Thanks for coming, guys. We have OPENLANE here. One of the largest players in the wholesale used vehicle and auction space in North America and Europe. And has a fully digital approach which is fairly unique. And they also operate a financing business through AFC. And so we have Peter Kelly here CEO and Michael Eliason. And we also have James here as well. So I guess you guys have some opening remarks if you wanna. Great. Sure. Go through. Yes. James Coyle is our President of North American Marketplaces. So delighted to be here. Thank you for your interest in OPENLANE. So I just got a few opening remarks and then we'll go to Q and A and discussion. So OPENLANE we're a leading wholesale digital marketplace for used vehicles. Okay? Last year we sold 1.3 million vehicles. Just over 90% of that is in North America U.S. and Canada. But as Billy mentioned we also have a profitable and growing business in Europe. Our customers include tens of thousands of dealers both franchised and independent in North America as well as commercial sellers ranging from the largest OEMs and captive finance companies automotive finance businesses rental car company Jeep business etc. Our business as Billy mentioned operates in two segments. I think of our digital marketplace business as our core business. That's OPENLANE. We also have a finance subsidiary AFC that provides floor plan financing to independent dealers. Independent dealers are a core buyer audience in our marketplace. We have a large addressable market which in normal times we estimated about 15 million units sort of wholesale in North America. North America can wholesale 15 million plus units in normal times. For the last few years it's been below normal. COVID and various supply chain impacts and pricing impacts caused the wholesale market to be substantially below normal. We now believe we're on a recovery path back to a more normal market size over the coming number of years. OPENLANE is committed to a digital asset-like model. We believe the digital model delivers great outcomes for our customers. Our customers on the seller side are looking for speed of sale, low cost of sale, and best proceeds for their vehicle. We think the digital delivers all three. Buyers are looking for convenience, condition reports they can trust, access to nationwide pool of inventory. Again, we think digital addresses that very well. We believe that the digital model will continue to gain share versus what I call the legacy physical model. That secular shift of share from one model to the other is continuing over time. Our business is growing. Marketplace volumes grew 10% in the fourth quarter. That volume of vehicle transactions grew 10% in Q4. Revenue last year grew 8% over the prior year. Our business delivers strong earnings and cash flows. Adjusted EBITDA of $272 million last year. That was 18% up on the prior year. Cash flow from operations last year was also very strong at $237 million. Okay? Low leverage. Current leverage is approximately 1x Adjusted EBITDA. And we see a great opportunity for continued long-term volume shift. All right. There's a terminal marking there. As more and more of the industry moves in a digital direction. So there's a secular shift as the industry moves from physical to digital. And there's a cyclical recovery as the historically low volumes of the last few years recover towards normal. So there's two different growth drivers in our business. And obviously we're driving that to our strategy as well. So in terms of our growth strategy, we're looking to continue to grow our share and especially in the United States from the shift in dealer principally dealer-to-dealer volumes from a physical to digital model, driven by the benefits I talked about: fast time to sale, low cost of sale, great outcomes for the seller and buyer. We're looking to grow in our commercial business principally through the cyclical recovery in commercial volumes. Off-lease vehicles in particular were very very low the last few years. That's a big segment for us. We're now seeing an environment where lease originations are increasing again. Where consumer buyouts of off-lease vehicles are declining. That means more off-lease vehicles are starting to flow into the wholesale channel. That's very positive for our business. Then we have obviously a finance business which again I would call that more of a, you know, mid-single digit kinda growth opportunity there. But a strong cash flow business and a growing business there as well. You know when I talked about our North American business, our Canadian business in Canada, we are the market leader. We see perhaps a slower growth opportunity in Canada but a very strong business in terms of market share, unit economics, profitability, and cash flow in Canada as well with growth opportunity there for us as well. You know, one other thing we've noticed as we've moved to more digital to digital model, the business is very very scalable. The costs tend to be more fixed in nature, and the incremental returns as volumes grow are very strong. So we see this, you know, nice intersection of volume growth, revenue