Good day, and welcome to the OPENLANE first quarter 2024 earnings conference 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, you may press star, then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mike Eliason, Treasurer and Vice President of Investor Relations. Please go ahead. Thanks, Cindy. Good afternoon, and thank you for joining us today for the OPENLANE first quarter 2024 earnings conference call. Today, we'll discuss the financial performance of OPENLANE for the quarter ended March 31st, 2024. After concluding our commentary, we will 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 operation, 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'll 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 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. I will begin with a discussion of our company strategy and how we are positioning OPENLANE for growth. Then I'll hand the call over to Brad to cover the majority of our financial and operating metrics for the quarter. To start, I'm very pleased with the results that OPENLANE delivered in the first quarter. On a consolidated basis, we grew adjusted EBITDA to $75 million, and we also generated $100 million in free cash flow from operations. These Q1 results were largely driven by significantly improved performance in the OPENLANE marketplace, which grew volumes 13% compared to Q1 of last year, grew adjusted EBITDA by 40% on a clean basis and contributed 47% of our total company adjusted EBITDA during the quarter. AFC was also a strong contributor, generating approximately $40 million of adjusted EBITDA in Q1. These results demonstrate the positive impact of our brand and platform consolidation efforts, and also the strong scalability characteristics of our company. A leaner, more agile operating model, accelerated innovation, and a differentiated experience that makes wholesale easy for our customers. And I believe that Q1 is a compelling preview of the value that OPENLANE is capable of delivering. So let me turn to our strategy and how we plan to build on this positive momentum. OPENLANE is highly focused on growth, growth in volume and market share, as well as growth in our financial results. We view these goals as complementary, and OPENLANE has spent several years transforming our business model to advance them simultaneously. Our strategy for growth is anchored in our purpose, which is to make wholesale easy so our customers can be more successful, and guided by our vision, which is to build the world's greatest digital marketplace for used vehicles. OPENLANE has several strategic advantages that I believe will help us achieve our purpose and vision and further accelerate profitable, scalable growth. These advantages include, first, our expanding volume and share in the commercial and dealer segments. Second, the opportunities enabled by our asset-light digital model, and third, our focus on the customer experience. Let me address each of these individually, and I'll start with volume growth and share. In the first quarter, OPENLANE grew its marketplace volumes by 13%, increased gross merchandise value by 17% to $7 billion, and also increased market share. The volume, GMV, and share growth were largely driven by our U.S. business. These results, coupled with the financial performance that I referenced earlier, purely demonstrate the strength of our marketplace, and at the heart of that strength is a differentiated mix of commercial and dealer inventory. In terms of commercial off-lease volumes, OPENLANE remains a clear market leader. Our commercial off-lease volumes were up substantially in both the United States and Canada during the quarter, and based on Auction Net industry data, our volume growth meaningfully outperformed the U.S. commercial market. Commercial off-lease supply is still well below pre-pandemic levels, and we expect volumes to remain pressured in the second half of this year and into 2025, given the low level of leases written in 2021 and 2022. However, current lease originations of new vehicles are rising. They increased again in the first quarter, making Q1 the fourth quarter in a row where that has happened, and they're expected to increase further throughout 2024. So OPENLANE will be a beneficiary of these future off-lease volumes when these leases mature. Additionally, given the financial results we produced in Q1 with just a modest increase in off-lease volume, I'm increasingly optimistic about what OPENLANE can deliver when off-lease volumes are even more robust. We also see additional growth opportunities in the commercial segment, including expanding the products and services that we offer, growing vehicle consignment from new off-lease, rental, and repo customers, as well as increasing conversion, particularly in higher revenue channels. From a dealer volume perspective, we are also well positioned for growth. First, we have a very strong dealer-to-dealer platform that delivers excellent results for our dealer customers in terms of time to sale, cost of sale, and financial outcomes. We are growing the number of franchise and independent dealer registrations across our geographies, and through our private label programs, we have the unique ability to transition thousands of franchise private label buyers into multi-channel buyers and sellers on OPENLANE. The story with respect to OPENLANE's Q1 dealer volumes is nuanced. At an industry level, we saw declines in total dealer volume sold in the U.S., and to an even greater degree in Canada. Additionally, we also saw significant growth in commercial vehicle supply in the OPENLANE marketplace. This resulted in some dealers who, in recent periods, would have purchased dealer-consigned vehicles, in effect, trading up and purchasing commercially consigned vehicles instead. This is a direct result of our diverse inventory and is actually a positive trend for our marketplace. So the net-net of all of this for OPENLANE was as follows: Canada represented the majority of our dealer volume headwinds during the quarter. In the U.S., we saw increased supply from our network of selling dealers, we increased our D2D market share versus physical auctions, and we grew the total volume of open marketplace transactions in the United States. As I look to the future, there are several key factors that will support our dealer volume growth. First, there