Q2 2025 OPENLANE Earnings Call
Good day, and welcome to open. Lane's second quarter 2025 earnings call. All participants will be in listen-only mode. Should you need assistance? Please signal a conference specialist by pressing the star key followed by zero.
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Aru, please. Go ahead.
Good morning, everyone. Welcome to open Lane's second quarter 2025 earnings call.
With me today are Peter Kelly CEO of open Lane and Brad, Aaron EVP, and CF of openland.
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 of performance to defer materially from such statements.
Factors that could cause such differences include those. Discussing our press release issued today and in our SEC filings
setting non-gaap Financial measures as defined under SEC. Rules will be discussed on this call.
Reconciliations of gaps and non-gaap measures are provided in our earnings materials and available in the investor relations section of our website.
Please know that all financial and operational metrics presented during this call are on a year-over-year basis, unless otherwise specifically noted.
With that, I'll turn the call over to Peter Peter.
Thank you for tuning in and good morning, everyone.
I'm pleased to be here today to share. Open Lane strong second quarter results.
I'll start with a few highlights before updating you on our strategy and our perspectives on the market environment.
But first, I'd like to officially welcome Brad Herring, open Lane's Chief Financial Officer to his first quarterly earnings call.
Brad, joined the company in May and is already making positive contributions to our executive leadership team and to our finance functions across the company.
Brad will cover our details financials later in this call and we'll also share a little more about himself and what you can expect from a reporting and investor perspective.
Turning now to our results, open Lane delivered, a strong second quarter of growth, profitability, and cash generation.
This growth, all of which was organic, is a direct result of the Strategic Investments we've made in people technology and our go to market approach.
And it reflects the increasing Market recognition, strength and preference of the open Lane brand.
Our Consolidated basis, we grew Revenue by 9% delivered, 87 million in adjusted e, but, uh, representing 21% growth,
And generated very strong cash flow.
As a reminder, these results were achieved against a prior year. That included contributions from the automotive Keys business that we divested during the fourth quarter of last year.
In the marketplace segment.
While commercial vehicle volumes were down as expected. We grew dire to dealer volumes by 21%, representing the third straight quarter of double digit, volume increases.
We also generated a 24% increase in auction fee, revenue and a 36% increase in Marketplace, adjusted buta.
Our finance segment. Also had a great quarter, growing average manager receivables, holding the loan loss rate to 1.5% and increasing adjusted, EBA by 9%.
In summary, open Lane is successfully executing our 2025 plan and longer term strategy.
I believe our second quarter results, further reinforced the strong scalability characteristics of our asset light digital operating model and help position us to deliver sustained growth profitability, and shareholder value.
Based on all of those factors, we are raising our 2025 guidance. And Brad will walk through the details of that later in this call.
So let me turn to openlane strategy, and our outlook for our business, and for the broader industry.
As a reminder, our strategy for growth is anchored in our purpose, which is to make wholesale easy. So our customers can be more successful.
And we're making whole silly Easy by focusing on 3, enhanced priorities.
First by delivering the best Marketplace expanding to more buyers and more Sellers and offering the most diverse commercial and dealer inventory available.
Second by delivering the best technology, Innovative products and services that help our customers make informed decisions and Achieve better outcomes.
And third by delivering the best customer experience, keeping our Marketplace, fast fair, and transparent, making it easy for customers to transact.
And making open Lane, the most preferred Marketplace.
So let's start with more detail on the marketplace where we increase our gross merchandise value to 7.5 billion, while organically growing. Overall volumes auction fee, revenue and gross profit.
This was driven by our standout performance in dealer to dealer, which we will cover in a moment.
But first, there is no change in the commercial business story. The Q2 decline, in all 3 is volume was in line with our expectations.
Our long-standing customer relationships and our deep system Integrations.
Additionally, the continued industry. Migration from physical to digital.
Along with another strong quarter of new car. Lease, originations in Q2 represent compounding Tailwind for open lens. Longer-term growth opportunity in commercial
In dealer to Dealer, open Lane executed, very well, AC the business. We continue to expand our customer base enrolling, thousands of new dealers, and capturing volume opportunities with some of North, America's largest franchise dealer groups,
We saw a double digit increase in unique buyers and sellers active on the marketplace.
Which drove higher demand and engagement.
And we conducted a record number of vehicle inspections, leading to double-digit increases in dealer vehicles offered for sale and in vehicles sold.
when we add all of this up, our analysis shows that our North American dealer growth, meaningfully outpaced, the industry during the quarter and that open Lane gained in dealer market share
I attribute this success to our focus and commitment to this strategic priorities that I mentioned earlier, delivering the best Marketplace, the best technology and the best customer experience.
From a Marketplace perspective.
Perspective, we are clearly demonstrating the impact of our brand and operational consolidation to open Lane and our go to market Investments.
We have more sales leaders on the ground. And on the phones, new digital marketing, marketing capabilities to streamline Recruitment and engagement, and enhanced analytic capabilities around pricing and customer Behavior.
All of this is driving growth in our customer Network, in our wallet, share and overall volumes transacted.
And it's clear to me the growth in our buyer and seller Network coupled with our unique selection of commercial off lease. And dealer inventory is making open Lane, an increasingly differentiated Marketplace for all of our customers.
In terms of Technology leadership, we continue to execute a multi-year plan to simplify our technology, reduce costs and increase speed to Market.
We have a deep pipeline of innovation that will help make buying and selling faster smarter and more transparent.
Our number one app in the United States is cross-pollinating commercial sellers and dealers and helping drive a double-digit increase in commercial vehicles sold in our open sales channel during the quarter.
In addition, our absolute sales feature now supports the majority of our us-based dealer transactions, and is generating an average of $800 in additional value per vehicle for the sellers.