growth, but also a very scalable digital asset-like model. And finally, we're committed to being innovative, an industry leader, helping make wholesale easy so our customers can be more successful. Whether it's OEMs, independent dealers, franchised dealers, everybody's looking to be more efficient, leverage technology, leverage artificial intelligence, things like that. We're here to help them do that. So we invest in innovation and technology. James drives a lot of that through our product and technology teams at OPENLANE. And we're very excited about the opportunity ahead. All right. Great. Well, you already answered a bunch of my questions. So as we go through it, I'll ask some questions. And if you guys have questions, you can just hop in as well. I guess we can start off just on the volume standpoint. You guys did 1.3 million, as you mentioned, for the marketplace. What are you expecting for this year? And I guess in terms of like the mix from dealer to dealer and commercial, what are you expecting on that part? Yeah. Thanks, Billy. You know, I didn't speak about the mix between commercial and dealer. But last year our mix skewed slightly more towards commercial close to 50/50. But you know low 50% commercial high 40s dealer last year. We see a particular opportunity right now on the commercial side because commercial volumes have typically been closer to 60-70% of our volume. But that has been very much under pressure for the last few years again because of the situation that existed with off-lease vehicles. Used car values are very high. The market value of the vehicle was higher than the residual value of the lease. And that meant that at the end of the lease the consumer didn't have much motivation to return the car. They just buy it out. If they didn't buy it out, the dealer to whom they returned it bought it out because there was a lot of equity in that vehicle to take advantage of. But that situation is now changing. We're seeing consumer buyouts drop. We're seeing more of the vehicles flow. We call it the funnel deeper into the funnel deeper into the remarketing process where we get the chance to make more revenue. We think that drives some growth opportunity on the commercial side. Dealer volumes are tied more to retail unit volumes which are fairly steady, slightly up versus last year. With new car sales, consumers will have trade-ins. Then the equation is how many of those trade-ins does the dealer want to retain versus wholesale. So on the dealer side we see it more as the secular shift as we encourage more and more dealers educate them on the benefits of digital and transition the business from a sort of physical model to a digital model. Okay. Great. And I guess to go along with that you answered it a little bit. But just on supply like what are you seeing in terms of trends in the different channels? So like you said leasing is improving. What do you expect needs to improve the most I guess to really get the flow going a little bit more? I'd say the segment that's been slowest to recover is off-lease. And that still has the greatest distance to go. So even though we're seeing improvement, we're still very below normal. If I go through the other segments, dealer volumes, dealer consignment volumes are still down 15-ish% versus pre-pandemic level at an industry level. But that's, you know, that's not that much relative to what we've seen in some of the other segments. Repo volumes have been quite strong the last couple of years, last year and a half. So they're back to normal. Repos sell principally at the physical auction channel for various logistical and regulatory reasons. We have some businesses that we do make profits in that repo segment. But we don't sell a lot of repos online. We're seeing increased volume from rental car players as they're able to get new vehicle allocation from manufacturers and replenish their fleet. That means they can deplete their older higher mileage vehicles. But we've seen a good recovery again in repo and fleet. Dealers have been fairly steady. The segment that's been the hardest hit is in off-lease. And we're seeing I'd say the beginning of a recovery there in OPENLANE. Okay. Great. You also already talked about this a little bit. But can you go into a little bit more depth about the equity gap and how that impacts like leasing volumes for you guys? How How it impacts the business? Yeah. What the trend has been recently? Yeah. So OPENLANE is the market leader in operating off-lease remarketing programs for most OEM brands in North America. Okay? And the program we offer you know it varies a little bit by OEM brand. But the broad brushstrokes of it are very similar. An off-lease vehicle gets returned. It's first offered to the grounding dealer the dealer to whom it's returned. And then if that dealer doesn't buy it it's offered to the franchise network in that brand. And if those dealers don't buy it it's then offered in our open marketplace to all dealers. So that's kinda the steps of the waterfall. And if we don't sell it there then it's typically moved to a physical auction and sold there. Okay? So it's a four-step remarketing process. And the revenue opportunity sort of increases as you go down that stairs. You know the revenue per vehicle still goes up. So what we saw, I'd say, in sort of mid-2022 early 2023 frankly consumers were buying out. Consumers? Yeah. 80-90% of vehicles. You know, between the consumer and the dealer. And then whatever wasn't getting bought out was typically bought out by that very first year to where the vehicle landed. 