remains a large addressable market, with the majority of industry volumes still being transacted at physical auctions. We, we believe we will continue to take share here as our digital marketplace enables faster and easier buying and selling and delivers better outcomes. Also, we now have a single platform experience, with a unified sales team focused on growing our new customer base and our wallet share with existing customers. And then finally, we are also highly focused on expanding our relationships with the largest dealer groups in the country. Many still utilize physical auctions, but again, our digital marketplace capabilities have already opened the door to many new opportunities and relationships. In summary, OPENLANE is well positioned with both commercial and dealer customers, and there is growing evidence that having all of the buyers, all of the sellers, and all of the vehicles all in one place creates a more active and vibrant marketplace. In addition to the volume opportunities, I believe we can accelerate growth by capitalizing on the opportunities that are enabled by our asset-light digital model. We continue to make good progress combining disparate tools and technology into a single marketplace platform. This will reduce our costs over time, but more importantly, it increases our operating leverage and also accelerates the speed at which we can bring new innovations to market. At our core, we are a technology company, developing and launching new digital products and features on a regular basis. Let me give you a few examples from the quarter. As we previewed on our last earnings call, during the first quarter, we launched our new Visual Boost AI condition report technology, which is aimed at improving the accuracy and transparency of condition reports in our marketplace. To date, we believe we're still the only digital marketplace that gives buyers access to an AI-powered inspection visualization on every dealer vehicle listed in our marketplace. Our data has shown that buyers who utilize Visual Boost AI submit twice as many bids and offers on the vehicles that they view. More bids leads to more seller confidence that we're achieving the best market outcome possible. One large volume buyer described Visual Boost AI as a game-changing technology. Others said it allows their dealerships to view the car as if I was standing right in front of it, and several, several have mentioned that it helps them buy with more confidence. So Visual Boost AI is a powerful differentiator for us that is driving increased trust and transparency on the OPENLANE marketplace. Another OPENLANE innovation that was deployed in Q1 is our Absolute Sale feature. This was deployed in the U.S. marketplace. Absolute Sale is available to all sellers and visible to all buyers on that marketplace. Once the bidding has reached an acceptable price point to the seller, the seller can click on the Absolute Sale button to signal to the marketplace that they are now 100% committed to selling this vehicle. After the Absolute Sale process has been initiated, typically, we see buyer bidding increasing rapidly because buyers now know that if they submit the highest bid, they are guaranteed to win that vehicle. Sellers like this because it increases buyer engagement on their vehicles, and participating sellers have seen sale prices increase by an average of almost $500 after they have activated the Absolute Sale feature. Based on this, it's evident that Absolute Sale is also driving higher marketplace engagement, increased velocity of sale, and better outcomes for sellers. These are just two examples of a very robust and progressive portfolio of innovation that we're investing in to create the greatest digital marketplace for used vehicles. And then finally, let me turn to customer experience, which is an area where I believe there is tremendous opportunity of differentiation and an area that I believe will help drive meaningful growth. During the quarter, we formed a centralized customer experience team that will lead our customer experience strategy across OPENLANE and leverage the data, the processes, and best practices from all of our business. This team is already advancing a broad portfolio of initiatives with two main goals. First, address any known customer pain points or issues, and second, identify the new products and features that will help make OPENLANE the preferred platform for buyers and sellers. In the first quarter, we designed a new customer NPS framework that is now being implemented across our business. This will help us monitor experience delivery more consistently than ever before, and will also help us benchmark with other companies and in other industries. We also deployed new technology to enhance key aspects of the customer experience and aggregate customer feedback in a way that will help inform and prioritize our products development pipeline. So it's evident that we made positive progress on each of these fronts in the first quarter, growing our volumes, deploying new innovation, and improving customer experience. It's also evident that when combined, these strategic areas are capable of driving a highly scalable business. In the case of the first quarter, we saw 40% adjusted EBITDA growth, approximately 40% adjusted EBITDA growth in the marketplace on a 13% increase in volume, also with strong cash flows. As I look to the future, OPENLANE will build on this strong foundation and lean more heavily into our go-to-market strategy, investing further into sales, marketing, technology, and innovation to continue driving growth. And in terms of our finance business, AFC remains an industry leader and a strategic asset for OPENLANE. It increases buyer engagement and stickiness on our marketplace platforms and contributes meaningfully to our bottom line. Consistent with comments on our last call, I believe the risk environment is flattening, and we remain committed to managing risk and growing responsibly in the AFC business. So that was the quarter. But before I hand things over to Brad, I just want to reinforce OPENLANE's key strengths in terms of our value proposition for investors and our ability to deliver stockholder value. OPENLANE is an asset-light digital marketplace leader for wholesale used vehicles. There is a large addressable market in North America and Europe, and we are well-positioned to capture the opportunities to grow both dealer and commercial volumes. Our brand and platform consolidation efforts are enabling us to accelerate innovation and product development. Our focus on operational efficiency gives us the financial headroom to invest in innovation without sacrificing financial results. We are cash flow positive with a strong balance sheet, and we believe our business has the capability to generate meaningful earnings growth over the next several years. With that, I'll hand it over to Brad for a deeper discussion on our operational and financial metrics in the quarter. 