Good day, and welcome to the OPENLANE Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the * key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press * then 1 on your telephone keypad. To withdraw your question, please press * then 2. Please note, today's event is being recorded. I would now like to turn the conference over to Mike Eliason, Vice President of Investor Relations. Please go ahead, sir. Thanks, Rocco. Good afternoon and thank you for joining us today for the OPENLANE Third Quarter 2023 Earnings Conference Call. Today, we'll discuss the financial performance of OPENLANE for the quarter ended September 30, 2023. After concluding our commentary, we will take questions from participants. Before Peter kicks off our discussion, I'd like to remind you that this conference call contains forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties that may affect OPENLANE's business, prospects, and results of operations, and such risks are fully detailed in our SEC filings. In providing forward-looking statements, the company expressly disclaims any obligation to update these statements. Let me also mention that throughout this conference call, we will be referencing both GAAP and non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to the applicable GAAP financial measure can be found in the press release that we just issued, which will also be available in the investor relations section of our website. Now I'd like to turn this call over to OPENLANE CEO, Peter Kelly. Peter? Thank you, Mike, and good afternoon, everybody. I'm delighted to be here today to provide you with an update on OPENLANE. And joining me on today's call is our Chief Financial Officer, Brad Lakhia. I'm going to begin with OPENLANE 's third quarter performance, and as usual, I will speak about our business in two segments, a marketplace segment and a finance segment. I'm pleased with our Q3 performance, and I'm particularly encouraged by the improved performance of our marketplace business, despite the challenging industry environment. I believe our Q3 results present compelling evidence that we are successfully evolving our business model to meet the realities of today's market, while positioning OPENLANE for continued growth and expansion in the future. During the third quarter, we grew our transaction volumes in both our marketplace and finance segments. We grew total revenue and gross profit. We reduced our SG&A. We invested in technology, innovation, and product development, and we continued to generate strong cash flows in the business. While adjusted EBITDA declined slightly, driven mainly by a return to historically normalized loan losses in our finance business, OPENLANE's marketplace business delivered its best quarter since the divestiture of the U.S. physical auctions. Brad will provide more detail around our specific performance later in the call, but I would like to highlight a few key results from OPENLANE's third quarter. First, growth in both commercial and dealer transactions increased total marketplace volumes by 8% to 339,000 vehicles, with a total gross merchandise value of approximately $6 billion. We generated year-on-year revenue growth of 6% to $416 million, with contributions from both our finance and marketplace segments. Auction fee revenue in the marketplace segment grew by 15%. Gross profit in the quarter was $200 million. That was an increase of 9% from Q3 of last year. Gross profit represented 56% of revenue, excluding purchased vehicles, and I'd like to specifically call out the marketplace segment here again, where we increased gross profit by 17% year-on-year, representing 46% of revenue, excluding purchased vehicles. OPENLANE generated Adjusted EBITDA of approximately $68 million in Q3. $27 million was from our marketplace segment. This was a 51% increase versus the third quarter of last year, and $41 million was from our finance segment. I'm very pleased that the marketplace business is now operating at an Adjusted EBITDA run rate of over $100 million per year and significantly stronger than one year ago. Also, it's notable that our marketplace segment delivered approximately 40% of our total adjusted EBITDA performance in the quarter, significantly higher than last year. Over time, I expect the marketplace segment will represent over 50% of the total adjusted EBITDA performance for OPENLANE. Brad will discuss cash flow generation and capital allocation later in the call, but I do want to highlight the strong cash flow characteristics of our business that were again evident in Q3. OPENLANE generated cash flows of $74 million from operating activities in the third quarter. And as I mentioned last quarter, the company has a strong balance sheet, an improved leverage ratio, and ample liquidity to invest in innovation and growth while still delivering profits and strong cash flows. I'd now like to update you on our efforts to simplify our business. OPENLANE is committed to making wholesale easy, easier for customers to do business with us, and also easier for our company to innovate and grow. A cornerstone of this strategy is our rebrand to OPENLANE and the corresponding work to consolidate our marketplace platforms. I'm very pleased that we're already seeing improvements to the customer experience, accelerated product development timelines, and meaningful reductions in cost. To support this work, we performed extensive market research during the second and third quarters with more than 1,000 dealers across the United States and Canada. The results are very strongly aligned with our vision for OPENLANE. First, inventory selection is very important to our customers. Our combined OPENLANE marketplaces will offer a highly differentiated mix of off-lease inventory that is not available on any other digital or physical marketplace, and dealer-to-dealer inventory at every age, condition, and price point.... Another key theme from our customers was ease, and we were pleased to hear that our buyers and sellers find our platforms very easy to use. Once combined, the OPENLANE marketplace will offer the most flexible multi-format marketplaces in North