'Cause they had no inventory. And and they had a good opportunity to buy this car. The value of the car was higher than residual. So we're seeing that shift now. In normal times consumer buyouts are more like 20-25%. And today we're somewhere between 90 and 20. It depends on the brand. We're still probably closer to the 90 than the 20. But it's coming down. And as you imagine for us if that 10% expands to 30 that's a threefold increase in supply for us. So that's pretty meaningful even if historically we're used to getting 70. It impacts our business very positively. The gap's gone down every quarter for the last three-four quarters. Yeah. Great. And then I guess on supply, continuing on that part we've been talking a lot about in our research about how late model vehicles are, there's kind of a bubble there, right? Where there's a big glut because of the lack of production over the last few years. Right. Do you and I know you guys operate across the age spectrum. But do you guys have any sense in terms of when you think the volume there will really start to inflect positively? Yeah. I guess how does this impact your business? I think what I'd say there Billy is that's a reason why we the recovery will be gradual. Because there was fewer vehicles produced in 2021 2022. Recovered pretty much back towards normal in 2023. But there was a deficit of production. With that there was a deficit of leases originated. Right? So there's a couple of sort of structural things that continue to play out over the next year or two that delay but otherwise be a I think a speedier recovery. But I still think there's a recovery. Okay? I think that's another reason as well why I think used vehicle values while it while they have declined about I think 20% from their post-pandemic highs they're still 30% give or take higher than pre-pandemic levels. But I don't think they're gonna drop back down to those levels. because there is this sort of structural deficit of similar late model vehicles obviously with an inflation for a few years since then. So we see slight downward pressure on used vehicle values. But nothing you know we don't see dramatic unraveling of used vehicle values from their current levels. Okay. Yeah. We're thinking similar. And then I guess we can maybe shift a little bit to your digital-only strategy. So I mean this is pretty unique and you got to tout it how it really benefits the consumer or not the consumer, your customer the dealers. What are the benefits you've seen for both dealers and your customers and then your business from going to like this one OPENLANE online platform where you can kinda see everything all at the same time? What are the benefits there? Well, so we have a two-sided marketplace in Canada, Europe, and the US. And so, I guess the first thing is kinda the consolidation. You don't really wanna have multiple sites in a two-sided marketplace, right? You wanna aggregate your supply and demand at one place. So that was kinda the impetus for the start. You know we were put together through acquisitions. And so we had a lot a lot of brands. And so, kinda coming from, I came from Amazon. You always wanted to have all of your supply and demand at one place. And so I think we kinda saw four benefits. So one, getting all the inventory at one place, we thought would really improve our CX. We had two sites in Canada, three sites in the US, and two sites in Europe. So we went down to one in each region. So I think that was sort of one. And two it just simplifies the experience for customers. You're not going to three places. In some cases if you're buying off-lease cars you can go up to 10 or 15 places because you know original lessors each have their own sites as well. So the bottom of that funnel all kinda comes into the same place then. Two it just reduces our operating costs right? We have technology teams for each site. And we were able to split that down back office cost as well. We had back office teams supporting each one of those businesses which we could then put together. So that was the third. And then you know we see it further consolidation of business processes you know as we go into the future. So you know when we look at the digital model versus physical you know we still have physical facilities in Canada. You know when we sell cars digitally just from the time it goes on the site until it sells until someone gets the car it's just so much faster. You know and if you look at a car that goes you know like an off-lease car that you know sells right away versus going all the way to physical auction we talk about 25 days. You know in some cases for the whole process. A month. And so I think when you're trying to maximize