kelly: 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 VST charge and represents 46% of Open Lane'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.

Brad: On 7% volume growth the marketplace business contributed $33 million and adjusted EBITDA, which includes the 2 million D. S. T charge and represents 46% of open lanes total adjusted EBITA.

Brad: AFC was again, a strong contributor growing loan unit volumes and generating approximately $39 million of adjusted EBITDA in the second quarter.

Peter Kelly: 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.

Brad: 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 a strong scalability characteristics of our company.

Peter Kelly: 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 market 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. Open Lane remains highly focused on growth.

Brad: We are accelerating innovation, improving the customer experience and making wholesale easy for our customers.

Brad: The combination of these factors positions us very well to continue gaining share and deliver even stronger financial results in the future.

Peter Kelly: So let me turn to a strategy on how we plan to build on this positive moment. Open Lane 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.

Brad: So let me turn to our strategy and how we plan to build on this positive momentum.

Brad: Open Lane remains highly focused on growth.

Peter Kelly: We are a leaner, more agile company than ever before, and I believe this enables us to grow our volumes, our market share, and our 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 I'm guided by our vision to build the world's greatest digital marketplace for used vehicles.

Brad: We are a leaner more agile company than ever before and I believe this enables us to grow our volumes and market share and financial results simultaneously.

Brad: As I previously said our strategy for growth is anchored in our purpose to make wholesale easy so our customers can be more successful on.

Brad: Guided by our vision to build the world's greatest digital marketplace for used vehicles.

Peter Kelly: Our pursuit of these goals and open lanes acceleration of profitable growth is enabled by three core strategic advantages. First, our expanding volume and share in both the commercial and dealer segments. Second, the opportunities enabled by our asset-like digital model, and third, our focus on the customer experience.

Brad: Our pursuit of these goals and open lanes acceleration of profitable growth is enabled by three core strategic advantages.

Peter Kelly: Our pursuit of these goals and Open Lane's acceleration of profitable growth is enabled by three core strategic advantages. First, our expanding volume and share in both the commercial and dealer segments. Second, the opportunities enabled by our AssetLite 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, Open Lane 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 her year-on-year volume growth would have been approximately 9%.

Brad: First our expanding volume and share in both the commercial and dealer segments.

Brad: Second the opportunities enabled by our asset light digital model and <unk>.

Brad: Third our focus on the customer experience.

Peter Kelly: Let me address each of these individually, and I'll start with volume growth and share. In the second quarter, Open Lane 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 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 US marketplace.

Speaker Change: Let me address each of these individually and I'll start with volume growth and share.

Brad: In the second quarter openly and grew its market place volumes by 7% despite headwinds from the CDK ransomware attack that never negatively impacted our volumes in the quarter by approximately 6000 vehicles and without approach or year on year volume growth would've been approximately 9%.

Peter Kelly: We also increased our gross merchandise value by 6% to nearly $7 billion. This marks the fifth consecutive quarter of 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.

Brad: We also increased our gross merchandise value by 6% to nearly $7 billion.

Brad: This marks the fifth consecutive quarter with year on year growth in the marketplace segment.

Brad: And similar to the first quarter. This volume growth was again, driven primarily by our U S marketplace.

Peter Kelly: Our Open Lane branded marketplace has been live for just over a year in Canada, and approximately eight months in the US 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, Open Lane 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.

Brad: 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.

Peter Kelly: 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, Open Lane remains a clear market leader, and our commercial and off-lease volumes were up meaningfully in both the United States and Canada during the quarter.

Brad: The positive feedback we continue to receive and the results we are delivering in the months since that launch gives me increased confidence in the strength of our platform.

Brad: And that confidence is fueling increased investments in both technology and people that I will discuss later in my remarks.

Brad: In terms of commercial off these volumes open lane remains the clear market leader and our commercial and off lease volumes were up meaningfully in both the United States and Canada during the quarter.

Peter Kelly: We increase commercial vehicles offered for sale, and also unique buyers who purchased that off-least inventory during the quarter. This is exactly the network effect we aimed for when consolidating our commercial and deuter marketplaces into Open Lane. As I mentioned last quarter, commercial off-least supply remains well below pre-pandemic levels and would 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-least equity gap continue to narrow. This results in a higher percentage of maturing off-lease vehicles being returned by leases, and a lower percentage of those vehicles being purchased by the grounding deuter.

Peter Kelly: We increase the number of commercial vehicles offered for sale and also unique buyers who purchase 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 less, and a lower percentage of those vehicles being purchased by the grounding dealer.

Brad: We increased commercial vehicles offered for sale and also unique buyers who purchased that off lease inventory during the quarter.

Brad: This is exactly the network effect, we aimed for when consolidated in our commercial and dealer market places into open lane.

Brad: As I mentioned last quarter commercial losses 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.

Brad: However, we are seeing the off lease equity gap continues to narrow.

Brad: This results in a higher percentage of maturing off lease vehicles being returned by lessons and a lower percentage of those vehicles being purchased by the grounding dealer.

Peter Kelly: To the extent that this trend continues, it would 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. Open-In will be the primary and earliest beneficiary of these future volumes, as those leases matured. 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.

Peter Kelly: 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. Open Lane will be the primary and earliest beneficiary of these future volumes as those leases mature.

Brad: To the extent that this trend continues it will result in a higher percentage of off lease maturities entering through marketing funnel.

Brad: And flowing deeper into the funnel both of which are positive for open late.

Brad: Also new vehicle sales continued to increase and the volume of new lease originations increased for the fifth straight quarter.

Brad: Opening will be the primary and earliest beneficiary of these future volumes as those leases mature.

Brad: And then finally many of our commercial customers have expressed a desire to continue selling more and more of their inventory online.

Peter Kelly: And 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'm equally optimistic about our opportunities for growth in this segment. There remains a large addressable market, particularly for dealers still using physical auctions or wholesalers.

Brad: So we're leveraging our deep data insights and technology to design new programs that support this trend in a more digital future for our customers.

Peter Kelly: Switching to Deuter volumes, I am equally optimistic about our opportunities for growth in this segment. The remains a large addressable market, particularly with debtors 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 debtor base that we continue to expand. Similar to the first quarter, total wholesale industry debtor volumes declined in the U.S. and to an even greater degree in Canada. Open lane theater 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.

Brad: Switching to dealer volumes I am equally optimistic about our opportunities for growth in this segment.

Brad: There remains a large addressable market, particularly with theaters still using physical auctions our wholesalers.

Peter Kelly: Our platform is faster, easier, and more convenient. It has a significantly lower cost of sale and generates better revenue, 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.

Brad: Our platform is faster easier and more convenient it.

Brad: 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.

Brad: Okay.

Brad: Similar to the first quarter total wholesale industry dealer volumes declined in the U S and to an even greater degree in Canada.

Peter Kelly: Aligning 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, and wholesale prices are declining.

Brad: <unk> Cedar 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.

Brad: Many of the market fundamentals that drive tutor volumes are also improving new vehicle inventories returning to pre pandemic levels wholesale prices are declining.

Peter Kelly: Many of the market fundamentals that drive theater 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 ends and more used vehicle transactions, which would be very positive for Open Lane.

Peter Kelly: And this is Improving Vehicle Affordability for Consumers. Those factors should contribute to increased trade ends and more used vehicle transactions, which would be very positive for open land. So, in summary, Open Lane is well positioned with both commercial and dealer customers. The market fundamentals are trending in our favor, and there is 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 market, 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.

Brad: And this is improving vehicle affordability for consumers.

Brad: Those factors should contribute to increased trade ins and more used vehicles transactions, which would be very positive for openly.

Speaker Change: So in summary, propylene is well positioned with both commercial and dealer customers. The market fundamentals are trending in our favor and there is growing evidence that having all of the buyers all of the sellers and all of the cars all in one place quite some more active and vibrant marketplace.

Peter Kelly: So, in summary, Open Lane is well positioned with both commercial and dealer customers. The market fundamentals are trending in our favor, and there is 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.

Peter Kelly: 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 theater vehicle listed in our marketplace. This quarter, we are enhancing our differentiated inspection capabilities with the release of Code Boost IQ. Code Boost 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.

Brad: Shifting to the opportunities enabled by our asset light digital model.

Brad: I also believe were accelerating growth through our differentiated core technology and our deep pipeline of innovation.

Brad: Let me give you a few examples I'll start with vehicle inspections.

Peter Kelly: I'll start with vehicle inspection. 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.

Brad: 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.

Peter Kelly: This allows us to accurately predict which codes indicate the highest probability of issues or repairs or which codes may lead to 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 Code Boost IQ, we are providing comprehensive, industry-leading condition data on every dealer vehicle, inside and out.

Brad: This quarter, we are enhancing our differentiated inspection capabilities with the release of code boost IQ.

Brad: Could boost IQ aggregates over a million Ob D. Two scans that we've captured through our data rich service networks and follows those codes through pre and post transaction.

Peter Kelly: 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 Code Boost IQ, we are providing comprehensive industry-leading condition data on every theater vehicle inside and out.

Brad: This allows us to accurately predict which codes indicate the highest probability of issues, our repairs or which codes may lead to an arbitration.

Speaker Change: We did then simplify that intelligence into easy to understand alert banners at the top of each inspection report.

Brad: Which helps buyers make faster and better informed bidding and buying decisions.

Brad: So between visual boost AI and could boost IQ, we are providing comprehensive industry, leading condition data on every dealer vehicle inside and out.

Peter Kelly: Next, I'd also like to provide you with a brief update on our absolute sale feature in the US 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. Theater adoption continues to grow, and absolute sale represents a growing share of open lanes 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.

Brad: Next I'd also like to provide you with a brief update on our absolute sale feature in the U S marketplace.

Brad: 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.

Peter Kelly: It significantly increases buyer engagement, generates better price outcomes, and increases the velocity of sale. Dealer adoption continues to grow. An absolute sale represents a growing share of Open Lane's overall marketplace transactions in the United States. Building on that momentum, last week, we launched an 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.

Brad: Jeter adoption continues to grow in absolute sale represents a growing share of open lanes overall market place transactions in the United States.

Brad: Building on that momentum last week, we launched automated absolute sale. This major enhancements allows sellers to set and forget absolute sale triggers right at the time of listing the vehicle and Thats, our technology to do the rest and finalize the sale.

Peter Kelly: 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.

Peter Kelly: Our absolute sales 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.

Brad: Our absolute sales 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.

Peter Kelly: 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 awfully exclusive listings together on Open Lane, 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.

Brad: And then finally, let me turn to a third growth driver improving the customer experience.

Brad: During the quarter, we comprehensively re mapped many of the customer journeys identifying hundreds of customer touch points from awareness to registration to transactional wholesale activities.

Peter Kelly: 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 Open Lane, 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.

Brad: The opportunities identified are being prioritized and operationalized in the business.

Brad: For example, with tens of thousands of dealer in off lease exclusive listings together on open lane, we're making it faster and easier for dealers to find the right cars for their loss.

Brad: Two customer interviews, our own marketplace data and agile product development, we completely redesigned our marketplace search functionality during the second quarter.

Peter Kelly: 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 Open Lane 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 Open Lane 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%.

Brad: And these new filters and capabilities are already receiving positive feedback from our customers.

Peter Kelly: This is just one example from our broad portfolio of CX initiatives that I believe will help make Open Lane 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 Open Lane from our competition and driving meaningful, scalable growth. In the second quarter, our marketplace volume increased by 24,000 vehicles versus the prior year are 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.

Brad: This is just one example from our broad portfolio of CX initiatives that I believe will help make open lane the most preferred platform for buyers and sellers.

Brad: Yeah.

Brad: So together, our commercial and dealer segment positioning our speed to innovation and our focus on the customer experience are differentiating open lane from our competition and driving meaningful scalable growth in.

Brad: In the second quarter, our marketplace volume increased by 24000 vehicles versus the prior year or 7% and this helped drive the meaningful marketplace adjusted EBITDA contribution.

Peter Kelly: And this helped drive a 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 investment. 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, including new products and features and greater ease of use for our customers.

Brad: As I mentioned earlier. These results gives me a lot of optimism and confidence in our future and with our confidence we are doubling down on our strategy and our investments.

Peter Kelly: 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 opportunities to gain share. And we've already started to see some early wins in here in the third quarter.

Brad: During the quarter, we began executing our multichannel plan to further accelerate growth.

Brad: We are funnelling additional SG&A savings into technology investments across our platform.

Brad: New products and features and greater ease of use for our customers.

Peter Kelly: 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.

Brad: 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 theaters into underserved markets and supplementing teams in existing markets, where we see opportunity to gain share.

Brad: And we've already started to see some early wins in this year's third quarter.

Speaker Change: Before I hand, it over to Brad I want to reinforce that open lane is gaining positive momentum I.

Peter Kelly: Before I hand it over to Brad, I want to reinforce that Open Lane 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. Open Lane is an asset light digital marketplace leader for hotel used vehicles. There is a large investment 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.

Speaker Change: I believe we've only scratched the surface of what this company is capable of delivering.

Brad: And our key strengths in terms of our value proposition for investors and our ability to deliver stockholder value remain compelling.

Brad: Propylene is an asset light digital marketplace leader for wholesale to used vehicles.

Peter Kelly: 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 volume. 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.

Brad: There was 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.

Brad: Our brand and platform consolidation efforts are enabling us to accelerate innovation and product developments.

Peter Kelly: 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 a 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.

Speaker Change: Our focus on operational efficiency, which I now believe to be part of the fabric and culture of this company. It gives us the financial headroom to invest in innovation without sacrificing financial results.

Speaker Change: We are cash flow positive with a strong balance sheet.

Speaker Change: And we believe our business has the capability to generate meaningful earnings growth over the next several years.

Peter Kelly: 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 of our operational and financial metrics for the quarter.

Brad Lakhia: With that, I'll hand it over to Brad for a deeper discussion into our operational and financial metrics for the quarter. Brad. Thank you, Peter. We are certainly very pleased with our second quarter results, especially the continued improvement in our marketplace segment. As usual, certain comments I make related to consolidated open lane and the marketplace segment are on a net revenue basis, which excludes the impact of purchase vehicles. In addition, my comments will be on the second quarter year-to-year basis unless I state otherwise. Our consolidated revenue was $432 million, up 4%, mainly driven by the 7% unit volume growth in our marketplace segment.

Speaker Change: With that I'll hand, it over to Brad for a deeper discussion into our operational and financial metrics for the quarter Brett.

Brad: Thank you Peter we are certainly very pleased with our second quarter results, especially the continued improvement in our marketplace segment.

Brad Lakhia: We are certainly very pleased with our second quarter results, especially the continued improvement in our marketplace segment. As usual, certain comments I make related to consolidated open lane and the marketplace segment are on a net revenue basis, which excludes the impact of purchase vehicles. In addition, my comments will be on a second quarter, year-over-year basis, unless I state otherwise.

Brad: As usual certain comments I make related to consolidated open lane and the marketplace segment or on a net revenue basis, which excludes the impact of purchased vehicles.

Brad: In addition, my comments will be on the second quarter year over year basis, unless I state otherwise.

Speaker Change: Our consolidated revenue was $432 million up 4%, mainly driven by the 7% unit volume growth in our marketplace segment.

Brad Lakhia: Our consolidated revenue was $432 million, up 4%, mainly driven by the 7% unit volume growth in our marketplace segment. In our results, you'll see our net revenue was down 1% as we continue to realize the impact of the transportation accounting change we made in the fourth quarter of last year. This change impacted net revenue by $21 million in the quarter. Total cost of services was $246 million, up 10%, and gross profit was $186 million, down 4%.

Brad Lakhia: In our results, you'll see our net revenue was down 1% as we continue to realize the impact from the transportation accounting change we made in the fourth quarter of last year. This change impacts the net revenue by 21 million in the quarter. Total cost of services was $204 million, up 10%, and gross profit was $186 million, down 4%. Higher auction and service volumes, as well as higher pricing, were more than offset by a charge of 12 million related to the newly enacted Canadian digital services tax. Excluding this tax, gross profit would have been up approximately 2%.

