Good day and welcome to OPENLANE's 2023 year-end 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. After today's presentation, there will be an opportunity to ask questions. To ask a question, press star, then one, on your telephone keypad. To withdraw your question, press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Mike Eliason. Please go ahead. Thanks, Ed. Good afternoon, and thank you for joining us today for the OPENLANE fourth quarter 2023 earnings conference call. Today we'll discuss the financial performance of OPENLANE for the year ended December 31st, 2023. After concluding our commentary, we'll take questions from participants. Before Peter kicks off our discussion, I would 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 issued this afternoon, which is also available in the investor relations section of our website. Now I'd like to turn this call over to OPENLANE's 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. Joining me is OPENLANE's Chief Financial Officer, Brad Lakhia, who will cover the majority of our financial and operating metrics later in the call. I will begin by highlighting a few key areas of our 2023 performance, but will focus most of my remarks on the execution of our company strategy, the broader industry environment, and our positive outlook for the future. In terms of results, it's clear that our business made significant progress in 2023. We are now beginning to see the positive impacts of our strategic investments in innovation and technology, our brand simplification work, as well as our diligence around costs. I believe our solid execution in the fourth quarter and throughout 2023 delivered strong and encouraging results that position OPENLANE for future growth and success. When I look at OPENLANE's consolidated performance for the year, a few things stand out. We grew our volumes, revenue, and gross profit. Notably, consolidated gross profit increased by $92 million, or 13% compared to the prior year. We beat our 2023 guidance by delivering consolidated adjusted EBITDA of $272 million. That was an 18% increase from the prior year. OPENLANE had another strong year of cash flow performance, generating $237 million in cash flow from operations in 2023. Our finance business, AFC, demonstrated solid performance in 2023 against a backdrop of declining vehicle values and a higher interest rate environment. With a continued focus on risk mitigation, the business grew responsibly and made a meaningful contribution to OPENLANE's bottom line. Our marketplace business made significant progress in 2023 and finished the year on a strong note. We grew fourth quarter volumes by 10% to 318,000 vehicles. This is the strongest year-on-year volume growth for OPENLANE in any single quarter for over 12 quarters. For the full year 2023, we grew marketplace volumes by 3% to over 1.3 million vehicles sold. Looking at 2023 overall, we grew revenue, revenue excluding purchased vehicles, and gross profit in the marketplace segment. Most notably, gross profit increased by over 20% versus the prior year. The strong revenue and gross profit performance, coupled with disciplined cost management, drove a significant increase in adjusted EBITDA from the marketplace segment, as well as an expansion in EBITDA margin. For Q4, marketplace adjusted EBITDA was $24 million, representing a more than 200% increase over the fourth quarter of 2022. For the full year, we expanded our marketplace adjusted EBITDA to $108 million, representing a $79 million increase over the prior year. I think these Q4 and full year results provide compelling evidence that our digital strategy is the right strategy, that we are executing well given the realities of our environment, that we are investing in the areas that our customers value the most, and that we are delivering a better, more simplified customer experience. Because of this, I believe OPENLANE is well positioned for increased competitive differentiation, continued growth, and strong performance in the years to come. Let me explain why I believe that to be the case, starting with the industry environment. First, based on what we're now seeing in the industry, I think it's increasingly evident that the industry environment that existed over the past few years since 2020 was likely an anomaly. Many of the factors that had a negative impact on our wholesale used vehicle industry are now starting to return back to what I would describe as more normal, not yet mirroring 2019, but trending in that direction. Manufacturers are able to build new vehicles. The supply chain constraints of the past few years appear to largely have been resolved at this point. There are more and more new and used vehicles on dealers' lots. Manufacturers are once again starting to use incentives to drive new car sales and leases, all of which are good news for the wholesale market and for OPENLANE, particularly as we look out beyond the current year. Here are some of the facts based on third-party sources. The new vehicle supply issues experienced during the pandemic and chip shortage have largely subsided, and new vehicle production increased over 10% in 2023. Though this is still below pre-COVID levels, sales and production are expected to increase modestly again in 2024. The amount of new and used vehicle inventory on dealers' lots is also increasing. Day Supply of new inventory was up approximately 30% in 2023 and also increased modestly for used inventory. We expect both of these to increase further in 2024 as well. Used car values remain structurally higher than pre-COVID levels last year but have been declining steadily from their peak in mid-year 2022. Now, let me be clear. Most experts predict that wholesale supply will grow only modestly in 2024, and we know that lease returns in the back half of this year and next year will remain low due to the lower volume of leases written in 2021 and 2022. However, I'm very encouraged to see that in the 2023 year, lease originations increased by more than 20% versus the prior year, and they also accelerated quarter by quarter throughout the 2023 year. In fact, lease originations in the fourth quarter increased by more than 40% versus the fourth quarter of 2022. Increased lease originations are driven in part by OEM's use of incentives, and OEM incentives increased in 2023, with the average incentive offered increasing to close to 5% of the vehicle transaction price by year-end. This was almost double what it was at the end of the prior year. Given our strong position in the off-lease segment, as the increased volume of leases written in 2023 and expected to be written in 2024 start to mature, OPENLANE will be well positioned for growth in this important