cash you know the time value of money is just it's a really big deal. And we, you know, in Canada was the first place we were, you know, entirely digital. And you know we haven't seen any erosion in conversion. We haven't seen any loss of customers. In fact you know when you have an auction running a physical auction plus digital together you know the physical auction takes a huge benefit of having all those online customers right? You get way more buyers when you have the digital experience. And we think it's been a good strategy for us. We also obviously like the gross margin impact it's had on our business. Cool. Okay. So we can kinda go a few different directions here. Maybe continuing with something you just mentioned about the technology. What are some of the product initiatives and features you guys are kinda working on and putting in? What are the biggest I guess initiatives that you think are really having a positive impact for the experience for you guys? Well, a lot of people always ask about AI first, I feel like. I figured that would come up. Yeah. We just view AI as another type of technology. You know we see a lot of applications for you know customer facing and a lot of internally focused like ops projects. You know think some of somebody's calling in you're trying to figure out where the car's at. Can you you know go through a whole bunch of different you know shipping information in our systems and kinda hold the answer really quick. I think from a front-end consumer facing perspective we have an AI-enabled inspection right now that shows visual damage on cars. And you know we believe we're the first to market with a viable solution that allows you to sort of toggle on and off with AI. And you know I think many people probably thought ACV would get there first. I think we were the first to market. We see we've seen higher conversion on cars. And if you think about it our core marketplace was BacklotCars which was a lot of older high mileage cars. And I think you know you hear a lot of feedback around you know I need to go see that car smell that car touch that car all the you know kinda more old school language from the auction. And we think we can show damage like you're there in person. And obviously in the CR you can say hey it smells like smoke or whatever. And so we've seen a couple points of conversion increase just by having AI-enabled inspection so far. You know we've built you know some visible technology that allows us to adjust the sensitivity on it as well. So like if the car's older we can make it really sensitive and show everything. We can also turn it down and not be quite as aggressive on the inspection. I think you know a couple other things on AI. So we've given so all of our marketplaces have this sort of negotiation post-purchase process. So you sell the car or sorry the car doesn't meet a reserve. And then let's say the reserve price was $10,000 you hit $9,000. There's a negotiation that happens to try to complete a transaction. And it's a very like methodical process. Call the seller hey would you take you know $9,500 and call the buyer would you go up? And so we've in Europe we've actually put a negotiation tool that sort of does the negotiation like via AI. So it's sort of texting, emailing, hey, would you take this? Would you take this? We're actually getting the sort of cost out of the process. As you can imagine, calling someone five or six times to negotiate a price kinda gets expensive over time. Especially when you're doing it on like 20% or 30% of your transaction. So that's some of the sort of back-end stuff items. The most recent thing we've launched in the U.S. marketplace is we've come a lot, we've put a tool in place where our marketplace sale normally is three days. The seller can flip it on to basically sell that day. It's called Absolute Sale. And so we're seeing, you know, pretty significant increases in proceeds from that project. You know a lot of times if there's bids on a car like hey I'm getting bids let's just go and get it done today. And so we're seeing more value coming out of it. We're also seeing higher conversion off of it. Okay. Great. Going to Peter, you've talked about this a bit on earnings calls and just wanted to go a little bit deeper into it on how your go-to-market strategy has changed with dealer customers. And some of the value that the network effects are providing for them. So for example, you've talked about how some dealers are finding profit on older used vehicles that they maybe weren't unable to. Yeah. To get to before. With your platform they're able to realize that. Can you talk a bit more about that? Yeah. Sure. So if we think about the vehicles we're selling, our commercial vehicles are typically sold by commercial sellers. The buyer audience tends to lean more franchise dealer, okay, with some independence. And then our dealer consignment segment on the sell side is more franchise dealer. On the buy-side leans more independence. So you kinda two different kind of portfolio. Commercial relationships and our franchise dealer relationships on the buy-side to help convert franchise