Speaker Change: And our results you'll see our net revenue was down 1% as we continue to realize the impact from the transportation accounting change we made in the fourth quarter of last year.

Speaker Change: This change impacted net revenue by 21 million in the quarter.

Speaker Change: Total cost of services was $246 million up 10% and gross profit was 186 million down 4%.

Brad Lakhia: Higher auction and service volumes, as well as higher pricing, were more than offset by a charge of $12 million related to the newly enacted Canadian Digital Services Tax. Excluding this tax, gross profit would have been up approximately 2%. As further background, at the end of the quarter, the Canadian government implemented a 3% DST, which applies to digital-based revenue. This became effective at the end of the second quarter and is applied retroactively to January 1st.

Speaker Change: Higher auction and service volumes as well as higher pricing were more than offset by a charge of $12 million related to the newly enacted Canadian digital services tax.

Speaker Change: Excluding this tax gross profit would have been up approximately 2%.

Brad Lakhia: As further background, at the end of the quarter, the Canadian government implemented a 3% DST, which applies to digital-based revenues. This became effective at the end of the second quarter and has applied retroactively to January 1, 2022. As a result of this new tax, we recorded a charge of 12 million in the quarter. Of this 12 million, approximately 10 million relates to 2022 and 2023, and approximately 2 million relates to 2024. Assuming no changes to this legislation, including the scope of its application, we estimate the ongoing annual cost related to this tax will be 5 million per year.

Speaker Change: As further background at the end of the quarter the Canadian government implemented a 3% D S T, which applies to digital based revenues. This.

Speaker Change: This became effective at the end of the second quarter and was applied retroactively to January one 'twenty.

Unknown Executive: Good day and welcome to the open lane, 2nd 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.

Speaker Change: 2022.

Brad Lakhia: 2022. As a result of this new tax, we recorded a charge of $12 million in the quarter. Of this $12 million, approximately $10 million relates to 2022 and 2023, and approximately $2 million relates to 2024. Assuming no changes to this legislation, including the scope of its application, we estimate the ongoing annual costs related to this tax will be $5 million per year.

Speaker Change: As a result of this new tax we recorded a charge of $12 million in the quarter.

Speaker Change: All of this 12 million approximately 10 million relates to 2022 and 'twenty 23, and approximately 2 million relates to 'twenty 'twenty four.

Unknown Executive: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star than one on your touch tone phone. And to withdraw your question, please press star, then two. Please note this event is being recorded.

Speaker Change: Assuming no changes to this legislation, including the scope of its application we estimate the ongoing annual cost related to this tax will be $5 million per year.

Itunu Orelaru: I would now like to turn the conference over to Miss Itunu Orelaru. Head of investor relations, please go ahead, ma'am. Good afternoon, everyone.

Brad Lakhia: However, we are planning to implement actions to mitigate this impact, and therefore we do not expect a significant impact on future year's earnings and cash flow. Consolidated SGA in the quarter was $106 million, which was down 5%, reflecting the successful execution of our cost savings initiatives. The decline in SGA was primarily a result of decreases in compensation and compensation-related expenses. Our relatively flat SGA for the last several quarters not only reflects the impact of our cost savings initiatives, but also illustrates the fixed cost nature of our SGA. This is an important scalability feature of our asset-like digital model.

Brad Lakhia: However, we are planning to implement actions to mitigate this impact, and therefore, we do not expect a significant impact on future year's earnings and cash flow. Consolidated SG&A in the quarter was 106 million, which was down 5%, reflecting the successful execution of our cost savings initiatives. The decline in SG&A was primarily a result of decreases in compensation and compensation-related expenses. Our relatively flat SG&A for the last several quarters not only reflects the impact of our cost savings initiatives but also illustrates the fixed cost nature of our SG&A. This is an important scalability feature of our Asset Light digital model.

Speaker Change: However, we are planning to implement actions to mitigate this impact.

Speaker Change: And therefore, we do not expect a significant impact on future years earnings and cash flow.

Itunu Orelaru: Welcome to open lane, 2nd quarter, 2024, earnings call. With me today are Peter Kelly, CEO of open lane and Brad Lakhia, EVP and CFO of open lane. 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 defer materially from such statements. Factors that could cause such differences include those discussed in our press release issue today and in our SSE filings.

Speaker Change: Consolidated SG&A in the quarter was $106 million, which was down 5%, reflecting the successful execution of our cost savings initiatives.

Speaker Change: The decline in SG&A was primarily a result of decreases in compensation and compensation related expenses.

Speaker Change: A relatively flat SG&A for the last several quarters not only reflects the impact of our cost savings initiatives, but also illustrates the fixed cost nature of our SG&A.

Speaker Change: This is an important scalability feature of our asset light digital model.

Itunu Orelaru: 13 non-gap financial measures as defined under the SEC rules will be discussed on our call. Reconciliation of gap to non-gap measures are provided in our earnings materials and available in the investor relations sections of our website.

Brad Lakhia: For the balance of 2024, we expect our SGA spend to remain at similar levels. As you will note in our earnings release, adjusted EBITDA was 71 million, which was negatively impacted by the 2 million current year portion of the DST charge. Turnings in the marketplace segment revenue increased 5% to 336 million. Our total volumes were up 7%, primarily driven by our US business. Our dealer volumes decline, primarily driven by our Canadian business for similar reasons discussed during our first quarter call. Auction fee revenue increased by 5% driven primarily by the volume growth. Reported services revenue was down 6%, once again primarily due to the transportation accounting change mentioned in my earlier remarks and also highlighted in our last two calls.

Brad Lakhia: For the balance of 2024, we expect our SG&A spend to remain at similar levels. As you will note in our earnings release, adjusted EBITDA was $71 million, which was negatively impacted by the $2 million current year portion of the DST charge. Turning to the Marketplace segment, revenue increased 5% to $336 million. Our total volumes were up 7%, primarily driven by our U.S. business. Our dealer volumes declined, primarily driven by our Canadian business, for similar reasons discussed during our first quarter call. Auction fee revenue increased by 5%, driven primarily by volume growth. Reported services revenue was down 6%.

Speaker Change: For the balance of 'twenty 'twenty four we expect our SG&A spend to remain at similar levels.

Speaker Change: As you will note in our earnings release, adjusted EBITDA was $71 million, which negative was negatively impacted by the 2 million current year portion.

Peter Kelly: With that, I'll turn the call over to Peter. Peter. Thank you, Atunu and good afternoon, everyone.

Speaker Change: The D S T charge.

Speaker Change: Turning to the market place segment.

Peter Kelly: Before I get started, I just wanted to formally welcome Atunu to the role of head of investor relations for open lane. 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 open lane story. Turning to our results, open lanes continue to focus on execution and profitable growth led to positive results in the 2nd quarter.

Speaker Change: Revenue increased 5% to 336 million.

Speaker Change: Our total volumes were up 7%, primarily driven by our U S business.

Speaker Change: Our dealer volumes declined primarily driven by our Canadian business for similar reasons discussed during our first quarter call.

Speaker Change: Auction fee revenue increased by 5% driven primarily by the volume growth.

Peter Kelly: We grew our volumes and on a consolidated basis, we grew revenue and delivered 71 million of adjusts, but not. 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 of operations. Similar to Q1, I'm very pleased that these results reflect a significantly improved performance in the open lane marketplace.

Speaker Change: Reported services revenue was down 6% once again, primarily due to the transportation accounting change mentioned in my earlier remarks, and also highlighted in our last two calls.

Brad Lakhia: Once again, primarily due to the transportation accounting change mentioned in my earlier remarks and also highlighted in our last two calls, excluding this accounting change, services revenue was up 9% driven by inspection, repossession, and reconditioning services. This is the result of our ongoing focus to drive greater attachment of our services to our marketplace offering. Marketplace adjusted EBITDA was $33 million and would have been $35 million excluding the impact of the $2 million current year portion of the Canadian DST charge.

Brad Lakhia: Yes, excluding this accounting change, services revenue was up 9% driven by inspection, repossession, and reconditioning services. This is the result of our ongoing focus to drive greater attachment of our services to our marketplace offering. Marketplace adjusted EBITDA was $33 million and would be $35 million excluding the impact of the $2 million current year portion of the Canadian DST charge. This represents an increase of approximately 48% year-over-year when we exclude the impact of this tax item and the prior year 20 million gain that arose from early contract termination. Marketplace SGNA was down 5%, driven by the factors mentioned earlier.

Speaker Change: Excluding this accounting change services revenue was up 9% driven.

Speaker Change: Driven by inspection repossession and reconditioning services.

Speaker Change: This is the result of our ongoing focus to drive greater attachment of our services to our marketplace offering.

Peter Kelly: On 7% volume growth, the marketplace business contributes 33 million in adjusted EBITDA, which includes the 2 million DST charge and represents 46% of open lanes total adjusted EBITDA. AFC was again a strong contributor growing loan unit volumes and generating approximately $39 million of adjusted EBITDA in the 2nd 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.

Speaker Change: Marketplace, adjusted EBITDA was $33 million and would be $35 million, excluding the impact of the 2 million current year portion of the Canadian D. S T charge.

Speaker Change: This represents an increase of approximately 48% year over year, when we exclude the impact of this tax item and the prior year 20 million gain that arose from an early contract termination.

Brad Lakhia: This represents an increase of approximately 48% year-over-year when we exclude the impact of this tax item and the prior year $20 million gain that arose from an early contract termination. However, Marketplace SG&A was down 5% driven by the factors mentioned earlier.

Speaker Change: Marketplace SG&A was down 5% driven by the factors mentioned earlier.

Brad Lakhia: Once again, we are very pleased with the overall performance of our marketplace business. We are committed to prioritizing investment and our one marketplace solution, including key investments in industry-leading product innovations and go-to-market initiatives. These investments will make wholesale easier for our customers, which enables us to capture volume growth and enhance the scalability of our margins. Turning to our finance segment, loan transaction units in the quarter were up 3%. Revenues for the quarter were down 2%, primarily driven by lower interest income resulting from lower vehicle values within the portfolio. These two factors were also the primary driver of our finance segment adjusted EBITDA result of $39 million, down 4%.

Brad Lakhia: Once again, we are very pleased with the overall performance of our marketplace business. We are committed to prioritizing investment in our one marketplace solution, including key investments in industry-leading product innovations and go-to-market initiatives. These investments will make wholesale easier for our customers, which enables us to capture volume growth and enhance the scalability of our margins. Turning to our finance segment, loan transaction units in the quarter were up 3%. Revenues for the quarter were down 2%, primarily driven by lower interest income resulting from lower vehicle values within the portfolio.

Speaker Change: Once again, we were very pleased with the overall performance of our marketplace business.

Speaker Change: We are committed to prioritizing investment in our one marketplace solution, including key investments in industry, leading product innovations and go to market initiatives.

Speaker Change: These investments will make wholesale easier for our customers, which enables us to capture volume growth and enhance the scalability of our margins.

Speaker Change: Turning to our finance segment loan transaction units in the quarter were up 3%.

Speaker Change: Revenues for the quarter were down 2%, primarily driven by lower interest income, resulting from lower vehicle values within the portfolio.

Speaker Change: These two factors were also the primary driver of our finance segment, adjusted EBITDA result of $39 million down 4%.

Brad Lakhia: These two factors were also the primary driver of our finance segment adjusted EBITDA result of $39 million, down 4%. The provision for credit losses was 2.1%, which was improved versus last quarter. As I've indicated previously, we are encouraged by the ongoing improvements we are seeing in the severity of losses. This is the combined result of Stabilizing Fundamentals and our Disciplined Risk Management Action. We expect the loan loss rate for the second half of the year to be in line with the first half of the year.

Brad Lakhia: The provision for credit losses was 2.1%, which was improved versus last quarter. As I've indicated previously, we are encouraged by ongoing improvements we are seeing in the severity of losses. This is the combined result of stabilizing fundamentals and our disciplined risk management actions. We expect the loan loss rate for the second half of the year to be in line with the first half of the year. To reiterate, we continue to target a long-term loss rate of 1.5% to 2%. Overall, we remain pleased with AFC's financial performance and cash flow generation.

Speaker Change: The provision for credit losses was two 1%, which was improved versus last quarter.

Speaker Change: As I've indicated previously we are encouraged by ongoing improvements we are seeing in the severity of losses.

Peter Kelly: Let me address each of these individually, and I'll start with volume growth and share. In the second quarter, Open Lane grew its marketplace volumes by 7%, despite headwinds from the CDK ransomware attack that negatively impacted our volumes in the quarter by approximately 6000 vehicles, and without which year 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 US marketplace.

Speaker Change: This is the combined result of stabilizing fundamentals and our disciplined risk management actions we.

Speaker Change: We expect the loan loss rate for the second half of the year to be in line with the first half of the year.

Brad Lakhia: To reiterate, we continue to target a long-term loss rate of 1.5 to 2%, and overall, we remain pleased with AFC's financial performance and cash flow generation. Moving to the balance sheet and capital allocation, consistent with prior quarters, we continue to generate strong cash flow. Year to date, we have generated $138 million of cash flow from operations, and our consolidated leverage stands at approximately one times adjusted EBITDA. This level of cash generation demonstrates the value of our asset-light, digitally focused marketplace business working in combination with our leading floor plan finance business. Overall, our capital allocation priorities remain unchanged.

Speaker Change: To reiterate we continue to target a long term loss rate of one 5% to 2%.

Speaker Change: Overall, we remain pleased with AFC is financial performance and cash flow generation.

Brad Lakhia: Moving to the balance sheet and capital allocation. Consistent with prior quarters, we continue to generate strong cash flow. Year to date, we have generated 138 million of cash flow from operations. Our consolidated leverage stands at approximately 1 times adjusted EBITDA. This level of cash generation demonstrates the value of our asset light, digitally focused marketplace business working in combination with our leading floor plan finance business. Overall, our capital allocation priorities remain unchanged. We continue to prioritize the funding of organic investments while ensuring flexibility for high return, complementary strategic opportunities, and shareholder returns. At the end of the quarter, we continue to have 125 million remaining on our share repurchase authorization.

Speaker Change: Moving to the balance sheet and capital allocation <unk>.

Speaker Change: Consistent with prior quarters, we continued to generate strong cash flow year to date, we have generated $138 million of cash flow from operations and our consolidated leverage stands at approximately one times adjusted EBITDA.

Peter Kelly: Our Open Lane branded marketplace has been live for just over a year in Canada, and approximately eight months in the US 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-least volumes, Open Lane remains a clear market leader, and our commercial and off-least volumes are up meaningfully in both the United States and Canada during the quarter.

Speaker Change: This level of cash generation demonstrates the value of our asset light digitally focused marketplace business working in combination with our leading floor plan finance business.

Brad Lakhia: We continue to prioritize the funding of organic investments while ensuring flexibility for high-return, complementary strategic opportunities, and shareholder returns. At the end of the quarter, we continue to have $125 million remaining on our share repurchase authorization. Additionally, as discussed in the last call, we have a $210 million senior note maturing in June of 2025.

Speaker Change: Overall, our capital allocation priorities remain unchanged, we continue to prioritize the funding of organic investments, while ensuring flexibility for high return complementary strategic opportunities and shareholder returns.

Peter Kelly: We increase commercial vehicles offered for sale, and also unique buyers who purchased that off-least inventory during the quarter. This is exactly the network effect we aimed for when consolidating our commercial and deuter marketplaces into Open Lane. As I mentioned last quarter, commercial off-least supply remains well below pre-pandemic levels, and would 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-least equity gap continued to narrow.

Speaker Change: At the end of the quarter, we continue to have $125 million remaining on our share repurchase authorization.