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. In addition, my comments will be on a first, first quarter year-over-year basis, unless I state otherwise. Peter mentioned we are very pleased with our first quarter results. On a comparable basis, our consolidated net revenue was up 4% year-over-year, mainly driven by the 13% unit volume growth in our Marketplace segment. In our reported results, you will see our net revenue was down 2% as we continue to realize the impact from the transportation accounting change we made in the fourth quarter of last year. This resulted in a $22 million impact to net revenue in the quarter. Consolidated gross profit improved $6 million or 3%, and gross margin improved on a year-over-year basis for the fifth quarter in a row, this time by 270 basis points to 56.5%. Gross profit and margin benefited from higher auction and service fees, higher marketplace volumes, and continued improvements to our cost structure. Consolidated SG&A in the quarter was $109 million and essentially flat to last year, even though our volumes were up 13%. We believe our digital model and our ongoing cost efforts will allow us to continue to scale efficiently, and we expect absolute SG&A to subsequently remain at these levels for the remainder of the year. Consolidated adjusted EBITDA was $75 million, an increase of $16 million. Last year, we incurred a $11 million charge related to an early-stage investment. Accounting for this, adjusted EBITDA was up $5 million. Turning to the Marketplace segment, our total volumes were up, primarily driven by our U.S. business. Our total marketplace dealer volumes declined, and this was primarily driven by our Canadian business. Similar to late last year, we continue to see Canadian buyers migrate towards commercial vehicles where supply has improved, and we expect this to continue as the overall wholesale mix of commercial and dealer vehicles shifts to pre-pandemic low norms. In terms of pricing and fees, for the third quarter in a row, we saw auction fees grow at double-digit rates. Total auction fee revenue increased 10%, driven by strong volume growth. On a comparable year-over-year basis, services revenue was up 4%, driven by higher repossession, inspection, and key service revenue. We continue to focus on driving greater attachment of our ancillary services to our marketplace offerings. I want to note that our reported revenues show service revenue down 9%, again, primarily due to the transportation accounting change I discussed earlier. The collective positive impact of our volumes, pricing, and disciplined cost management resulted in marketplace-adjusted EBITDA of $35 million. Adjusting for the prior year one-time charge, this is approximately a 40% increase and represents 47% of OPENLANE's total adjusted EBITDA, compared to 36% in the first quarter of last year. Marketplace SG&A was flat, and as mentioned in my earlier consolidated comments, we expect similar levels of SG&A for the balance of the year. As Peter said, we are very pleased with these improved results, but more importantly, we believe these improvements are sustainable and position us to deliver further improvements as we capture incremental value from our one marketplace solution. Turning to our Finance segment, loan transaction units in the quarter were relatively flat as we continue to balance growth and risk. Revenues for the quarter were down 2%, primarily driven by increased net credit losses and lower interest income, resulting from lower vehicle values within the portfolio. These two factors were also the primary driver of our Finance segment adjusted EBITDA result of $40 million, down $5 million versus last year. The provision for credit losses was 2.3%, which was slightly better than our expectations. The higher loss rate versus historical performance is attributable to the ongoing impact of higher interest rates, declines in used vehicle values, continued consumer inflationary pressures, and tightening retail credit availability. We are encouraged by the recent improvements we are seeing in the severity of losses. This is the result of stabilizing fundamentals and proactive risk mitigation actions we have taken over the last year. As I mentioned in our year-end call, we continue to expect the overall first half loss rate to be comparable to the second half of 2023. As a result, as usual, I will provide an updated outlook for our second half 2024 expectations during our next earnings call. I'd like to reiterate that our long-term loss rate target of 1.5%-2% remains unchanged. As Peter and I have said previously, we're very pleased with OPENLANE's portfolio of businesses and assets. As it relates to AFC, we value AFC's market leadership, the synergies with our marketplace, and its leading financial performance and cash flow characteristics. Moving to the balance sheet and capital allocation. Consistent with prior quarters, we continue to generate strong cash flow. Cash flow from operating activities was $100 million in the quarter, and our consolidated net leverage was approximately 1x adjusted EBITDA. This level of cash generation demonstrates the value of our asset-light, digitally focused marketplace business, in combination with our leading floorplan finance business. Overall, our capital allocation priorities remained unchanged. We continue to prioritize the funding of organic investments in our core digital businesses, while ensuring flexibility for high return, complementary strategic opportunities, and shareholder returns. At the end of the quarter, we continue to have $125 million remaining on our share repurchase authorization. Looking to the future, we have a $210 million senior note maturing in June of 2025. We intend to use cash flow generated by the business, along with our strong liquidity position, to fund this maturity. Wrapping up, our 2024 adjusted EBITDA expectations remain unchanged. We are still guiding to adjusted EBITDA between $285 million and $305 million for the year. Other guidance metrics also remain unchanged, and are available in our earnings release. To summarize, we remain pleased with the business and financial performance. We generated $100 million of cash from operations in the quarter, and we were pleased with our overall volume growth. Our finance business credit losses were better than expected, and finally, on a comparable basis, our marketplace adjusted EBITDA grew approximately 40%, and we believe we are well positioned to continue to deliver continued improvement. With that, I'll turn the call over to the operator for questions. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Rajat Gupta of JPM organ. Go ahead, please. Hi, Rajat. I'm sorry, one moment, please. Okay, go ahead, Rajat. You are in the question queue. Thank you. Can you hear me now? Yes, Rajat, good afternoon. Good afternoon. Thanks for taking the questions. Could you give us a little more color on, you know, the trajectory of, you know, the dealer-to-dealer volumes in the U.S.? You know, what was your growth rate there? And any color on market share that you can provide in the quarter, and relatedly, you know, any color on profitability of that business as well would be helpful. And I have a follow-up. Thanks. Thanks, Rajat. So I guess, first of all, just in terms of overall volume, dealer and commercial, we grew 13%. We believe that was a greater growth rate than the industry demonstrated, so we think it's a quarter where we gained share in the industry overall. If I look at U.S. dealer, we saw growth in dealer consignment, volume of vehicles offered for sale. We increased our share vis-a-vis physical auctions. Physical auctions showed a decline in the quarter, and we grew the absolute number of open marketplace transactions in the U.S., the vast majority of which are dealer-to-dealer transactions. So, we had a strong quarter. We believe we gained share overall, and we believe we gained share in the dealer-to-dealer segment, at least in comparison with physical auctions, which is the only data we have to compare with at this moment. So generally pleased with that. I'd also say, Rajat, profitability, while we don't break out profitability by the business units, our D2D business is profitable in the U.S. and in Canada, and making a material contribution to our overall results. And I'd say we saw a significant improvement in the profitability of the U.S. model, because in Q1 of last year, it was still an unprofitable business, whereas in Q1 this year, it was a positive contributor. Understood. Thanks for the color. And maybe, like, just a quick follow-up on the previous question. You know, any expected cadence for profitability in the U.S. D2D business, just given, you know, 1 Q is typically a seasonally strong quarter. So wondering, like, if we can continue growing profitability there, you know, despite, you know, some of the seasonal dynamics in the second half. Yeah, Rajat, well, first of all, the business transitioned to being a positive contributor to our overall earnings in the middle of last year, I believe, so it's been a number of quarters now. So we expect this to continue. That is certainly the plan of the strategy. And again, you know, you know, the D2D business has a lot of strengths. This digital model, as I mentioned in my remarks, is getting very good results for customers, high conversion rates, high, you know, fast time to sale, low cost of sale, great price outcomes. So we're seeing, you know, great feedback from customers, strong adoption. As I said, consignment of vehicles by our selling dealers is increasing. Conversion rates are strong, the business is profitable. So I'm feeling, I'm feeling good about that, Rajat. I will say that in, in the quarter, and this was evident in both U.S. and Canada, we saw a significant growth in commercial volumes, 30% overall, approximately for the quarter. So, you know, that's positive for our business for sure. But one of the impacts of that is for a buyer in the marketplace, they're gonna see a lot more commercial vehicles than they saw, say, in prior periods. And for a lot of these buyers, the commercial vehicles are the more desirable vehicles. So a lot of franchise buyers would rather buy from the commercial consignment than from other dealer consignments. So we, we certainly saw, from a buyer appetite perspective, a trading up, I would describe it, from dealers that might have bought more dealer consignment last year, you know, now that, now that there's more commercial supply, buying more there. So there's an interplay between those two things. They don't exist in isolation between each other. But on a combined basis, as I said, we grew volumes 13%. Obviously, most of that, driven, as I said, by U.S. growth, which was the strongest part of our business here in Q1. I'm very pleased about that. And, and again, driven a lot by commercial supply as well. Got it. Got it. And just, just on, like, the off-lease dynamic, you know, given what you're seeing in terms of, you know, return versus retention rates, from the consumer, how, how do you think, you know. Any updated thoughts on, like, how the dynamic should play out here in the second half, once, you know, once we start to lap, like, the drop in lease origination from 2021 onwards? I'm just curious, like, how are you seeing that interplay so far- Yeah ... based on the return rates? Thanks. Great. Well, obviously, Rajat, and you know this, off-lease volumes is the most significant part of the commercial segment in our business. So a lot of the increase that we saw in Q1 was driven by increase in off-lease volume, and that was really driven, Rajat, by you know, a lower percentage of consumer buyouts of their off-lease vehicles. Again, in normal times, consumer buyouts might be 20%, 30%. You know, in the last few years, that increased to, like, 70%, 80%. We're now seeing that drop again, and that drove some increased supply. And you can see how that flows through our model, drove some of the volume and profitability increases that we talked about. But I would also say that in the