And we will be extending our leadership in AI driven inspection technology with several new releases in the near future.
And finally, there is clear evidence that our commitment to delivering an exceptional. Customer experience is also becoming a competitive differentiator
OPENLANE is a digital marketplace in a relationship business.
And we're highly focused on building and maintaining every customer relationship. No matter the size or geography.
Buyer and seller feedback through our transactional. NPS surveys continues to rate open Lane in the grace to excellent range.
And a recent third party survey showed open Lane had significantly improved. Its preference ranking among franchise dealers and is now the most preferred Pure Play digital Marketplace in the US.
So as I think about the marketplace performance in the first half of 2025, I feel really good about what the open Lane team has accomplished and how that positions the company for further success.
As we look to the second half of this year, I'm also pleased that we now have more clarity on the Tariff situation than we had 90 days ago, particularly related to many of the largest Automotive trading nations.
I still believe tariffs may be a potential headwind total. New vehicle retail sales in the second half of this year and our projections do affect that possibility.
However, I continue to have very strong conviction as it relates to open Lane, strategic paths, reflecting a technology leader in an industry that will continue to migrate to digital Solutions.
A commercial vehicle volume recovery, starting early next year and extending through 2027 and Beyond.
Just going dealer business. That is becoming more recognized more differentiated and preferred in the markets.
And finally, a highly scalable business model with excellent cash flow characteristics.
another area that feels my confidence for growth is the increase in connection between our Marketplace business and our finance business AFC,
as I mentioned earlier AFC posted another excellent quarter showing growing managed receivables, controlling the loan loss rate and increasing adjusted ebata
It is a high-performing business with a leading Market position and a broad and loyal customer base.
And I believe an even deeper integration between these businesses and their respective offerings and customers continues to be 1 of the best opportunities that we have to further accelerate our growth.
JFC dealer. Another open Lane vehicle whenever an AFC loan is paid off.
Based on their early successes, these programs are expanding across North America.
We are also developing additional approaches, including Cross customer research, 2-way promotions bundle pricing structures, aligned sales and branch manager incentives, and potential user experience Integrations.
I look forward to leveraging, the people technology brand equity and the extraordinary industry expertise that exists across these marketing businesses. I'm confident this connection will be positive for our customers and help generate results that exceed the sum of the parts.
So, just to summarize, we had another strong quarter of Financial and operating results.
We are executing our strategy with focus and discipline and that strategy is resonating with our customers.
Because of that, I believe the key elements of our value proposition for investors remain very compelling.
Openlane is an asset light. Highly scalable digital Marketplace leader focused on making wholesale easy for automotive dealers manufacturers and other commercial sellers.
There is a large addressable market in North America and Europe, and we are uniquely well positioned in both dealer and commercial.
Our technology Advantage is a competitive differentiator.
Our floor plan finance business is a category leader that is highly synergistic with our Marketplace.
We are cash flow positive with a strong balance sheet and no debt.
And we believe our business has the capability to deliver meaningful growth, profitability and cash generation over the next several years.
So with that, I will now turn the call over to Brad Lakhia.
Thanks Peter and good morning to everyone on the call before I get into reviewing our financial results for the quarter. I want to take a quick minute to introduce myself and talk about how excited I am about joining Peter and the team here at open Lane.
My background is made up of 3 Decades of corporate finance in such notable organizations as Delta, Airlines Equifax and Fiserv, as well as more recent tours, as public Company CFO with Shift, 4 payments, and infusion.
My decision to join open Lane was driven by 3 key factors first, I see open Lane is a top tier participant in an industry that will continue to move in our direction. As digital Solutions, continue displacing, the Legacy physical auctions,
Second following numerous discussions with Peter, the leadership team and the board. I'm convinced that this is the right group to lead open Lane on this exciting Journey.
We finally, as a car Enthusiast myself, I am fortunate to have a unique opportunity to work in an industry that overlaps heavily with my own personal interests.
Also want to take a minute to talk about my Approach on how we would be discussing open Lane financial performance going forward.
The focus of our discussions will be on 3 key elements, growth profitability and cash generation.
years of experience have taught me that when organizations focus and deliver on these key measures positive results, materialize for our shareholders, our customers, and our employees,
Second in response to open lanes ongoing transformation into a leader in the digital Marketplace segment.
We have started an extensive review of how we present, our financial performance, and underlying operational drivers with the intent of providing in improved transparency, and comparability of our results.
You will notice the output of some of these efforts in our supplemental earnings materials, filed this morning with additional updates, coming over the subsequent quarters.
now on to our quarterly results,
Starting with Consolidated revenues. We are proud to report that revenues for the quarter were 482 million, which represent growth of 9%.
The key driver of this growth was in the marketplace segment, which I'll talk about more in a few moments.
Consolidated sgna for the quarter was 114 million, which is up 9%.
This increase is primarily due to higher incentives that are tied to our 2025 year-to-date performance.
Excluding the increase in incentives, our sgna for the quarter would have been up 1% and reflects our expectations. That Revenue growth will continue to outpace increases in sgna. Despite continued investments in sales and go to market.
Consolidated, adjusted EBA for the quarter was $87 million, which represents an increase of 21%.
The resulting adjusted, even the margin for the quarter was 18%, which reflects margin expansion of 190 basis points.
This expansion, reflects the ongoing scalability of our cost structure across both the marketplace and AFC.
Of our earnings materials.
Consolidated adjusted free cash flow for the quarter was 87 million, which represents a conversion rate of 100%.
Because of some inherent timing swings in our settlement and funding processes. It is more appropriate to look at our conversion rate on a rolling 12-month basis.