America, including time sales, bid-ask listings, and live bidding auctions that take place nearly every day of the week. Finally, trust remains an important factor with our customers. So, we're highly focused on providing the most reliable condition reports, the most responsive customer service, and the most dependable supporting services, such as financing and transportation. I believe we're operating from a position of strength in these areas, but we will continue to invest to ensure our customer experience, like our inventory, remains a positive differentiator for OPENLANE. So, I believe that our one marketplace strategy is highly aligned with the preferences of our customers, and I'd like to share some specific milestones that we achieved in the third quarter. Starting with Canada, our combination of the ADESA and TradeRev platforms into a single OPENLANE branded marketplace is now complete and has been successful. The migration was initiated late in the second quarter, and in Q3, our year-over-year volume growth in Canada outpaced the growth rate in our marketplace business as a whole. Since launch, we have implemented additional enhancements, enhancements to our search and filter capabilities, as well as the vehicle images, our buy and sell functionality, and other aspects of the marketplace. I'm very encouraged by how quickly we were able to develop, test, and deploy these updates, and I think this provides evidence of the direct relationship between simplifying our business and our ability to innovate and quickly respond to the preferences of our customers. Another benefit of consolidation is our ability to leverage the best products and features from across our different platforms. For example, today, first of November, in Canada, we launched OPENLANE Pro. A successful TradeRev dealer program that will now be available to all Canadian dealers on OPENLANE. Participating dealers receive volume-based rebates and access to OPENLANE's digital pricing guide and other exclusive tools. For OPENLANE, this expands a highly successful offering that generates non-transaction, subscription-based revenue streams and also increases stickiness with our customers. Shifting to the United States, we are now only weeks away from launching our consolidated OPENLANE branded marketplace in the U.S. This will combine the off-lease open sale inventory from our U.S. commercial sellers with a broad-based dealer-to-dealer inventory currently available on BacklotCars. This will be a single, simplified online experience with a number of sales formats to align with the buying habits of our dealers. By connecting these two marketplaces, buyers will have access to more diverse inventory, and sellers will have even more confidence that they're obtaining the best possible outcomes on their vehicles. One of the most promising benefits is directly connecting the buying experience on OPENLANE with the ease of selling vehicles in our marketplace. A significant portion of the franchise dealers who have purchased inventory through our private label programs and our open sale do not yet sell vehicles with OPENLANE at the same volume levels. Through the new unified experience, those dealers can now purchase off-lease inventory while also seamlessly listing their own wholesale vehicles directly from their lot. We're excited to get this off the ground and believe this combined marketplace will be well received by our customers. Then finally, in our international business, our rebrand to OPENLANE in Europe and the U.K. is also on track to launch towards the end of this month. This rebrand builds on the consolidation of our Europe and U.K. technology platforms that was completed earlier this year. Our European business continues to perform well, and we believe that OPENLANE has an opportunity to capture share by delivering a unique, differentiated model to our growing base of customers in Europe. So, in summary, I'm looking forward to beginning 2024 with all of our marketplaces and all of our buyers, all of our sellers, and all of our inventory together under the OPENLANE brand. As I mentioned earlier, platform consolidation is not just about improving the customer experience and accelerating innovation. It also affords us a meaningful opportunity to reduce our costs by eliminating duplicative technology and avoiding the costs associated with maintaining older and sometimes outdated back-end systems. We're very focused on this and have appointed leadership to advance this consolidation effort. We are optimistic about what we can achieve in terms of cost reductions, efficiency, and also a more streamlined customer experience. Beyond platform consolidation, our cost management efforts now extend to every department and team across our organization. During the third quarter, we reduced our total SG&A versus the prior year, as well as sequentially, and we continue to work through our pipeline of cost-saving initiatives. It's clear to me that our focus on this area is positively contributing to our overall performance, particularly the improvement in gross margins and our overall Adjusted EBITDA growth. Ultimately, our cost-conscious culture will help create the financial headroom for innovation, which in turn will further accelerate growth and improve our overall performance. I'd now like to provide some updates on the macro environment and our perspectives on the industry outlook for the fourth quarter, 2024, and longer term. Our third quarter results were delivered against a backdrop of industry volumes that are still well below normal and well below pre-pandemic levels. However, we believe there is increasing evidence that industry volumes have bottomed out and are beginning to rebound, particularly as it relates to commercial vehicle volumes. I believe this is supported by the following factors: new vehicle production, new vehicle sales, and new vehicle inventory on dealership lots continue to increase. In fact, they continued to increase in the third quarter, despite some disruptions from industry labor actions late in the quarter. While each individual metric remains below pre-pandemic levels, their