first quarter, our actual off-lease volumes, I'd still say were about 50% of normal. So still well below what we would characterize as normal or well below pre-pandemic levels. You know, as you look to the next period of time here, the next few quarters or, you know, the second half of this year and into next year, there's definitely going to be fewer vehicles at the top of the funnel. We understand that. I've got clear data on that from our customers. But offsetting that, we expect the consumer buyout percentage to continue to drop, okay? And that's gonna mean more cars entering remarketing, a higher percentage of cars entering remarketing. And, you know, the interplay of those two factors is difficult to predict with precision, but I suspect, you know, I don't suspect it will be as bad as what we had to endure in the sort of 2022 and 2023 year. That's, that's my, my own view on it, and that's the feedback I'm also getting from customers. And then on a very positive note, we're seeing new lease originations increase. And I believe in the first quarter, new lease originations increased by approximately 25% compared to Q1 of last year. That's now the fourth quarter in a row we've seen increasing new lease originations. I'm hearing from our customers, they expect that to continue. They expect to have more incentives and more leasing on vehicles. And that, that obviously was very positive for us as those vehicles mature. So in this off-lease segment, I certainly see the light at the end of the tunnel at this point. I see the increased volume showing up in Q1. That's very positive. I recognize we still have some challenging quarters to get through, but I think, we're generally on, you know, a more positive trajectory in that, in that category. Got it. Got it. Great, great. Thanks for, thanks for all the color and good luck. Thank you, Rajat. The next question comes from John Murphy of Bank of America. Go ahead, please. Good afternoon, guys. Peter, just wanted to, you know, ask a question about your comment about market share gains in digital versus physical auctions, especially here in the U.S., and where you think we are on that. And then also, I just wanted to get a gauge where you guys are on your market share in closed auctions, specifically here in the U.S. So the shift in the market from physical to digital, and then what your market share is in closed auctions. Yeah. John, I guess what I'd say when we look at our volumes, first of all, our volumes are entirely digital. It's a digital marketplace business. And again, if I look at our total volume growth of 13% in Q1, that I believe is greater than the volume growth in the industry overall in Q1. So that would point to increasing market share, you know, on a sort of overall level basis, based on the data we're looking at. And then it's possible to sort of subdivide or estimate how much of that volume is commercial versus dealer. And again, when we look at it through that lens, we believe we outperformed both in the commercial and in the dealer category in the United States during Q1 as well. So that's what we speak to in terms of market share. We think it's a positive quarter in that regard. In terms of, you know, what is the, the pace of transition? You know, I was talking about off-lease vehicles. The majority of those off-lease vehicles sell in a digital format. We enable obviously a lot of that for a lot of customers. So, the majority of our customers' vehicles are selling online in the digital format, a mix of closed and open. In the dealer-to-dealer category, the majority of vehicles are still selling in a physical format, going to physical auctions. That is still true, I believe, in the United States. But we see the digital channels gaining share. And again, we believe our Q1 volumes gained share versus physical volumes in the first quarter, when we looks just at the D2D category. So, you know, John, you know the industry. It's this industry takes time to evolve and adopt new technologies, but I think over time, it does, and these trends become evident. And certainly when I'm talking to you know, franchise dealer customers, I think there's an increasing acceptance and understanding among that customer group that digital really is the future, that digital offers a lot of benefits to them, both in terms of time, cost, price realization, and they're very receptive to you know, a greater adoption of digital channels as they look to the future. I'm sorry, can you also comment on your market share in these closed auctions? Because it sounds like we're gonna head more in that direction. So it seems like, you know, as more vehicles coming off of lease, more of those vehicles are gonna be ending in closed auctions than maybe ever before. I think you have a pretty big market share there. Just curious if you could talk about that position. Yeah. Yeah, John, good point. Sorry, I missed that in your. I I forgot to answer that part. The majority of the off-lease vehicles we're selling today sell within these closed auction marketplaces. So that is a fact. And those are obviously very important to our OEMs and franchise dealer networks, because a lot of OEMs, they wanna keep a high percentage of these vehicles within their franchised dealer network and support the brand and the used car portfolio. But importantly, you know, they do also flow into the open, and that's an opportunity for us as well as for our customers to liquidate some of the vehicles there. But, but you're right, John, the closed auctions are very, very important, and we have, you know, our closed auction technology supports the majority of, OEMs and captive finance companies in North America. And I'd also say, just wanna point on customer retention. While, while it has been a challenging few years in the off-lease segment, and volumes have been you know, way, way down, down lower than levels I would have ever imagined, candidly, we have not lost customers through that period. We still have those OEM relationships, those captive finance relationships, and those are very positive relationships for us and for our customers. And as these volumes are coming back in, in whatever form they come back, I mean, obviously, it's all gonna be digital, that you process these vehicles. Can you talk about just what the operating leverage is? I know we're kind of still bouncing