For the 12 months ending, June of 2025. Our conversion rate was 91% compared to 66% for the same trailing. 12 months, in 2024,
The increase in conversion rate was primarily driven by a combination of growth and high pass through rates in our Marketplace segment.
Going forward. I anticipate a Consolidated trailing 12-month conversion rate at 75% or higher.
Moving to the results in our business segments, I'll start with the marketplace.
Total gmv process over our digital platform with 7.5 billion dollars, which represents a 10% increase.
Inside of that figure with 32% growth in our dealer gmv. While commercial gmv was essentially flat.
Our growth in dealer gmv. Reflects further Market, penetration made evident by the increase in buyer and seller counts as well as our continued focus on moving share from physical to digital.
Auction fees in the marketplace, grew by 24% driven by a sales, mix and auction fee price increases. While service revenue is decreased by 3%.
Adjusted, even though, for the marketplace, segment was 45 million, representing an adjusted ebitda margin of 12%, this reflects growth of 36% and 220 basis points of margin expansion.
Excluding the destitute of our keys business. In Q4 of 2024, the year-over-year comparisons would have been slightly higher with 42% growth and 260 basis points of margin expansion.
Turning to our finance segment, our average outstanding receivables. Managed in the quarter was 2.3 billion, which is up 4%.
The average balance per transaction, increased by 5%. While total vehicle Finance transactions were down 1%
Net yield for the quarter was 13.6%, which is consistent with last year.
The Q2 provision for credit losses was 1.5%, which is consistent with our results from last quarter and 60 basis points, lower than last year.
Our expectation for the provision remains in the 1 and a half to 2% range for the foreseeable future. However, we expect to remain on the lower side of that range. The remainder of 2025
The resulting adjusted debit for the finance, segment was 42 million, which was up 9%.
Moving to Capital considerations, we had a few items to highlight in a quarter.
First, you may have seen that during the quarter. We used 210 million of our existing cash balances to pay off our outstanding senior notes,
This leaves our net debt position that zero at the end of the quarter.
You may also recall that in q1. Our board approved an increased share repurchase program through 2026.
As of the end of July under this program, we have repurchased approximately 1.3 million shares at a total cost of approximately 31 million.
With regard to liquidity, we ended the quarter with a cash balance of $119 million, and a capacity of $411 million on our existing revolver facilities.
now on to guidance,
As Peter mentioned in his remarks, there's still a fair amount of uncertainty in our markets that could drive variability in our results for the back half of the year.
however, our strong performance in the first half of 2025,
Has given us sufficient confidence to increase our expectations, for the full year.
We are therefore revising our full year guidance for adjusted ibida from a range of 290 to 310 million to a revised range of 310 to 320 million.
This revision, reflects a refreshed view of back half volumes as well as some additional Investments to build out our buyer and seller Networks.
We are also increasing our full-year guidance for operating adjusted EPS from a range of $0.90 to $1.00 per share to a revised range of $1.12 to $1.17 per share.
Our capex guidance for the year, Remains the Same at a range of 50 to 55 million.
In summary. I'm very privileged to be part of this organization and have great confidence in our mission, our strategy, and the over 4500 employees who execute on a daily basis.
The proof points in our ability to execute our evidence, in our results for the quarter, which I would summarize as follows.
And steady growth with exemplary risk management from our finance segment.
Going forward. We are confident that the execution of our strategy will continue to produce results that are headlined by a growing Topline, expanding profitability and high cash flow conversion.
Now, I'll pass the call back 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 1 on your telephone keypad. 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 2
At this time, we will pause momentarily to assemble our roster.
And your first question comes from Bob leick with CJs Securities. Please go ahead.
Good morning, congratulations on uh, strong results and uh, welcome to Brad to to openly.
Thank you, Bob.
Certainly so uh really strong dealer volumes and so I wanted to kind of dig down on that a little bit too. How are how are the volumes impacted kind of by the broader macro you know, tariffs Etc? Was there a pull forward? Has there been delays. You know the the industry is moving around a lot based on the macro. So maybe how how did it impact the quarter? And how do you see that, you know, playing out for dealer volumes in the second half as well.
Yeah, thanks Bob. Um appreciate the question. Listen, I was really pleased with the dealer volume in the quarter. Uh, 21% year-on-year growth, our third quarter of double digit growth in that category.
Um, and your well, we don't report geographically, geographically results, strong in all, in all markets, in all geographies. So, uh, really pleased with the quarter, um, and I I attribute that growth. Um, really to, as I said, on the call to the strategy, you know, uh, the execution of the strategy as we've outlined it on previous calls, uh, the consolidation of the brand to open Lane simplifying and making this company easier to do business with, um, a focus on the customer experience and obviously some of the technology Investments that have improved, you know, absolute sale, improved condition reports, things like that. Um those are you know truly beneficial to dealers. We hear that from our customers every day. How much? They like those uh advancements. And then also the the additional go to market resources, you know, we increase investments in this area about a year ago. Um we're seeing the results of that we're going to continue uh to be aggressive and and uh to make investments to grow volume and share. Um, so I feel really good about that. I think again as we've said this is a large category.
So it's about 50% of the time is dealer to dealer and it's still heavily physical. But I really do believe that the digital platform offers tremendous value to our customers. I think they're seeing that every day and you know even with the volumes we did in the quarter we're still relatively small player in the context of the overall dealer to dealer tan you know around about 10%.
So um we've got a lot of opportunity there and we're going to keep focused on that, um, to, to get to some of the points. You mentioned, listen. I think there were 2 facts that are worth, sort of remembering uh, in the context of the quarters results, there was at the very beginning of the quarter. There was that pull ahead of of retail volume
Um, which was well reported in the industry. When the tariffs were first announced, consumers rushed to dealerships to buy new cars. So, uh, that created strong retail sales in the sort of late March to mid-April period.
