All right. Good morning, everyone, and thanks for joining us for our first Barclays US Auto Retail Summit. My name is John Babcock, and I'm the Lead Analyst covering the sector. Today, we're going to be hosting a number of sessions that we hope you will find valuable. Replays will be available later today. If you have any questions during the fireside chat sessions that you'd like us to ask anonymously, please feel free to submit it on OpenExchange or send me a message via email or Bloomberg, and hopefully we'll be able to address that during the chat. First, we're here to welcome OPENLANE, and very pleased to have with us CEO Peter Kelly and CFO Brad Herring. Yes. As I mentioned, I'm going to go through a couple of questions with the team and hopefully address some of your questions. I guess just to start out, Peter and Brad, it would be great if you could just give an overview for those not super familiar with the story of OPENLANE's business and also what some of the key drivers of its growth will be over the coming years. Thanks, John. Good morning, everybody. Delighted to be here, John, looking forward to the session here this morning. OPENLANE, we are a leader in the digital marketplace for wholesale used vehicles. Okay, a digital marketplace for used vehicles in the wholesale channel. Wholesale really means between businesses. Our customers are principally automotive dealers, both franchise and independent, but we also have a significant part of our business focused on commercial sellers which are typically OEMs or automotive captive finance companies, or automotive finance companies. That's the business we serve. It's a large TAM. It ebbs and flows a little bit. It's a pretty stable TAM over time. The industry has historically been much more of a physical auction business, but it's been transitioning steadily in a more digital direction over the past number of years. OPENLANE is focused on being a leader in the digital marketplace side of that business. Rough stats, last, 2025, close to 1.5 million vehicles sold, just under $2 billion in revenues, $333 million of EBITDA. The business is organized in two segments, a marketplace segment, which is as I've described, and we've also got a finance segment, which is a specialty finance business focused on independent automotive dealers. We provide inventory financing for independent dealers associated with our marketplace business. Okay. Thanks for that. As you look out over the balance of 2026 and into 2027, what are the main strategic priorities for the business over that time? Yeah. We're very focused on continuing to grow the business and continuing to drive the digital transformation of the industry. In terms of the growth vectors for our business, I'd say underpinning it, one big one is the secular shift from physical auctions to digital marketplaces, and we're driving that and having good success on that, and that's most evident by the growth in our dealer-to-dealer business. D2D vehicles are typically about half of the addressable market. Historically, has been a heavily physical auction component of the industry. We're driving a lot of growth there. In Q1, our volumes were up in the mid-teens, up in the high -20s in the U.S., year-on-year percentage growth rate. Continuing to focus on that and driving greater scale, greater adoption, more participants on that side of our business. There's another growth vector. An important growth vector for us is on the commercial side of our business. We're basically on the cusp of a significant rebound in off-lease volumes. Okay? Most of our commercial volumes are driven by captive finance customers and portfolios of leased vehicles. Leasing of new vehicles dropped post-pandemic and hit an all-time low in sort of early 2023, was the bottom of the curve there. Leases are typically three years long. We have just sort of crossed over that bottom of the curve, in early 2026. As we look to the future, we're expecting significant growth in off-lease volumes, driven by higher lease penetration rates in late 2023, 2024, 2025. That's going to be a strong growth driver for our business as well. We're focused on executing against that. Obviously, we're focused on continuing to drive an innovation agenda here at OPENLANE, leveraging the technologies that exist, including AI, to make the process easier and faster, more higher trust, higher transparency for all our customers. There's a lot we're doing in that regard as well. All right. Thanks. I know you've done a very good job, certainly in the U.S., and we've seen that in the numbers, and frankly even in Canada, outperforming the market. Based on the growth trends that you've achieved so far and what you're doing on the go-to-market side, what can you do on a go-forward basis to help to maintain or potentially even accelerate? I guess we'll see if that's achievable from here. To keep that growth moving forward. Yeah. Well, we've been certainly very pleased with the growth that we've seen over the past, I'll say 18 - 24 months. What has driven that, I think some of the decisions we made around focusing on the digital model, consolidating various platforms and various brands, investing in the technology platform itself, improving condition reports, better