off the bottom, so it was a good, you know, volume quarter, but, you know, operating leverage wasn't, you know, necessarily huge. But I mean, over time, as you kind of fill up the pipe here and units return to something that might be vaguely normal over time, now, how should we think about operating leverage as you're selling units? I don't know if you maybe say revenue were up 5% or 10%, you know, what kind of flow through do you get to, you know, EBITDA or maybe even talking to EBIT level? It just, you know, things have changed, the model's changed. I'm just curious if you could talk about what you think that is? Yeah, I might answer that in sort of qualitative terms, then Brad, if you want to answer to add any further color to that, please do. But John, I guess having sort of worked in digital businesses for best part of my career at this point, I think the operating leverage is really, really strong on these models because so much of our cost structure is essentially fixed. The cost of our platform, the cost of our, you know, overhead, the cost of our sales team, and the marginal cost per incremental vehicle sold is pretty low. And frankly, I think Q1, we had really strong evidence of operating leverage. At the end of the day, we had a 13% volume increase, but a 40% EBITDA increase in the Marketplace segment, and I think that's very, very strong. The other thing, frankly, is, you know, we-- I do model out each month our volume versus our adjusted EBITDA performance in the, you know, in the business, and we continue to take steps to increase that operating leverage. You know, we talked about some of the platform consolidation that we're doing. That reduces our cost, it increases our operating leverage. It also increases the speed at which we can deploy new innovation. So I think this business has a ton of operating leverage. I think we got a glimpse of that in Q1. Again, I would reiterate, commercial off-lease volumes, in my view, were still 50% below normal in Q1. So the sort of mental experiment I do is, okay, what if we had that 50% of volume flowing, flowing through here? What would the returns look like at that point? They would look, I believe, really, really strong. Now, obviously, that's not gonna happen in the next quarter. We have to. We're gonna have to wait and work for that, but I think that opportunity exists. Brad, I don't know if you want to add anything to that. Yeah, no, I'll just say, I mean, I commented, John, on our SG&A performance in the quarter compared to last year, you know, overall flat SG&A. You know, and so the revenue, you know, it's kind of the top line unit growth, volume growth benefit of that. SG&A is certainly much more fixed, as Peter was alluding to. So I think you can see that in a year-over-year comparable. I would also say, just to go maybe a low level deeper, if you're in the direct expense category, we do have more variable costs as it relates to inspections. So if you think about volumes coming back, inspection costs are more purely variable. Not purely variable, but more so. I think that's one. I would say in the legacy off-lease, private label business, you know, legacy, we used to call OPENLANE, that's a, that's largely more of a fixed cost business. So as those volumes come back, there's a lot of scalability there. Okay. And then just one last one. You know, Peter, you mentioned something about Absolute Sale, just sort of this neat feature of basically, you know, a vehicle kicking over the reserve and that being kind of disclosed to everybody to create a, you know, feeding frenzy around that vehicle. You know, what does that ultimately mean to you as far as, you know, getting a conversion, you know, something converted that may have not converted before or the price higher? You know, what does that actually mean? And how many other sort of, you know, I would call that a neat little trick. It's actually a very smart, you know, feature to turn on. But how many other sort of, somewhat simple innovations that are very important do you think there are to make out there to drive the business going forward other than, you know, big tear-ups in the tech stack? Yeah, good point, John. First, so first of all, Absolute Sale, I agree. Listen, you know, we've all been to auctions of different types of products where you see that happening, whether it's like, okay, this, you know, it's on the market, it's gonna sell. It draws renewed interest in the sale, and that's what this does. And by the way, Absolute Sale has become very, very, very popular. Like, in less than three months since deployment, it's now the preferred selling mechanism for most of our franchise dealers in the U.S. marketplace already. So we've seen a massive adoption of it, and, you know, the sellers really like it for that reason. And John, not only do they like, you know, the fact that on average, once they hit the button, they're seeing another $500 on average, or close to that in terms of price realization, but then they get that one car where the car runs up, you know, $2,000 or $2,500, and that leaves a real lasting kind of memory in the minds of the seller. That one car where I pressed the button and suddenly it just took off. That's a real kind of aha moment in terms of their experience of the platform. So, but listen, we're watching it. We think it's driving. We think it's improving, helping improve conversion, helping improve price, helping improve stickiness, so that's positive. John, without going into specifics, listen, we're looking at all the opportunities that exist across our marketplace, and obviously, we're looking for the easier to deploy ways we can create a value add or eliminate a pain point. And there are plenty of those available to us, rather than sort of having to sort of reengineer the whole tech stack. So, more to come. I look forward to speaking about more of the innovations on future calls. Great. Thank you very much, guys. Thank you, John. The next question comes from Gary Prestopino of Barrington Research. Go ahead, please. Hi, Peter and Brad, how are you? Good, Gary. How are you, Gary? Good. A couple of questions here. The commercial vehicle growth was, you know, really sensational. Was the bulk of that what you're seeing in return in off-lease, or were there other buckets that are also starting to come back for you? Good question, Gary. You