Brad Lakhia: As discussed in the last call, we have a 210 million senior note maturing in June of 2025. and we intend to use cash flow from operations along with our strong equity position to fund this maturity.

Speaker Change: As discussed in our last call we have a 210 million senior note maturing in June of 2025.

Brad Lakhia: And we intend to use cash flow from operations along with our strong liquidity position to fund this maturity. Wrapping up on guidance, there's no change to our adjusted EBITDA guidance of $285 to $305 million and no change to our operating adjusted EPS of $0.77 to $0.87 per share. We have updated our 2024 GAP EPS and income from continuing operations guidance to reflect the impact of the Canadian DST discussed earlier. These updates are reflected in our earnings release issued earlier today.

Speaker Change: And we intend to use cash flow from operations, along with our strong liquidity position to fund this maturity.

Brad Lakhia: Rapping up on guidance, there's no change to our adjusted EBITDA guidance of 285 to 305 million and no change to our operating adjusted EPS of 77 to 87 cents per share. We have updated our 2024 GAP EPS and income from continuing operations guidance to reflect the impact of the Canadian DST discussed earlier. These updates are reflected in our earnings release issued earlier today.

Speaker Change: Wrapping up on guidance, there's no change to our adjusted EBITDA guidance of $285 million to $305 million.

Peter Kelly: This results in a higher percentage of maturing off-least vehicles being returned by leases, and a lower percentage of those vehicles being purchased by the grounding deuter. To the extent that this trend continues, it would result in a higher percentage of off-least 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.

Speaker Change: And no change to our operating adjusted EPS of <unk> 77 to 87 per share.

Speaker Change: We have updated our 2024, GAAP EPS and income from continuing operations guidance to reflect the impact of the Canadian D. S. T discussed earlier.

Speaker Change: These updates are reflected in our earnings release issued earlier today.

Peter Kelly: Open-In will be the primary and earliest beneficiary of these future volumes, as those leases matured. And then finally, many of our commercial customers have expressed 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.

Brad Lakhia: To summarize, we remain pleased with the business and financial performance. We generated 138 million of cash flow from operations through six months; our marketplace volumes grew 7%. Our marketplace adjusted EBITDA would have grown by approximately 48% if we exclude the current year DST charge and the prior year contract early termination gain discussed earlier. Our credit loss rate is gradually beginning to moderate. And finally, the actions we have taken to consolidate our digital marketplace offerings to unify our brand to Open Lane and to successfully launch new product innovations gives us strong confidence in the future.

Speaker Change: To summarize we remain pleased with the business and financial performance.

Brad Lakhia: To summarize, we remain pleased with the business and financial performance. We generated $138 million of cash flow from operations through six months. Our marketplace volumes grew 7%. Our marketplace adjusted EBITDA would have grown by approximately 48% if we exclude the current year DST charge and the prior year contract early termination gain discussed earlier. Our credit loss rate is gradually beginning to moderate.

Speaker Change: We generated $138 million of cash flow from operations through six months.

Speaker Change: Our marketplace volumes grew 7%.

Speaker Change: Our marketplace adjusted EBITDA would have grown by approximately 48% if we exclude the current year D. S T charge and the prior year contract early termination gain discussed earlier.

Peter Kelly: Switching to Deuter volumes, I am equally optimistic about our opportunities for growth in this segment. The remains a large addressable market, particularly with debtors 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 debtor base that we continue to expand. Similar to the first quarter, total wholesale industry debtor volumes declined in the U.S, and to an even greater degree in Canada.

Speaker Change: Our credit loss rate is gradually beginning to moderate and finally the actions we have taken to consolidate our digital marketplace offerings to unify our brand to open lane and to successfully launch new product innovations gives us strong confidence in the future.

Brad Lakhia: And finally, the actions we have taken to consolidate our digital marketplace offerings, to unify our brand to open lane, and to successfully launch new product innovations give us strong confidence in the future. With that, I will turn the call over to the operator for questions. Thank you. We will now begin. The question is...

Unknown Executive: With that, I will turn the call over to the operator for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. And at this time, we'll pause momentarily to assemble our roster.

Speaker Change: With that I will turn the call over to the operator for questions.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star and then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Craig Kennison with Baird. Please go ahead.

Speaker Change: Thank you we will now begin the question and answer session.

Peter Kelly: Open lane theater 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 theater 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 ends and more used vehicle transactions, which would be very positive for open lane.

Speaker Change: To ask a question you May press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing the keys in fact anytime. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.

Craig Kennison: Any first question will come from Craig, Kenneth, and with Baird, please go ahead.

Speaker Change: And your first question will come from Craig Kennison with Baird. Please go ahead.

Craig Kennison: Hey, good afternoon. Thanks for taking my questions.

Peter Kelly: Hey, good afternoon. Thanks for taking my questions. I wanted to start with the dealer volume. If I add the CDK volume that you mentioned, 6000 units, it looks like that business would have been closer to flat. Is that keeping pace with your digital competitors in that market and the broader wholesale dealer channel?

Craig Kennison: Hey, good afternoon. Thanks for taking my questions I wanted to start with the the dealer volume.

Peter Kelly: So in summary, open lane is well positioned with both commercial and dealer customers. The market fundamentals are trending in our favor and there is 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.

Craig Kennison: I wanted to start with the dealer volume. If I add the CDK volume that you mentioned, 6000 units, it looks like that business would have been closer to flat. Is that keeping pace with your digital competitors in that market? And, you know, the broader wholesale dealer channel?

Craig Kennison: If I add the CDK.

Craig Kennison: Volume that you mentioned 6000 units it looks like that business would have been closer to flat is that keeping pace with you.

Speaker Change: Digital competitors in that market and the broader wholesale dealer channel.

Speaker Change: Yeah. Thanks, Craig appreciate the question.

Peter Kelly: Thanks, Craig. Appreciate the question. As I mentioned, dealer volumes were down in the quarter, but most of that was Canada. First of all, I'd say the 6000 units wasn't all dealer; it was a mix of commercial and dealer. So I would assume a similar mix to our sales overall because volumes on the commercial side were also impacted by dealers that couldn't turn in cars and couldn't purchase cars. So maybe a 50-50 split on that volume. If we look at the decline, the decline was principally in Canada. We obviously check other sources to see what volumes are.

Peter Kelly: Yeah, thanks, Craig. Appreciate the question. So as I mentioned, dealer volumes were down in the quarter, but most of that was Canada. So if you, first of all, I'd say 6,000 units. Unknown Attendee, Rajat Gupta, Michael Eliason, Brad Lakhia, James Coyle, Kar Auction Services Inc.

Speaker Change: So as I mentioned dealer volumes were down in the quarter, but most of that was Canada. So if you first of all I'd say the 6000 units.

Peter Kelly: Unknown Attendee, Rajat Gupta, Michael Eliason, Brad Lakhia, James Coyle, Kar Auction Services. If we look at the decline, the decline was principally in Canada. We obviously check other sources to see what volumes there are. Our understanding, based on the data I'm looking at, is that dealer volumes at physical auction in the United States were down in the first and second quarters of the year, and, in comparison, our volumes slightly outperformed physical auction volumes.

Craig Kennison: It wasn't all dealer was a mix of commercial and dealer. So I would assume a similar mix to our sales overall, because our volumes on the commercial side, where we're also impacted by dealers that couldnt turn in cars and Couldnt purchase car. So.

Peter Kelly: Code boost 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 code boost IQ, we are providing comprehensive industry leading condition data on every theater vehicle inside and out.

Speaker Change: Maybe a 50 50 split on that volume.

Craig Kennison:

Speaker Change: If we look at the decline the decline was principally in Canada, we obviously check other sources to see what volumes are our our understanding based on the data I'm looking at is that a dealer volumes dealer volumes at physical auction in the United States were down in the first and second quarters of the year and that in comparison.

Peter Kelly: Our understanding, based on the data I'm looking at, is that dealer volumes, dealer volumes at physical auction in the United States were down in the first and second quarters of the year. And that, in comparison, our volumes slightly outperformed the physical auction volumes. So I don't think it's a loss of share. I think we'd have a slight gain of share even though our volumes in the quarter were down. But you're right, Craig. CDK had an impact; a small impact. And then I mentioned in the quarter we saw an improving trend as the quarter went on.

Craig Kennison: Our volumes.

Craig Kennison: Slightly outperformed the physical auction volumes. So I don't think it's a loss of share I think we had a slight gain of share even though our volumes in the quarter were down.

Peter Kelly: So I don't think it's a loss of share. I think we had a slight gain of share even though our volumes in the quarter were down. But you're right, Craig, CDK had an impact, a small impact.

Craig Kennison: But you're right Craig CDK had an impact a small impact and then I mentioned in the quarter, we saw an improving trend as the quarter went on so I feel more optimistic about the trend line in the second half of the year that this will be back in a in sort of year over year growth territory.

Peter Kelly: And then I mentioned in the quarter, we saw an improving trend as the quarter went on. So I feel more optimistic about the trend line in the second half of the year, that this will be back in sort of year-over-year growth territory. So anyway, we will watch and see that.

Peter Kelly: So I feel more optimistic about the trend line in the second half of the year that this will be back in sort of year-over-year growth territory. So anyway, we will watch and see that.

Craig Kennison: So anyway, we will watch and see that I guess beyond that Craig I'll say you know, we obviously spend a lot of time talking to our dealer customers I'm very pleased by the feedback we're getting from our customers about the strength of our offering.

Peter Kelly: I guess beyond that, Craig, I'll say, you know, we obviously spend a lot of time talking to our dealer customers. I'm very pleased by the feedback we're getting from our customers about the strength of our offering: you know, selling their cars quickly, selling their cars, you know, excellent price outcomes. You'll see our GMV in the quarter was up 6%. So, you know, values are strong in our marketplaces as well. And obviously, you know, having a strong differentiated offering in the marketplace. So I'm very pleased by the feedback we're getting from our customers. And, you know, this is an area we're very focused on investing into.

Peter Kelly: I guess beyond that, Craig, I'll say, you know, we obviously spend a lot of time talking to our customers. I'm very pleased by the feedback we're getting from our customers about the strength of our offering, you know, selling their cars quickly, selling their cars, you know, at excellent price outcomes. You'll see our GMV in the quarter was up 6%.

Craig Kennison: Selling their cars quickly.

Peter Kelly: 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 let's 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.

Craig Kennison: Selling their cars.

Craig Kennison: You know that.

Craig Kennison: Excellent price outcomes, you'll see our G. M V in the quarter was up.

Craig Kennison: 6%.

Craig Kennison: So you know values are strong in our marketplaces as well.

Peter Kelly: So you know, values are strong in our marketplaces as well, and obviously, you know, having a strong differentiated offering in the marketplace. So I'm very pleased by the feedback we're getting from our customers. And, you know, this is an area we're very focused on investing in. And again, I mentioned in my remarks how we have, you know, you know, put some increased go-to-market resources in the field late in the second quarter and are feeling good about that. We're already seeing some traction there too.

Craig Kennison: And obviously you know having a strong differentiated offering in the marketplace. So I'm very pleased by the feedback we're getting from our customers and you know this is an area. We're very focused on investing into and again I mentioned in my remarks, how are we have you know.

Peter Kelly: 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 awfully exclusive listings together on open lane, we are making it faster and easier for dealers to find the right cars for their lots.

Peter Kelly: And again, I mentioned in my remarks how we have, you know, you know, put some increased go-to-market resources into fields, laid in the second quarter. Feeling good about that. We're already seeing some traction there too.

Craig Kennison: You know puts.

Craig Kennison: Put some increased go to market resources in the field are late in the second quarter feeling good about that we're already seeing some traction there too.

Unknown Executive: Thanks, Peter, and then you have a good message with some of the technology innovations.

Peter: Thanks, Peter and then.

Peter Kelly: Thanks, Peter. And then, I mean, you have a good message with some of the technology innovations. I'm curious if you feel like you're getting that message out to dealers, or if you need to target more marketing dollars for that effort so they see what you're doing with Visual Boost or Code Boost. Thank you. Yeah, good question. You know, I think

Speaker Change: I mean, you have a good message with some of the technology innovations I'm curious if you feel like you're getting that message out to dealers.

Peter Kelly: I'm curious if you feel like you're getting that message out to dealers, or if you need to target more marketing dollars to that effort, so they see what you're doing with digital boosters, code boost, IQ. Yeah, good question. I think, Craig, I think there is, sometimes I think we're sort of misunderstood in terms of the strength of our technology, that there's a gap there between what we offer and what, say, analysts or investors or sometimes customers might understand. So that is something we are investing in. When we roll out these launches, we're training our sales team; we're obviously preparing the go-to-market materials to support this. If you spend any time on OpenLane.com, you'll see a bunch of dealer testimonials that speak to the power of these offerings and what they do for those dealers.

Speaker Change: Or if you need to target more marketing dollars to that effort. So they see what you're doing with visual boost or co boost are cute.

Peter Kelly: 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 open lane the most preferred platform for buyers and sellers.

Speaker Change: Yeah. Good question, you know I think.

Peter Kelly: Yeah, a good question. You know, I think.

Peter Kelly: Craig, I think there is sometimes a misunderstood gap between what we offer and what analysts or investors or sometimes customers might understand. So that is something we are investing in, you know, when we roll out these launches, we're training our sales team, and we're obviously preparing the go-to-market materials to support this. And, you know, if you spend any time on openlane.com, you'll see a bunch of dealer testimonials that speak to the power of these offerings and what they do for those dealers.

Craig Kennison: Craig I think there is sometimes I think we're sort of misunderstood in terms of the strength of our technology.

Craig Kennison: That there is a gap there between what we offer and what state.

Peter: Say analysts or investors are sometimes customers might understand.

Peter: So that is something we are investing in you know we look rollout. These launches we're training our sales team. We're obviously preparing the go to market materials to support this.

Peter Kelly: So together, our commercial and dealer segment positioning, our speed to innovation and our focus on the customer experience are differentiating open lane from our competition and driving meaningful scalable growth. In the second quarter, our marketplace volume increased by 24,000 vehicles versus the prior year are 7%. And this helped drive the meaningful marketplace adjusted EBITDA contribution.

Peter: And you know if you are if you spend any time on open lane dot com, you'll see a bunch of dealer testimonials that speak to the.

Peter: The power of these offerings and what they do for those dealers. So it's an area. We're focused on you may have seen we ran a dealer.

Peter Kelly: So it's an area we're focused on. You may have seen we ran a dealer appreciation event in the month of July, called Dealer Fest. And again, that was kind of our way of saying thank you to our customers for their business, but also educating them on some of the great new things that we've brought to market over the last six months that we plan to bring to market, you know, between now and the end of the year. So it's an area we're very focused on, and I think it's going to be an area of increasing strength for our business, Craig, as we consolidate platforms, speed innovation, etc. I think you'll see more to come from us in this dimension.

Peter Kelly: So it's an area we're focused on; you may have seen we ran a dealer appreciation event in the month of July, a dealer fest, and again, that was kind of our way of saying thank you to our customers, an appreciation of their business, but also educate them on some of the great new things that we've brought to market over the last six months and we plan to bring the market, you know, between now and the end of the year. So it's an area we're very focused on, and I think it's going to be an area of increasing strength for our business, Craig. As we consolidate platforms, speed innovation, et cetera, I think you'll see more to come from us in this dimension.

Speaker Change: Appreciation event in the month of July dinner first and again that was kind of our way of saying. Thank you to our customers appreciate appreciation of their business, but also educate them on some of the great new things that we brought to market over the last six months that we plan to bring to market you know between now and the end of the year. So it's an area. We're very focused on and I think it's going to be an area of increasing strength for a bit.

Peter Kelly: 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 SGNA 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.

Peter: Craig as we consolidate platforms.

Craig Kennison: Feed innovation et cetera.

Craig Kennison: I think you'll see more to come from us in this dimension.

Unknown Executive: Great, thank you. Thanks, Craig.

Speaker Change: Great. Thank you.