collective improvement will help balance supply and demand in the used vehicle market over time. Shifting to used vehicle values, we continue to see downward pressure on prices in the third quarter, although the rate of price decline slowed... perhaps driven in part by the industry labor actions that I referenced just a moment ago. Now that those labor actions appear to have been resolved, we expect continued pressure on used vehicle prices through the end of the year. I remain optimistic about the resiliency of our asset-light model and our ability to deliver strong results irrespective of the environment. Based on our conversations with commercial customers and on the data that we analyzed, we believe that new vehicle lease originations increased by double-digit percentages in the third quarter compared to the same period last year. This is very encouraging, as increased volumes of off-lease vehicles will be a tailwind for us in the future as those leases mature. I would also point out that the level of lease originations in the third quarter was still well below pre-pandemic levels, so we expect to see further increases in this over time. Despite the overall price decline for wholesale used vehicles, the majority of off-lease vehicles that are maturing today still remain in a strong equity position versus their residual values. However, this gap is narrowing. We saw a modest increase in off-lease volumes supply in the third quarter, and this contributed to our overall results. Looking to the future, we expect to see a decline in the percentage of vehicles that are in a positive equity position. Should this happen, it will result in a lower percentage of vehicles being purchased by consumers over time, and consequently, more volume flowing into our OPENLANE marketplace. The precise timing around this is hard to predict, but it is something we are watching carefully. In summary, I believe that the set of facts that I described here points to a slow but steady improvement in wholesale supply and an improving environment for OPENLANE. As I said last quarter, I believe that the two primary pieces of our growth equation remain intact. First, we believe that digital channels will continue to gain share. Our recent dealer surveys support this, and we believe that our technology, inventory, and customer experience will position us well to gain more of that additional share over time. We also believe that all signs point towards a recovery in commercial volume, which, given our existing market share and deep commercial set of relationships, will result in increased off-lease commercial vehicles in our marketplaces in the future. In terms of our performance outlook for the remainder of this year, in our marketplace segment, I expect OPENLANE's volumes in the fourth quarter to increase compared to the fourth quarter of last year. This volume growth, coupled with the strong unit economics that we're currently demonstrating, should drive improved financial performance in the marketplace segment. In the finance segment, we expect continued strong volumes and revenue. Our Q3 loan loss ratio at AFC was at the higher end of what we believe to be the normal range and generally aligned with the range experienced before the pandemic. We continue to manage this risk very closely across the portfolio, and we have been very deliberate about growing responsibly to ensure that new business we take on at AFC is very stable. Overall, we expect continued solid performance from AFC, even though AFC's full year results will be below last year's record levels. Brad will provide a more detailed update on how those factors impact various aspects of our guidance for the remainder of 2023. As we look beyond this year, we will continue to execute a focused strategy and take actions to control the things that we can control. We expect to build on our 2023 performance in 2024 and beyond. We believe that the majority of our growth will be driven by our marketplace segment, but that our finance segment will also grow over 2023 levels and will remain a very strong contributor to our overall results. So, to conclude my remarks this afternoon, I want to reiterate that I believe OPENLANE has a unique and differentiated offering to the market, a compelling business model and a sound strategy for growth. We are a pure play digital marketplace leader with deep strength with commercial sellers and in the dealer-to-dealer business. We have access to a large addressable market in North America and in Europe. We intend to grow our share in these markets. I believe that the macro factors point to an improving outlook for commercial off-lease volumes. I expect the recovery will take time, but it will come, and this recovery, plus the continuing secular shift towards digital, all points to an exciting future for OPENLANE. We have a robust pipeline of innovation that supports our growth strategy. By consolidating our platforms, we will get greater leverage from our technology and product investments, and we will focus our energy, resources, and investments on building the greatest digital marketplace for our customers. We are profitable and we deliver strong positive cash flows. Our third quarter and year-to-date results clearly demonstrate that our profitability and cash flow characteristics have improved in spite of the lower-than-normal volume environment, and I'm confident that they will, that they will improve further as we grow our volumes. Our strong cash flows allow us to invest in our business while generating additional capital that can be used to pay down debt, return capital to shareholders, and make strategic investments. So, with that, I will now turn the call over to Brad Lakhia, who will provide additional detail on our third quarter financial performance. Brad? Thank you, Peter, and good afternoon, everyone. I'll start with our marketplace segment. As Peter mentioned, we had strong unit volume growth, which drove a 3% increase in marketplace revenues, excluding purchased vehicle sales. We also delivered volume increases in both our commercial and dealer channels. Auction fees per unit increased 