know, off-lease is the biggest category. We saw growth in rental consignment and sales. We saw growth in commercial in all our geographies, Europe, Canada, and North America. So it is off-lease is the most of it. We saw growth in all categories. That'd be the short answer. Okay, that's fine. Then, as I'm looking at my numbers here, it looks like your gross auction proceeds were up about almost 17%. It looks like your gross auction proceeds per vehicle were up about 3.5%. So obviously, that's the impact of selling a lot more commercial vehicles. But yet, your auction fees per vehicle were down about 2.4%. So could you maybe square that with me? I mean, I think if you're selling a higher priced car, your auction fees for vehicles should be going higher. Now, is there some distortion in there from the Canadian business that you purchased, or? No, but good, good observation. You are correct. So GMV increased 17%, volume increased 13%. So GMV per vehicle was up, you know, 4% or 3.7%, whatever the number you said- Right. I think it's probably accurate. It's really driven by what John spoke to. Increased volume of commercial vehicles. A higher percentage of those are selling in the closed sales, where we have a lower revenue per unit, lower auction fee revenue per unit. Okay. But Gary, offsetting that, we also have a lower direct cost per unit as well. So they, those commercial cars tend to come with lower ARPU, but sometimes with higher gross profit margin, percentage margin. So I think... So I kind of, I kind of look at it as volumes grew 13%. I think auction fees grew 10% in the quarter, so there was a little bit of dilution in auction fee per vehicle. Got it. Okay, that's helpful. Thank you. You're welcome, Gary. Thank you. The next question comes from Craig Kennison of Baird. Go ahead, please. Yeah, thanks for taking my question. It's Craig from Baird. Just a quick follow-up on Absolute Sale. I'm guessing the seller can set that feature to the, you know, to on, prior to the sale, or is that something they have to monitor in real time? Craig, thank you. Good, good, good to hear from you again. So the way it's deployed, at least initially, the seller sort of manually activates the Absolute Sale button, when they believe they've got enough sort of action on the vehicle, that gives them the confidence to say, "Hey, this car is going to sell no matter what." Okay, so that was our initial deployment. Given its popularity, we're exploring exactly what you said, Craig, of you know, can we set up some automated rules that enable this to be activated either you know, immediately in the auction or once a certain price level has been attained without the seller having to actively engage? So these are all part of the roadmap, Craig. I confess, I don't know the exact timeline of either of those two items. It's possible one of them may be live already, but that's the plan. Thank you for that. And then, you know, naturally, you're going to get some growth if we see the off-lease cycle turn positive for you. But I'm curious about your sales effort and where you're focusing those sales dollars. Are you trying to add more dealers, you know, to the network, or are you focused more on increasing the number of volume or the amount of cars you can do, your existing fleet, network of dealers? Craig, thank you. Listen, I think one of the strengths of the business is we have a very strong network of participating dealers in, in all, in all our geographies, tens of thousands of dealers active, you know, each month and each quarter, you know, on our business. You know, I mentioned, given the traction we're seeing and the one marketplace leaning in more into our go-to-market efforts, I would say principally, Craig, increasing the size of the network. You know, I mentioned we've got a lot of private label franchise buyers, franchise dealers who are buyers that are not yet sellers. So how do we, you know, work with those and convince them that OPENLANE is a great place to sell their vehicles as well? So there's opportunities there, converting buyers into sellers. And then obviously getting a greater share of wallet, you know, with the customers we already have. So we've got initiatives, you know, really addressing all of those aspects. But obviously, size and scale of the network, both on the sell side and the buy side, is obviously an important one. That's great. Hey, thank you. Thanks, Craig. Thanks. The next question comes from Bob Labick of, I'm sorry, CJS Securities. Go ahead, please. Great. Thank you. Good afternoon. Hey, Bob. Bob. Hi. I wanted to dig in further. Obviously, a lot's been addressed so far, but just digging a little further on the off-lease. Equity in off-lease vehicles is, you know, kind of stubbornly high in 2024. It's picked up a little bit, I think, even since the end of last year, but it's obviously down a lot since the beginning of 2023. So how does that factor into the lessee retaining the vehicle or the originating dealer buying the vehicle, meaning keeping them from going to auction? Is equity in leases low enough now that we're kind of normalized, or is there more benefit for you to come as that equity in leases continues to revert back to prior norms of zero to negative? Yeah, Bob, great question. So I liked your phrase, stubbornly high. It has been stubbornly high. I agree with that. From my view, very, very stubbornly high, but that's where it's been. But it has declined, and that is leading to an increased percentage of vehicles being returned. However, the percentage being returned is still way below normal. So that's why our volumes, as I've said, are still about 50% below what I'd say, or off lease volumes, still about 50% below normal, even with the increase in Q1. Then, Bob, in terms of the timing, you know, in Q1, typically, there's a spring market phenomenon, as you know, in our industry, and that typically supports prices in Q1. So the equity gap didn't really decline that much in Q1. In fact, by some metrics, increased a little bit again, like it did in Q1 of last year. But the expectation, I think, from speaking to, you know, some of our finance customers, is that it... The equity gap-- this equity gap will, over time, continue to decline. And I think, you know, two reasons for that. One is, you know, continued downward pressure on new-used vehicle prices. As you