Peter Kelly: 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 opportunities to gain share. And we've already started to see some early wins in here in the third quarter.

Craig Kennison: Thanks, Craig.

Bob Lubbick: The next question will come from Bob Lubbick with CJA Securities. Please go ahead. Good afternoon, thanks for saying our questions.

Speaker Change: The next question will come from Bob looked at with C. J S. Securities. Please go ahead.

Operator: The next question will come from Bob Labick with CJS Securities. Please go ahead.

Robert Labick: Good afternoon, and thanks for taking our questions. Hey, Bob.

Speaker Change: Good afternoon, and thanks for taking our questions.

Robert Labick: Hi, I want to start on the lease side. And Peter, you alluded to this in your remarks, but maybe I was hoping you could go a little deeper. Could you give us a sense of the mix of off lease right now in terms of where it's going in terms of owner retained, you know, dealer retained, closed open auction? And really, just where are we in the kind of normalization process? And you know, how do you see it progressing?

Peter Kelly: Hey Bob. Hi, I want to start on the off-leaf side, and Peter, you alluded in your remarks, but maybe I hope you could go a little deeper. Could you give us a sense of the mix of off-leafs right now in terms of where it's going, in terms of owner retained, you know, dealer retained, closed open auction, and really just where are we in the kind of normalization process and how do you see it progressing?

Bob: Hey, Bob Hi.

Bob: Hi, I wanted to start on the off lease side and Peter you alluded. This in your remarks, but maybe I was hoping you could go a little deeper could you give us a sense of.

Peter Kelly: Before I hand it over to Brad, I want to reinforce that open lane 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. Open lane is an asset light digital marketplace leader for hotel used vehicles. There is a large investment market in North America and Europe and we're well positioned to capture the opportunities to grow both dealer and commercial volumes.

Bob: You know the mix of off lease right now in terms of where it's going in terms of our.

Speaker Change: Owner retained you know dealer retained closed open auction and really I'm, just where are we in a kind of normalization process and you know how do you see it progressing.

Peter Kelly: Yeah, great. A good question, Bob.

Peter Kelly: Yeah, great, good question, Bob. Thanks. Thank you for that.

Speaker Change: Yeah, Greg Good question Bob. Thanks. Thank you for that first of all I'm very pleased with commercial volume growth I don't know if I can.

Peter Kelly: First of all, I am very pleased with commercial volume growth. I don't know if I spoke to it directly, but our commercial volumes are up 21% in the quarter on a year-on-year basis. So again, I think that's very strong volume trends there on commercial. I feel good about that. I believe that's now five consecutive quarters of commercial volume growth. So I think clearly indicates we've come off the bottom, and commercial volume growth have been a source of strength here over the past five quarters or more. So, in terms of what we're seeing, we're seeing a higher percentage of off-leaf vehicles, a higher percentage of the portfolio that's maturing being returned.

Peter Kelly: First of all, I'm very pleased with commercial volume growth. I don't know if I spoke to it directly, but our commercial volumes are up 21% in the quarter on a year-on-year basis. So again, I think that's very strong volume trends there on commercial. I feel good about that. I believe that's now five consecutive quarters of commercial volume growth.

Peter Kelly: 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 a 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.

Greg: Spoke to directly but our commercial volumes were up 21% in the quarter on a year on year basis. So again I think that's very strong volume.

Speaker Change: Trends there on commercial I feel good about that I believe that's now five consecutive quarters of commercial volume growth. So I think clearly indicates we've come off the bottom in commercial volume growths have been a source of strength here over the past five quarters or more.

Peter Kelly: So I think it clearly indicates that we've come off the bottom, and commercial volume growth has been a source of strength here over the past, you know, five quarters or more. So in terms of what we're seeing, we're seeing a higher percentage of off-lease vehicles, a higher percentage of the portfolio that's maturing, being returned. So a lower percentage being purchased by the consumer, okay? So that equity gap, the extent to which these off-lease vehicles are in equity at the end of the lease, that is declining. Although it's been a slow decline, Bob, but it's a continued erosion of that.

Speaker Change:

Speaker Change: So in terms of what we're seeing we're seeing a higher percentage of off lease vehicles, a higher percentage of the portfolio. That's maturing being returned so a lower percentage being purchased by the consumer okay. So that's that.

Brad Lakhia: With that, I'll hand it over to Brad for a deeper discussion into our operational and financial metrics for the quarter, Brad. Thank you, Peter. We are certainly very pleased with our second quarter results, especially the continued improvement in our marketplace segment. As usual, certain comments I make related to consolidated open lane and the marketplace segment are on a net revenue basis, which excludes the impact of purchase vehicles. In addition, my comments will be on the second quarter year-to-year basis unless I state otherwise.

Peter Kelly: So a lower percentage being purchased by the consumer. So that equity gap, the extent to which these off-leafs vehicles are in equity at the end of the lease, that is declining, although it's been a slow decline, Bob, but it's a continued erosion of that. And as that erodes, I think two things happen. One, the fewer consumers buy out their lease, so more of them get returned. That's positive for us. And secondly, fewer grounding dealers purchase the vehicles because a lot of these grounding dealers have the same sort of equity opportunity that the consumer has. So this percentage declines, and these cars then flow deeper into our funnel.

Bob: That equity gap the extent to these the extent to which these off lease vehicles are in equity at the end of the lease that is declining although it's it's been a slow decline Bob but it's you know a continued erosion of that and is that a roads I think two things happen one the consume fewer consumers buy out their lease so more of them get returned that's P.

Peter Kelly: And as that erodes, I think two things will happen. One, fewer consumers will buy out their lease, so more of them get returned; that's positive for us. And secondly, fewer grounding dealers will purchase the vehicles because a lot of these grounding dealers have the same sort of equity opportunity that the consumer has.

Bob: Positive for us.

Brad Lakhia: Our consolidated revenue was $432 million, up 4% mainly driven by the 7% unit volume growth in our marketplace segment. In our results, you'll see our net revenue was down 1% as we continue to realize the impact from the transportation accounting change we made in the fourth quarter of last year. This change impact the net revenue by 21 million in the quarter. Total cost of services was $204 million up 10% and gross profit was 186 million down 4%.

Speaker Change: And secondly, fewer grounding dealers purchase of vehicles, because a lot of these grounding dealers have the same sort of equity opportunity that the consumer has now so that percentage declines in these cars then flow deeper into our funnel. So we're seeing that continue to play out it's been.

Peter Kelly: So that percentage declines, and these cars then flow deeper into our funnel. So we're seeing that continue to play out. It's been, you know, fairly gradual, I'd say over the last few quarters, but it continues. A number of customers are predicting that it could accelerate in the coming quarters based on residual values in their portfolios, etc., but I think I'm taking a wait-and-see approach to see how that trends. But it's something that gives me confidence that even though there are fewer off-lease maturities at the top of the funnel, our commercial volumes will, will, you know, that decline will be offset by an increased percentage of those vehicles that get returned.

Peter Kelly: So we're seeing that continue to play out. It's been fairly gradual. I'd say over the last few quarters, but it continues.

Speaker Change: Fairly gradual I'd say over the last few quarters, but it continues.

Speaker Change: You know a number of customers are predicting that it could accelerate in the coming quarters based on residual values in their portfolio et cetera, but I think I'm, taking a wait and see approach to see how that trends.

Peter Kelly: You know, a number of customers are predicting that it could accelerate in the coming quarters based on, you know, residual values in their portfolio, et cetera. But I think I'm taking a wait-and-see approach to see how that trends. But it's something that gives me confidence that even though there's fewer of these maturities at the top of the funnel, our commercial volumes will, you know, that decline will be offset by an increased percentage of those vehicles that get returned. And I think our business will continue to perform through the period. So that's the expectation. We obviously have to take each month as it comes, but so far, you know, we're now in that period where there's, where there's lower off these maturities, but we're still seeing you're on your, you're on your commercial volume growth, so I feel good about that.

Brad Lakhia: Higher auction and service volumes as well as higher pricing were more than offset by a charge of 12 million related to the newly enacted Canadian digital services tax. Excluding this tax gross profit would have been up approximately 2%. As further background at the end of the quarter, the Canadian government implemented a 3% DST which applies to digital based revenues. This became effective at the end of the second quarter and has applied retroactively to January 1, 2022.

Speaker Change:

Speaker Change: But it's something that gives me confidence that even though theres fewer off lease maturities the top of the funnel our commercial volumes will.

Speaker Change: Will you.

Speaker Change: That decline will be offset by an increased percentage of those vehicles that get returned and I think our business will continue to perform through the period. So.

Peter Kelly: And I think our business will continue to perform through the period. So, that's the expectation. We obviously have to take each month as it comes. But so far, you know, we're now in that period where there are lower off-lease maturities, but we're still seeing year-on-year commercial volume growth. So I feel good about that.

Speaker Change: That's a that's the expectation we obviously have to take each month as it comes.

Speaker Change: But so far you know we're now in that period, where there is where there is a lower off lease maturities, but we're still seeing year on year year on year commercial volume growth. So I feel good about that.

Speaker Change: Okay Super very helpful color and then just I mean, you talked about the Canadian dealer market a little bit before.

Unknown Executive: Okay, super, very helpful color.

Robert Labick: Okay, super, very helpful color. And then just, I mean, you talked about the Canadian dealer market a little bit before. I think it was back in December you made an acquisition of Mannheim in Canada. Can you talk about the progress on that integration? I thought there was potentially an opportunity for a sale of a facility or something like that. I don't know if that's still in the works or how that integration is progressing?

Peter Kelly: And then just, I mean, you talked about the Canadian dealer market a little bit before. I think there's a back in December. You made an acquisition of Manheim Canada. Can you talk about the progress on that integration? I thought there was potentially an opportunity for a sale of a facility or something like that. I don't know if that's still in the works or how that integration's progressing.

Brad Lakhia: As a result of this new tax we recorded a charge of 12 million in the quarter. Of this 12 million, approximately 10 million relates to 2022 and 2023 and approximately 2 million relates to 2024. Assuming no changes to this legislation, including the scope of its application, we estimate the ongoing annual cost related to this tax will be 5 million per year. However, we are planning to implement actions to mitigate this impact and therefore we do not expect a significant impact on future year's earnings and cash flow.

Speaker Change: Thank you Sir.

Speaker Change: Back in December you made an acquisition of Mannheim, Canada can you talk about the progress on that integration I thought there was potentially an opportunity for a sale of a facility or something like that I don't know if that's still in the works or how that integrations are progressing.

Brad Lakhia: Yes, of course. Before I go there, let me just add one more comment on your last question, which I think is really important. We're also seeing significant increases in new vehicle lease originations. I know I've talked about that on prior calls, but, you know, lease originations dropped in 2021 and 2022, but they've been increasing in 2023 and 2024. I think five consecutive quarters of lease origination increases. That again is very positive. Again, we're going to have to look out, you know, maybe another 18 months till that starts to really flow through our business, but that will be very positive for us and very confident of that.

Speaker Change: Yes of course, so before I go there let me just add one more comment on your last question, which I think is really important.

Peter Kelly: Yes, of course. Before I go there, let me just add one more comment on your last question, which I think is really important.

Speaker Change: We're also seeing significant increases in new vehicle lease originations.

Peter Kelly: We're also seeing significant increases in new vehicle lease originations. I know I've talked about that on prior calls, but, you know, lease originations dropped in 2021 and 2022, but they've been increasing in 2023 and 2024. I think five consecutive quarters of lease origination increases is very positive. Again, we're going to have to look out for, you know, maybe another 18 months till that starts to really flow into our business, but that will be very positive for us. I'm very confident of that.

Speaker Change: And I have talked about that on prior calls but.

Speaker Change:

Speaker Change: Lease originations dropped in 2021, and two but they've been increasing in 'twenty three 'twenty four I think five consecutive quarters of lease origination increases that again is very positive.

Brad Lakhia: Consolidate SGA in the quarter was $106 million which was down 5% reflecting the successful execution of our cost savings initiatives. The decline in SGA was primarily a result of decreases in compensation and compensation related expenses. Our relatively flat SGA for the last several quarters not only reflects the impact of our cost savings initiatives but also illustrates the fixed cost nature of our SGA. This is an important scalability feature of our asset-like digital model.

Speaker Change: Again, we're going to have to look out you know maybe another 18 months to let starts to really flow through our business, but that will be very positive for us and very confident of that.

Speaker Change:

Peter Kelly: So going to Canada, very pleased with the acquisition. So we've made the acquisition. We've consolidated the operations in all five metro areas. So, you know, in the city of Toronto, for example, there had been two auction properties: one owned by us, one owned by our competitor. Now that volume is consolidated into one. So we're getting greater scalability, greater leverage out of these facilities. We're still running the auctions digitally for the most part in Canada. Customer attention has been strong, particularly strong on the commercial side. So we've had very good customer attention through the acquisition. And we're seeing, obviously, in addition to that sort of retention of acquired customers, we're seeing some organic growth in commercial volumes in Canada as well.

Peter Kelly: So going to Canada, very pleased with the acquisition. So we've made the acquisition, and we've consolidated the operations in all five metro areas. So, you know, in the city of Toronto, for example, there had been two auction properties, one owned by us and one owned by our competitor. Now that volume is consolidated into one. So we're getting greater scalability and greater leverage out of these facilities. We're still running the auctions digitally for the most part in Canada.

Speaker Change: So going to Canada.

Speaker Change: Very pleased with the acquisition. So we've made the acquisition we've consolidated the operations and all five metro areas. So you know.

Speaker Change: In the in the city of Toronto for example, there had been to the.

Speaker Change: Auction properties, one owned by US one of them by our competitor now that now that volume is consolidated into one so we're getting greater scalability.

Brad Lakhia: For the balance of 2024, we expect our SGA spend to remain at similar levels. As you will note in our earnings release, adjusted EBITDA was 71 million which was negatively impacted by the 2 million current year portion of the DST charge. Turnings in the marketplace segment revenue increased 5% to 336 million. Our total volumes were up 7%, primarily driven by our US business. Our dealer volumes decline primarily driven by our Canadian business for similar reasons discussed during our first quarter call.

Speaker Change: Leverage out of these facilities were still running the auctions are digitally for the most part in Canada.

Speaker Change: Customer retention has been strong.

Peter Kelly: Customer attention has been strong, particularly strong on the commercial side. So we had very good customer attention through the acquisition. And we're seeing, obviously, in addition to that sort of retention of acquired customers, we're seeing some organic growth in commercial volumes in Canada as well. So overall, it's, I think, a good story.

Speaker Change: Particularly strong on the commercial side. So we had very good customer retention through the acquisition.

Speaker Change: And we're seeing obviously in addition to that sort of retention of acquired customers. We're seeing some organic growth in commercial volumes in Canada as well so overall.

Brad Lakhia: So overall, it's, I think, a good story.

Brad Lakhia: We've had some challenges, as I've mentioned, on the dealer side in Canada. Again, that improved over the course of the second quarter. I feel like we're entering the second half of the year in a much better position than we were in January. So I'm optimistic about a more positive trend line on the dealer side in Canada as well in the second half.

Speaker Change: It's I think a good story, we've had some challenges as I've mentioned on the dealer side in Canada.

Peter Kelly: We've had some challenges that have mentioned on the Deeter side in Canada. Again, that improved over the course of the second quarter. I feel like we're entering the second half of the year, much better position than we were in January. So I'm optimistic for a more positive trend line on the Deeter side in Canada as well in the second half.

Speaker Change: That improved over the course of the second quarter I feel like we're are entering the second half of the year much better position than we were in January.

Brad Lakhia: Auction fee revenue increased by 5% driven primarily by the volume growth. Reported services revenue was down 6%, once again primarily due to the transportation accounting change mentioned in my earlier remarks and also highlighted in our last two calls. Yes, excluding this accounting change, services revenue was up 9% driven by inspection, repossession and reconditioning services. This is the result of our ongoing focus to drive greater attachment of our services to our marketplace offering.