6%, driven by select fee increases and the introduction of new auction-related services. Marketplace service revenues declined 3%, largely due to lower transportation services and the receipt of a royalty payment in the third quarter of last year. The overall improvement in the marketplace revenue resulted in a 17% increase in gross profit. This represents a 530-basis point improvement versus the third quarter of last year, again, excluding purchased vehicle revenues. It also represents a 200-basis point improvement sequentially when compared to the second quarter of this year. In addition, gross profit benefited from improved mix in our service-related businesses and cost-saving initiatives. As Peter highlighted earlier, our marketplace adjusted EBITDA for the quarter was $27 million, $9 million higher than the third quarter of last year. Also, as discussed earlier, this was driven by improvements in volume, price, mix, and cost savings initiatives, including lower year-over-year and sequential SG&A. Looking at year-to-date, our marketplace adjusted EBITDA was $85 million, a $63 million improvement compared to last year. For added context, our dealer-to-dealer business is profitable and meaningfully contributed to this year-to-date improvement. This improvement also supports the $100 million adjusted EBITDA run rate we highlighted in the second quarter call, and Peter mentioned earlier in his comments. It also reflects our pricing and cost management actions are materializing and provides a window into the volume scalability of the segment. Turning to our finance segment, revenues in the quarter were $100 million, a 1% increase over the prior year. This was driven by a 2% increase in loan transactions, improved fee income per unit, and interest rate yields. Finance segment adjusted EBITDA in the quarter was $41 million, compared to $52 million last year. This decrease is explained by a $10 million increase in credit losses, which equates to a 2% loss rate for the quarter. And as discussed in prior calls, this represents a more normalized rate when compared to very favorable fundamentals that enabled a much lower loss rate over the last two years. And with regard to credit loss management, I'd like to highlight and emphasize a couple things we have noted in prior calls and disclosures. First, our finance business has a very strong service offering that leverages the combination of a high-touch customer relationship model and a data-driven risk management process that we believe is industry-leading. This combination allows the business to deliver growth while prudently managing risk. And second, as we move through the remainder of this year and into next year, we will be faced with changed, changing used car fundamentals, and therefore we will continue to manage a conservative portfolio. Over time, we continue to expect the loss rate to be 2% or lower annually. However, actual losses any period could deviate from this range. Turning to SG&A, consolidated SG&A declined 2% or $25 million compared to the third quarter of 2022, again, reflecting the successful execution of our ongoing cost savings initiatives. And as we've previously mentioned, the implementation of some of these initiatives include duplicative costs that will roll off throughout the course of 2024 and will help us offset ongoing inflationary pressures. I would also like to highlight that we expect fourth quarter SG&A to be higher than the fourth quarter of 2022, due to a $9 million reduction in non-cash compensation expense that occurred last year. Turning to the balance sheet and capital allocation. Consistent with the first half of the year, we continue to generate strong cash flow. Cash flows from operating activities now stand at $216 million year to date. This level of cash generation demonstrates the value-creating potential of our asset-light, digitally focused strategy and business model. Our cash generation has notably improved our overall liquidity position and further strengthened our balance sheet. This is evidenced by a $131 million reduction in debt, net debt since the end of 2022, and a meaningful improvement in our consolidated net leverage ratio, which now stands at approximately 0.5 turn of adjusted EBITDA. Given the current macro and industry environment, we will continue to focus on managing a prudent balance sheet while maintaining and improving our liquidity position. We will continue to prioritize capital to fund organic investments in our core digitally focused business; while also ensuring we have flexibility for high return, complementary strategic investments and shareholder returns. During the quarter, we completed $22 million in share repurchases, and we increased and extended our share repurchase program authorization to $125 million through the end of 2024. I'll wrap up my comments by addressing a few annual guidance items. We're confirming our prior Adjusted EBITDA guidance of $250 million-$270 million, and as we said last quarter, we continue to believe we are trending to the higher end of this range. We're also confirming our expected operating adjusted net income per share of between $0.60 and $0.70. Finally, capital expenditures are now expected to be $55 million, compared to our previous expectation of $60 million. With that, I'll turn the call back over to Rocco for questions. Thank you. If you would like to ask a question, please press star then one on your telephone keypad. If you'd like to withdraw your question, please press star then two. Today's first question comes from Craig Kennison with Baird. Please go ahead. Hey, thanks for taking my questions. The first one is on the repo market. Just wondering if you could comment on the impact on your commercial business. Craig, thank you for that question. We, we've seen an increase in repo volume in the industry for sure, okay? So, repo, I would say, as a segment, is back to, I'd say, very close to pre-pandemic levels at this point. Now, the simple fact is, while we have some exposure to repos in our services businesses- ... and in Canada, although repo volumes in Canada are relatively lower, we do not sell many