Um, I would say we got a small benefit from that.
Um, and then you may, the audience may not remember this, but a year ago in late Q2, there was the CDK outage which depressed volume in late Q2 of last year.
Um, so I'd say we got a small, you know, on the margin benefit from both of those.
That may be in my mind might account for 2 or 3% of the growth, you know, but I still think without that, um, it was a very, very strong quarter in dealer volume growth. And I think the core drivers of that are strategic, not, not, sort of, um, those industry factors that you might have referred to
Yeah, no, that's great and thank you for that color there. And I think you just answered that you know, you don't really break it out but maybe in terms of US versus International growth, we're both growing double digits because it was so strong, you know, at 20 across or or, or any, you know, further color on how kind of Canada and European volumes were impacted kind of in this again, Global. Yeah, I think.
I'd say very comparable Bob, um,
I think growth rates.
Well, first of all, more than 90% of our volume is North American. So I really I put the focus on North America here. Um, the dealer volume in Europe is not going to be material mover in in the dealer, to dealer equation. Um,
In in both Canada and United States.
um,
Yeah, so, you know, I think that was the pattern of the quarter. Obviously, we're a bigger player in Canada, we have more share in that market. So I think the long-term growth opportunity for us in Canada.
You know, on the dealer to dealer side is not as you know, I we don't have that situation where 10% of the of the Tam in Canada, right? We have less upside in that market, but obviously a very strong position, very strong volumes, and and strong profitability in that market.
Okay, great. And then just last 1 I'll get back in queue. Um, you, you, you already talked about this, so, maybe just dig a little further. The the increase in kind of s the selling the feed on the street. Um, you know, you said, obviously benefit is you with new accounts and maybe where are you in that process and and how, how much, you know, longer you? Do you expect, you know, kind of outsized.
You know, benefits from that investment, are you done investing, but you still have, you know, 3 more quarters of benefits because of the comp, or how should we think about how that increase in in, in Your Capacity? You're selling capacity? Uh, impacts. Yeah, you know, the P p&l. Yeah. Yeah.
well, I guess 1 thing, first of all, you know, it's all
Also evident to me as I see these results, play out how scalable the business is, you know, we know that about tech platforms that are inherently scalable. Um, you know, particularly with, you know, Cloud Technologies and whatnot and there ever even more scalable than ever before. Um,
But you know, the the platforms inherently scalable, our ability to scale our inspector Network and our inspection capacity is extremely scalable.
Um,
You know, we met so so the sales Investments, you know, um play well in into that environment, right? So a year ago, we looked at areas where we felt, you know, we didn't have enough presence, we didn't have say boots on the ground in certain cities and we were doing it, you know, telephonically. We thought we'd put some uh, folks in the field. Uh, we did that um, you know, so we're seeing the benefits of that, I will say Bob what we've seen candidly particularly in the US is we've seen
You know, we report sales growth here, we've seen an even faster growth in in volume consigned.
Right. So we're so I'd say our investments went more into the seller side, the supply side of the equation and what we're looking at today and and, you know, Brad mentioned some incremental Investments. We're making. Now, uh, putting those more into the demand side, building up the buyer Network. Um,
Because frankly, the supply side Investments have been so successful. So we're we're focused more today on building up the demand side Network, frankly, our AFC business plays really well into that because, you know, as, you know, AFC serves the independent dealer Network, and in this dealer to dealer Market, um,
The core buying audience for those vehicles are independent dealers. And today, only about 40% of afc's, dealers are registered and, you know, with uh, and buying in the open Lane Marketplace. So there's still a significant opportunity to convert the the other 60%.
and that's something we're focused on in, in in collaboration between the open Lane and the AFC teams
That sounds great. Um, thank you very much. I'll jump back in. Cuba, congrats on a great quarter.
Thank you, Bob.
In your next question, comes from, rajat Gupta. With JP Morgan. Please go ahead.
Uh, great thanks for taking the question. And can that from a strong execution here? Um, I had a question just in the second half guidance. Um, uh, you know, I understand, you know, in the past, uh, you've taken the conservative approach.
uh it still looks like you've maintained that approach but it was curious um you know with the deceleration
Embedded in the guidance on on ibida.
Uh, could you say for us, you know what you're expecting, you know, from a market standpoint, you know, are you expecting like a meaningful deceleration and growth? You know, I know there's some tougher companies in the second half here we are. Uh, we're curious if you could frame that for us and, and also embedded in that
Uh, do you expect, uh, with double digit type share, game trajectory to continue? Um, you know, in that context, I have a quick follow up.
Hey, what's up? I'll take the first part of that. Now, I'll pass the sheer part over to uh, to Peter. So appreciate the question, um, on guidance. So
The other way, we, we did a lot of work sitting down, you know, doing our projections for the back half. And and I mentioned in my pre-recorded remarks, there is there's still
Just based on the calendar in Q4. So between those 2 factors that really drove, you know what, our Top Line and what our volume expectations looked like for the back half. Um, and then on top of that, I mentioned, in my, my remarks, We are continuing to make some more of these investments in the back app. Peter just got done talking about some of our investments to fill out, um, to fill out the buyer Network, um, you know, this is a great opportunity. We're getting a lot of traction out of those Investments. So we want to, um, you know, we want to keep that momentum going with those Investments. So, at the end of the day, you know, we do see, you know, some form of of deceleration in terms of EBA in the back half but we think it's it's grounded in some pretty fundamental and and pretty widely agreed upon expectations for volume of the back half combined with, you know, us continuing to make some Investments uh, for the future.