part of our business. Additionally, as we now look at an environment with more new car sales but also with more new and used inventory on dealers' lots, we believe this will tend to result in a higher volume of dealer trades being offered for sale in the wholesale market versus being retained for inventory. This should positively impact dealer consign volumes as well. So in summary, we're seeing positive signs that the industry is trending back towards a more normal environment with far less volatility and greater predictability than we've experienced over the past few years. And I believe that over time, this will be very positive for OPENLANE. In terms of the execution of our strategy, I believe we are successfully executing our plan and advancing our purpose, which is to make wholesale easy so our customers can be more successful. During the fourth quarter, we completed the integration of our dealer and off-lease exclusive inventory into a single OPENLANE-branded platform in the United States. This was a significant step forward for our company. The transition was very well executed without any technology issues, customer disruption, or negative impacts to sales or customer retention. We are entering 2024 with one brand, one marketplace, and one customer experience in our largest market, the United States, and with a marketplace offering that is highly differentiated from our competition. The primary differentiation is inventory. OPENLANE includes the majority of captive finance companies, whose off-lease exclusive inventory is available first in OPENLANE before it is offered on any other digital platform or physical auction. OPENLANE also has a national selection of dealer inventory at every age, mileage, condition, and price point. This means that OPENLANE has an inventory selection that is unique and highly attractive to both franchise dealers and independent dealers. Each week, tens of thousands of vehicles are offered for sale on our U.S. OPENLANE marketplace, with a roughly even split between commercial seller volumes and dealer volumes. We believe that the network effect of combining all of our sellers, buyers, and vehicles in one place will ultimately help us generate increased demand, increased supply, a better marketplace experience, and ultimately better outcomes for our customers, commercial sellers, and dealer customers alike. Just one quick example. When we did the final marketplace switchover in November, we did it after regular business hours, and the very first off-lease vehicle sold in our combined OPENLANE U.S. marketplace was sold via mobile app at 10:45 P.M. to an independent dealer. From a dealer perspective, the feedback on our new OPENLANE marketplace has been very positive and reaffirming. Just over two weeks ago, I attended the National Automobile Dealers Association convention, and I met with many dealers ranging from large multi-store groups who are highly active on OPENLANE to smaller single-point dealer owners. A senior manager from a large national dealer group commented to me that the results they achieve on OPENLANE are the best of any remarketing channel that they use. Strong conversion rates, average days to sale of approximately one day, low remarketing expenses, and strong sale proceeds all help contribute to this outcome. The CEO of another medium-sized franchise dealership group described how he had been a reluctant convert to digital selling, but today has instituted OPENLANE as the preferred remarketing channel across all of his stores, and that he and his general managers are very pleased with the results. Having done that, this dealership group now wants to work with us to successfully purchase more highly desirable commercial inventory going forward. Another highlight of my weekend at the convention was a brief exchange with a dealer that owns three franchise dealerships. This dealer sought me out at our booth to tell me that OPENLANE has completely transformed his business in a very positive way, enabling his dealerships to monetize trade-in units in a way that was never possible before when they were selling to a wholesaler or through their local auction. In his words, creating profits for profits that never existed before. This is truly why we created OPENLANE and why we are so committed to making wholesale easy for our customers so that they can be more successful. So it's clear that our customers, commercial sellers, as well as franchise and independent buyers and sellers alike, are already experiencing the benefits of our 24/7 digital marketplace. And I believe that OPENLANE's value proposition is very straightforward. In addition to our differentiated inventory, our digital marketplace enables faster speed to sale. In fact, our average days to sell for dealer customers in the United States is approximately one day. Also, a larger always-on buyer base can help drive more bidding and true market price discovery for all our sellers. And buying and selling digitally on OPENLANE helps maximize financial outcomes while avoiding the unnecessary costs of transportation, reconditioning, and higher fees associated with physical auctions. With OPENLANE delivering fast time to sell, low cost to sell, and excellent price outcomes for their vehicles, it's not a surprise to me that our customers are excited about the launch of the new OPENLANE marketplace. We're working collaboratively with many of them to help them rethink their remarketing approach, increase conversion, and explore how OPENLANE's data and technology offerings can help their businesses more broadly. I'm very excited about the opportunity to extend and reinforce these already strong customer relationships. In addition to the significant United States launch, we also completed the rebrand of our European business to OPENLANE in the fourth quarter. We start 2024 with a single marketplace brand, OPENLANE, in all of our principal geographies: the United States, Canada, and Europe. Shifting to innovation, one of the positive benefits of consolidating platforms is the ability to accelerate product development and more quickly deploy those innovations to our customers. We continue to deploy features and functionality aimed at making the wholesale process easier for our customers, accelerating search, reducing friction, and increasing the velocity in our marketplace. A great example of this is our January launch of Visual Boost AI. Visual Boost AI is our new AI-powered technology, and it helps dealers quickly identify and assess vehicle damage and make better-informed buying decisions. And today, it is available on all dealer inventory across the OPENLANE marketplace in the United States. While we are only a few weeks in, we are already