repossessed vehicles in our digital marketplaces in the U.S. So, I'd say we see repo volumes have increased materially, say, since 2021. That is for sure. We benefit from that in our services businesses, but we don't benefit in terms of numbers of vehicles sold in our U.S. digital marketplaces to any significant extent today. Thank you. And then with respect to your off-lease business, Peter, I take your point about the positive equity that exists today, but, you know, when that market comes back, are you confident that you will capture the same very high percentage of that market through your platform? Well, I guess in a short answer, yes, Craig, I think I am confident. We have, you know, the seller relationships are intact. We're servicing those customers. If anything, I'd say that the percentage of those vehicles that are selling digitally today is higher than pre-pandemic. So, the top of the funnel is lower, but the conversion rate is higher. And based on my discussions with those sellers, I think, you know, they are very, very focused on trying to maximize the online selling percentage for those off-lease vehicles. Now, obviously, it all remains to be seen, but I think there's arguments to say we could capture an even increased share versus pre-pandemic. Great. Thanks, Peter. Thanks, Craig. Thank you. Our next question comes from Gary Prestopino with Barrington Research. Please go ahead. Hey, good afternoon, all. Couple of questions, Peter. Were conversion rates somewhat abnormally higher because of the impact of the UAW strike in the quarter, or did that not come into play? Thanks, Gary, for the question, first of all. It didn't really come into play. The labor action didn't really start until late in the quarter. So, it didn't really impact, you know, July or August at all. I guess what I'd say, if we look at sort of pricing and conversion rates. Pricing, we saw pricing declining at a fairly fast clip as the quarter started, and by the time we got to the end of the quarter, the rate of decline had fallen off. It wasn't declining at the same rate. And I sort of assigned that really to the UAW action, you know, less supply, et cetera. We also saw a little bump in conversion, I'd say, late in the quarter, but probably for the same reason. But it wasn't what I'd call material, and I'd say conversion rates in the third quarter were generally in line with what we saw in the first half of the year. Okay. That's, that's good. And in terms of you saw some pretty good growth in commercial vehicles. I mean, could you, you know, maybe highlight what segments of the commercial vehicle market were really strong? And the other thing is with lease penetration, where is that now? Yeah. Okay. So, commercial vehicles and lease penetration, so, I can know the second part of the question, too. So, on commercial vehicles, you're right, we did see growth. We actually saw growth in commercial in all of the markets that we operate in. We saw commercial volume growth in Canada, commercial volume growth in the U.S. and in Europe. Obviously, Europe volumes are less impactful to us but saw strengths there as well. I kind of ascribe some of it or quite a bit of it to, you know, the OEMs are able to provide more inventory to those commercial accounts, whether it's rental car companies, you know, fleet operators, things like that. So that's, t here's kind of, that has sort of accelerated some de-fleeting out of commercial business. And there was a... You know, that was badly needed because those customers weren't getting a lot of supply for the last couple of years. So, some of it is that. We obviously talked about repossession volume on the last question, and that's commercial business. And then in the off-lease space, we did see, you know, the equity gap narrow a bit, and while still the majority of cars are being bought out sort of before they get into the remarketing process properly, but we did see that percentage decline a bit and more vehicles flow in in our U.S. off-lease business as well. So, I'd say broad-based on that front. And then in terms of lease penetration, the numbers I was looking at, Gary, were that, as best I can determine, the volume of leases written in the third quarter is probably up about 30% compared to the volume of leases written in the third quarter last year. Now, you know, I've got to stitch together some different data sources to get that. What that means in terms of lease penetration, I can't recall, but I think it's in the 20s. In the low, you know, around about 20%, I guess, is what I should say. I also know from talking with customers, you know, some of our commercial accounts, you know, at least, I would say a number of commercial accounts have clearly told me that they're leasing significantly more vehicles, that they're originating significantly more leases than a year ago. That's not true of all of them. I'd say some of them are kind of flattish, but some of them are actually higher. It depends a little bit on how much that brand is sort of incentivizing vehicle sales, because that tends to drive leasing. Okay. And then just lastly, real quickly, you cited some... the introduction of some new auction-related services that help to drive increase in auction fees for vehicles sold. Could you maybe just very briefly discuss what some of these, these new services are that you're, you're generating fees on? Yeah, Gary, this is Brad. Thanks for your question. You know, I can be a little general with you on where that is. It's in our dealer channel, largely focused in our U.S. business. ... is where we've introduced some of these new service offerings. It really has helped us from a volume perspective for sure. It gives some of our customers a different option for how they wanna pay and also has helped us drive some improvements in working capital as well. It's really kind of a two-pronged benefit. One, you know, where, you know, buyers are able to have a more flexible payment option. Then also from our perspective, we're able to drive some more efficiency in our capital structure. Okay, thank you very much. Thank you, Gary. Thank you. Our next question today