dealers into sellers as well. Right? So we're doing that with some success. We're also helping franchise dealers in key aspects of the strategy. One aspect is hey, you've got you know great quality off-lease vehicles entering your ecosystem at all your different points. And franchise dealer chains have gotten bigger through acquisitions. They have more points than ever in many cases. We can help them sort of recognize that these vehicles are coming in that they have real value to be retained within their group. Even if the vehicle is not right for the store that it's bought at, perhaps it's a great vehicle for another store within that group. We can help them with that through technology. We're also helping franchise dealers, and we heard—I heard—on the panel today, you know, the best used vehicle is the one they get on trade. Well, sometimes they take a car in on trade at one store and it's not the right vehicle for that store. It's the wrong brand. It's too high mileage or whatever. But it could be a great vehicle at another store within that same franchise ownership group. So we've built technology that creates this intergroup trading platform that they can leverage before they put the car into an open wholesale channel. So we call that an intergroup trading network. And we do that for a good number of franchise dealers dealership groups. And then after that those cars that they don't want within their network we can wholesale very very quickly. And the speed of sale is pretty phenomenal. Even though our marketplace listing in theory lives for three days in reality the car is sold within a day. Our average days to sell in dealer to dealer is one day. So it means we inspect a car this morning it's probably sold by tonight. And it can be off their lot tomorrow. So it's very very fast. It's not expensive. So the fees are attractive relative to the cost of putting it in a different channel. Obviously we benchmark the outcomes in terms of pricing versus you know what are other channels bringing in terms of Black Book percentages et cetera. It compares very very strongly on that as well. So I think this is a pretty compelling model to dealers. I think dealers you know dealers are entrepreneurs and innovators. They want to be more digital as well. But they want the process to be easy. So we've gotta find a way to bring great technology into the solution but make the process and the experience very very easy for our our sellers and our buyers. That's that's really where the the heart of our efforts are. You know pleased with the feedback we get on that. Our systems you know routinely from dealers we hear how you know our systems are very easy to use. The experience is easy. But obviously we keep investing into that. Okay. And you talked a bit about fees there. What's your I guess pricing strategy in terms of auction fees? Like are you guys trying to go for market share right now and and maybe pricing a little bit under other players in the market to to to get more people onto the platform and really leverage the network effect? Or is there opportunity to. Yeah. Increase prices over time? Or how do you think about that? I think in reality, Billy, given our volumes we're so challenged the last couple of years particularly on the commercial side of our business which historically was a huge you know volume and profit source for us. And that was under such massive pressure. We were honestly trying to optimize for you know a level of profitability and cash flow from the business. You know? So I think we were you know we raised fees I guess in 2022 and 2023 in the dealer to dealer part of our business. The unit economics are strong. The fees are typically sell fee and buy fee. More of the fee is on the buy-side than on the sell. And our fees in our marketplace are very comparable to a digital competitor we have. They're probably a little bit below what physical auctions are charging, but not a lot. They're in that range. They're in the margin of error of that. So that's been our focus. I think at this point we are focused on building our customer base and gaining share and converting more of our, you know, we've got a very big network of franchise dealer buyers on our private labels buying off-lease cars. We wanna convert more of those into sellers. So we like the fact that we're, I'd say, attractively priced vis-à-vis alternative channels even if it's, you know, just by a little bit. I'll also say, frankly, the customer feedback is the customers are more focused on outcomes. You know, speed, time, and principally speed and proceeds of the vehicle. Like if you can't bring appropriate market value on the vehicle it doesn't really matter what your fees are. Right? You're not gonna get that business. Yeah. You're not gonna sustain it. So the customers are rational. They're more focused on you know the outcomes you're getting to them. There's something that they've figured out. Then I guess like one more before we go to some investor questions if you guys like. Outside of the auction fees, where do you see some of the opportunities in some of your other revenue streams for growth