And I'll turn Peter over for the uh the sharing question. Yeah, thanks Brad. Um, ra appreciate the question. Um,
listen again, really pleased with the trajectory we've seen over the last. I'll say 4 quarters on the D2D side. Um, and your question goes to, you know, can we continue gaining share at the sort of double digit rate that we talked about? I guess here's how I I'd answer that. I'd say, first of all, you know, I mentioned the difference between US and Canada, so
You know, I think the growth opportunity, the ability to sustain a double-digit.
Growth rate over an extended period of time. That's much more robust for us, in the US than, than it is in Canada, where I think we we start hitting a ceiling earlier in the process, right? So, uh, but I, you know, the US has obviously a core market and the larger market of the 2. Um, but I think, at least in theory, there's a significant opportunity to sustain, you know, a significant growth rate indeed to D in the US over over the longer term as that industry, moves towards digital. And again, I think we have a leading digital offering uh that that addresses these types of vehicles.
Um,
I guess one way I think of it is, you know, industry volumes can ebb and flow. So I look at our performance versus how our dealer-to-dealer volumes have fared in the overall industry. And I’d like to think that we can outpace those growth rates. So, if the industry is flat, you know, I’d like to think we could be growing at mid.
Mid to higher single digits. You know if industry is growing 5% we could be growing faster than that by mid to high mid to high single digit. It's kind of what my
I'd call it more aspiration right now. Is that a firm expectation? You know, I'd caution that I think 3 or 4 quarters is great. Very pleased to see it.
Um but you know, we've got to continue to execute, you know, um, I think the team is doing a great job. I think the feedback we're getting from our customers, um, probably stronger than ever, you know? So I feel really good about that. Um, I I loved the the feedback that that came through, the JP Morgan survey of a franchise dealers, where our, our brand recognition had increased significantly as the preferred wholesale Marketplace. So I think we're doing a lot of good things. I don't want to say with conviction, we can outpace the industry by, you know, 10 points every quarter.
Um but certainly our goal is to grow at a faster rate than the industry and that's what the team is, very focused on.
Understood, uh, and just, you know, relatedly, you know, I just want to clarification, uh, in the second quarter.
Um, you know, I think you point out of the share like your share games. So so it was higher than the 10% right? And the second quarter uh is that right? Uh and then
Uh, in relation to that. Um was there like um, an inflection, you saw and just digital adoption here in the second quarter as well. Or do you think this was uh really more unique to like your own strategy uh to grow share uh and have just 1 last follow up.
Yeah. Okay. So on the, on the first 1, again, if I look at sort of us dealer volumes in the quarter, I believe they grew round about 10 percentage. So our growth was roughly double that, you know, that was kind of. So I think a solid quarter, that's at least the data. I'm looking at rajat. Um, was an inflection point in the industry, I think it's too early to say, I don't have I don't have all the data. Um, I I doubt it. I don't think this industry tends to have those types of inflection points, but I'd say, I'd say rajat, there's a bit of our inflection point, in my view with dealers understanding and appreciation for who is openly.
Right. And I think again, this goes back to our 1 brand but
Great. Let me see how this works. Oh wow, this is super easy, that's all I need to do. Just you guys come and inspect the cars
Well, that's great. Let's do that. And then of course we sell the cars and oh absolute sale. They see the, the the value they're getting there, you know. So I think there's a bit of an inflection point in who is open Lane
What can open Lane offer my dealership? How does open Lane helped me to be more successful? Again, that's our core purpose.
And I I I think we're benefiting from that. Um, but you know, on the broader industry question, I guess, we'll see. Um, and again, I'm I'm hesitant to point to inflection points. I think it requires sustained execution, quarter after quarter and a line team and a line culture. Great technology. Great customer experience and those are the things we're focused on.
Got it, got it. Thanks for. Thanks for that. And just just lasts 1 on pricing. I mean, where where do you think your pricing is today relative to
You know the the more mature, like physical players, you know how much you think the Gap is still there?
Um, and and, and are you seeing any increase compared to the first from some of the more Legacy players like Manheim, or aesa on just the digital side. Uh, and the way the way you are doing the transaction, right?
well, I think on the pricing, you know, as I've said on prior calls,
I think our strategy is to offer a high level of value, or a high value service at a reasonable price so that our customers can clearly capture value and see the value benefit. They're getting Visa V alternative channels. So what that means, I think we're attractively priced but, you know, I think our I don't see us as a low price leader. I see it says again high value at a reasonable cost is my little rubric for that. Um, for sure our fees are lower than, uh, many or most physical options, certainly, lower than, than the leading brand. Um, and so there is, I think a long-term pricing opportunity there.
Um again in the near term, we're more focused on volume and share and and NPS scores and customer adoption.
Um, but I think long term that exists, for sure. And we do occasionally make tweaks to pricing. We made a small tweak in Q2.
Um, in terms of focus, it's hard for me to comment. Listen I'm focused on what we're doing. Uh, what we're doing for our customers, our customer base is growing
Uh, not only double digit growth in in volumes, in the quarter, dealer to dealer, but double digit growth in sellers, double digit growth, in buyers, uh, that's what we're focused on.
Um I did notice that large the largest physical auction chain, bought 2, new, physical auctions, just last week.
Uh, so clearly they're making continued investments in physical. Um, our focus is obviously, as, you know, uh, very much in the digital Realm.
Understood. Thanks for all the color and good luck.
Thank you, row.
In your next question comes from Craig Kennison with beard. Please go ahead.