data, all those things have played an important role. Marketplace, yeah. Yeah. On top of that, as Brad mentioned here, we've invested quite a bit in go-to-market resources. More boots on the ground, greater awareness out there on the part of franchised and independent dealers, that's been very effective. We're going to keep doing those types of things. I think we've got a good playbook here. I think we have improved our understanding of what works and what types of investments tend to have the biggest impacts. What types of markets or geographical areas might be most receptive given the data we're looking at. We're going to continue doing that. The other thing I'd say, John, is we're still a relatively small share. I talked about D2D as about half the TAM. Our market share in U.S. D2D is close to 10%. Okay, yeah, we've had good growth, we're still only 10% of the market. There's a lot of sort of headroom available for us to grow, particularly if you buy into the thesis, which I do, that the digital model is stronger, faster, better, superior, if you like, to the physical, and that customers will learn that over time by trial and usage. They'll learn those benefits. We're focused on that. I think we've got a long trajectory here of growth opportunity, and we're going to keep pushing that as hard and as fast as we can. No, I think at least based on the last data point I saw, digital auctions are right now around, what, 22% or so of the market. How do you see that evolving over time? Do you think it ultimately gets to 75%? Do you think it gets to 90%? What do you think is the end game and ultimately, I guess similarly for OPENLANE, what's kind of the end game for them or for you guys rather? Yeah. Well, you're right. Again, digital is 22% and we're close to 10% is what I said. We're a big component of that. Listen, I think in the D2D component, dealer-to-dealer transactions, I fundamentally believe that entire segment's fully addressable, that all of those vehicles can be sold in a digital marketplace. That's my fundamental view. Now, others may have a different point of view, but that's my one. I think the market's fully addressable, and we're going to go after the entire market. I do look at the off-lease side as maybe a bit of a predictor. Off-lease vehicles went online much earlier than dealer-to-dealer, and there's a reason for that is, with an off-lease vehicle, it's a three-year-old vehicle. It's a higher quality, lower mileage, less damage vehicle. It's also a vehicle that's typically been sold by a captive finance company. Think of Honda Finance selling a Honda vehicle to a Honda dealer, right? In that environment, there's a lot of trust, right, a lot of experience working together, knowledge of the product. D2D is quite a bit more complex than that. It's an older vehicle. It's a dealer selling to another dealer. It's maybe a different brand, much higher mileage, higher damage, et cetera. If I look at off-lease, off-lease grew from 10%, 20% digital to today, more like 70%+ digital. I think the same outcome is possible on the dealer side. Listen, it's going to take time. We're focused on one quarter at a time, one year at a time, continue to execute the playbook as best we can. Again, I think the segment ultimately is fully addressable. From a geographic standpoint, are there regions you think are most likely to be targeted over the next couple of years or so that are maybe particularly intriguing relative to others? Also, if you could just broadly talk about where you're maybe most exposed within the U.S., that would be helpful. Yeah. Well. To the extent you're willing to talk about it, too, but It's certainly not uniform across the U.S. I would say we've got markets that we're particularly strong in, then markets where I think we're weaker than we really ought to be, on a geographical basis. We're strong out West. We're strong in the South, in like Texas, or I'd say central South up into the Midwest. That sort of belt from the whole Central Time Zone, if you like. We actually have a good share in the Northeast, despite having a competitor that's regionally very strong in the Northeast as well. An area I'd say that we wish to do more business would be the Southeast. Some big states down there, Florida, Georgia. We've got decent share, but quite a bit lower than the share we have in, say, out West, California, places like that. I think some markets are maybe predictive of where other markets can get to if we execute the playbook the right way, and that's kind of the way we look at it from a sort of a headcount and investment kind of approach. What can we learn from the markets we're doing well in to help bring other markets further along? Okay. The next question is really on the broader market. I was wondering if you could talk about the health of the vehicle wholesale market and how that's evolved over the last couple of months, and particularly since you reported earnings. Yeah, I think the wholesale market is in reasonably good shape, is kind of how I'd say it. The wholesale market took a bit of a beating during COVID. Volumes got hit really badly, actually, for a whole bunch of reasons across the different categories. It's recovered a lot since then. If we look at the