and? Yeah. How are you driving that? And actually I should say Billy on that front if you look at sort of auction fees for vehicles sold they've generally trended up. Gross profits per vehicle sold have trended up. Gross profit as a percent of net revenue has trended up strongly. And again I think these are functions of our our go-to-market strategy but also our digital model. The the cost improvement that James talked about the scalability of the business. So I'm very encouraged by that you know. And the sort of operating leverage that this business now has is is I think very impressive. So other revenue streams we generate quite a lot of services revenues. In fact more than half of what we call our net revenues are services. The biggest component of services revenue is logistics. When we sell a vehicle we might make you know $400 of auction fees. There might be a $500 move of that vehicle's movement from A to B. So that's also ancillary revenue. And that's that's lower margin revenue. But we do make a margin on that in the sort of mid-teens. It's a typical sort of transport margin. We have other services that that we monetize. We monetize some of our inspection services. We have businesses kinda SaaS tech businesses whether it's you know guidebook pricing repossession management software auction software that other industry players use. So it'll all roll up into our services revenue. So we like we like that component of revenue as well. And obviously we have finance. That's about 25% of our total revenue. Right. So we haven't really talked about that yet. Right. Yeah. Maybe you can talk about some of the trends there you're seeing. Obviously I think a big topic is just where credit losses are trending and kinda delinquencies in the market and. Yeah. What you guys expect for the rest of this year? Yeah. So our finance business is AFC. It's an independent dealer floor plan financing business. So it's we're not financing retail customers. We're financing independent dealers. It's secured with the inventory that they've acquired. We're lending some percentage of that based on the assessment value of that vehicle at the short term. Typically 60 days maybe extendable to 90 or perhaps 120. But the initial floor plan period is typically a 60-day period. So it's a business we've got a lot of experience with. It's been a strong performer for us over decades over multiple business cycles. It's a business we know very well. We're probably the number two market share in North America. But I think we're a fairly close number two with very strong operating you know financial profile cash flow characteristics et cetera. Losses in that business were extraordinarily low in 2021 and 2022. When used vehicle values were appreciating rapidly. Because you could lend on a $10,000 vehicle today if the dealer got into difficulty which was unlikely 'cause their business was going so well the vehicles were $12,000 you know four months later by the time with any trouble. So there was no loss. And obviously with the depreciation in vehicles over the last you know 15-18 months risks over the last few quarters have been running slightly higher than our than the range we like to target. We like to target a range of 1.5%-2% as sort of quote unquote normal. So they've been a little bit higher than that. Our most recent earnings call, our messaging was we expect losses in the first part of this year to be comparable with the last half of last year on a percentage terms. And we're somewhat optimistic that they may trend down in the second half of this year. And I'd say our opinion today is still broadly in line with that. But it's a great business. It's a strong contributor. It's a lower growth business but a great cash flow business. Okay. And I guess we can go with the audience. Do you guys have any questions? If not, I can just keep you out. Can we ask a question about conversion rates? Yeah. They were maybe talking about historically kinda how much volatility were there in conversion rates. Obviously they've really spiked, I think, in 2021 and then dipped in 2023. You know the Black Book data you know is showing kinda an update right now. Confusion coming with that. But also then kinda is it fair for us to maybe assume that your business as you talk about AI-enabled inspections leading better conversions is structurally higher over time? Certainly above Black Book presumably and then but also structurally higher over time or whatever that number could be. Yeah. I'll take a first attempt James if you wanna jump in. Conversion rate's important because the higher the conversion rate it'll tend to be very positive in terms of our gross profit percentages. 