Hey, good morning, thanks for taking my questions. Uh, a lot of talk about inflections I wanted to talk about 20226
Um, I'm curious, when you think we might see that inflection in Off Lease, activity on your platform, just based on what you've seen in terms of historical, lease activity. And then what you're currently seeing in terms of consumer bio trends,
Yeah, thanks Craig. I appreciate that question. Um,
so, uh,
I guess, first of all, if we look at our experience in year, current year uh commercial volumes are down. You know, I said in my remarks they're down as expected and and that is true. They're down. I'd say within our expected range, they're probably down at the lower end of our expected range. So I think not in the quarter, the commercial was down about 9% if I recall. So, you know, I think that's
I'm pretty pleased with that. Let's just say, you know, I probably thought it could be anything from 9 to 15, or you know, 8 to 15 or something. So I think they're down sort of at the lower end of the range.
as we look into 2027,
Um, I'd say with a high level of confidence, we we expect our commercial volumes to be increasing from Q2 onwards.
And that's with a high level of confidence.
There is a possibility that our commercial volumes are increasing on a year-over-year basis starting in q1.
um,
Um, but I don't want to sort of commit to that because, you know, depending on which side of the scenario you go on, it could be a slight decrease or a slight increase. Okay, but I think there is a high level of confidence from Q2 on, um, commercial bonds are increasing. Now, if we look at the sort of
Sort of drivers and compounding factors. Here 1 is
You know, uh, that growth is driven by increased Off Lease maturities from Q2 onwards, okay, on top of that, we can layer a declining.
but 1 of the things I can point to is we look into the
early to mid part of next year. There's a lot of EV leases in those portfolios. Um, the consumer buyout percentage on those Vehicles is going to be very very low because those vehicles are heavily out of equity. And that's that's being reported and that's very evident in our customers data sets. So I think we'll see the consumer buy off percentage decline there. It'll also decline I think on Ice Vehicles because of the residual Equity equation.
Um, and then as that decline, I think we have the opportunity and we've talked about this for those vehicles to start to flow deeper, into our funnel and as we've talked on prior calls, we tend to earn more Revenue per unit, the deeper, the vehicle goes in the funnel. So all those things are compounding factors and by the way, another little proof point that I think we mentioned our remarks about a repeated here.
No, despite commercial volumes being down in Q2.
By 9%.
The commercial volumes sold in our open sale, went up.
Okay, so if you think through that, there was less volume at the top of the funnel.
But some that flow deeper and our ability to convert those cars.
in the open sale which is our highest revenue channel for commercial vehicles, increased
So if commercial volumes in the open sale are already increasing, despite the top of the funnel being down, that gives me a lot of confidence as how these Dynamics start to play out in 2027 and Beyond. So, anyway, listen, I think we got a very good story on Commercial. I'm excited. Uh, we're more than halfway through this sort of, uh, u-shaped decline in commercial. We're coming out the other side and looking forward to 2027 2026. Sorry.
Yeah, just to clarify. Are you saying Q2 2026 is where you have confidence in? Sorry, my bad, I've got my maths 2026, let me be very clear 2026, okay?
Yeah. Great. That's very clear. Yeah.
Thanks Craig.
Yeah, of course. Um, and 1 other question if I could maybe just share
An update or maybe just add more color on some of these cross pollination projects between AFC and open Lane. How would you frame the the value? You think you could unlock if you know, you get some of these projects, right?
Yeah. Well
listen, you know, we've we've talked, I mean, I think we're fortunate
Fundamentally, we have 2, wonderful businesses, you know, um, AFC, you know, is an a leader in its its space. Uh, the the relationships it has with its customers. I think are second to none, uh, The NPS scores over there are kind of off the charts. Um, it's great risk management, you know, there are category leader on so many dimensions, but that, that relationship they have with their customers. As a trusted business partner, is really a huge asset for a company. And then obviously open Lane, we've got industry-leading, digital Marketplace, wonderful Technologies, great NPS scores. I think we're trying to replicate a lot of those
Um, sentiments that afc's customers have for that business. We want openly to have the same sentiments in the minds of our customers, um, but not only that, not only do we have 2, wonderful businesses, they have synergies between them at a minimum AFC provides liquidity to buyers in the open Lane Marketplace and
Obviously every transaction on openly and that's sold to an independent dealer, is that potential floor? Plan opportunity for AFC, uh, but we want to get more than that. You know, we want to get beyond that. Sort of, you know, OnePlus 1 equals 2 to get to 1 plus 1 equals 3. And, you know, some of the things we're doing um earlier this year. We deployed on the AFC, digital solution, the website and the app, a little Carousel. So when a dealer pays off a vehicle like a 7 year old Altima, let's say,
um, we'll showcase here's
10 more vehicles, that could be potentially replacement, some of them are Altimas. Some of them might be, you know, civics or elantas or whatever vehicles that are, you know, similar price point in the same geography, similar age. Um, so just kind of getting them to sort of restock that piece of inventory and, you know, get them to connect openly. So we saw some nice pull through on that we've now made that, uh, a national program.
Um,
you know, when AFC registers a dealer, they collect a tremendous amount of information about that, dealer's business way more than open Lane needs to register a dealer. So, if you like the AFC registration packet is a super set of all the information open Lane needs. So we've streamlined, the the sign up process. If you're an AFC dealer and you want to register on open Lane,
Click this button; we have all the data.
We'll just send over a package of information. Enter a password away, you go. Alright so that's new right um and then just you know I talked about some of the the uh
To each other. Uh, so, getting our own internal incentives, right? For those teams to support each other and work together in a constructive way. So those are a few of the examples Craig, um, but excited about the opportunities there.
Great. Thanks. Peter.
Thank you.
In your next question, please welcome Jeff Lick with Stevens. Go ahead.
Uh, good morning. Thanks for taking my question. Congrats and Brad. Welcome.
Um, thank you. So
As I was wondering if, uh, for some Peter, if you could give an update on the, uh, the win back customer that you're gonna onboarding your, how is that going? Is that going? According to plan, and then, Brad or, or Peter, I was wondering if you could maybe just talk through how you're thinking about the uh, series a preferred and you know, even
You know, broad Strokes. What are the options?