comes from Bob Labick with CJS Securities. Please go ahead. Hi, good afternoon. It's actually Lee Jagoda for Bob. I think you already commented a little bit on kind of the lease volumes and where they're going, but can you break it down a little bit more in terms of just talking about lease volumes in general, and then what part of the funnel the off-lease cars are going to today and breaking that down between, you know, the lessee, the grounding dealer, closed auctions, or, you know, open or physical? Yeah. Thanks, Lee. Let me attempt to do that. I guess I'll say first of all, that in what I would call a more abnormal or typical lease environment, which I'd say the 20 years pre-pandemic would be examples of, we would typically see something like the following: consumers would buy out maybe 20%-30% of the maturing volume, and then 70%-80% would enter the remarketing process. And, then you'd have, you know, some component of that would sell to the grounding dealer, some into the franchise dealer network, some on the open sale, and the rest go to physical auction. What we've seen really over the last two years and, and continuing through to today, for the most part, is there's been such a run-up in used vehicle values that these vehicles are sort of strongly in, in an equity position. The consumer pers- the percentage of vehicles the consumer is buying out is considerably higher than before. It's sort of 60, 70, in some cases, more, more than that,%. To the extent the consumer doesn't buy out the car, a lot of OEMs and captive finance companies give the grounding dealer the same buyout option the consumer has. If the consumer doesn't buy out the car, it gets returned to the grounding dealer, and they exercise that because the car, again, is in equity. So that has meant that for the last, you know, couple of years, the amount of vehicles flowing deeper into the channel has been down, I'd say, by 90% versus what we would have called normal. And obviously for that to get addressed, the equity gap has to decline, and all that sort of stuff needs to play out. So, we see that happening. We see the sort of beginnings of that right now. It depends. It varies by brand, by portfolio, right? But, you know, what I see happening as we move into 2024 and 2025, first of all, those leases were written against much higher new vehicle transaction prices, okay? Because the vehicles, the sale price of the car was considerably higher, so they tend to have higher residual values written into the contract, right? So, the residual value line has trended up, and then on the other side of that, the actual value of the vehicle, we're seeing downward pressure on that. So, I think these two lines are gonna converge and get back to a more normal type of environment. I hesitate to predict exactly when that's gonna happen, but I believe it will happen, and it'll be positive for us as it happens. And then the second part of it is obviously the new lease originations. And with OEMs, you know, getting back to sort of full production again, and with consumer demand being somewhat weaker, we're seeing some increase in incentives. We're seeing an increase in leasing, and that points to a strong, you know, off-lease volume well into the future. Great. And I think, you know, I think it's fairly clear that, you know, the consensus out there is the secular... You know, that there is this secular shift to online dealer to dealer from physical. Presumably, that's gonna be a lumpy transition. Can you speak to maybe your best estimate of the physical versus digital volumes in the market, and their growth year to date? And then how should we think about that going forward into 2024? Yeah. I guess, Lee, what I'd say to that is, based on the data we look at, and obviously we're public, some of our digital competitors also report public volumes. If I look at the U.S. market, our assessment is that, you know, approximately 30-ish% of the volume has transitioned to sort of fully digital offsite model, and 70% is transacting in a physical or more hybrid model today. Now, there's also dealer-to-dealer transactions that don't take place in either of those models, that take place, you know, sort of informally through wholesalers and other types of channels. So, I'm really just talking about the formal channel. So, I think we see digital at 30. To be honest, it's been fairly steady at that level for the last year or two because I think there was a little bit of a rebound in the physical coming out of COVID as the pandemic eased and, you know, consumers in many industries kind of went back a little bit more to physical and in-store type of thing. But I think if you correct for that and look over a longer period of time, you'll still see that there's a steady secular shift towards digital. And our interviews with customers, our surveys of customers, really sort of support that fact. Particularly talking to franchise dealers, I think there's a clear preference there from dealers. The majority of those dealers prefer to purchase vehicles online. They do not-... put a priority on going, attending physical auctions in person anymore. And when we look to independent dealers, they're probably not as far along that curve, but I'd say, there's no question the digital preference is still very well established there and is, I think, gaining all the time as well. Great. Appreciate the color. Thanks, Lee. Our next question today comes from Bret Jordan with Jefferies. Please go ahead. Hey, good afternoon, guys. On the AFC- Good afternoon. In AFC, I guess, as we think about the loss rates and the environment that we see today with, you know, obviously, margin pressure for the independent used car dealers and higher floor plan expenses, is there a risk that it would go above that sort of 2% loss rate in the short term? Or because the loans are short term enough, you can kind of pull the credit back and reduce your exposure to the, to their pressures, I guess? Yeah, yeah, thanks for the question. I think you nailed it with your latter part of your question. I mean, our... They are short term, as you know, it's about 60 days on average