Speaker Change: So I'm optimistic for a more positive trend line on the theater side in Canada as well in the second half.

Brad Lakhia: Yeah, and Bob does Brad here just to address the second part of your question regarding the real estate. We do continue to have an opportunity there to monetize some real estate that we acquired as part of the transaction. It's really harmonizing our real estate play in a key market. And we have an active project underway to do that. It's difficult for me to be able to provide any specifics on the timing and the amount of that, and just given the process where we're at in it, but it is an active, an active project for us.

Bob: Yeah, and Bob does Brad here just to address the second part of your question regarding the real estate, we do continue to have an opportunity there.

Brad Lakhia: Yeah, and Bob, this is Brad here. Just to address the second part of your question regarding the real estate, we do continue to have an opportunity there to monetize some of the real estate that we acquired as part of the transaction. And it's really harmonizing our real estate play in a key market, and we have an active project underway to do that. It's difficult for me to be able to provide any specifics on the timing and the amount of that, just given the process and where we're at in it, but it is an active project for us.

Bob: To monetize some real estate that we acquired as part of the transaction and its really harmonizing a real estate play in our key market and we have an active project underway to do that are difficult for me to be able to provide any specifics on the timing and the amount of that just given the process.

Brad Lakhia: Marketplace adjusted EBITDA was $33 million and would be $35 million excluding the impact of the $2 million current year portion of the Canadian DST charge. This represents an increase of approximately 48% year-over-year when we exclude the impact of this tax item and the prior year 20 million gain that arose from early contract termination. Marketplace SGNA was down 5% driven by the factors mentioned earlier. Once again, we are very pleased with the overall performance of our marketplace business.

Speaker Change: So where we're at in it.

Speaker Change: But it is an active an active project for us.

Unknown Executive: Okay, super. Thanks so much.

Speaker Change: Okay Super Thanks, so much.

Robert Labick: Okay, super. Thanks so much.

Unknown Executive: Thank you, Bob.

Bob: Thank you Bob.

Operator: The next question will come from John Murphy with Bank of America. Please go ahead.

John Murphy: The next question will come from John Murphy with Bank of America.

Speaker Change: The next question will come from John Murphy with Bank of America. Please go ahead.

Unknown Executive: Please go ahead.

John Murphy: Good afternoon, guys. This is Billy Helion on behalf of John. Hey, Billy.

Billy Healey: Good afternoon, guys. This is Billy Healey on for John. Hey Billy. Thanks for taking the questions. I just wanted to ask again a little bit more on the supply dynamic in the market right now. At least the dealers we talked to are still calling out a challenge sourcing environment for used vehicles. And you guys are doing well in volumes up 7%, another large fires up 33% year year. So would you chalk this up to market share gains or see more vehicles flowing into the auction channel? How do you think about that?

Speaker Change: Good afternoon, guys. This is Billy Healy on for John.

Speaker Change: Hey, Billy.

Billy Helion: So, thanks for taking the questions. I just wanted to ask, again, a little bit more about the supply dynamic in the market right now. At least the dealers we talked to are still calling out a challenging sourcing environment for used vehicles. And you guys were doing well on volumes up 7%; another large fire is up 33% year-over-year. So, would you chalk this up to market share gains, or do you see more vehicles flowing into the auction channel? What how do you think about that?

Billy Healy: So thanks for taking the questions I just wanted to ask again, a little bit more on the supply dynamic in the market right now.

Speaker Change: He used to dealers we talked to you are still calling out are a challenge sourcing environment for used vehicles and.

Brad Lakhia: We are committed to prioritizing investment and our one marketplace solution, including key investments in industry leading product innovations and go to market initiatives. These investments will make wholesale easier for our customers, which enables us to capture volume growth and enhance the scalability of our margins. Turning to our finance segment, loan transaction units in the quarter were up 3%. Revenues for the quarter were down 2%, primarily driven by lower interest income resulting from lower vehicle values within the portfolio.

Speaker Change: You guys are doing well in volumes up 7%, another large fires up 33% year over year. So.

Speaker Change: Would you chalk this up to market share gains are you see more vehicles flowing into the auction channel our.

Speaker Change: How do you think about that.

Speaker Change: Mobility. Good question, you know, even though volumes have been strong I do agree that volumes in the industry are still below pre pandemic levels are below what I would consider to be normal for industry and I think that's part of our growth equation as those volumes return towards normal I guess when I look at that you know I divide the.

Peter Kelly: Well, Billy, good question. Even though volumes have been strong, I do agree that volumes in the industry are still below pre-pandemic levels. They're below what I would consider to be normal for the industry, and I think that's part of our growth equation as those volumes return to normal. I guess when I look at that, I divide the industry roughly into dealer and commercial from a supply standpoint. Dealer volumes, I'd say, are still below normal, but not massively below normal; maybe 15%, 20% below normal would be how I'd characterize them.

Peter Kelly: Well, Billy, good question. You know, even though volumes have been strong, I do agree that volumes in the industry are still below pre-pandemic levels or below what I would consider to be normal for the industry. And I think that's part of our growth equation as those volumes return towards normal. I guess when I look at that, you know, divide the industry roughly into dealer and commercial from a supply standpoint. Dealer volumes, I'd say, are still below normal, but not massively below normal. Maybe, you know, 15, 20% below normal would be high characterize it. I think those volumes will improve at the extent dealers have more vehicles on their lot, more new and used vehicle inventory.

Brad Lakhia: These two factors were also the primary driver of our finance segment adjusted EBITDA result of $39 million, down 4%. The provision for credit losses was 2.1%, which was improved versus last quarter. As I've indicated previously, we are encouraged by ongoing improvements we are seeing in the severity of losses. This is the combined result of stabilizing fundamentals and our discipline risk management actions. We expect the loan loss rate for the second half of the year to be in line with the first half of the year. To reiterate, we continue to target a long-term loss rate of 1.5% to 2%. Overall, we remain pleased with AFC's financial performance and cash flow generation.

Speaker Change: Industry roughly into dealer and commercial from a supply standpoint.

Billy Healy: Dieter volumes I'd say are still below normal, but not massively but not below normal maybe 15, 20% below normal will be hired characterize it I think those volumes will improve as the extent dealers have more vehicles.

Peter Kelly: I think those volumes will improve to the extent dealers have more vehicles on their lots, more new and used vehicle inventory. We've seen those trends generally heading upwards over the last 12 months. Transcripts provided by Transcription Outsourcing, LLC, opportunities there

Billy Healy: On there a lot more new and used vehicle inventory, we've seen those trends generally heading upwards over the last 12 months.

Peter Kelly: We've seen those trends generally heading upwards over the last 12 months at the extent the consumer affordability problem improves. I think that'll increase vehicle trade-ins and wholesale volumes on the dealer side as well. So there's some positive opportunities there. I would expect them to sort of readjust gradually.

Billy Healy: To the extent the.

Billy Healy: The consumer affordability problem improves I think that will increase vehicle trade ins and wholesale volumes on the dealer side as well. So there is some positive.

Peter Kelly: I would expect them to sort of readjust gradually. Billy is my view on that. On the commercial side, it's a bit of a mixed bag. You know, repo volumes are quite strong relative to pre-pandemic, but that's not a huge segment for us.

Billy Healy: Unities, there I would expect them to sort of readjust gradually believes we my view on that on the commercial side. It's.

Peter Kelly: Billy, be my view on that on the commercial side. It's a bit of a mixed bag, you know; repo volumes are quite strong. Rather than to pre-pandemic, that's not a huge segment for us. What is a big segment for us is off lease. And, as I've said on prior calls, off-lease volumes are still about 50% below pre-pandemic levels. So I do see significant opportunity for commercial volume growth on the off-lease segment. I do think we'll be really well positioned there. But again, Billy has been very clear about it on prior calls. You know, we should be modest in our expectations over the next 18 months.

Billy Healy: It's a bit of a mixed bag repo volumes were quite strong relative to pre pandemic, that's not a huge segment for us.

Peter Kelly: What is a big segment for us is off-lease, and as I've said on prior calls, off-lease volumes are still about 50% below pre-pandemic levels. So I do see a significant opportunity for commercial volume growth in the off-lease segment. I do think we'll be really well positioned there, but again, Billy, as I've been very clear about on prior calls, you know, we should be modest in our expectations over the next 18 months when we look at the cycle, the three-year cycle of a lease vehicle.

Billy Healy: Well it is a big segment for us as off lease and as I've said on prior calls off lease volumes are still about 50% below pre pandemic levels. So I do see a significant.

Billy Healy: Significant opportunity for commercial volume growth on the off lease segment I do think we'll be really well positioned there, but again, Billy as ive been very clear about in prior calls.

Billy Healy: You know, we should be modest in our expectations over the next 18 months for you know when we look at the cycle the three year cycle or at least vehicle I think I've been very open on that.

Peter Kelly: For, you know, when we look at the cycle, the three-year cycle of a lease vehicle. I think I've been very open on that. But I do then see, again, I think those volumes will be quite strong for us. And then I see acceleration coming, you know, after the end of 2025. And in the years to follow after that.

Brad Lakhia: We continue to prioritize the funding of organic investments while ensuring flexibility for high return, complementary strategic opportunities, and shareholder returns. At the end of the quarter, we continue to have 125 million remaining on our share repurchase authorization. As discussed in the last call, we have a 210 million senior note maturing in June of 2025, and we intend to use cash flow from operations along with our strong equity position to fund this maturity.

Peter Kelly: I think I've been very open about that. But I do then see, again, that those volumes will be quite strong for us, and then I see acceleration coming, you know, after the end of 2025 and in the years to follow after that.

Billy Healy: But I do then see a again I think there was obviously quite strong for us and then I see acceleration coming after the end of 2025 and in the years to follow after that.

Speaker Change: Okay Super helpful. And then just one more on the margins for the marketplace segment in the quarter I mean, I know there was a lot of noise going on with the accounting change in.

Unknown Executive: Okay, super helpful.

Billy Helion: Okay, super helpful. And just one more on the margins for the marketplace segment for the quarter. I mean, I know there's a lot of noise going on with the accounting change and tax in Canada and maybe some impact from CDK. But can you just talk about your expectations for the trend going into the back half of the year? I mean, just looking at the numbers down a bit sequentially and year-over-year on the gross margin next purchase vehicle. So I wanted to get your thoughts on the back half of the year.

Billy Healey: And just one more on the margins for the marketplace segment in the quarter. I mean, I know there's a lot of noise going on with the accounting change and tax in Canada, and maybe some impact from CDK. But he just talked to maybe your expectations on the trend going to the back half of the year. I mean, if just looking at the numbers down a bit sequentially and year-rear on the gross margin, experts should be equal.

Speaker Change: Tax in Canada, and maybe some impact from CDK, but can you just talk to maybe your expectations on a trend going into the back half of the year because I mean, just looking at the numbers.

Speaker Change: Down a bit sequentially and year over year on the gross margin ex purchase vehicles. So I wanted to get your thoughts on the back half of the year.

Brad Lakhia: So I want to get your thoughts on the back half of the year.

Billy Healy: Yeah, Billy Brad here. Thanks for the question I think just to provide some added clarity on our margins in the quarter.

Brad Lakhia: Yeah, Billy, Brad here. Thanks for the question. I think, you know, just to provide some added clarity on our margins in the quarter. Certainly, when you look at the gross profit margin in the quarter, that reflects the full impact of the $12 million charge that I highlighted in our early remarks. So would want to just highlight that to you. I think if you normalize for that, you know, we would see fairly consistent margin performance. Especially in the marketplace business sequentially and really kind of looking back over the last few quarters. So highlight that on an adjusted EBITDA margin basis.

Brad Lakhia: Yeah, Billy, and Brad here. Thanks for the question. I think, you know, just to provide some added clarity on our margins in the quarter, certainly when you look at the gross profit margin in the quarter, that reflects the full impact of the $12 million charge that I highlighted in our early remarks. So, I would want to just highlight that to you. I think if you normalize for that, you would see fairly consistent margin performance, especially in the marketplace business, sequentially and really kind of looking back over the last few quarters.

Speaker Change: Certainly when you look at the gross profit margin in the quarter that reflects the full impact of the $12 million charge that I highlighted in our earlier remarks. So.

Speaker Change: Wanted to just highlight that to you I.

Brad Lakhia: To summarize, we remain pleased with the business and financial performance. We generated 138 million of cash flow from operations through six months, our marketplace volumes grew 7%. Our marketplace adjusted EBITDA would have grown by approximately 48% if we exclude the current year DST charge and the prior year contract early termination gain discussed earlier. Our credit loss rate is gradually beginning to moderate. And finally, the actions we have taken to consolidate our digital marketplace offerings to unify our brand to open lane and to successfully launch new product innovations gives us strong confidence in the future.

Billy Healy: I think if you normalize for that.

Billy Healy: We would see fairly consistent margin performance.

Billy Healy: Oh, it, especially in the marketplace business.

Billy Healy: Sequentially in <unk>, and really kind of looking back over the last few quarters.

Brad Lakhia: So, highlight that on an adjusted EBITDA margin basis. You know, you'll see in our adjusted EBITDA reconciliation that we did adjust out the out of period component of the $12 million charge, which was $10 million. So, if you look at our adjusted EBITDA margins and then adjust for that smaller amount of $2 million in the current period, you would see that our margins, again, on an adjusted EBITDA basis, are fairly consistent sequentially.

Billy Healy: So highlight that on an adjusted EBITDA margin basis.

Brad Lakhia: You'll see in our adjusted EBITDA reconciliation that we did adjust out the out of period component of the $12 million charge, which was $10 million. So if you look at our adjusted EBITDA margins and then adjust for that smaller amount of $2 million in the current period, you would see that our margins, again, on an adjusted EBITDA basis, are fairly consistent sequentially. And then, as you know, you highlighted yourself, we had this impact of transportation revenue. And so the comparability there, that item in particular does give us a little bit of favorability in terms of our margin.

Billy Healy: You'll see it in our adjusted EBITDA reconciliation that.

Billy Healy: We did adjust out the out of period component of the $12 million charge, which was $10 million.

Billy Healy: So if you look at our adjusted EBITDA margins.

Billy Healy: And then adjust for that smaller amount of $2 million in the current periods.

Billy Healy: Would see that our margins again on that one.

Billy Healy: On an adjusted EBITDA basis are fairly consistent sequentially.

Unknown Executive: With that, I will turn the call over to the operator for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star than one on your touch tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. And at this time, we'll pause momentarily to assemble our roster.

Speaker Change: And then as you know you you you highlighted yourself, we had this impact of transportation revenue.

Brad Lakhia: And then, as you highlighted, we had this impact on transportation revenue, and so the comparability there, that item in particular does, you know, does give us a little bit of favorability in terms of our margin, but is not a significant driver of the ongoing improvements that we're delivering.

Billy Healy: And so the comparability there that that item in particular does.

Billy Healy: It does give us a little bit of favorability in terms of our margin.

Brad Lakhia: But now is not a significant driver of the ongoing improvements that we're delivering.

Billy Healy: But that is not a significant driver of the ongoing improvements that were that were delivering.

Unknown Executive: Great, thanks, super helpful. Thank you, Billy.

Speaker Change: Great. Thanks, that's super helpful.

Brad Lakhia: Great, thanks; super helpful.

Billy Healy: Thank you Billy.

Speaker Change: Again, if you have a question. Please press Star then one our next question will come from Bret Jordan with Jefferies. Please go ahead, hey, good morning.

Bret Jordan: Again, if you have a question, please restore. Then, one, our next question will come from Bret Jordan with Jeffries.

Operator: Again, if you have a question, please press star, then 1. Our next question will come from Bret Jordan with Jeffries. Please go ahead.

Craig Kennison: Any first question will come from Craig, Kenneth and with Baird, please go ahead. Hey, good afternoon. Thanks for taking my questions.