'Cause you know conversion rate's 50% you're kinda inspecting two cars to sell one. 65. Was just above 50% across the portfolio of commercial sellers. It went up as high as 90% off of considerably lower supply for the situation I mentioned in you know 2022. So we were kind of converting everything but at the very top of the funnel where there wasn't a ton of revenue for us. We've seen that come down. My hypothesis is that will trend down as more supply enters the market. But structurally I think we'll be higher than we were pre-pandemic because there's more buyers online. That remains to be seen but we're certainly higher than that pre-pandemic number right now even though we're down from the 90% level. It's open in that business. It's a better gross margin answer for us if conversion goes down oddly because it means more cars go deeper and. Deeper, and we get, yeah. And on the dealer side, we target a conversion rate comparable to what physical auctions deliver. The conversion rate, if you think about it, is a key aspect of the customer experience both for the seller and the buyer. And it's also key for our economics. We do not want to inspect 10 cars to sell one. That's not a good business model. It's also not a good buyer experience if I'm searching through 10 cars and only one of them is really gonna sell. And it's not a good seller experience. So for all those reasons, we wanna get conversion rates up. So we actively lean into dealers to help them understand the tools that are available to them. Help to understand the techniques that are available to them that drive greater conversion. And James mentioned one, you know, the Absolute Sale process that we launched really just in the last couple of months here. Again, it's designed with that in mind. And the way it works is the car is in this marketplace. A number of bids have come in. And maybe the seller hasn't got all the way to where they want the price to be. But if they hit this button and put it in Absolute Sale, they're basically signaling to all the buyers that this car will sell today. It's now 100% guaranteed sale. Okay? We don't yet know what price. It's gonna be at this price or greater. I've got a bid at this price. I've got three bids. The highest one's this price. Now I'm definitely selling it. And what that does, it brings in buyers. Because buyers are like, all right, that's a car worth looking at 'cause I know that one's gonna sell. And that buyer activity gives that car another lease of life. And if we see another run-up in bidding, we also see higher conversion. We also see greater outcomes in proceeds from sellers. So it's kind of a win on all these dimensions. And we're, you know, we're really thoughtful about how we sort of build those experiences into the market. The only other thing I'd add, the biggest challenge on conversion in both the U.S. and Canada is since prices have fallen the last six months, do you get some sellers with unrealistic expectations? So that's probably the one challenge we're trying to fight through. But we don't see commercial trending positively. We see conversion trending positively largely this year. It does fluctuate seasonally. You know when prices are running up conversion will tend to be strong. When prices are trending down conversion will be under pressure. Yeah. The audience that's more in tune with the actual demand is the buyer. The buyers are assessing demand based on the traffic they have on their websites. The traffic they have in the retail stores. They're absolutely in tune with consumer demand. The sellers are kinda looking to what they got last week last month. Oh I used to get $15,000 for this car. I need to get 15. The buyer's saying sorry it's not worth 15. It's worth fourteen five. You know? And getting them to sort of come to alignment there is really really key to keeping conversion high. Two questions. Your acquisition of Manheim's business in Canada, can you kinda talk about the decision behind that? And then also, I believe it has a physical asset as well. Yeah. We see that as very consistent with the digital strategy of our business. But let me sort of explain that. We We did acquire Manheim's business in Canada. Manheim operated at five sites, five cities in Canada. We operated 12. So in the five cities they operated and we also operate, because of the shift of the industry from physical to digital and also because wholesale volumes are down in Canada from normal for the same reasons that they're down in the U.S., both our facilities were underutilized. Ours were underutilized and so were theirs. So the acquisition, we bought their business with the exception of one facility, we didn't buy their facility. So let me, in the four locations we didn't buy their facilities, we have migrated their volume to our locations. And their facilities get repurposed for development. So the essence of the transaction I guess reduces the total acreage of physical auctions in Canada reflecting the fact that the industry has moved away from physical towards digital. Right? It also gives us more scalability at our locations. We have now more volume off the same acreage than we had before. And obviously the benefit for the customers of the Manheim locations is they're now in a larger in terms of audience of buyers digital marketplace because our marketplace you know is the largest wholesale used vehicle marketplace in Canada. Can you also talk about, I guess maybe, some of the offset between volume and price? And I might be wrong in this thought, but if prices on vehicles are coming down and maybe the buyer's scheme