in terms of our portfolio tenor. And we have a lot of levers, a lot of options to be able to pull that back. I would also emphasize that, you know, more recently, over the last year, you know, with those higher risk profile independent dealers, we've been more risk off with those, on one hand, and then, on the other hand, our credit monitoring and risk management processes have been, I would say, more tuned into them as well, to the extent we do continue to have exposure. But to answer your question, there is, as we said, you know, the chance that periodically we could move above that 2% range, but I would say here over the more immediate near term, we're feeling pretty comfortable with that. Okay. And then I guess a question, your comment earlier about the potential to gain share in off-lease. You know, and again, you then followed to say that a lot of volume is still sort of in a hybrid model. Given that you don't really have a physical option anymore, what is the proposition that you have to drive the share gain? Is it economic? Do you do it cheaper? You know, what is the off-lease seller getting when they're not getting the physical alternative? Yeah, I think a lot of the benefit of the digital model goes to speed, efficiency, and, and, you know, market efficiency as well as network effects. You know, even before the pandemic, the, the conversion rate of off-lease vehicles in our upstream channel was, I think, on average, 55-ish% among our U.S. customers. So, it was already more than half of the volume was selling in a, you know, in a fully digital model. So, and it had been trending up over many, many years from, you know, 30 to 40 to 50 and then 55. So, it was already on a long-term upward trend. I think fundamentally, what you offer the seller is, hey, these are good quality vehicles for the most part, three-year-old, lower mileage, single owner vehicles. You inspect them accurately, you put that up in a digital marketplace where you get a lot of buyers, and you get true price discovery through a digital marketplace. And once the car has been purchased, usually you do that very quickly in a very short space of time, like a few days, one day, perhaps, but a few days max, and then you deliver the car immediately to the buyer. And that's a very efficient process. It enables us to transact a car at a very low cost, and the seller gets the benefit of network effects, nationwide network of buyers, opportunity to sell the car to the franchise dealer network, and to a broader network of buyers as well. So, if anything, our capability there has just gone up because we've got, honestly, a lot more buyers online today than we had in 2018 or 2019. So, we've got a much more liquid marketplace. And I'd say... I'd also then say, these sellers have kind of got accustomed to not sending many cars to the physical auctions over the last three years, because they haven't had a whole lot of vehicles making it that far in the process. So, I think they have a preference to maintain the strongest possible upstream, you know, upstream online conversion rate. Obviously, a lot of this remains to be seen, but I think the digital channel has some unique advantages here, and I think those will be, you know, very evident as these volumes recover. Okay, great. Thank you. Thank you, Bret. Thank you. And our next question comes from Rajat Gupta with J.P. Morgan. Please go ahead. Great. Thanks for taking the question. I have one question on just the dealer consignment volumes. It was up 3% year-over-year. I think you mentioned Canada outperformed that number. Would you be able to give us some color on, you know, what the U.S. industry did on the D2D side, and any way to characterize, like, what your market share growth might have been in D2D in the U.S. in the third quarter? And I have one follow-up. Thanks. Thanks, Rajat. I appreciate that. So, first of all, when I spoke about Canada, I was speaking about Canada in the aggregate, commercial, and dealer. I actually think in the third quarter, our U.S. dealer-to-dealer year-on-year growth rate and our Canadian were very similar. In fact, I think the U.S. might have been slightly higher than Canada, just to be clear. So, if 3% is the average, I think the U.S. might have been slightly better than that. So, the number I talked about was the aggregate, commercial, and dealer. And then we don't break out the specific numbers by geography, Rajat. But, you know, the U.S. is the majority of our dealer-to-dealer volume for sure. ... Got it. And just, like, what, any way to characterize, like, what your market share might have been, growth there, in the US versus the overall D2D industry? Like, what the, the 3% would compare to, like, how much for the overall industry, in the third quarter? Rajat, there isn't a number I can share on this call. We do track market share vis-a-vis... You know, we track market share in lots of different ways. I mentioned the 70/30 physical versus digital, so we look at that and our component of that. In total, we also look at our share of just the digital piece. And I also think our competitors haven't reported numbers for the quarter yet, so, I don't have the full set of facts for Q3. I would say that our share has been fairly stable over the past period of time. And obviously, we believe that as a segment, the digital dealer-to-dealer segment will grow. We think we're very well positioned to gain share as part of that as well. Got it. Got it. That's helpful. And then just on the fourth quarter implied guidance, you know, it implies like $50 million in EBITDA. I wasn't sure, you know, if, if that is just like the seasonal drop that you're expecting from third quarter, and any way to dissect, how much of that is coming from the marketplace versus, AFC in the fourth quarter? Thanks. Yeah, Rajat, thanks for the question. I think, so yeah, you know, $50 million, it would imply $50 million on the low side. As I mentioned earlier, we're, we're feeling, believing that we would trend more to the high side, so, you know, call it $50 million-$60 million. There is seasonality in Q4, so it does certainly reflect that. And what