Unknown Executive: Please go ahead. Hey, good morning. Good afternoon, guys.

Bret Jordan: Hey, good morning. Good afternoon, guys.

Bret Jordan: Good afternoon guys.

Bret Jordan: Hey Bret, good afternoon. Hey, I'm a market share guy...

Peter Kelly: Hey, Bret, good afternoon. I'm a market share question. You said you're outperforming the physical auction volume. I guess if you looked at all auction channels and looked at market share, are you? Obviously, there are lots of cars traded in various places. Are you outperforming the broader market? Are you more or less right now performing the physical? I would say our market share, Bret, over the past period has been fairly steady. There's a little bit of ebb and flow in some quarters. We've seen strong growth on commercial or dealer volumes; have been more flatish over the past 12-month period.

Billy Healy: Hey, Brett and good afternoon.

Bret Jordan: Hey, on the market share question, you said you're outperforming the physical auction volume. I guess if you looked at all the auction channels and looked at market share, are you, and obviously, there are lots of cars traded in various places, are you outperforming the broader market, or are you more or less right now outperforming the physical?

Peter Kelly: I wanted to start with the dealer volume. If I add the CDK volume that you mentioned, 6000 units, it looks like that business would have been closer to flat. Is that keeping pace with your digital competitors in that market and the broader wholesale dealer channel? Thanks, Craig. Appreciate the question. As I mentioned, dealer volumes were down in the quarter but most of that was Canada. First of all, I'd say the 6000 units wasn't all dealer was a mix of commercial and dealer.

Bret Jordan: On the market share question I think you said, you're outperforming the physical auction volume I guess, if you looked at all auction channels and looked at market share are you and obviously you know.

Speaker Change: There is lots of cars traded in various places are you outperforming the broader market or are you more or less right now for me the physical.

Speaker Change: I would say our market share our bread over the past period has been fairly steady you know theres, a little bit of ebb and flow in some quarters.

Peter Kelly: I would say our market share, Bret, over the past period has been fairly steady. You know, there's a little bit of ebb and flow in some quarters. We've seen strong growth in commercial or dealer volumes have been more flattish over the past, say, 12-month period. So, again, I think that's against the backdrop of a commercial off-lease volume environment that has been challenged. And I think that's particularly impactful on us. So, I feel good about our market share.

Peter Kelly: So I would assume a similar mix to our sales overall because volumes on the commercial side were also impacted by dealers that couldn't turn in cars and couldn't purchase cars. So maybe a 50-50 split on that volume. If we look at the decline, the decline was principally in Canada. We obviously check other sources to see what volumes are. Our understanding, based on the data I'm looking at, is that dealer volumes, dealer volumes at physical auction in the United States were down in the first and second quarters of the year.

Speaker Change: We've seen strong growth on commercial or dealer volumes have been more flattish over the past say 12 month period.

Speaker Change:

Speaker Change: So, but again I think that's against the backdrop of a commercial off lease volume environment that has been challenged and I think that's particularly impactful on us so.

Peter Kelly: But again, I think that's against the backdrop of a commercial off-lease volume environment that has been challenged, and I think that's particularly impactful on us. I feel good about our market share. You have to look at it in the dealer category and then in the commercial category, and then in aggregate, because the mix shift can flex from one quarter to another, one period to another. I think we're, I would say, we've held our market share. It might be slightly up over the period. If we look at it in aggregate, and then we look at it in commercial and dealer, I also feel pretty good about where we stand.

Speaker Change: You know I feel I feel good about our market share.

Ken: We have you have to kind of look at it you know in the dealer category and then in the commercial category and then in aggregate because the mix shift Ken can kind of flex from one quarter to another one period to another.

Peter Kelly: You have to kind of look at it in the dealer category and then in the commercial category and then in aggregate because the mixed shift can flex from one quarter to another or one period to another. So, I think, you know, we're... I would say we've held our market share; it might be slightly higher over the period. If we look at an aggregate and then we look at it in commercial and dealer, I also

Speaker Change:

Speaker Change: So I think you know where I.

Speaker Change: I'd say, we've held our market share it might be slightly up over the period.

Peter Kelly: And that in comparison, our volumes slightly outperformed the physical auction volumes. So I don't think it's a loss of share. I think we'd have slight gain of share even though our volumes in the quarter were down. But you're right, Craig. CDK had an impact, a small impact. And then I mentioned in the quarter we saw an improving trend as the quarter went on. So I feel more optimistic about the trend line in the second half of the year that this will be back in sort of year over year growth territory.

Speaker Change: If we look at it in aggregate and then we look at it in.

Speaker Change: In commercial and dealer I also feel pretty good about where we stand.

Bret Jordan: Okay, and then within AFC, is your bar, is your customer base changing at all? Are you taking out some of the lower credit customers? And yeah, I guess if you sort of thought about the number of active clients at AFC right now, has that changed much year over year?

Speaker Change: Okay, and then within AFC.

Bret Jordan: Okay, and then with an AFC, is your customer base changed at all?

Speaker Change: Is your borrowing base your customer base changed at all are you taking out some of the lower credit customers and you know I guess it would be a sort of a thought about the number of active clients at AFC right now has that changed much year over year.

Brad Lakhia: Are you taking out some of the lower credit customers? I guess if you sort of thought about the number of active clients at AFC right now, has that changed much year over year? Yeah, hey, Bret. Thanks for the question. I would say just a couple things here. We have been intentional around our risk management processes here, and been pretty diligent, particularly last 12 to 18 months around the customer portfolio. So there's been some proactive takeout of customers that were flagging risk for us. So that, and that's ordinary, but I would say certainly in the last 12 to 18 months, it's been more of a priority for us.

Brad: Yeah, Hey, Brett Brad here. Thanks for the question. So I would say just a couple of things here. We have you know been intentional around our risk management processes here, and our and been pretty diligent, particularly over the last 12 to 18 months around.

Brad Lakhia: Yeah, hey, Brad here. Thanks for the question. So I would say just a couple of things here. We have, you know, been intentional about our risk management processes here and been pretty diligent, particularly in the last 12 to 18 months around, you know, the customer portfolio. So there's been some proactive takeout of, you know, customers that were flagging risk for us. So that, and that's normal, but I would say certainly in the last 12 to 18 months, it's been more of a priority for us.

Peter Kelly: So anyway, we will watch and see that. I guess beyond that, Craig, I'll say, you know, we obviously spend a lot of time talking to our dealer customers. I'm very pleased by the feedback we're getting from our customers about the strength of our offering, you know, selling their cars quickly, selling their cars, you know, excellent price outcomes. You'll see our GMV in the quarter was up 6%. So, you know, values are strong in our marketplaces as well.

Brad: The customer portfolio, so theres been some proactive take out.

Speaker Change: You know customers.

Brad: We're flagging risk for us.

Speaker Change: So that and that's ordinary but I would say certainly in the last 12 months to 18 months, it's been a bit more more of a priority for us in this business and the independent floor planning financing business. There is some normal churn.

Peter Kelly: And obviously, you know, having a strong differentiated offering the marketplace. So I'm very pleased by the feedback we're getting from our customers. And, you know, this is an area we're very focused on investing into. And again, I mentioned in my remarks how we have, you know, you know, put some increased go-to-market resources into fields, laid in the second quarter. Feeling good about that. We're already seeing some traction there too.

Brad Lakhia: In this business and the independent floor planning financing business, there is some normal churn. So there are normal churn, but as we've demonstrated historically, we're able to maintain a pretty consistent base of customers with that churn. So, as we lose some, we gain some, and on the net, we're able to grow unit volumes over time. So that's just my comments there, but I would say this business continues to perform very, very well. Obviously, our credit loss rates have been a little bit higher than where we would like them to be on a target basis, but we feel our relative performance there, based on what we know are some of our peers in this space and their performance.

Brad Lakhia: In this business, in the independent floor planning financing business, there is some normal churn. So there is, you know, normal churn, but as we've demonstrated historically, we're able to maintain a pretty consistent base of customers with that churn. So as we lose some, we gain some, and on the net, we're able to grow unit volumes over time. So that's just my comments there.

Speaker Change: So there are normal churn, but as we've demonstrated historically were able to maintain a pretty consistent base of customers with that churn. So as we lose some we gained some and on and that we're able to grow our unit volumes over time so.

Peter Kelly: Thanks Peter, and then you have a good message with some of the technology innovations. I'm curious if you feel like you're getting that message out to dealers, or if you need to target more marketing dollars to that effort, so they see what you're doing with digital boosters, code boost, IQ. Yeah, good question. I think Craig, I think there is, sometimes I think we're sort of misunderstood in terms of the strength of our technology, that there's a gap there between what we offer and what say analysts or investors or sometimes customers might understand.

Speaker Change: That's just my comments there.

Brad: But I would say this business continues to perform very very well, obviously, our credit loss rates have been a little bit higher than where we would like them to be on a target basis, but we feel our relative performance there.

Bret Jordan: But I would say this business continues to perform very, very well. Obviously, our credit loss rates have been a little bit higher than where we would like them to be on a target basis, but we feel our relative performance there, based on what we know are some of our peers in this space and their performance, is very strong. The margin structure of this business, not only from a fee basis but also from a net interest margin perspective, and the returns that it yields, are very, very attractive. And I like this business.

Brad: Based on what we know our some of our peers in this in this space and their performance our relative performance. There is very strong the.

Brad Lakhia: Our relative performance there is very strong. The margin structure of this business, not only from the fee basis, but also from a net interest margin perspective, and the returns that yields is very, very attractive and like this business.

Speaker Change: The margin structure of this business not only from a fee basis, but also from a net interest margin perspective, and the returns that yields.

Speaker Change: Very attractive and I like this business.

Brad Lakhia: Great. A quick housekeeping question. You also commented that you increased your go-to-market resources late in the second quarter. Is that something that is – obviously, you've maintained your guide. Is there any timing that that expense is going to generate a return later in the year, or is it just not that significant?

Bret Jordan: Great, quick housekeeping question.

Speaker Change: Great I had a quick housekeeping question can you also comment as you increase your go to market resources late in the second quarter is that something that is obviously you maintained your guide is there any timing that that expense is going to generate a return later in the year or is it just not that significant.

Brad Lakhia: You also commented you increased your go-to-market resources late in the second quarter. Is that something that is, I obviously, you're maintained your guide? Is there any timing that that expense is going to generate a return later in the year, or is it just not that significant? Yeah, I guess, Bret, I'd say first of all, it's not that significant of the context of rural SG&A structure, so I'd say it's more on the margin, but obviously the business case associated with these investments is, yeah, you increase some staffing and you expect to see volume impacts to happen in fairly near term, but not immediately.

Peter Kelly: So that is something we are investing in, when we roll out these launches, we're training our sales team, we're obviously preparing the go-to-market materials to support this, and if you spend any time on OpenLane.com, you'll see a bunch of dealer testimonials that speak to the power of these offerings and what they do for those dealers. So it's an area we're focused on, you may have seen, we ran a dealer appreciation event in the month of July, a dealer fest, and again, that was kind of our way of saying thank you to our customers, a appreciation of their business, but also educate them on some of the great new things that we've brought to market over the last six months and we plan to bring the market, you know, between now and the end of the year.

Speaker Change: Yeah, I guess, Brett I'd say first of all it's not that significant in the context of rural SG&A structure. So I'd say, it's more on the margin, but you know obviously the business case associated with these investments is yeah you you.

Brad Lakhia: Yeah, I guess, Bret. I'd say, first of all, it's not that significant in the context of the overall SG&A structure. So I'd say it's more on the margin.

Brad Lakhia: But, you know, obviously, the business case associated with these investments is, yeah, you increase some staffing, and you expect to see volume, you know, impacts happen, you know, in the fairly near term, but not immediately. So yeah, we've got a business case that anticipates some incremental volume here in the second half of the year and continuing to 2025. You know, some of the investments are also in technology and product development; those probably have a little bit of a longer lead time, but not by much.

Speaker Change: You increased some staffing and you expect to see volume.

Speaker Change: You know impacts to happen in fairly near term, but.

Peter Kelly: So it's an area we're very focused on, and I think it's going to be an area of increasing strength for our business Craig, as we consolidate platforms, speed innovation, et cetera, I think you'll see more to come from us in this dimension.

Speaker Change: But not immediately so yeah, we've got a business case that envisions some incremental volume here in the second half of the year and continuing into 2025 some of the investments also in technology and.

Peter Kelly: So yeah, we've got a business case that envisions some incremental volume here in the second half of the year and continuing to 2025. Some of the investments also are in technology and product development. Those probably have a little bit of a longer lead time, but not massively. And again, I would characterize that as we feel really good about the offering we have. We feel really good about the feedback we're getting from our dealers, many of whom are very sophisticated, do a lot of analysis on how we're performing versus other channels. And there's an opportunity here to sort of increase share in certain markets where, frankly, we don't have a presence in terms of a sales person, or in certain markets where we've got more opportunities than the person on the ground can reasonably handle.

Speaker Change: Product development, those probably have a little bit of a longer lead time, but but but not massively.

Unknown Executive: Great, thank you. Thanks Craig.

Bob Lubbick: The next question will come from Bob Lubbick with CJA Securities. Please go ahead. Good afternoon, thanks for saying our questions. Hey Bob. Hi, I want to start on the off-leaf side and Peter, you alluded in your remarks, but maybe I hope you could go a little deeper. Could you give us a sense of the mix of off-leafs right now in terms of where it's going, in terms of owner retained, you know, dealer retained, closed open auction, and really just where are we in the kind of normalization process and how do you see it progressing?

Speaker Change: And again I, you know I would characterize that as we feel really good about the offering we have we feel really good about the feedback we're getting from our dealers Manny.

Brad Lakhia: And again, you know, I would characterize that as we feel really good about the offering we have; we feel really good about the feedback we're getting from our dealers, many of whom are very sophisticated and do a lot of analysis on how we're performing versus other channels. And there's an opportunity here to sort of, you know, increase share in certain markets where, you know, frankly, we don't have a presence in terms of a salesperson or in certain markets where, you know, we've got more opportunities than the person on the ground can reasonably handle. So it's a situation like that.

Manny: Many of whom are very sophisticated do a lot of analysis on how we're performing versus other channels.

Manny: And there's an opportunity here to sort of increased share in certain markets, where frankly, we don't have a presence in terms of a salesperson or in certain markets, where we've got more opportunity than the person on the ground Ken can reasonably handle so it's it's a situation like that okay.

Unknown Executive: So it's a situation like that.

Unknown Executive: Great, thank you.

Speaker Change: Alright, great. Thank you.

Rajat Gupta: The next question will come from Rajad Gupta with JP Morgan. Please go ahead. Great, thanks to the question. I want you to join the call a little late. I was curious, like if you commented around your US due to do grow up and what your share games were in the quarter and have a couple of quick follow-ups. Thanks. Well, we commented that you know, the story was similar to Q1 in so far as there were some declines in total dealer volume; most of those were located in our Canadian business. You know, our US volumes were stronger and relative terms based on the information we have or US volume growth in dinner was stronger than US volume growth at physical auction. Actually, it was a decline at physical auction, I believe, over the first half of the year.

Speaker Change: The next question will come from Rajat Gupta with JP Morgan. Please go ahead.

Operator: The next question will come from Rajat Gupta with J.P. Morgan. Please go ahead.

Bob Lubbick: Yeah, great, good question Bob. Thanks, thank you for that. First of all, a very pleased with commercial volume growth. I don't know if I spoke to it directly, but our commercial volumes are up 21% in the quarter on a year on year basis. So again, I think that's very strong volume trends there on commercial. I feel good about that. I believe that's now five consecutive quarters of commercial volume growth. So I think clearly indicates we've come off the bottom and commercial volume growth have been a source of strength here over the past five quarters or more.

Rajat Gupta: Oh, great. Thanks for taking the question what would you have joined the call Little late I was curious like if you commented around.