You know, how you might address this?
Jeff. Thank you. I appreciate that. Let me take the first part for add can take the second. Uh, so you know in a nutshell um that project's going. Well, it's on track.
Um, we hope to launch that program sometime around the end of the year.
Um,
So you know feel good about that this is obviously Jeff. There's always risk in these projects so we're not out of the woods yet but the, you know, it's a green light status project right now which is great. Um, and by the way, that is another factor in our commercial vehicle story, you know, on the assumption that that vehicle that program does get launched at year end.
Then it's much more likely. We'll show commercial volume growth in q1, up 2026.
since I made the mistake earlier of the year,
uh, so I just want to, uh, you know, that's another sort of factor in that equation. But um, you know what, I talked about earlier was more to do with leaving that aside, just looking at the under underlying Trends. I'll let Brad speak about the, uh, the other second part of the question. Yeah. Hey Jeff. So thanks for that question, on the, on the preferred. So obviously it comes due. Um, in June of next year, it's approximately 36 million shares. Um, upon conversion. Um, they are in the money now, it it's something that's certainly on our radar. We're we're not ready to give an update on on our path. But you know what, I look at from my seat is
You know, I I I like a clean balance sheet uh, and I like a lot of cash production, it certainly opens doors for opportunities. But uh, we're not ready at this point to kind of publicly talk about the plan for that that series they prefer other than it is certainly on our radar. And certainly something that uh, that we will be addressing over the next 12 months.
And I guess maybe just thinking out loud on that 1, the nominal value or the the the amount coming to you is about 612 million. I mean, is it fair just to kind of say, well look they could convert
But if they convert, then they they have shares. And the only way they can get liquidity is through the open market and it's a lot of shares relative to what you trade, you know, versus
There could be an agreement struck where it's like, look, we could give you liquidity for everything right now at a discount, which would be the effective equivalent of you being able to buy back, a big chunk of shares at a discount is that at least in concept of fair way to look at it.
No, I appreciate the comments. Yeah but we're not we're not commenting any deeper than my my comments before. Okay, great. Thanks.
Best of luck.
Yep. Thanks. Thanks Jeff.
In your next question, comes from Gary prestipino with bington research, please go ahead.
Hi. Uh, good morning all hey uh Peter
Can you maybe, um, directionally give us uh, some guidance. In terms of with the cam Consignment Vehicles up, 20.5% in the dealer space, how much of that growth was generated through same store versus, um, uh, new dealer. Customers coming into the fold,
Hello. Yeah, it's a good question Gary. I don't have the answer to that. Um, here's what I can say is
You know what, what under you know, what? Underpins that growth, you know, well, we saw a comparable if not even a slightly higher growth in vehicles consigned.
Um, we saw comparable growth in the number of Sellers and comparable growth in the number of buyers.
Um,
but we also know that when we sign up new sellers,
They don't typically convert at the rate of our existing sellers in those early months you know, after being signed up.
Um, and probably the same is true. True on buyers; new buyers don't buy, you know, as robustly as existing buyers. It takes them, you know, they want to build up a track record and get comfortable, all that kind of stuff.
Signups.
But also, you know, growth within the network. I just don't have the exact stat.
Uh, so I don't want to comment much more than that. I will also say, though. I do look,
You know, when it comes to some of what we call major dealer accounts, I do look.
You know, at at sort of those dealer networks, you know groups of 20 40 50 100 stores and it appears to me we have been gaining share and volume.
With many of those groups.
Um, so that would again point to sort of same store type growth because, you know, that was a customer relationship. We had with those 50 stores. A year ago, we have it today, we're doing more volume today, right? So, um, but good question, Gary. I'll I'll I'll I'll I'll dig deeper into that. I just don't have an answer right now.
Okay. Um, and then
Just looking at the commercial vehicles. So it looks like it was down about 8.8% year-over-year.
And it was down 14% um are are your expectations that you know?
For an improvement in that decline for the back, half of the year. And then I just want to get it straight.
q1 of 26, you would expect
Uh, commercial vehicle increases as as, because of more lease cars coming through the pipe.
Okay, so let me get the first, the second part of the question. First, with a high level of confidence?
We expect commercial volumes to be increasing from Q2 of 2026 onwards.
Okay, okay, there is a possibility. There is a possibility.
That we could see that increase in Q1.
Okay.
But my level of confidence in q1 is a little less. So, q1 is court of closer to the line could be, could be up, could be down, I don't know. But Q2 2026 high level of confidence. Commercial volumes are going up and then and then increasing further in Q3 and Q4. Okay, um, and and then I, I guess scary I would
I, I
You know, the decline was kind of U-shaped. So, at some level, we would kind of expect.
That that decline. Shouldn't really, I, I'd say it shouldn't worsen materially that the 9% we posted in Q2.
You know.
I would say declines of about that level in Q3 and Q4 or maybe even a little less are probably sort of butts in the planning scenario here. Okay?
Okay.
All right, um, and then, just as I look at the floor plans for tail, that was down about 3.3%. And that that's indicative of, I guess, solid sell through, at the, at the dealership level. Um,
Would that indicate that we're getting more to an equilibrium of a normal Market in term terms of, um, use Supply?
Uh, versus demand.
You know, its first of all, your first part of your observation, I think is the correct 1 um, curtailment were down.
That's indicative of pretty strong, you know, retail environment and vehicles, you know, moving off the lot. Not needing to be curtailed.
Uh, so that is true. Um,
Is the market in more of an equilibrium.