seeing the impact of improved inspection quality and consistency. In fact, dealers who toggle on the Visual Boost button are more than twice as likely to make an offer on a vehicle, and those offers help to lead to increased conversion over time. As I look back on 2023, I believe we accomplished some very important and foundational work. We start 2024 in a much stronger position with a stronger offering and more differentiation in the eyes of our customers. As I look to the future, I'm very excited for the opportunities that lie ahead, and I believe that OPENLANE remains very well positioned for growth. In the U.S., our unified OPENLANE marketplace is an unmatched mix of inventory, a large and expanding base of commercial and dealer customers, and is deploying data and technology to deliver a differentiated customer experience. Our analysis suggests we are continuing to gain share, and this market will remain a key focus of our growth in 2024 and beyond. In Canada, we are a clear leader with strong volumes, profitability, and cash flows. The business we acquired from Manheim is being integrated, and this will make a positive contribution to our results in 2024. Our European business is also performing well. In fact, it had a record year in 2023. And while Europe remains a smaller contributor to our overall results, we are expanding our relationships and our offerings to capture what we believe is a larger, longer-term opportunity to serve customers across Europe. Our finance business, AFC, remains a consistent and strong performer. We will continue operating our conservative portfolio while working to increase attach rates and identify new ways for AFC to help power the OPENLANE marketplace. We remain disciplined around our costs. We are now more asset-light and more digital than ever, and this has enabled us to expand our margins and to improve the scalability of our business. This, in turn, provides OPENLANE with the financial headroom to increase our investments in technology and innovation. Staying on innovation, with our teams aligned and unified, we are leveraging our best talent and technologies to benefit our customers. OPENLANE has been a digital leader in this industry for over 20 years, and we still consider ourselves disruptors. And we look forward to bringing our deep pipeline of innovation to market to the benefit of all our customers. We will continue to execute our plan. The results we presented today are a direct reflection of our strategy and our ability to execute that plan. We will retain this strong focus going forward, guided by our purpose, which is to make wholesale easy so our customers can be more successful. And finally, we're very optimistic for the future. With the industry fundamentals trending in a more positive direction for our business and our 2023 performance as a solid foundation, we believe that our talent, data, technology, and the innovative spirit of the OPENLANE team will enable us to deliver a compelling and highly differentiated offering to our customers, driving our growth and delivering shareholder value. So with that, I will now turn the conversation over to Brad for more detail on our 2023 results and our 2024 guidance. Brad. Thank you, Peter, and good afternoon, everyone. Before I begin, I'd like to remind everyone that all financial metrics I comment on at a consolidated level and a total marketplace segment level are on a net revenue basis, which specifically excludes the impact of purchased vehicle sales. Let me start with the marketplace. As Peter mentioned, for the full year, we delivered 3% unit volume growth, which drove a 6% increase in marketplace net revenues. For the year, commercial volumes grew 7% and dealer volumes declined 2%. While our overall dealer volumes declined 2%, we continue to deliver U.S. dealer volume growth that partially offset declines in Canada. Peter highlighted the fact industry fundamentals are normalizing, and in Canada, we experienced a more rapid decline in vehicle values in the second half of 2023, which resulted in a headwind to dealer volumes in the third and fourth quarter. That said, we see our geographic diversification as a clear strength. This is reflected in our leading Canadian market position and a growing, profitable European business. A combination of these provides us a unique ability to grow profitably in varied market environments. A couple of other additional top-line highlights that are important. First, as we discussed in our last call, our U.S. dealer volumes are growing and our U.S. dealer business is profitable. Second, in the fourth quarter, overall marketplace volumes grew by 10%, which reflects improving dealer wholesale fundamentals and improved volumes and mix within our commercial channel. For the year, auction fees per unit increased 4%, driven by fee increases, which more than offset the impact of declining wholesale used vehicle values and the impact of a higher proportion of commercial vehicle volume. As we've discussed previously, our digital fees are lower compared to physical auctions, and therefore our pricing and value proposition position us well to capture share from the physical channel while opportunistically increasing fees over time. Services and service-related fees remain a critical component of our revenue mix and are an essential component to delivering a leading digital marketplace solution to our customers. For the year, service fees comprise approximately 61% of marketplace net revenues. These include transportation, repossession, data, and technology-related offerings. In 2023, service revenue was up 5%, driven by higher prices, volumes, and improved mix. In the fourth quarter, service revenues declined 1% in the quarter, largely due to lower transportation services revenue. This was driven by changes to a key customer contract that now result in some revenue being recorded on a net commission basis instead of a gross basis historically. Looking forward, you can expect similar transportation revenue declines on a year-over-year basis through the first three quarters of 2024 due to this contract change. For your modeling purposes, we estimate the impact to revenue versus 2023 to be approximately $20 million per quarter in Q1 and Q2 and $13 million in Q3. It's important to note this is not a change to the absolute transportation service volume, profitability, or realized margins. The overall improvement in marketplace net revenue resulted in a 21% increase in gross profit on a full-year basis or a 560 basis point improvement versus last year. For the quarter, gross margins improved 750 basis points or 24%. On both a full-year and quarterly basis, these improvements resulted from the combination of