Rajat Gupta: Great. Thanks for taking the questions. Apologies, I joined the call a little late. I was curious, like, if you commented on anything around... I'm going to talk about your U.S. D2D growth and what your share gains were in the quarter. And I have a couple of very quick follow-ups.

Rajat Gupta: Your U S <unk> growth and you know what your what your share.

Speaker Change: Share gains were in the quarter.

Speaker Change: A couple of quick follow ups. Thanks.

Rajat Gupta: Yeah.

Peter Kelly: Yeah, Rajat. Well, we commented that, you know, the story was similar to Q1 insofar as there were some declines in total dealer volume, but most of those were located in our Canadian business. Unknown Speaker, You know, our U.S. volumes were stronger in relative terms. Based on the information we have, our U.S. volume growth in dealer was stronger than U.S. volume growth at physical auction. Actually, it was a decline in physical auctions, I believe, over the first half of the year.

Speaker Change: Well, we commented that the.

Bob Lubbick: So in terms of what we're seeing, we're seeing a higher percentage of off-leafs vehicles, a higher percentage of the portfolio that's maturing being returned. So a lower percentage being purchased by the consumer. So that equity gap, the extent to which these off-leafs vehicles are in equity at the end of the lease, that is declining, although it's been a slow decline, Bob, but it's a continued erosion of that. And as that erodes, I think two things happen.

Speaker Change: The story was similar to Q1 and so far as there were some declines in total dealer volume, but most of those were located in our Canadian business.

Speaker Change: You know our U S volumes were stronger in relative terms based on the information we have our U S volume growth in dealer was stronger then.

Speaker Change: U S volume growth at physical auction actually it was a decline of physical auction I believe over the first half of the year.

Peter Kelly: So, yeah, so I think our US dealer-to-dealer trends are stronger than the overall aggregate trend that we talked about. You know, a couple of other things worth mentioning: you know, commercial volume growth of 21% in the quarter, you know, similar to Q1 when you have strong commercial volume growth. There is a little bit of, you know, I suppose cannibalization on the by side where a buyer might who previously might have bought dealer cars, which is over and buys a commercial vehicle. And that's just part of the normal network effect in our business, so I think that's to be understood.

Peter Kelly: So yeah, I think our US dealer to dealer trends are stronger than the overall aggregate trend that we talked about. You know, a couple of other things worth mentioning, you know, commercial volume growth of 21% in the quarter, similar to Q1, when you have strong commercial volume growth, there is a little bit of, you know, I suppose cannibalization on the buy side where a buyer who might previously might have bought dealer cars switches over and buys a commercial vehicle.

Speaker Change: So yeah, so I think our U S dealer to dealer trends are stronger than the overall aggregate trends that we talked about.

Bob Lubbick: One, the fewer consumers buy out their lease, so more of them get returned. That's positive for us. And secondly, fewer grounding dealers purchase the vehicles because a lot of these grounding dealers have the same sort of equity opportunity that the consumer has. So that percentage declines and these cars then flow deeper into our funnel. So we're seeing that continue to play out. It's been fairly gradual. I'd say over the last few quarters, but it continues.

Speaker Change: A couple of other things worth mentioning commercial volume growth of 21% in the quarter similar to Q1. When you have strong commercial volume growth. There is a little bit of you know I suppose cannibalization on the buy side. We're a buyer might we previously might have bought dealer cars switches over and buys a commercial vehicle.

Peter Kelly: And that's just part of the normal network effect in our business. So I think that's, that's to be understood. I guess the other thing I said, Rajat, is we saw an improving trend over the course of the quarter, both in the US and Canada. So, you know, to the extent there were declines, we saw those declines sort of diminish as the quarter went on, and I feel good about the trend line that's set up for the second half of the year.

Speaker Change: And Thats just part of the normal network effects in our business. So I think that's a.

Speaker Change: That's.

Speaker Change: That's to be understood I guess, the other thing I said Rashad as we saw an improving trend over the course of the quarter both in U S and Canada. So.

Bob Lubbick: You know, a number of customers are predicting that it could accelerate in the coming quarters based on, you know, residual values in their portfolio, et cetera, but I think I'm taking a wait and see approach to see how that trends. But it's something that gives me confidence that even though there's fewer off these maturities at the top of the funnel, our commercial volumes will, you know, that decline will be offset by an increased percentage of those vehicles that get returned.

Peter Kelly: I guess the other thing I said, Richard, is we saw an improving trend over the course of the quarter, both in the US and Canada. So, you know, to the extent there were declines, we saw those declines sort of diminish as the quarter went on, and I feel good about the trend line that set up for the second half of the year. We noticed like one for competitors, like wage prices on the digital side in the month of June. I was curious, did you follow through the bat, or are you going to be a little more cautious about that and maybe you got an opportunity to take some share.

Speaker Change: You know to the extent the word declines we saw those declines sort of diminish.

Speaker Change: Diminish as the quarter went on and I feel good about the trend line that set up for the second half of the year.

Rajat Gupta: Got it. And we saw, we noticed, like, one of the competitors, like, raised prices on the decision side. In the month of June, I was curious, you know, did you follow through with that, or, you know, you're going to be a little more cautious about that? Transcripts provided by Transcription Outsourcing, LLC.

Rashad: Got it and we thought we really noticed like lots of competitors like reached prices.

Speaker Change: Is it implied.

Speaker Change: In the month of June I was curious you know did you followed through with that or you know you you're going to be a little more cautious about that and.

Bob Lubbick: And I think our business will continue to perform through the period. So that's the expectation. We obviously have to take each month as it comes, but so far, you know, we're now in that period where there's, where there's lower off these maturities, but we're still seeing you're on your, you're on your commercial volume growth, so I feel good about that.

Speaker Change: Maybe use that as an opportunity to take some share just curious around the thought process around that thanks.

Peter Kelly: Just curious around the top classes around that. Thanks. Yeah, thanks for job. We noticed the same thing. You know, obviously, pricing is something we keep under review just at all. All times in our business in all the marketplaces, you know, commercial and dealer. So, you know, that's something we observed and something we will, you know, react to appropriately. I guess what I'd say to this, first of all, listen, our dealer-to-dealer business is an important part of our offering. It is profitable, significantly more profitable than was two years ago, so I feel really good about that.

Peter Kelly: Yeah, thanks, Rajat. We noticed the same thing. You know, obviously, pricing is something we keep under review just at all times in our business, in all the marketplaces, you know, commercial and dealers. So, you know, that's something we monitor and something we will, you know, react to appropriately. I guess what I'd say to this, first of all, listen. Our dealer-to-dealer business is an important part of our offering. It is profitable, significantly more profitable than it was two years ago. So I feel really good about that.

Speaker Change: Yeah. Thanks for job we noticed the same thing obviously pricing is something we keep under review just at all all times in all in our business in all the marketplaces commercial and dealer so.

Peter Kelly: Okay, super, very helpful color. And then just, I mean, you talked about the Canadian dealer market a little bit before. I think there's a back in December. You made an acquisition of Manheim Canada. Can you talk about the progress on that integration? I thought there was potentially an opportunity for a sale of a facility or something like that. I don't know if that's still in the works or how that integrations progressing.

Speaker Change: That's something we observed and something we will.

Speaker Change: You know react to appropriately.

Speaker Change: Yes, what I'd say to this first of all listen our dealer to dealer business is an important part of our offering it is profitable.

Speaker Change: Significantly more profitable than it was two years ago. So I feel really good about that I believe we've got a very efficient marketplace by which I mean, the cost to put a vehicle to our marketplace. I believe is lower than the cost to put the vehicle to a physical auction and probably lower than the cost to put it through some competing channels. So I think we've got a very efficient.

Peter Kelly: Yes, of course. Before I go there, let me just add one more comment on your last question, which I think is really important. We're also seeing significant increases in new vehicle lease originations. I know I've talked about that on prior calls, but, you know, lease originations dropped in 2021 and two, but they've been increasing in 2023 and 24. I think five consecutive quarters of lease origination increases. That again is very positive.

Peter Kelly: I believe we've got a very efficient marketplace, by which I mean the cost to put a vehicle through our marketplace is, I believe, lower than the cost to put a vehicle through a physical auction and probably lower than the cost to put it through some competing channels. So I think we've got a very efficient marketplace, and that has enabled us to have attractive pricing in the market, a growing business, and a profitable business.

Peter Kelly: I believe we've got a very efficient marketplace, by which I mean the cost to put a vehicle through our marketplace. I believe is lower than the cost to put the vehicle through a physical auction and probably lower than the cost to put it through some competing channels. So I think we've got a very efficient marketplace, and that has enabled us to have attractive pricing in the market, growing business, and a profitable business. So, listen, we're going to keep that under review. It's something we're actively looking at. We also had in Canada the digital services tax that Brad alluded to, Brad spoke about.

Speaker Change: Marketplace and that has enabled us to have attractive pricing in the market, a growing business and a profitable business.

Peter Kelly: Again, we're going to have to look out, you know, maybe another 18 months till that starts to really flow through our business, but that will be very positive for us and very confident of that. So going to Canada, very pleased with the acquisition. So we've made the acquisition. We've consolidated the operations in all five metro areas. So, you know, in the city of Toronto, for example, there had been two auction properties, one owned by us, one owned by our competitor.

Speaker Change: So listen we're going to keep keep that under review.

Peter Kelly: So listen, we're going to keep that under review; it's something we're actively looking at. We also have, in Canada, the digital services tax that Brad alluded to and Brad spoke about. So that's a function in Canada that we obviously need to find a way to address as well. So we're looking at pricing in that regard as well. So Rajat, I don't have anything to say on this particular call in terms of timing, but these are things we look at all the time.

Speaker Change: It's something we're actively looking at we also had in Canada. The digital services tax that Brad alluded to Brad spoke about.

Peter Kelly: Now that volume is consolidated into one. So we're getting greater scalability, greater leverage out of these facilities. We're still running the auctions digitally for the most part in Canada. Customer attention has been strong, particularly strong on the commercial side. So we've had very good customer attention through the acquisition. And we're seeing obviously in addition to that sort of retention of acquired customers, we're seeing some organic growth in commercial volumes in Canada as well.

Peter Kelly: So that's a function in Canada that we obviously need to find a way to address as well. So we're looking at pricing in that regard as well. So, Richard, I don't have anything to say on this particular call in terms of, you know, timing, but these are things we look at all the time.

Brad: So that's a function in Canada that we obviously you need to find a way to address as well. So we're looking at pricing in that regard as well so.

Brad: Richard I don't have anything to say on this particular call in terms of timing, but these are things we look at all the time.

Brad: Yeah.

Rajat Gupta: Okay. Just one last one, you know, on the CDK outage and... You know, the experience that the dealers went through with this. You're obviously, you know, very much integrated with your dealer network, you know, their systems in a way, you know, getting deeper and deeper in terms of partnerships. I was curious, you know, does this experience open up an opportunity for you to maybe participate more in those kind of systems and products, you know, given you already have a platform, and you're already like, well connected. So I was just curious about that.

Richard: Understood just one.

Peter Kelly: Just one last one, you know, on the CDK housing, you know, the experience that the dealers ran through with this, you're obviously, you know, very much integrated with your dealer network, you know, their systems in a way, you know, getting deeper and deeper in terms of partnerships. I was curious; you know, does this experience open up an opportunity for you to maybe participate more? You know, in those kinds of systems and products, you know, given you already have a platform, and you're already like well connected. So I was just curious about how you think about that opportunity.

Speaker Change: One last one on the CDK oxygen.

Speaker Change: The experience that the dealers went through with this Ah you're obviously.

Brad: Very much integrated with your dealer network you know their systems in a way.

Douglas: We are getting deeper and deeper in terms of partnerships I was curious you know Douglas.

Douglas: Experience open up an opportunity for you to maybe participate more no.

Douglas: Those kind of systems and products you know given you already have the platform.

Douglas: And you're already like welcome back good. So I was just curious like how you think about that opportunity.

Peter Kelly: So overall, it's, I think, a good story. We've had some challenges that have mentioned on the Deeter side in Canada. Again, that improved over the course of the second quarter. I feel like we're entering the second half of the year, much better position than we were in January. So I'm optimistic for a more positive trend line on the Deeter side in Canada as well in the second half.

Unknown Executive: Thanks.

Peter Kelly: Yeah, thanks Rajat. You know, first of all, I'm very clear, our information systems were not in any way compromised in the quarter. The volume impact was sort of a knock-on impact.

Peter Kelly: Yeah, thanks for job. You know, first of all, I'm very clear; our information systems were not in any way compromised in the quarter. The volume impact was sort of a knock-on impact. Our dealers' operations were impacted by the outage. That meant they couldn't take trade-ins, and they couldn't wholesale cars, and that sort of by implication impacted our volumes late in the second quarter. But our systems are robust, and we're unaffected through the whole process. Listen, Richard, it brings at home that information security is really important. I feel really good about what we've got. Our systems are a little different.

Speaker Change: Yes. Thanks for job you know first of all I'm very clear our information systems, we're not in any way compromised in the quarter. The the volume impact was sort of a knock on impact our dealers' operations were impacted by the outage that meant they couldnt take trade ins and they couldnt wholesale cars and that sort of it.

Peter Kelly: Our dealers' operations were impacted by the outage. That meant they couldn't take trade-ins, and they couldn't wholesale cars, and that sort of..., by implication, impacted our volumes late in the second quarter, but our systems are robust, and we're unaffected through the whole process. Listen, Rajat, it brings home that information security is really important.

Brad Lakhia: Yeah, and Bob does Brad here just to address the second part of your question regarding the real estate. We do continue to have an opportunity there to monetize some real estate that we acquired as part of the transaction. It's really harmonizing our real estate play in a key market. And we have an active project underway to do that. It's difficult for me to be able to provide any specifics on the timing and the amount of that and just given the process where we're at in it, but it is an active, an active project for us.

Douglas: By implication impacted our volumes late in the second quarter.

Speaker Change: But our systems are robust and were unaffected through that through the whole process.

Douglas: Listen resided it's it brings it home that the information security is really important I feel really good about what we've got.

Peter Kelly: I feel really good about what we've got. Our systems are a little different. We don't... We're not, sort of... tied into the core operations of the dealership like a dealer management system is. Uhhhhm.

Speaker Change: Our systems are a little difference, we don't we're not as sort of a.

Peter Kelly: You know, we don't, we're not as sort of tied into the core operations of the dealership like a dealer management system is. But we have opportunities, you know, as part of our product innovation, to make the wholesale process easy for dealers. So, you know, part of that we are expanding our product offering beyond just the purchase and sale of a vehicle but helping dealers with, you know, pricing guidance and vehicle stocking decisions and things like that both in the US and Canada. So we've got some exciting initiatives in the works. I think we'll have more to talk about in future, in future calls, you know, as we bring these products to market.

Douglas: Tied into the.

Douglas: The core operations of the dealership like a dealer management system is.

Speaker Change: Bus we have opportunities.

Peter Kelly: Boss, we have opportunities, you know, as part of our product innovation, to make the wholesale process easy for dealers. So, you know, as part of that, we are expanding our product offering beyond just the purchase and sale of a vehicle to help dealers with, you know, pricing guidance and vehicle stocking decisions and things like that, both in the US and Canada. So we've got some exciting initiatives in the works. I think we'll have more to talk about in future calls as we bring these products to market.

Speaker Change: As part of our product innovation is to make the wholesale process easy for dealers. So you know as part of that we are expanding our product offering.

Bob Lubbick: Okay, super. Thanks so much. Thank you, Bob.

John Murphy: The next question will come from John Murphy with Bank of America. Please go ahead. Good afternoon guys, this is Billy Healey on for John. Hey Billy. Thanks for taking the questions. I just wanted to ask again a little bit more on the supply dynamic in the market right now. At least the dealers we talked to are still calling out a challenge sourcing environment for used vehicles. And you guys are doing well in volumes up 7%, another large fires up 33% year year.