market here in 2026, it's much better than it was in, say, 2021, 2020. But it's not back to where it was in 2019, and I think some of that is kind of structural. There used to be 17.5 million cars sold per year. The last few years it's been more like 16, right? Well, you do that for four or five years in a row, and suddenly there is like six or seven million fewer five-year and younger cars out there, right? That's just going to drive fewer transactions and it's going to impact the retail used car market in terms of scarcity and price. It's also going to impact the wholesale used car market. Wholesale volumes are still below pre-COVID levels, but better than they were a few years ago. In the last couple of months, there's nothing really big to report, in my view. There was a strong, what I'll call spring market, driven by the tax refund season, in the first quarter. That typically ends around April, mid-April. The same kind of happened this year. We've seen a little bit of weakening in terms of conversion rates, but honestly not bad. I maybe expected a little bit more than we saw. Prices are still robust. Demand is still strong. Conversion rates are still in a good place. I wish there were more cars, but I'm always going to wish there were more cars. Yeah, of course. Right. The only thing I would add is one of the things we try to make sure investors understand is, we're still able to grow pretty sizably in a flat market because of what you just mentioned a minute ago, John, this kind of ongoing shift toward digital. Right? That was 10 years ago, that number was zero. Now we're call it below to mid-20s. The way we think about what we're chasing around is, if we get one to three percentage points a year of continual digital shift, that's anywhere between 100,000, 150,000 cars a year that incrementally kind of come into our space for digital penetration. Even in a flat market, we're still able to grow pretty sizably because we're really chasing where those digital conversions are coming from, and that's where we're winning a disproportionate share of those digital conversions. We just want to make sure people understand that even in a flat market, we still have a really strong opportunity to grow because we're still so low on that digital penetration scale. Yeah. Understood. Separately, I did want to ask you about this. Carvana at their inspection reconditioning center tour that they hosted, it was like two weeks ago, talking about plans to potentially open up their ADESA Clear platform for free to dealers. They're going to ultimately start out, it sounds like keep that restricted to certain dealers, so there won't necessarily be full flow, per se. I'm just kind of curious if they decide to broaden that out, how do you see that impacting the market, if at all? Just kind of curious to get your take there. Yeah. I don't have a whole lot to say on that one. We talked about it a bit amongst the management team on Friday. I guess what I'd say is Carvana bought ADESA from us back in 2022. That's just over four years ago now. I would say their wholesale business over that time, at least the ADESA business that they acquired, has generally kind of declined. I don't think they were that concerned about that because their thesis was to use those facilities more for the retail reconditioning operations. They've become, I'd say, less of a player in the wholesale space over the four-year period since the transaction. This kind of maybe signals a bit of a lean back in, but I don't know. Franchise dealers still look at Carvana through the lens of, "These guys compete with us for retail business and retail customers." I don't think franchise dealers are going to be super excited about participating there, but it remains to be seen. Obviously, we have competition, mix of physical and digital. ADESA Clear is, again, it's probably more of a hybrid. The cars are physically at the facilities. We'll see how it plays. We're not that concerned about it at the present moment. Okay. Understood. Now, I guess, going to the off-lease side of things. Lease activity was relatively slow in 2025, at least to my understanding. What are your current expectations on when off-lease volumes will peak? Should we expect that to occur in 2027, 2028, just given kind of the three-year lag, per se, from 2025, or is there reason to think otherwise? Yeah, I think there's some reason to think otherwise. If we think of what's our equation on off-lease vehicles? It starts with maturities. If we look at maturities are really a function of what were lease originations like three years ago. We saw lease originations, I think, bottom out around 18%, something like that, I am going from memory here, and then they got into the 24%-25% range in 2024. They kind of stayed in that range in 2025. They did not really grow again in 2025. They lost, I think, part of a point or something. Lease originations right now are somewhere around 24%-25%. Okay. The second component for us is within that portfolio, what is the consumer payoff percentage likely to be? Historically, pre-COVID, that was around 30%. Consumers would buy out 30%, we would get about 70% back in through remarketing. What we have seen with the run-up in used car values, that consumer payoff percentage increased from 30% to 60%, 70%, 80%, 90% at its peak. It has been slowly eroding back, and now it is back around 65% again. From this point looking forward, we are looking really at two variables. One is what does the maturity curve look like? That is going to ramp up from now through mid 2028, and then it is going to kind of flatten out. I would say it is kind of flat looking forward, after mid 2028. Within that, what is the consumer payoff percentage? I think that is going to continue to erode. Remains to be seen, right? That is my thesis, that these cars are being leased with a bit more aggressive residuals. Used car prices are not going to keep appreciating. I think the values are going to stay strong, but they are not going to go up another 50% from where they are at. I think we will see a lower consumer payoff percentage, meaning our volumes will tend to increase post over a longer term horizon. We will have to see, right? That is kind of my current theory of the case, and we will see how it plays. What is the typical payoff percentage? Is that, what, 25%, I think, is the number I have seen historically. Is that right? It used to be more like 30%- Okay ... pre-COVID. Within different portfolios it might vary a bit. I've seen it as low as 20 in certain portfolios and as high as 40. It's been structurally higher the last few years given high used car values, low volumes of lease maturities. I think the next 12 months will be very interesting, John. As we see more off-lease vehicles come in, start to come back, what does that consumer payoff percentage start to trend? By the way, it's very much driven by the equity in the vehicle. Today, as an example, within these lease portfolios, there's really two different types of vehicles. There's EVs, which are heavily negative equity. The consumer payoff percentage on those is very low, like 10%, 15%. Okay? There's the ICE and hybrid vehicles, which still have plenty of equity, and those have much higher, like 60%, 70%, 80% payoff percentages. Again, it's an economic question. The consumer is getting to the end of the lease. They're looking at the value of the vehicle versus the residual value in their contract, and they're making a decision based on, you know, which one is more valuable to me, right? Yep. And then next question, I wanted to talk about AFC a little bit. You know, could you just talk about the progress you've had in getting users of AFC financing to transact in your marketplace? Also, do those users have any notable differences in ticket size, frequency or conversion rates than other users on the marketplace? Well, AFC serves independent dealers, so non-franchise dealers. We've got a base of around 15,000 with a, with a contract or with a, you know, an allocation, a floor plan allocation. 15,000 dealers. As of today, a little over 55% of those dealers are registered with OPENLANE, and that's up from about 40% at the beginning of last year. We're making progress getting more and more of these dealers to register and, you know, sign up for OPENLANE and, you know, start to use the system. However, the number of dealers who are buying vehicles in OPENLANE each month is a subset of that 55%. Even those dealers that are buying vehicles are not buying all of their vehicles there. You do the math on that, you know, there's still a lot of opportunity here in this AFC portfolio to drive more future volume. I feel good about that. In terms of the size of these dealers, these are independent dealers, okay? Think of, you know, the smaller used car stores that you see. They don't have a franchise. Typically they're gonna be, you know, much smaller than your typical franchise dealer. That said, AFC's base of dealers is broad enough that, you know, their average size dealer would be equivalent to the average size for the industry. Okay? Yep. Now I guess maybe this is a question more for Brad, but how should we think about the impact of rate movements on AFC results? You know, you've talked about this a little bit in past quarters, but if you could just give a refresher, particularly just given, you know, what's going on now and, you know, maybe some discussion about potentially a rate hike. You know, I guess we'll see what happens. If you could just give a refresher on that'd be great. Yeah, sure. You know, rate changes do affect AFC, but they affect it pretty moderately. I mean, you have to keep in mind, in the AFC portfolio, the average loan is 62 or so days. What you end up getting is a, an impact that's really driven by the rate reset period, which really covers that 62-day window. You know, in a rising rate environment, it can be some tailwind for us. In a shrinking rate environment, it can be some headwind. These are pretty small around-the-edges items, just because of that rate, that really tight reset period. We offer it up as grounding folks in understanding what does a rate increase or a rate decrease look like, but they're not monumental movers for us just because the rate reset period's so tight. Gotcha. Thank you. From your interactions with customers, are there any products or services, and this is more like on a go-forward basis, product innovation type setup. Are there any products or service that they're asking you guys to provide? I know you talked about the inventory management system that you're working on and we'll get to that next. I was just kind of curious, are there features they'd like you to add to your current digital auction setup, or are there other new products that they'd like you to work on even beyond that, other than the inventory management system? I think first of all, when we talk to our customers, we are generally very pleased with the feedback we get about our, I'd say our system and also our business process. Our system, I think customers perceive us as an industry leader when it comes to digital technology. Our system is very easy to use. It's deliberately so. There's a lot of sophisticated technology behind the scenes. We try to keep the actual customer experience very simple. We're focused on trust, transparency, high-quality condition reports, leveraging all of the technologies we can to improve, continue to improve that, and that's a job that I don't think is ever fully done. That's what we're focused on, and I think our customers are appreciative of that. A request we do hear from time to time is, given the growth in our marketplace, the greater number of transactions, et cetera, what can we do in terms of data to help our customers make better decisions in terms of the prices which to sell and buy vehicles? We've got a lot of transaction data, a lot of dealers active on the site every single day. What is all of that telling us about the supply and demand and characteristics of the market as it pertains to a certain type of used car, for example? We're investing in that. Again, we do all of this under the banner of OPENLANE Intelligence, and we leverage AI where we can within that, to create greater pricing transparency, historical transactions, advice on, "Hey, the bidding has got to a certain level on your car. This seems like a really good price to us. You should be motivated to take this, in our view." While recognizing at the end of the day, that piece of inventory is something we don't own. The seller has to make that decision and be comfortable with the decision to sell it or not sell. Okay, thank you. Next, now moving on to the MyAut inventory management system that you talked about at your Investor Day a couple of months ago. Could you just talk about how that's going to be positioned to compete in the market? Maybe it's too early to say because it's probably still in development. You've done some work on it. Just curious if you could talk about how you expect it to be positioned, at least as of now, and particularly relative to other offerings, like say, vAuto, for example. Yeah. Well, thank you. First of all, inventory management. This is maybe going a little bit beyond what I was just talking about with data and creating a subscription product that advises the dealer. Again, think maybe through the lens of an independent dealer now, who might have 40 or 50 cars on the lot. What do we think are the best cars to stock given your business model, given the market conditions that we're seeing in your geographical area? What do you think is the ideal inventory mix to stock? What prices do we think you should stock them at? Are there vehicles currently on your lot that we think aren't a good fit, and would they be better put into a wholesale market? It's that kind of software to advise on those types of questions. I would say we're probably targeting a smaller dealer than vAuto would typically target. We're targeting more of an independent dealer or a small franchise who is just not going to pay the kind of headline price that a vAuto would cost them on a monthly basis. There's a lot of dealers that don't pay for that. We're in at a much lower price point and in with a simpler product. Coupled with that price point, if the dealer participates, they get some other benefits in terms of the transaction fees that are charged within our marketplace business in Canada. Think of it as, on the one hand, product extension, putting additional digital tools in the hand of a customer, converting some revenue to SaaS, getting recurring, predictable monthly revenue, and hopefully getting more share of wallet with that customer as well by having this combination of a sunk cost of a monthly subscription fee with a lower transaction cost, as opposed to the rack rate model that might exist if you're not a subscriber. That's the equation there. It's proven to be quite popular, it's probably too early to say yet, what the long-term plans are. I would say we're getting good feedback from customers. The adoption's probably exceeded our expectations. There's a number of things on the roadmap that we're focused on before pushing another wave of expansion for the product. Understood. Have you done work in terms of what the potential TAM might be for this? Maybe there's a TAM for the broader inventory management market that maybe is more appropriate to share? No, there's nothing. Okay I'd put out on this call. I would just say we've been pleased with the sign-ups thus far, and I think a big decision would be, will we bring it to the U.S. at some point? It is not currently on our roadmap to bring to the U.S. We're going to get this in really good shape in Canada before we make any decisions on the U.S. Frankly, the U.S., in terms of market share, we already have much higher market share in Canada than in the U.S. The U.S., I'm much more focused on growing the marketplace scale, the transactional volumes, et cetera. Canada, the business is more mature, I'm more focused on trying to broaden the portfolio up there. Okay. I'll ask, I do ultimately want to get to capital allocation last, before I do, while we're just talking about Canada, can you just give an update on that market, how it's doing? It seems like it's been a little bit of a challenge up there based on everything I've read out in the paper, any updates you could share would be useful there. It's been a little bit of a challenge. I'd say from a macro standpoint, I think really the tariffs was 15 months ago. They've been pretty negative for the Canadian economy on many different sectors, automotive sector being one, for example, with automotive production up there, et cetera. It just hasn't been a good period for Canada. That's played through into retail, new car sales, and some of those flow through into our industry, too. That said, I feel encouraged that it doesn't seem to be getting worse. In fact, it seems to be getting a little bit better. I also think that this phenomenon really started to become evident around about this time last year. May, June of last year is when the problems first started to show up. I feel like we're now starting, particularly as we move into Q3 and Q4, going to be lapping a different comp set for Canada. Our Canadian business is doing well. I wish the macro up there was a little stronger than it is, nonetheless, we're doing well. I'm hopeful that we'll be able to show some growth in Canada in the second half of the year. Okay. I would also say that, if I look at our numbers on a two-year basis, not comping to 2025, but comping to 2026, 2024 rather, on a two-year basis, our volumes are still up a decent amount in Canada. I think, again, that speaks to business doing well. Digital model has gained share, feel good about our position. That's kind of a summary on Canada. What's the digital penetration in Canada? Is there a number around that, or is it similar to the U.S.? It's considerably higher, and some of that was our market position in Canada. We were the leader in Canada, and we moved our business in a fully digital direction in the pandemic, and we never went back, unlike the physical auctions in the U.S. To some extent, we were able to move the market. In my view, the digital penetration in Canada is well above 50%. Okay. Thanks for that. Now on capital allocation, could you just quickly talk about your capital allocation priorities for 2026 and 2027, to the extent you can talk about that? Yeah, sure. We mentioned this at our Investor Day. There's a good slide out there in our materials that are posted on our website. The first thing for us is funding our organic growth. Our CapEx runs around $60 million a year to fund our organic growth. If you look at our cash flow generation, that's a pretty small component of how much cash flow we actually generate. That leaves a lot of cash left over. We've also been pretty vocal about being active in the share buyback markets. We use open and closed window trading strategies to repurchase shares. We'll continue that path for 2026, 2027, and probably beyond that. The last piece we have is we do have a term loan outstanding of $500-ish million, that over time, we'll probably be paying that down. We got a really good deal on it. It's not a strapping instrument for us, so we're going to leave that in the market for a little bit. That would be third. Okay. M&A, not necessarily in the purview at this point. How are you thinking about that broadly longer term? I'll start off, then hand it over to Peter. I mean, we've talked about it internally, but the reality for us is there's no real gap that we feel like we immediately need to fill with an M&A strategy, whether it's capabilities, whether it's distribution, whether it's geography expansion. None of those gaps are front of mind for us. That said, we're always going to be opportunistic should the right opportunity come up. We're fortunate, given our cash position and our capital position, we could actually pursue those kinds of ventures, but there's just nothing on the horizon that's staring us that we're wildly interested in because of these really high hurdle rates we have to go down that path. I'll let Peter speak some more. I mean, Brad's kind of said it. Listen, I like the organic growth plan we have. I think we're executing well. The plan is delivering results. I think we've got a long runway ahead, as I mentioned earlier, on many, many dimensions. I feel good about that. I think we'd look at M&A through an opportunistic lens, but I don't think there's a sort of a capability gap or a technology gap that I'm trying to address at the present time, so I feel good about that. All right. Well, I think that's all I have for questions. Thank you, Peter, Brad, and Bill also for joining on the side. Really a true pleasure to have you guys on the call and certainly to join the Auto Summit. Thanks again. Perfect. Thank you, John. Have a good summit. Take care. Thanks, John. You too.