know, dealers have more cars on their lot, as manufacturers put more incentives on new cars, that flows through into being downward pressure on used vehicle prices. So there's probably some level of that that will still take place here. And then secondly, as we're sort of lapping new cohorts of leases that were written, they were sold at higher prices, higher, higher average transaction prices, and leased at higher residual values. So I think the expectation, Bob, is that ultimately this will all kind of revert to normal, but it's gonna take time. But, you know, we're, you know, we're obviously dealing with that and obviously trying to maximize our performance given the constraints that exist at the moment. But I'm pleased with at least some of the breaks that we saw in Q1. Okay, agree. I know it was fantastic commercial volume despite the higher equity. And then, so kind of related to that, the dealer growth, I know, you know, you mentioned this potential trade-off. If someone's on the site, and you could get a commercial car or a dealer car, you take the commercial car, and, you know, that's so that'll impact dealer cars as well. But it's been hard to come by for dealer growth for you guys for a little while now. What's gonna change? What has to change, and what will change to get dealer car volumes up in absolute volume? Yeah. So good question, Bob. And listen, I agree with your comment. I think dealer volume growth has been hard to come by, and I would say probably in the industry, the dealer volume growth has been more flat at an industry level as well. In fact, at an industry, dealer volumes, physical auctions were down in Q1, based on the data we have. So, listen, what I'd say, Bob, is we launched our own marketplace, OPENLANE, in late Q4, so really, Q1 was the first full quarter where we had that offering in market. I'm pleased with the performance of that marketplace. We grew our open sale transactions in aggregate compared to Q1 of last year. So that's positive. Obviously, a lot of that growth was driven by commercial, but dealer consignment was also very strong. We saw increased consignment from dealers. We gained share vis-a-vis physical auctions in Q1. So I'm encouraged by that. I'm also encouraged by the reaction we're getting from customers. So, you know, what are we doing? I think things like I mentioned, Absolute Sale, improving condition report. Those are things that we're doing. We're increasing our dialogue and focus with some of the largest dealer groups in the industry, making some positive progress there as well. And, you know, we're looking at our sales and marketing, you know, operations. We've had a brand change to OPENLANE. There's still a bit of a brand awareness, who is OPENLANE? Oh, I didn't really know you had this great dealer-to-dealer solution. So we've heard that as we've done some research. And we've got some areas where maybe we could use an extra person or two on the ground in certain regions of the country. So all of these things are being addressed, and obviously, it's a top focus of mine and of this company to continue to grow this part of the business, particularly in an era where we think the industry is fundamentally shifting in a more digital direction. Okay, super. Appreciate that. Thank you. Thank you, Bob. I think we have time for one more question. Okay, the last question is from Brett Jordan of Jefferies. Go ahead, please. Hey, thanks, guys. I'll make it quick. As you look at the off-lease volumes, and next year is the trough year in lease returns, and I guess you make some assumptions about equity gap and buyout rates. Do you see your off-lease business growing in 25? You know, given it's a trough year in units, but with the lower buyouts that are likely coming, offset that? So, Brett, great question, and thank you for that. This is a scenario where it's possible to model, and it's very difficult to predict with confidence, is how I describe it. So we obviously have done quite a detailed amount of modeling around this and various sort of scenario planning. And I guess what I'd say, Brett, is my current assessment is that the interplay of the two things that you just mentioned, the lower volumes at the top of the funnel, but also the lower percentage of consumer buyouts, I think in most scenarios that we model, that will be a net positive for us. There are some scenarios where maybe it's more of a wash, maybe it's more flat, but there are plenty of scenarios where if you apply what I think is a reasonable judgment to the situation, our volumes can still move in a positive direction. Now, that remains to be seen. I'm not committing to that on this call. But obviously, we do a lot of planning, and we're looking at it through that lens. And then, you know, the positive news, I just want to reiterate that again, is that we're now four quarters into increasing lease originations, and I believe in Q1, lease originations increased by about 25% versus Q1 of last year. So the trough is a fact, but it also comes to an end. Leasing is rebounding, new vehicle incentives are increasing, number of new vehicles on dealers' lots are increasing, and volumes of off-lease vehicles will increase. And frankly, that is not too far away at this point. We can see the light at the end of the tunnel, and I think that'll be very positive for this company. I think we're in a great position to serve our customer base as those volumes come to market. Great. Thank you. Thank you, Brett. So, I think that concludes your questions. So before we end the call, I just would like to acknowledge Mike Eliason, our Treasurer and Vice President of Investor Relations. Mike will be retiring from OPENLANE before our next earnings call. Mike has been with this company for 25 years and has always kept our investor community updated and informed on OPENLANE's performance and all of the transactions and transformations that we've gone through over the past years. So, Mike, a sincere thank you for your many contributions to OPENLANE, as well as to our investors, and we wish you all the very best. To the audience, thank you for joining us today. I look forward to speaking to you again on our next call and sharing more about how OPENLANE is making wholesale easy so our customers can be more successful. Thank you very much. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.