improved volumes, fees, mix, and cost savings initiatives. Although gross margins are dependent on our mix of services and the mix between our dealer and commercial volumes, we anticipate the margin improvements achieved in 2023 to be sustainable. We see further opportunities for improvement as we continue to execute on our cost management initiatives and we realize the value from our integrated digital marketplaces, including higher volumes over time. As Peter highlighted, our marketplace adjusted EBITDA for the year was $108 million, and for the quarter, it was $24 million. That is a full-year improvement of $79 million and a $16 million improvement in the fourth quarter. As previously highlighted, this was driven by collective improvements in volume, price mix, and cost. Intentionally repeating what has already been said, as of the end of the year, we now have an OPENLANE branded, fully integrated digital marketplace platform in the U.S., Canada, and Europe. This unique and differentiated digital solution has the capability to further advance our dealer and commercial growth and will enhance our overall competitive advantage while better positioning us to deliver scalable, profitable growth within the marketplace segment. Turning to our finance segment, revenues for the year were up 5%, driven by a 4% increase in loan transaction units, higher interest income, and higher fee income. For the quarter, revenues decreased 4% versus prior year. Loan transaction units in the quarter were relatively flat, and higher interest and fee income in the quarter were more than offset by higher credit losses. Finance segment Adjusted EBITDA for the year was $164 million, down $38 million, more than explained by higher credit losses. Similarly, in the quarter, finance segment Adjusted EBITDA was $38 million compared to $49 million last year, driven primarily by an $8 million increase in credit losses. For the full year, our credit loss rate was 2.1%, and for the quarter, 2.5%. This increased loss rate was due to significant used vehicle value declines, interest rate increases, and tightening retail credit availability that impacted used vehicle retail sales. Going forward, we expect the first half of 2024 to experience similar loss rates as the second half of 2023. As we've mentioned previously, credit loss rates in this business will fluctuate over time, and like other financing businesses across many sectors, we are seeing higher loss rates compared to our 1.5%-2% targeted range. In fact, we are encouraged by the fact our competitive assessment confirms that our loss rates remain notably lower than our key floorplan peer. In the meantime, to mitigate losses and to continue to deliver leading returns, we will continue to manage a conservative and disciplined portfolio. We will leverage our leading risk management processes that are complemented by a high-touch customer service model. Turning to SG&A, consolidated SG&A for the year declined $15 million, reflecting the successful execution of our cost savings initiatives. SG&A increased $11 million compared to the fourth quarter of 2022, largely due to a $9 million increase in non-cash compensation. In the fourth quarter of 2022, approximately $9 million of non-cash compensation expense was reversed for performance awards that were no longer expected to vest. And as we've previously mentioned, certain duplicative transitional costs will no longer reoccur in 2024 and will help offset inflationary headwinds going forward. Moving to the balance sheet and capital allocation, consistent with prior quarters, we continued to generate strong cash flow. Cash flows from operating activities were $237 million in 2023. This level of cash generation demonstrates the value-creating combination of our asset-light, digitally focused marketplace business, and our leading floor plan finance business. Our cash generation has notably improved our overall liquidity position and further strengthened our balance sheet. In the quarter, our consolidated net leverage ratio increased to approximately 1x Adjusted EBITDA, largely due to the funding of our Canadian acquisition in December. Please recall, in 2023, we repaid $140 million of our 2025 senior notes and completed $22 million in share repurchases. Regarding the Canadian acquisition, the purchase price for this acquisition was approximately $103 million. The integration work is progressing well. We are migrating our existing Montreal operations to the acquired Montreal facility, and we are taking actions to sell our existing larger Montreal location. Although this sale process will take some time, we estimate the net proceeds from this sale will eventually serve to fund a meaningful portion of the acquisition. And as a reminder, the Montreal site is the only real estate we acquired as part of this transaction. We are migrating all other components of the acquisition to our existing vehicle logistics centers and offices throughout Canada. This includes integrating all shared support functions, business processes, and systems. In January of this year, we executed a new $175 million revolving credit facility. While not reflected in the year-end balance sheet and liquidity position, on a pro forma basis, this facility will provide several benefits. It will provide flexibility to debt fund our Canadian subsidiary at a level where we can more tax-effectively service interest expense. It will optimize our ability to fund seasonal working capital. Finally, it will improve OPENLANE's overall liquidity position, which provides flexibility to fund investments and other future commitments. Overall, our capital allocation priorities remain unchanged, and we will continue to prioritize the funding of organic investments in our core digitally focused business while also ensuring flexibility for high-return, complementary strategic opportunities, and shareholder returns. During the quarter, we did not repurchase shares, but we continue to have $125 million remaining on our share repurchase authorization. I will wrap up by addressing a few annual guidance items. We expect 2024 Adjusted EBITDA to be between $285 million and $305 million, driven primarily by continued improvement in our marketplace segment. This outlook reflects the industry update Peter discussed earlier, expected ongoing improvements in our margin structure, and the risk outlook for a finance business, which I highlighted earlier. We continue to target and benefit from the expected dealership from physical to digital. However, I want to remind you the second half of 2024 off-lease volumes will begin to see pressure based on low lease originations in late 2021 and into 2022. In terms of profitability and margins, this