could potentially be connected to the value of the vehicle. So there might be some headwind there, but then volumes you're saying going from, you know, 90% to 20%. Yeah. That's a good question. So our buy fees as I mentioned most of the auction fee is on the buy-side. So it's maybe a 70-30 buy fee sell fee kinda split. The buy fees typically are stair steps based on the value of the vehicle. So it's well commercial is pretty positive. It's but it's non-linear right? It's as the value the percentage of the vehicle value goes down as the vehicle value goes up. Right? So as vehicle values come down there is so I guess what I'd say is if vehicle values come down 10% our average buy fee might come down 5%. So you know and that means our average total auction fees might come down 3%. There is a relationship there but it's not all that impactful in the grand scheme of things. We'd rather have the volume. Because of the volume and keep the values high that's even better. Do you have any expectations for how much of the market moves online over time? Currently in the U.S. about 75% of the market's both physical. The shift is really only moving like 200-300 basis points a year or so towards digital-ish. If we look at the most recent data you know from Q4 and you know there's a tool called AuctionNet where you can get all the physical auction data right now. You see physical auctions declining you know 10% in the U.S. right now year-to-date on the dealer side. The commercial side's growing. So we think it'll accelerate. So right now it's about 200 or 300 basis points a year. Are you talking about time will pass too or just? Yeah, I would include that as digital. That's the. Oh, it's in the physical volume. Like a. Oh, sorry, it's in the physical volume, yeah. Yeah. So I look at it in terms of addressable market a little bit. I guess the outcome's similar to what James said. If I look at the vehicles that go through physical auction off-lease segment I think is very addressable by a digital model because it was very addressable pre-COVID. We were already at 55%. Okay? It's gone up since then. So I think that segment is very addressable by digital. And the base is it's 70 80 90 what is the percentage? But it's a significant piece of that section. I think the same is true on dealer-to-dealer. I think it took the industry longer to develop those tools. But today you know these cars can be sold from the dealership in about a day. Okay? And move directly to the buyer. And that's very very efficient. So we see a lot of dealers starting with digital. I'm gonna put everything digitally first. Okay? And then whatever doesn't sell I'll take to auction. That's becoming very, very common. And then we see dealers within that having very high conversions. You know the average might be in the 50s but there are some dealers there in the 80s and 90s. And I think that's more indicative of where dealers through the right use of these tools can get to. So I think that segment which is about half of the wholesale industry is in my view pretty much fully addressable by digital. Rental the rental companies have been selling a lot of cars digitally for over a decade at this point on their own systems as well as on systems that ourselves and our competitors provide. So more than half of rental cars are selling digitally today. And then the last segment that I think is very sticky at physical is repo. Okay? Repo has some unique regulatory aspects to it about you know you need to allow the lessee the debtor chance to make good on the default. There might be personal property in the vehicle. So there's reasons why a repo needs to be stored somewhere. And I think the physical channel is particularly sticky for that segment. When you have a relationship with a dealership, is it typically exclusive to you? Like, is ACVA—is it you and ACVA, and like you're kinda sharing volumes from that dealership? Or Or do they typically choose one or the other? It depends. Like the big dealer groups typically use—well, some of the dealer groups are exclusive. I would say a lot of them are mixed. They don't wanna have all their one on the sell side. I think it's different sell side buy-side. Sell side usually is one. I think dealers will buy cars from anywhere. Right? If there's a car in Cox versus us versus ACVA and the unit economics work, I think they'll buy cars anywhere. The sell side's more—I think the place where you get, you know, single ownership. But that said, I'd say most dealers still do both. Yeah, still, you know, they're either. They're either doing "I've got a digital and I've got a physical" or "I'm using multiple digital." We hear dealers saying, "Well, for these types of vehicles, I put them over there. Yeah. For these types of vehicles, I give them to you because I tend to get better outcomes if I do it that way. So it's a mix. For the most part, I'd say it's not exclusive. Not exclusive relationships, but there are exceptions. Okay. Unfortunately, I think we're out of time at this point. But thank you again to you, James and Mike, for coming and a great session. Thank you. I appreciate your interest. Thank you.