Speaker Change: And just to the purchase and sale of a vehicle, but helping dealers with pricing guidance.

John Murphy: So would you chalk this up to market share gains or see more vehicles flowing into the auction channel? How do you think about that? Well Billy, good question. You know, even though volumes have been strong, I do agree that volumes in the industry are still below pre pandemic levels or below what I would consider to be normal for industry. And I think that's part of our growth equation as those volumes return towards normal.

Douglas: Vehicle stocking decisions and things like that both in U S and Canada. So we've got some exciting initiatives in the works. So I think we'll have more to talk about.

Douglas: In future in future calls.

Douglas: As we bring these products to market.

Speaker Change: Understood great. Thanks for all the color.

Rajat Gupta: understood. Great. Thanks for all the color.

Unknown Executive: Thanks for all the color.

Unknown Executive: You're welcome.

Speaker Change: Youre welcome.

Unknown Executive: This concludes our question and answer session.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Mr. Peter Kelly for any closing remarks. Please go ahead.

Peter Kelly: This concludes our question and answer session. I would like to turn the conference back over to Mr. Peter Kelly for any closing remarks. Please go ahead.

Peter Kelly: I would like to turn the conference back over to Mr. Peter Kelly for any closing remarks. Please go ahead. Thank you very much. Listen, I'd just like to reinforce a few key themes that support my optimism for OpenLine's future. As I mentioned earlier, our performance in the first half of this year clearly demonstrates the power of our offering and the strong scalability characteristics of our company. We're leaning into that strategy and our investments to further accelerate the growth that we're already seeing. AFC continues to be a strategic asset, delivering meaningful adjusted EBITDA and enabling the OpenLine marketplace more than ever before.

Peter Kelly: Thank you very much.

Peter Kelly: Thank you very much. Listen, I'd just like to reinforce a few key themes that support my optimism for Open Lane's future. As I mentioned earlier, our performance in the first half of this year clearly demonstrates the power of our offering and the strong scalability characteristics of our company. We're leaning into that strategy and our investments to further accelerate the growth that we're already seeing. AFC continues to be a strategic asset, delivering meaningful adjusted EBITDA and enabling the open lane marketplace more than ever before.

Peter Kelly: And I'd just like to reinforce a few key themes that support my optimism for open lanes future.

Peter Kelly: As I mentioned earlier, our performance in the first half of this year clearly demonstrates the power of our offering and the strong scalability characteristics of our company.

Peter Kelly: We're leaning into that strategy and our investments to further accelerate the growth that we're already seeing.

Peter Kelly: AFC continues to be a strategic asset delivering meaningful adjusted EBITDA and enabling the open end marketplace more than ever before.

John Murphy: I guess when I look at that, you know, divide the industry roughly into dealer and commercial from a supply standpoint. Dealer volumes, I'd say are still below normal, but but not massively below normal. Maybe, you know, 15, 20% below normal would be high characterize it. I think those volumes will improve at the extent dealers have more vehicles on their lot more new and used vehicle inventory. We've seen those trends generally heading upwards over the last 12 months at the extent the consumer affordability problem improves.

Peter Kelly: Our marketplace business is profitable and growing and a well positioned to capture the opportunities and adherence in the improving industry fundamentals. We remain the clear leader in commercial office remarketing and are best positioned to benefit from the current leasing recovery. And we're investing in our dealer business to accelerate our innovation pipeline, grow our volumes in our market share, and continue delivering the profitable growth that you're seeing. When viewed together, I think the combination of these factors provides a very compelling vision for OpenLine's future. Thank you all for joining us on today's call.

Douglas: Our marketplace business is profitable and growing and we're well positioned to capture the opportunities inherent in the improving industry fundamentals.

Peter Kelly: Our marketplace business is profitable and growing, and we're well-positioned to capture the opportunities inherent in the improving industry fundamentals. We remain the clear leader in commercial off-lease remarketing and are best positioned to benefit from the current leasing recovery. And we're investing in our dealer business to accelerate our innovation pipeline, grow our volumes and our market share, and continue delivering the profitable growth that you're seeing. When viewed together, I think the combination of these factors provides a very compelling vision for OpenLAN's future. Thank you all for joining us on today's call. I look forward to speaking to you all again soon.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Douglas: We remain the clear leader in commercial off lease remarketing and are best positioned to benefit from the current leasing recovery.

Speaker Change: And we're investing in our junior business to accelerate our innovation pipeline grow our volumes and our market share and continue delivering the profitable growth that youre seeing.

Speaker Change: When viewed together I think the combination of these factors provides a very compelling vision for <unk> future. Thank.

John Murphy: I think that'll increase vehicle trade ins and wholesale volumes on the dealer side as well. So there's some positive opportunities there. I would expect them to sort of readjust gradually. Billy, be my view on that on the commercial side. It's a bit of a mixed bag, you know, repo volumes are quite strong. Rather than to pre-pandemic, that's not a huge segment for us. What is a big segment for us is off lease.

Douglas: Thank you all for joining us on today's call I look forward to speaking you to you all again soon.

Unknown Executive: I look forward to speaking to you all again soon.

Unknown Executive: The conference has now concluded. Thank you for attending today's presentation.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

You may now.

Douglas: [music].

John Murphy: And as I've said on prior calls, off lease volumes are still about 50% below pre-pandemic levels. So I do see significant opportunity for commercial volume growth on the off lease segment. I do think we'll be really well positioned there. But again, Billy has been very clear about in on prior calls. You know, we should be modest in our expectations over the next 18 months. For, you know, when we look at the cycle, the three-year cycle of a lease vehicle.

Douglas: Hum.

Douglas: [music].

John Murphy: I think I've been very open on that. But I do then see, again, I think those volumes will be quite strong for us. And then I see acceleration coming, you know, after the end of 2025. And in the years to follow after that.

Brad Lakhia: Okay, super helpful. And just one more on the margins for the marketplace segment in the quarter. I mean, I know there's a lot of noise going on with the accounting change and tax in Canada and maybe some impact from CDK. But he just talked to maybe your expectations on the trend going to the back half of the year. I mean, if just looking at the numbers down a bit sequentially and year-rear on the gross margin, experts should be equal.

Brad Lakhia: So I want to get your thoughts on the back half of the year. Yeah, Billy, Brad here. Thanks for the question. I think, you know, just to provide some added clarity on our margins in the quarter. Certainly, when you look at the gross profit margin in the quarter, that reflects the full impact of the $12 million charge that I highlighted in our early remarks. So would want to just highlight that to you.

Brad Lakhia: I think if you normalize for that, you know, we would see fairly consistent margin performance. Especially in the marketplace business sequentially and really kind of looking back over the last few quarters. So highlight that on an adjusted EBITDA margin basis. You'll see in our adjusted EBITDA reconciliation that we did adjust out the out of period component of the $12 million charge, which was $10 million. So if you look at our adjusted EBITDA margins and then adjust for that smaller amount of $2 million in the current period, you would see that our margins, again, on an adjusted EBITDA basis are fairly consistent sequentially.

Brad Lakhia: And then, as you know, you highlighted yourself, we had this impact of transportation revenue. And so the comparability there, that item in particular does give us a little bit of favorability in terms of our margin. But now is not a significant driver of the ongoing improvements that we're delivering. Great, thanks, super helpful. Thank you, Billy.

Bret Jordan: Again, if you have a question, please restore, then one, our next question will come from Bret Jordan with Jeffries. Please go ahead. Hey, good morning. Good afternoon, guys. Hey, Bret, good afternoon. I'm a market share question. You said you're outperforming the physical auction volume. I guess if you looked at all auction channels and looked at market share, are you? Obviously, there are lots of cars traded in various places. Are you outperforming the broader market?

Bret Jordan: Are you more or less right now performing the physical? I would say our market share, Bret, over the past period has been fairly steady. There's a little bit of ebb and flow in some quarters. We've seen strong growth on commercial or dealer volumes have been more flatish over the past 12-month period. But again, I think that's against the backdrop of a commercial off-lease volume environment that has been challenged, and I think that's particularly impactful on us.

Bret Jordan: I feel good about our market share. You have to look at it in the dealer category and then in the commercial category, and then in aggregate, because the mix shift can flex from one quarter to another, one period to another. I think we're, I would say, we've held our market share. It might be slightly up over the period. If we look at it in aggregate, and then we look at it in commercial and dealer, I also feel pretty good about where we stand.

Brad Lakhia: Okay, and then with an AFC, is your customer base changed at all? Are you taking out some of the lower credit customers? I guess if you sort of thought about the number of active clients at AFC right now, has that changed much year over year? Yeah, hey, Bret. Thanks for the question. I would say just a couple things here. We have been intentional around our risk management processes here, and been pretty diligent, particularly last 12 to 18 months around the customer portfolio.

Brad Lakhia: So there's been some proactive takeout of customers that were flagging risk for us. So that, and that's ordinary, but I would say certainly in the last 12 to 18 months, it's been more of a priority for us. In this business and the independent floor planning financing business, there is some normal churn. So there are normal churn, but as we've demonstrated historically, we're able to maintain a pretty consistent base of customers with that churn.

Brad Lakhia: So as we lose some, we gain some, and on the net, we're able to grow unit volumes over time. So that's just my comments there, but I would say this business continues to perform very, very well. Obviously, our credit loss rates have been a little bit higher than where we would like them to be on a target basis, but we feel our relative performance there based on what we know are some of our peers in this space and their performance.

Brad Lakhia: Great, quick housekeeping question. You also commented you increased your go-to-market resources late in the second quarter. Is that something that is, I obviously, you're maintained your guide? Is there any timing that that expense is going to generate a return later in the year or is it just not that significant? Yeah, I guess, Bret, I'd say first of all, it's not that significant of the context of rural SG&A structure, so I'd say it's more on the margin, but obviously the business case associated with these investments is, yeah, you increase some staffing and you expect to see volume impacts to happen in fairly near term, but not immediately.

Brad Lakhia: So yeah, we've got a business case that envisions some incremental volume here in the second half of the year and continuing to 2025. Some of the investments also are in technology and product development. Those probably have a little bit of a longer lead time, but not massively. And again, I would characterize that as we feel really good about the offering we have. We feel really good about the feedback we're getting from our dealers, many of whom are very sophisticated, do a lot of analysis on how we're performing versus other channels.

Brad Lakhia: And there's an opportunity here to sort of increase share in certain markets where frankly, we don't have a presence in terms of a sales person or in certain markets where we've got more opportunities than the person on the ground can reasonably handle. So it's a situation like that.

Unknown Executive: Great, thank you.

Rajat Gupta: The next question will come from Rajad Gupta with JP Morgan, please go ahead. Great, thanks to the question.

Rajat Gupta: I want you to join the call a little late. I was curious like if you commented around your US due to do grow up and what your share games were in the quarter and have a couple of quick follow ups. Thanks. Well, we commented that you know, the story was similar to Q1 and so far as there were some declines in total dealer volume of most of those were located in our Canadian business.

Rajat Gupta: You know, our US volumes were stronger and relative terms based on the information we have or US volume growth in dinner was stronger than US volume growth at physical auction actually was a decline at physical auction, I believe over the first half of the year. So yeah, so I think our US dealer to dealer trends are stronger than the overall aggregate trend that we talked about. You know, a couple of other things worth mentioning, you know, commercial volume growth of 21% in the quarter, you know, similar to Q1 when you have strong commercial volume growth.

Rajat Gupta: There is a little bit of, you know, I suppose cannibalization on the by side where a buyer might who previously might have bought dealer cars, which is over and buys a commercial vehicle. And that's just part of the normal network effect in our business, so I think that's that's that's to be understood. I guess the other thing I said, Richard, is we saw an improving trend over the course of the quarter, both in US and Canada.

Rajat Gupta: So, you know, to the extent there were declines, we saw those declines sort of diminish as the quarter went on and I feel good about the trend line that set up for the second half of the year. We noticed like one for competitors, like wage prices on the digital side in the month of June. I was curious, did you follow through the bat or are you going to be a little more cautious about that and maybe you got an opportunity to take some share.

Rajat Gupta: Just curious around the top classes around that. Thanks. Yeah, thanks for job. We noticed the same thing. You know, obviously pricing is something we keep under review just at all. All times in our business in all the marketplaces, you know, commercial and dealer. So, you know, that's something we observed and something we will, you know, react to appropriately. I guess what I'd say to this, first of all, listen, our dealer to dealer business is an important part of our offering.

Rajat Gupta: It is profitable significantly more profitable than was two years ago, so I feel really good about that. I believe we've got a very efficient marketplace by which I mean the cost to put a vehicle through our marketplace. I believe is lower than the cost to put the vehicle through a physical auction and probably lower than the cost to put it through some competing channels. So I think we've got a very efficient marketplace and that has enabled us to have attractive pricing in the market, growing business and a profitable business.

Rajat Gupta: So, listen, we're going to keep that under review. It's something we're actively looking at. We also had in Canada, the digital services tax that Brad alluded to, Brad spoke about. So that's a function in Canada that we obviously need to find a way to address as well. So we're looking at pricing in that regard as well. So, Richard, I don't have anything to say on this particular call in terms of, you know, timing, but these are things we look at all the time.

Peter Kelly: Just one last one, you know, on the CDK housing, you know, the experience that the dealers ran through with this, you're obviously, you know, very much integrated with your dealer network, you know, their systems in a way, you know, getting deeper and deeper in terms of partnerships. I was curious, you know, does this experience open up an opportunity for you to maybe participate more? You know, in those kind of systems and products, you know, given you already have platform, and you're already like well connected.

Peter Kelly: So I was just curious about how you think about that opportunity. Thanks. Yeah, thanks for job. You know, first of all, I'm very clear, our information systems were not in any way compromised in the quarter. The volume impact was sort of a knock on impact. Our dealers operations were impacted by the outage. That meant they couldn't take trade-ins and they couldn't wholesale cars and that sort of by implication impacted our volumes late in the second quarter.

Peter Kelly: But our systems are robust and we're unaffected through the whole process. Listen, Richard, it brings at home that information security is really important. I feel really good about what we've got. Our systems are a little different. You know, we don't, we're not as sort of tied into the core operations of the dealership like a dealer management system is. But we have opportunities, you know, as part of our product innovation is to make the wholesale process easy for dealers.

Peter Kelly: So, you know, part of that we are expanding our product offering beyond just the purchase and sale of a vehicle but helping dealers with, you know, pricing guidance and vehicle stocking decisions and things like that both in US and Canada. So we've got some exciting initiatives in the works. I think we'll have more to talk about in future, in future calls, you know, as we bring these products to market.

Rajat Gupta: Thanks for all the color. You're welcome.

Peter Kelly: This concludes our question and answer session. I would like to turn the conference back over to Mr. Peter Kelly for any closing remarks. Please go ahead. Thank you very much. Listen, I'd just like to reinforce a few key themes that support my optimism for OpenLine's future. As I mentioned earlier, our performance in the first half of this year clearly demonstrates the power of our offering and the strong scalability characteristics of our company.

Peter Kelly: We're leaning into that strategy and our investments to further accelerate the growth that we're already seeing. AFC continues to be a strategic asset, delivering meaningful adjusted EBITDA, and enabling the OpenLine marketplace more than ever before. Our marketplace business is profitable and growing and a well positioned to capture the opportunities and adherence in the improving industry fundamentals. We remain the clear leader commercial office remarketing and our best position to benefit from the current leasing recovery.

Peter Kelly: And we're investing in our dealer business to accelerate our innovation pipeline, grow our volumes in our market share, and continue delivering the profitable growth that you're seeing. When viewed together, I think the combination of these factors provides a very compelling vision for OpenLine's future.

Peter Kelly: Thank you all for joining us on today's call. I look forward to speaking you to all again soon.

Unknown Executive: The conference has now concluded. Thank you for attending today's presentation.

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