was... I'm sorry, the, the second or third part of your question? Just, you know, if it's for $60 million, should we assume that the third quarter ADESA, sorry, not ADESA, the marketplace and AFC trends are similar sequentially? How was the- I would similar. Yeah, I mean, Peter highlighted in the Q3 result, marketplace represented 40% of our total adjusted EBITDA, and I think you could model, and assume something similar for Q4. Got it. That's helpful. I'll jump back in queue. Thanks for the questions. Thanks, Rajat. Thank you. Our next question today comes from Daniel Imbro with Stephens. Please go ahead. Yep. Hey, good evening, everybody. Thanks for taking our questions. Evening, Daniel. Peter, you mentioned maybe some of the benefits of consolidation in Canada, you know, the ability to innovate and grow. You gave some examples. Are those tools you introduced in Canada able to be exported to the U.S., maybe once that consolidation's actually occurred? In the U.S., and maybe if you give some other examples of, in the U.S., what are some of the opportunities you see that you could actually innovate, that you, that you couldn't do before the integration of OPENLANE? Good point. Thanks, Daniel. Good question. So, to your... The first part of your question, are those transferable to the US? I would say yes, to an extent. It's... So, I would characterize what we've done in Canada right now. We've migrated TradeRev ADESA to one consolidated platform, and we're obviously doing what we're doing in the US, getting to one consolidated open sale platform there, too. We still have to do more of our back-end consolidation to really get to one unified platform, and I spoke about that in my remarks. So, there can be some fairly significant technology lifts to make that happen. We're very focused on that. We've got teams working on that, and I'm confident we'll get there, and that will have a lot of benefits for our company. So, I'd say today, some of them are easy to transfer, some of them will take more work, but over time, it, it'll all become more transferable. This is how I would characterize that. You know, when I think about the U.S., I mentioned our dealer survey work. You know, one of the things I found really gratifying about that is the dealers were very positive about how easy our system, and, and I should say our systems, our OPENLANE private label system, but also our BacklotCars system, how easy it is to understand, how easy it is to navigate, how easy it is to do business on those platforms. And I think that's very encouraging because we put a lot of thought and effort in making sure they're easy. There's a lot of technology complexity. We try to keep that behind the scenes and not in front of the customer, make it easy for the customer. So, I think we got high marks on that. I'm excited by the opportunity to be able to put the off-lease cars into a much more liquid marketplace, one that has more buyers, and also one that has more established, I'll call, auction-type sale formats. Because historically, our private label and upstream business kind of operated more like a click and buy kind of situation. The car has a certain price, do you want to buy it or not? But there wasn't really a price discovery kind of channel. It more was a, "Here's the price, take it or leave it." But as we migrate to this new platform, we have that capability, but we also have true sort of auction-type formats that are widely used by buyers and sellers. So, I know that some of our commercial customers are very excited to start sort of experimenting in that and trying to drive, again, a higher conversion rate, get more conversion rate through this sort of auction-type price discovery format. So, that's one example. There are numerous others, but that would be one that I think could be impactful for us over time. Okay, that's helpful. And then maybe a longer term, just financial question. I know the market's upside down today, but as we think about a return of off-lease... historically, these were ARPU accretive. You maybe got $1,000, including recon, in revenue versus $200 in an open online auction. Without the recon maybe on the back end, I guess, should we expect just less ARPU accretion, or can you maybe help frame out the unit economics between off-lease and dealer-to-dealer as more of your volume shifts back to commercial in the coming years? Well, thanks, Daniel. It's probably hard for me to go into detail on that on this call. But what I would say in general terms is that those commercial up off-lease vehicles will tend to be lower ARPU, but higher gross profit. So, you know, we, you know, the revenue per car tends to be less, but our touch points on the car is also less, so we don't have as much direct cost against that. What I can also say is that business historically was very profitable, well beyond its current level of profitability. So, I'm confident that as those volumes return, it's, you know, unquestionably a good thing for our business. Mm-hmm. Will it change the ARPU metrics a bit? Yes. Will it improve the gross profit margin in percentage terms? I think yes. But it will absolutely improve the overall profitability of our company, for sure. Got it. But okay. We'll get more detail as we go. I appreciate all the color. Thanks a lot. Thank you, Daniel. Appreciate that. So, I think that's probably all, all the questions we've got time for, Rocco. Yes, sir. That's correct. Please proceed. Okay, great. Thank you. So, again, appreciate everybody's time today. Appreciate all the good questions. You know, as I said at the outset of this call, I'm pleased with the third quarter performance, and I believe the results speak for themselves. I will say that we're focused on closing out this year strong, executing our strategy as I've described it on this call and others, and growing this business in 2024 and beyond. I really appreciate you all joining today's call, and I look forward to updating you on our continued progress in our next call early in the new year. Thank you all very much. Thank you. This concludes today's call. You may now disconnect your lines and have a wonderful day.