top-of-the-funnel off-lease volume headwind could be mitigated by improved revenue per unit or mix as we see a gradual increase in vehicles flowing to non-grounding dealers and our open digital marketplace. The remaining guidance metrics are presented in our earnings release. We expect operating adjusted earnings per share to be between $0.77 and $0.87. As a reminder, we add back non-cash acquisition-related amortization to calculate operating adjusted EPS. We believe this metric provides a more meaningful measure because of our company's acquisition history. Again, these components of the calculation are detailed in our earnings release. Finally, we expect CapEx to be between $55 million and $60 million in 2024, which is a slight increase compared to 2023 CapEx of $52 million. This incremental investment will focus on advancing and unifying our marketplace technology stacks, and that translates in our ability to drive faster, more efficient innovation, which results in making wholesale easier for our customers. With that, I'll turn the call over to the operator for questions. Thank you. We'll begin the question and answer session. To ask a question, press star, then one on your telephone keypad. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. The first question today comes from Rajat Gupta with JPMorgan. Great. Thanks for taking the questions. Just wanted to follow up on the off-lease commentary. What's going to be the key driver of the commercial business this year? And do you see the net impact of perhaps increased return rates on the leases versus the lower off-lease returns in the second half being a net positive or a headwind for the company? And then where is the incremental holding growth going to come from on the commercial side? And I have a follow-up. Thanks. Thank you, Rajat. So I think the off-lease segment obviously is a historical strength for the company. It's been really challenged the past few years because of what I call the equity gap, vehicles being heavily in positive equity at the end of lease and getting bought out by the consumer, by the grounding dealer. So that period has been a challenge over the past couple of years. But we've seen that equity gap really decline pretty steeply and rapidly over the course of the last 9-12 months. And it's now at the lowest it's been, certainly for the last, I'd say, 18+ months. We are seeing increased volumes of off-lease vehicles being returned at this point and entering the remarketing funnel. So that is a positive for us in terms of volume. We're also seeing those vehicles flowing more deeper into the remarketing funnel. They're not all getting purchased by the grounding dealer. So that is another positive. That impacts mix and ARPU. So a little bit of that was evident in Q4. I think there's more of it probably happening in 2024. And again, we would expect over the long run, this will look much more like normal. And normal would be most off-lease vehicles at the end of the lease do not have any positive equity. They have negative equity. They get returned, and they enter the remarketing process. So to your question on could that trend, which we're now seeing, offset the sort of top-of-funnel impact of fewer vehicles maturing because of lower Lease Originations? Rajat, it's possible. It's difficult to model it with precision because we don't know the exact residual value status of all those vehicles. But at the present moment, I'd say I'm encouraged by what I'm seeing, and I take that as a positive. We're going to have to see how it trends in the second half of this year. Probably the most positive thing before I wrap up on off-lease vehicles here is the increased lease originations. A 20%+ increase in lease originations last year and a 40%+ increase in lease originations in the fourth quarter. This really tells me that leasing is going to be an important part of the way vehicles are brought to market in the U.S., as it has always been. And it's going to be a very important part of our business going forward. So it's very encouraging for me to see that trend. I know we're going to have to wait a couple of years for some of those vehicles to mature, but I still think it's a significant positive for the company as we look to the future. Got it. That's helpful color. And just on the full-year guidance, I think you mentioned that the EBITDA improvement is going to be primarily driven by the marketplace. I mean, should we expect AFC to grow in 2024, or do you think given the exit rate on the credit losses, should we model that business down in 2024 or flattish? Just curious if you can give us a little more color on the AFC outlook for 2024. Yeah. Yeah. Hey, Rajat. Hey, thanks for the question. So yeah, I would say for AFC, I certainly wouldn't want you to model it down for the year to just head that off directly. We actually see that business going forward year-over-year in terms of how we're kind of modeling it and planning it ourselves. But going forward, modestly, as I said in my comments, first half losses, not only a loss rate, but in terms of dollars, we expect that to be fairly similar to the second half of 2023. And we, as you can imagine, have a pretty good line of sight to that right now. We expect those loss rates to moderate in the second half of 2023, which year-over-year should provide us a benefit. Then I would also just say, as we alluded to in our comments, we're going to continue to look to grow that business. We're going to do it in a very disciplined manner, very conservative manner. It's a high-performing business from a cash flow and an earnings contribution. We'll continue to look to grow that business. Got it. Great. Thanks for the color. I'll jump back in queue. The next question comes from Craig Kennison with Baird. Hey, good afternoon. Thanks for taking my question. I wanted to follow up on the prior topic. Just Peter, you were talking about off-lease and the equity gap, and that seems to be narrowing. I'm curious, based on the work you've done, how long until we get to that normal environment where a car comes off-lease and there's actually negative equity if car prices stay about where they are today? Craig, it's a good question. It's hard for me to predict it with precision, but I'd say a number of things are relevant as we think about that. One is where are used car prices trending? It's been interesting to me that in the first few weeks of this year, they've continued to trend slightly downwards. So I still think there's, for the most part, more downward pressure on used vehicle pricing than upward at the present time, although I'm not expecting a significant decline over the course of 2024. And then the second point is where are the residual values on the leases, lease contracts written? And when I think of that, you got to think now we're starting to lap leases that were written in early 2021, mid-2021. That's a period when we saw a rapid run-up in new vehicle transaction prices. So that would tend to correlate with higher residual values on those contracts. So I think the equity gap is being compressed from both directions. And I expect it to normalize in the not-too-distant future, but I hesitate to put a specific time on that. If you were to look at the cohort of leases made in late 2022 when used car prices really peaked, is it fair to look at those, that cohort in particular, and say those look to be candidates for having significant negative equity? Craig, I can't really sort of shed more light on that than I've already shed in my answer. I guess there's one possible complication, Craig, that is there's fewer off-lease vehicles at the top of the funnel. There could be increased demand on the prices on those vehicles that could sort of lift the prices on those vehicles. That could cause that equity gap to not narrow as steeply as one might like. So there's just a lot of moving pieces here, Craig. I think here's what I would say. We've seen the equity gap come down a lot. We're seeing more vehicles enter the remarketing funnel. Based on my conversation with our commercial customers, they expect those trends to continue and that percentage of vehicles entering remarketing to go up. That has the potential to offset the top of the funnel that we are aware of. Yeah. Thank you very much, Peter. And then maybe if I could, on the dealer side, I believe it was down just a little bit versus last year. I'm wondering if you're still adding dealers, and if so, are you seeing fewer transactions per dealer for any reason? Yeah. As Brad mentioned, we saw some headwinds in the second half of last year on dealer volumes in Canada. In the very strong market of the prior year, there was a lot of export volume from Canada into the U.S., and that drove strong demand in Canada and drove liquidity in the dealer segment. So that kind of went away, I'd say, largely in the second half of last year. That was a little bit of a headwind. But we continue to add customers. Our customer base on D2D continues to grow. Our U.S. D2D volumes grew in the fourth quarter. And I'm, again, as I mentioned in my remarks, very pleased with the very positive feedback that I've gotten from dealers who are active customers and using our dealer-to-dealer solutions both on the sell and the buy side. So I feel very encouraged about our offering. I think it's very competitive vis-à-vis all other offerings that are out there and very sticky with its customer base as well. Yeah. Peter, I was just going to add, Craig, on the Canadian point, what we're seeing in Canada is not unique to us. The data, the market intelligence that we have suggests that's more broad-based. So I just want to make it clear that it's not unique to our business there. Great. Hey, thank you. Thanks, Craig. The next question from John Murphy with Bank of America Merrill Lynch. Hey, good evening, guys. First question, Peter, you guys talked about the dealer business in the U.S. being up a lot, but I mean, total is down. So I'm just curious how much dealer business was up in the U.S. And then also, conversely, on the commercial side, where the strength is really coming from. I know we're talking about off-lease, but there's rental, government, and commercial, commercial, commercial on the fleet side of the business. Was there any kind of particular strength there where these companies are finally getting back into auction lanes and selling as opposed to being buyers? Yeah. So thanks, John. So on the dealer side, I said dealer volumes were up in the U.S. I didn't say up a lot. I just wanted to be clear, but they were up in Q4. And I believe, based on our analysis, we gained share in the dealer segment in Q4 as well when we compare our dealer volumes versus what we saw in other data sources. In terms of commercial, we're seeing growth in commercial in both the U.S. and Canada. So I think it's fairly broad-based. I just spoke about off-lease vehicles. We're seeing increased consignment, more vehicles entering the funnel, flowing deeper in the funnel. So that's a positive for us. It was a positive in Q4, and we think that's the beginning of a trend. In the industry, there's also been an increase in repossession volume, John. Most of those repos are sold at physical auction. I want to be clear on that. So we don't sell a lot of repos in our digital model yet, although we are piloting with some customers and having some success in that segment as well. But the volumes there for us are still quite small. But repo volumes are up. Off-lease volumes are up. And we do sell rental cars as well for some of the major rental brands that you're aware of. And those volumes have been quite strong for us as well. Just lastly, is there any potential upside in auction fees as we see the dealer business maybe strengthen in the coming years, or is this 280-ish number kind of the upside, the upper limit? I mean, how much upside is there potentially from mix and potentially even fee increases over time? I think there is upside on price. We're competitively priced, I believe, vis-à-vis alternative channels. It's evident to me that buy fees at the physical auction side of the business have increased pretty materially over the past few years. So I think we're well-positioned there. John, I'd say I like where we're priced right now. I think we give our customers a great value proposition in terms of the speed of sale, the low cost of sale, and also the outcomes they achieve on their vehicles. And as Brad mentioned, well, you see our consolidated results, but our D2D business in the U.S. was profitable. We did increase price a little bit last year in that segment, and we've got some further opportunity to do that, but we don't have anything immediately planned. Great. Thank you very much. Thank you, John. Our next question comes from Gary Prestopino with Barrington Research. Hey, good afternoon, everyone. Most of my questions have been answered, but with the provision for credit losses going up as much as it did, could you tell me, was that more systemic to your Canadian business versus your U.S. business? I know they're having really a challenging economic environment up there. So could you elaborate on that a little? Yeah. Yeah, Gary, it's Brad here. Thanks for the question. I would say there's nothing, I would say, that we're seeing from a loss perspective that's unique to Canada versus the United States or vice versa. It's nothing systemic or unique. I would say, as we think about each market and our underwriting and risk appetite in each one, we do look at them differently. As we said, the vehicle value declines in Canada were a little bit more severe than what we see in the U.S. So from our financing business perspective, that's a factor we look at in not only our underwriting environment for potential new customers, but also in our risk management processes. In this kind of environment that we're in now, have you done anything to increase your lot checks on a weekly basis just to keep tabs on these vehicles? Yes. More activity there. Certainly, have stepped that up. And that's been true really throughout 2023, and we'll continue. I would also just add, Gary, we have really also driven a lot of advancement in our analytics over the past several years. And our analytics have better positioned us to allow us to move accounts that are signaling higher risk to move them into what we call a wind-down status, which allows us to significantly mitigate losses versus letting them go to a full delinquent status. So our analytics, our risk management processes are allowing us to lean into some of those cases better than they historically have. Thank you. Our next question comes from Bob Labick with CJS Securities. Yes. Hi. It's Pete Lucas for Bob. Most of my stuff has already been addressed here. But just, I guess, as it relates to just one question, as it relates to AFC, how do you see net interest income and spread and fee income per unit trending in 2024 and any color you can give there? Yeah. Thanks for the question. I think, Bob, let me start by just reemphasizing the point here. This business continues to be a strong performer. The portfolios that we have and our yields across the portfolio continue to be strong. If I go back to 2019 and through the years here, the overall yields have been, I would say, fairly consistent overall. That's both on a fee basis and an interest, kind of a net interest basis. So the portfolio continues to perform well. I would expect those yields into 2024 to not change materially at this point. Very helpful. Thanks. Our next question comes from Daniel Imbro with Stephens. Yeah. Hey, good evening, guys. Thanks for taking our questions. I wanted to ask about maybe on the unit economic side. As we think about the shift back to commercial, historically, those off-lease cars carry a lower revenue per unit, maybe a lower gross profit per unit if they get taken down by the grounding dealer. Curious, as you think about the mix shift into next year, maybe a little more commercial in the first half, how do you think about that impacting revenue per unit, but really gross profit per unit, probably more importantly, given those changes in sources? Yeah. Thanks, Daniel. So I'd say in commercial, particularly in our off-lease and those off-lease volumes, as those move down to what we would call the remarketing phases of the funnel, we do get more RPU. But I would say from a gross profit perspective, it also is more accretive to our gross profits in that channel or in that line. It's a more fixed-cost-based business for us. And so the incremental revenue that we get from that, particularly as it moves to the remarketing phase of the funnel, is more accretive. Yeah. Dan, if I could weigh in just to sort of highlight, I mean, every incremental vehicle is a benefit for our company. And this part of our business has a very high gross profit as a percent of revenue, which I like, a strong gross profit margin. But I guess, at a high level, the opportunity here is significant because I'd say, unlike the pre-COVID era, we now have a much more liquid online buyer base than ever before. We have more active buyers 24/7 in the marketplace. I talked about the days to sale for the dealer segment of, on average, about one day, high conversion rates in the dealer segment. There's an opportunity to replicate that on these vehicles that enter the open marketplace on the off-lease side. Historically, the conversion rates there were lower. So that's a real opportunity for this company. Obviously, working in collaboration with our sellers, the volumes were very, very small. A year ago, they're starting to get bigger. Our sellers see that. They're very focused on how can we work together with OPENLANE to maximize those conversion rates. So we're exercising the playbooks there. So this is an exciting area of opportunity for us. And once cars get into that stage of the process, the open sale, those are high RPU units, high-margin units, and very profitable for us as a company. That's great. And to follow up quickly on that one, so they're higher RPU even without reconditioning? Because I feel like, pre-COVID, a lot of that higher RPU when they moved down the funnel was the recon, right? So are they still higher RPU even since you sold the recon assets? Yeah. They're higher sort of buy-and-sell fee kind of RPU. Auction fees is what I'm talking about, Dan. So yeah, we don't do recon. We do, obviously, the auction fees, the buy-and-sell fee. These are typically higher-value vehicles, $25,000, $30,000 and up. And there's also transportation revenue. The other thing I would like to add here, I talked about sort of the unique offering that OPENLANE represents in the marketplace. So now that we have the commercial and dealer volumes together in one marketplace, and in parallel with that, we're starting to see more of the commercial volumes flowing into that marketplace, that's having a real positive impact on our buyer base in that marketplace. Those off-lease vehicles are highly attractive to franchise dealers. So when I look at the sales report every day and see who's buying those cars, it's much more sort of franchise dealers buying those cars versus, on our dealer-to-dealer segment, the buyers are typically independent dealers. So it's broadening the mix. It's increasing the appeal of the marketplace to a core customer constituency, franchise dealers. And then, as those dealers get to experience the power of this marketplace, they, in turn, are more interested in, "Okay, how can I leverage this to benefit my dealership on the sell side?" So again, this goes to the strategy of what we're trying to execute here. But I think we're seeing the evidence of this. I think it's going to be very positive. And again, I think we've got a very, very strong offering and a very differentiated offering out there for our customers at this point. Appreciate that color, Peter. And then quick follow-up, did you guys say - I might have missed it - how long you expect the volume challenges to persist in Canada? We're seeing some, I guess what I'll say, in Canada, we're seeing increases in commercial volume already, Dan, quite solid increases. We saw increased commercial volume through much of last year, and that's continuing. We have the benefit of the acquisition. So those are incremental volumes. The challenges in Canada have been on the dealer consignment side of the business. And as best we could determine, some dealers are just kind of the industry term is upside down on their inventory. They've got vehicles in inventory. They paid a certain price for them. They're not able to attain that price, but they're hesitant to wholesale them and take the loss. They're trying to retail their way out of the vehicle. So it's really been in the dealer consignment segment. We've started to see it improve a little bit here in the last few weeks. But Canada is sometimes a little later for the spring market to really impact up there. So we'll have to see how it plays out over the remainder of this quarter and into April. Great. Thanks so much, guys. Thanks a lot. Thanks, Daniel. Okay. I think we got time for one more question. Thank you. And our final question comes from Bret Jordan with Jefferies. Hey, good morning, or good afternoon, guys, evening. Hey, Brad. 2.5% loss rates. Is that about as high as we expected to move? I think it was almost back to like 2009 great financial crisis levels there. Obviously, the used retail market's challenge right now. Given how short-term these are and your control over your borrower, should we expect it to cap out around here? Yeah, Bret. So listen, I'll kind of just maybe reiterate a little bit of what I said. I think the first half of 2024, where we have a pretty clear line of sight at this point, will be similar to the second half, including that 2.5% that we reported for Q4. So I think to say that it's going to cap out, difficult to kind of commit to that or say that affirmatively. But if you go back to the great financial crisis, I think the loss rates were a lot higher then. I wasn't with the company then. I don't know that I could quote them off the top of my head, but I think they were quite a bit higher than 2.5%. I even think if you go to the heart of COVID, mid-2020, they were probably around this level or about 3%. So we don't expect them to get back to that point, but it's difficult to predict. I say what I said earlier. The second half of 2024, we do expect it to moderate. Okay. And then on the physical asset, sort of to Daniel's question about as you go down the funnel, were there commercial or particularly off-lease sellers that liked having that opportunity to have a car refurbished prior to sale? I guess, as you've converted to digital only, is there volume that really does require a physical asset, or is everybody's pretty much transferable to this platform? Probably different remarketers would have different opinions on that question. I guess what I would say to that, Bret, is here's what I know is clear. Our sellers are commercial sellers and dealer sellers are really focused on a number of important metrics when it comes to sell a car. How fast can I sell the car? Because that's holding inventory cost is depreciation, cost of capital. Well, the digital marketplace wins on that. We sell the car within one day or two or three of it being returned. So we're a clear winner on that. Second of all, what does it cost me to sell the car? And again, in terms of expenses, the digital channel is the cheapest. There is no transportation cost. You don't pay those higher fees. You don't pay for that recon. And then the third one is, what are the proceeds that I get from the vehicle? And again, I think we look at our dealer segments, and we look at, frankly, my discussions with commercial sellers. OPENLANE typically was the highest grossing channel that those commercial customers had. So I think we're a strong performer on the three core dimensions that customers are concerned about on the sell side. Now, in the past, yes, vehicles went to physical auction because that's where the market was. And when they're at physical auction, it made sense to recondition them because you spend $1, you get $1.50, that type of equation. But the question right now is, if there's a liquid demand base online today that'll buy this car today, is it really worth your while to send that car to a physical auction to sell it 21 days from now and potentially get some benefit from recon? I don't know. It feels like a risk that that customer will take. So I think different customers will have different points of view. But what I know is many of our customers are keenly interested in, how can I drive up conversion in the online channel because that's my highest performing channel? So we're going to work with our customers on that, and we're going to work with them on not just this quarter, but every quarter and for years to come to maximize these conversion rates and gain share in this industry. Great. Thank you. Great. Okay. So I think that's it. Closing remarks here. Okay. So again, thanks, everybody. I appreciate your time today. Appreciate all the questions as well. As I said at the beginning, I'm pleased with our fourth quarter and full-year performance. We delivered volume growth, revenue growth, $272 million of consolidated adjusted EBITDA, and more than $237 million in cash flow from operations in 2023. The improvement was driven by the marketplace business, which increased its adjusted EBITDA contribution by $79 million last year to $108 million for the full year. We intend to build on this strong marketplace performance in 2024, and we also expect our finance business to be a meaningful contributor to our overall results in 2024. In addition to the financial performance, I'm pleased with the brand and platform consolidation work to be accomplished in 2023. OPENLANE enters 2024 with a highly differentiated offering, one brand, one platform, with dealer inventory and exclusive commercial inventory integrated into one marketplace. This benefits all of our customers, differentiates us versus our competition, and strengthens our offering going forward. I'm also pleased with the trends we're seeing in the industry. While we believe that the 2024 industry recovery and wholesale volume will be modest, we see that dealer inventory is increasing, prices are stabilizing, and lease originations are increasing once again. All of this is good news for the future of OPENLANE. We're focused on continued strong execution in 2024, advancing our strategy, making wholesale easy for our customers, and growing the business this year and for many years to come. Thank you all for joining us today's call. I look forward to updating you on our continued progress on our next call. The conference has concluded. Thank you for attending today's presentation. You may disconnect.