You know, I I think, I, I'd characterize, the market has been
You know, normal to somewhat robust, you know, in the quarter, you know, I I don't I it's probably been on the normal or stronger side of normal would be my view and some of that was again, the Tariff stuff created this sort of. Yeah, this pressure to, you know, consumer pressure to try and get ahead of that used car prices went up a bit new car. Prices went up as you probably seen as well.
um,
So yeah, I think it's been a reasonable. It hasn't been a like a gang Buster sort of Market but it's been a reasonably strong Market. Yeah.
Okay, thank you.
Thank you, Gary.
I think we have 1, more question comes from Brett Jordan with Jeff. Please, go ahead.
Yes.
On the dealer to dealer share gain. I I back in the old days when trade rev was being rolled out. A lot of the conversation was these were cars that weren't seeing an auction. They were told that um wholesalers or direct uh dealers dealer phone calls, is the share game. You're seeing cars that didn't previously go to auction, or does this share coming from other auction? Uh, platforms?
um,
Good question. Brett, I I think
When I talk about share, I'm looking at numbers that I can sort of count like put put a where, there's a third-party data source, that's publishing a number that I can use.
My piece is honored is we're principally. Looking at a physical to digital shift. I consider it a secular shift from an industry that was 100% physical to today in the US is about 25% digital
Um, but that 25% has, you know, been increasing over the last number of years and will continue to increase, and we intend to gain shares, part of that. So, that's kind of how I look at it. Principally.
um,
Now, you know, in the quarter, physical auction dealer dealer Vons group too grew as well, they just didn't grow by the rate. We grew, they grew at about half that rate, okay? So that those were the sort of facts on the ground in the quarter. Um,
I think it is true that there are additional dealer to dealer vehicles that are sold through informal channels, through wholesalers, directly from 1, dealer to another
Those are just harder to count. So, for that reason, I don't make an estimate on those. Um, again, I when I speak about our share about Tam, I'm really looking at numbers that that are sort of, you know, firm and published. Um, but I think the market is true, it is correct to assume the market. Actually is a little bigger than that.
Okay. Great. And then and your prepared remarks, you mentioned at 800 dollar increase in yield. Um, could you give us more detail on that is, is there something in the process that's improving the yield, or
um, you know, I guess a little bit of color because it seems like a fairly significant uptick
Yeah, so, well, it's a... So this is a feature of what we call our Absolute Sale format or feature in the marketplace. This was something we launched, I believe, in Q1 of 2024. Okay, so the way Absolute Sale works...
You know the vehicle the seller puts the vehicle in the marketplace or vehicles in the marketplace a certain amount of bidding activity happens you know for you know 20 buyers. Look at the car 4 or 5 of them bids. There's competing bids, the car gets bid up to a certain level.
Now that we've introduced the absolute sale feature, The Cellar at a certain point in the process can say, okay there's enough activity on this car and the price has gotten to a level where I'm for sure. Going to sell this car.
Okay, so that's when they hit the absolute sale button. Alright? So we're looking at, what is the price? What is the bidding got to at that point? Okay, the point at which the seller hits the absolute sale button when the seller hits, the absolute sale button, we then remesh to the dealers who have been bidding on that car, you know, and and other dealers. Hey, this vehicle is now an absolute sale. We put the vehicle in a different category. If a, if a buyer goes on and says, show me all the absolute sale vehicles, this vehicle will appear in that set.
And that vehicle is guaranteed to sell today, the those absolute sale vehicles will close at 4 p.m. eastern time, okay? It's 100% certainty. It's going to sell so that attracts new buyer interest because they, they're looking for cars. They know are going to sell, they're not, they don't want to waste their time. On cars that aren't going to sell,
So we then measure how many incremental bids get placed, how many incremental dollars? Does the seller gain from the moment? They hit that button.
So when we first launched that program a year and a half ago
I think on average we were generating like, 40050 incremental dollars from the moment. They hit the button. Well that has been increasing steadily and in Q2 it was closer to 800. So again, that just is a it's another metric that speaks to the success and the adoption of this particular feature.
Um, sellers really like it. You know, I hear a lot of positive feedback on that, you know, a lot of buyers like it too, for the certainty, they get around these cars.
Um, I'm selling. Um, so that's in essence. What, we're what we're talking about when we talk about that 800 dollars. So, you essentially just come out, it's the, it's the increase after the reserve, Reserve comes off on the auction.
Exactly. Yeah. And by the way, 1 more thing I I should say on that is while that is the average. You know I've had so many conversations with dealers on this
Um well that is the average.
We see lots of vehicles for the run-up is 2,000. 2500
and when a dealer, a selling dealer has that experience,
You're kind of winning a convert.
Like they're saying, man, I thought I was good at 12 and you got me 145 on that car. Like that was incremental money incremental, profit that I did not think existed in that vehicle.
Was there previously not the ability to take the reserve off?
Previously there was a sort of a back and forth, interaction a Buy It Now, uh messaging but this sort of this kind of puts a more option like format into the mix.
Yeah, thank you. And, by the way, we didn't, we didn't take the old 1 away. Like the, the sellers can still use the old approach too, and many do so, today, in our USD Tod, I'd say about 60-ish percent. 50 to 60% of the cars we sell are sold through absolute sale and 40 to 50% are sold.
through uh, you know, the the more um Legacy Marketplace tool set, um, and that percentage has been
More and more towards absolute sale over the last 18 months as well.
Thank you.
Well Brett, I think that's all we have time for. Uh, so again, thanks everybody for uh your time today and your interest in our company. Um, I just want to close by saying, you know, I think our performance is the second quarter and the Investments that we continue to make in the company are helping position, open Lane to deliver sustained long-term growth
Our Marketplace and finance. Businesses are executing well.
We continue continue to generate very strong cash flows, zero debt.
As I look ahead, I believe open lanes, value proposition for investors remains very compelling look forward to speaking to you again in 90 days and updating you on our third quarter, have a great rest of your day.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect