Good day and welcome to the OPENLANE Fourth Quarter and Year-End Results 2024 Conference Call. All participants will be in listen-only mode. Operator provided instructions. After today's presentation, there will be an opportunity to ask questions. Operator provided instructions. Please note this event is being recorded. I would now like to turn the conference over to Itunu Orelaru. Please go ahead.

Thank you, operator. Good afternoon, everyone. Welcome to OPENLANE's fourth quarter and fiscal year 2024 earnings call. With me today are Peter Kelly, CEO of OPENLANE, and Brad Lakhia, EVP and CFO of OPENLANE. Our remarks today include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties that may cause our actual results or performance to differ materially from such statements. Factors that could cause such differences include those discussed in our press release issued today and in our SEC filings. Certain non-GAAP financial measures as defined under the SEC rules will be discussed on this call. Reconciliations of GAAP to non-GAAP measures are provided in our earnings materials and available in the Investor Relations section of our website. With that, I'll turn the call over to Peter. Peter?

Thank you, Itunu, and good afternoon, everyone. I'm pleased to be here today to share OPENLANE's fourth quarter and year-end results. I'll start with a few highlights, but spend the majority of my time discussing our strategy and where OPENLANE is headed. Brad will then walk you through the financials and provide our guidance for 2025. OPENLANE had a very positive fourth quarter and full year 2024. Customers are responding to our unique offerings and the differentiated value we deliver in terms of ease, speed and outcomes. The momentum that we're building in the market is tangible and all of this is reflected in our results. During the fourth quarter, we grew consolidated revenue by 12% and consolidated adjusted EBITDA by 18%, driven mainly by a 9% increase in Marketplace volumes. This marks the seventh straight quarter of year-over-year volume growth in the Marketplace segments, which included a 15% increase in dealer volumes. The Marketplace also generated $31 million in adjusted EBITDA during the quarter, an impressive 30% increase. On a full year basis, OPENLANE generated $293 million in adjusted EBITDA, driven by a 24% increase in Marketplace adjusted EBITDA. We also generated $293 million in cash flow from operations and our gross merchandise value grew 12% to $27 billion, another powerful indicator of the momentum we're building in the market. I won't spend a lot of time on our Finance segments today, given our detailed AFC investor update last November, but I will call out that AFC grew floor plan originations, held the loan loss rate to its lowest level in eight quarters and generated $159 million of adjusted EBITDA for the year. So in summary, OPENLANE’s consistent pattern of growth and financial performance clearly demonstrates the strong scalability characteristics of our asset-light digital model. And it fuels my optimism for our long-term growth in volume, market share and profitability. With that, let me turn to our strategy and how we plan to build on this positive momentum. As a reminder, our strategy for growth is anchored in our purpose, which is to make wholesale easy, so our customers can be more successful, and we're making wholesale easy by focusing on three enabling priorities. First, by delivering the best marketplace: expanding to more buyers and more sellers and offering the most diverse commercial and dealer inventory available. Second, by delivering the best technology: innovative products and services that help our customers make informed decisions and achieve better outcomes. And third, by delivering the best customer experience: keeping our marketplace fast, fair and transparent, making it easy for customers to transact and making OPENLANE the most preferred marketplace. As I approach my four-year anniversary as CEO, I believe OPENLANE is better positioned than ever to deliver on these priorities based on the many positive changes we’ve made during this period. We acquired, integrated and consolidated new digital assets. We divested our physical assets, paid down debt and improved the strength of our balance sheet. We rebranded the company into what I believe is rapidly becoming the strongest brand in our industry. We enhanced our team with new digital talents and we unified our culture around our customers. We're a very different company today and I would argue a much better and stronger company as well. So when I think about our strategy—delivering the best marketplace, the best technology and the best customer experience—the word that I'm anchoring on for 2025 is execution. Building on all that we've accomplished, now is the time for us to execute and win. In terms of the Marketplace, 2025 will be the bottom of the cycle for off-lease supply. We know that going in. However, we also have a clear line of sight that these volumes are coming back. New lease originations rose for the seventh straight quarter in Q4, and the majority of that volume will flow through OPENLANE first as those leases mature in 2026 and beyond. At the same time, our data and industry data confirm that the equity gap between off-lease values and residual lease values continues to narrow. This means a lower percentage of lease vehicles that we pay off when they mature and that will also result in more volume flowing through our Marketplace. So essentially, what was a double whammy for us over the past few years now looks set to become a double tailwind starting in 2026 and beyond: increased volumes of lease maturities and a declining payoff percentage, and this will be to OPENLANE’s benefit. We already support the majority of OEM and financial institution leasing programs in North America today and we were recently awarded back the off-lease remarketing business for a large OEM, which evidences OPENLANE’s technology advantage, leading customer experience, depth of remarketing knowledge and expert decision support capability. But I feel very good about our growth potential in commercial, and I'm equally optimistic about the opportunity in the dealer-to-dealer space. On the dealer front, our growth accelerated through every quarter in 2024 from lower volumes early in the year to single-digit growth in Q3 and then 15% dealer growth in Q4. Dealer listings grew, unique sellers and buyers grew, and we had several record months in terms of new dealer signups in the United States. So there's a lot of positive momentum going into 2025 and there is still a lot of opportunity for growth. I remain fundamentally convinced that digital is the future. We have seen that in almost every industry. OPENLANE offers a faster, more convenient solution that produces better outcomes for customers at a lower cost. That's something the physical auctions cannot easily replicate and it's something our customers are increasingly drawn to. We're seeing it in our positive NPS surveys. We're hearing it from customers during dealership visits and industry events. And most importantly, we're seeing it in our volume growth. While the TAM is very large, we are well positioned in dealer-to-dealer and I see this as a source of robust, long-term sustainable growth for OPENLANE. Hopefully these perspectives help reinforce what I believe is a positive industry position for OPENLANE as we look to 2025 and to the years that follow. And I'm confident we can capture these opportunities by continuing to invest in and execute on our strategy. In the middle of last year, we made meaningful investments in products, people and our go-to-market approach: more sales, more marketing and more innovation, including our recent launch of One App in the U.S. This new version of our platform allows dealers to seamlessly toggle between buying and selling and creates a direct link between the open Marketplace and our private-label programs. This has two beneficial effects. First, it connects our private-label franchise dealers directly into the OPENLANE Marketplace. Second, it offers the off-lease inventory that passes through the private labels to every franchise and independent dealer on our Marketplace—more buyers, more sellers and more inventory. I don't think we've seen the full impact of these investments yet, but our performance in the second half of the year definitely reflects some of the fruits of these investments. So we're going to lean in and invest further in delivering the best marketplace, the best technology and the best customer experience. We have a robust pipeline of innovation slated for 2025 that we look forward to sharing over the coming weeks and months. These include additional enhancements to our condition reports, deeper market insights around supply, demand, values and pricing, more AI-enabled features and capabilities, and more actionable data to help dealers make the best buying and selling decisions possible. To help promote these innovations and stimulate even more dealer engagement, we're also investing in our go-to-market approach. It’s sometimes hard to believe that OPENLANE has only been our flagship Marketplace brand in the United States for 16 months. I'm very pleased that both our internal surveys and third-party sources show that OPENLANE is rapidly climbing the ranks as one of the most recognized and most preferred marketplaces in the industry. Anecdotally, I had one Midwestern dealer tell me recently that six months ago he'd never heard of OPENLANE. Now, we're the preferred solution. That's encouraging and it reinforces to me that we're on the right track. We will continue to lean into broader awareness campaigns to support new market expansion, more personalized journeys to stimulate engagements and more targeted promotions to drive up transaction volume and wallet share. I had a West Coast dealer tell me in the fourth quarter that OPENLANE is everywhere these days, and that's precisely our goal: to be first in mind, first to list, first to sell, and first to buy. Finally, we're investing more in people: more feet on the street, more sales resources and more personalized support for our customers. As I've said before on these calls, OPENLANE is a digital marketplace in a relationship business. The collaborative partnership approach we take with our customers fosters greater customer loyalty and ultimately will earn us a greater share of their business. As we've mentioned previously, we are making meaningful go-to-market investments in our U.S. dealer business. We have made this strategic decision to invest now to further accelerate our dealer volumes and share. We are already very strong in commercial off-lease and we believe that these volumes will begin to return in 2026 and continue to grow thereafter. But I want to be sure we are equally strong in dealer-to-dealer, delivering growth in 2025 and continuing to grow as a multiplier to our commercial growth. These investments are reflected in our 2025 guidance, which shows our confidence in OPENLANE’s ability to both invest and grow revenue and also grow adjusted EBITDA simultaneously, just as we did in 2024. So overall, I believe we're well positioned to execute our strategy for growth and I believe our key value proposition for investors remains compelling. OPENLANE is an asset-light, highly scalable, digital marketplace leader focused on making wholesale easy for automotive dealers, manufacturers and commercial sellers. There is a large addressable market in North America and in Europe, and we're uniquely well positioned with both Dealer and Commercial segments. Our technology advantage is a competitive differentiator that enables us to bring new products and features to market very quickly. Our floor plan finance business is a category leader that is highly synergistic with our marketplace. We are cash flow positive with a strong balance sheet and well-positioned to invest in growth and to deliver shareholder returns. And we believe that our business has the capabilities to deliver meaningful earnings growth over the next several years. Before I turn things over to Brad, I want to remind you that this will be his last earnings call with OPENLANE. I appreciate his leadership and many contributions to our company and we wish him all the best. As an update to our search, we have been actively evaluating CFO candidates for the past few months and we look forward to introducing you to our new CFO when a final decision is made. With that, I'll now turn the call over to Brad.

Thank you, Peter. We had a successful 2024 and fourth quarter, delivering strong operating and financial results. The investments made in innovation, our go-to-market strategies and our disciplined cost management culture are reflected in these results. The OPENLANE team executed in a superior manner, resulting in a strengthened Marketplace platform that is winning in the market and consistently delivering excellent and easier customer outcomes. As usual, certain comments I make related to consolidated OPENLANE and the Marketplace segment are on a net revenue basis, which excludes the impact of purchased vehicle sales. In addition, my comments will be on a fourth quarter year-over-year basis, unless I state otherwise. I will start with results at the consolidated level and then cover segment results. Finally, I will wrap up with some commentary and expectations for 2025. Our consolidated revenue was $455 million, up 12%, the third consecutive quarter of top-line growth reflecting improved momentum in each of our segments. Revenue growth was mainly driven by the 9% unit volume growth within our Marketplace segment. Total cost of services was $245 million, up 19%, primarily due to increased Marketplace volumes and mix shift. Adjusted EBITDA was $73 million, up 18%, while full year adjusted EBITDA was $293 million, up 8% driven by increased Marketplace volume, lower SG&A and increased auction fees. Consolidated SG&A for the quarter was $100 million, down 2%, while full year consolidated SG&A was $409 million, down 3%. This reflects the successful execution of our cost savings initiatives, which have more than offset general inflationary headwinds and the incremental go-to-market investments we made in the second half of 2024. The net decrease in SG&A is primarily attributed to lower compensation expenses and professional fees and the realization of cost savings from our technology and platform consolidation initiatives. As a company, we remain committed to maintaining a culture of rigorous cost management that will continue to unlock investment in growth and innovation. Turning to the Marketplace segment, revenue increased 8% to $349 million. Our total volumes were up 9% with Dealer volumes up 15% and Commercial volumes up 5%. The Dealer growth was fueled by successful investments in our U.S. go-to-market strategy, as well as increased demand in Canada. Auction fee revenue increased by 24%, driven primarily by 9% volume growth, sales mix and auction fee price increases. Services revenue was down 2%. However, excluding the transportation accounting change, services revenue increased by 1%. Gross profit was up 20%, primarily due to increased volumes and lower depreciation and amortization costs. Please note, we have updated our Marketplace gross profit calculation. In our Form 10-K, Marketplace gross profit is now reported on a GAAP basis, which includes an allocation of depreciation and amortization within the cost of services. This method has been applied to comparable periods and a reconciliation to adjusted gross profit is now available in the supplemental materials posted on our website earlier today. Marketplace SG&A decreased by 1% in the fourth quarter, and by 3% for the full year, driven by the factors discussed earlier. Marketplace adjusted EBITDA was $31 million, up 30%. Full year Marketplace adjusted EBITDA was $135 million, up 24%. This improvement was driven by volume growth, higher auction fees, and lower costs. As Peter stated, 2024 was a strong year for our Marketplace business. We are pleased to see OPENLANE’s momentum accelerate. Our Dealer business is growing by offering a better, faster, higher value solution at a lower cost. This combination represents a highly scalable, competitively differentiated business model, particularly when compared to physical models. Our Commercial business is a clear market leader and is well-positioned to capture the benefits of the anticipated increase in lease maturities beginning in 2026. Our pipeline of innovation is extending our technology advantage and we believe our focus on customer experience creates the opportunity to position OPENLANE as the most preferred digital Marketplace provider. These factors among others give us confidence in our strategy and an increased willingness to invest for growth. As I turn to our Finance segment, I would like to remind you of the updates we've made for our AFC business. These changes were detailed in our November investor update, which is available on our investor relations web page. We feel these enhancements will improve investor understanding of this business, better highlight AFC's top-quartile performance metrics and should improve one's ability to value this meaningful part of OPENLANE. Turning to our Finance segment results: for the quarter, total finance revenues were down 5%, primarily driven by lower vehicle values, lower interest rates and a decrease in days outstanding. This was partially offset by a modest increase in volumes. In the quarter, floor plan originations were up 6%, floor plan curtailments were down 7% and total loan transactions were up 1%. The growth in floor plan originations was primarily due to two factors: first, we focused on organic growth initiatives during the quarter which yielded positive results; second, we saw a notable increase in independent dealer sentiment and health. Overall inventory on dealer lots increased in the quarter and this was further supported by improved inventory turnover evidenced by a decrease in days outstanding and a decrease in curtailments. Net Finance margin was $78 million reflecting a yield of 13.8%, up 50 basis points due to an increase in floor plan originations coupled with a decrease in average vehicle values. Finance segment adjusted EBITDA was $42 million, up 10% and representing the first quarter of year-over-year adjusted EBITDA growth in eight quarters. This improvement reflects the improved dealer fundamentals already discussed, improved risk management and disciplined cost management. Finance SG&A was down 6%, driven by factors discussed earlier. From a risk management perspective, we were pleased with the fourth quarter provision for credit losses of 1.9%. This is the lowest rate in eight quarters reflecting improved fundamentals and our leading proprietary risk management capability. We saw consistent improvement in the frequency and severity of losses during the quarter and throughout 2024 as a whole. We expect these improvements will continue through the first half of 2025. AFC's continued strong performance in 2024 can also be attributed to its unique service delivery model and robust customer relationships. As we previously highlighted, AFC is a core business for OPENLANE that is complementary to our Marketplace business. Its leading financial returns and risk management processes underscore AFC's overall strength and durability. In addition, AFC’s strong cash flow characteristics fuel innovation across OPENLANE and strengthen our capital allocation strategy. Moving to the balance sheet and capital allocation: consistent with prior quarters, we continue to generate strong cash flow. We ended the year with an improved balance sheet and liquidity. We had $293 million of cash flow from operations and our consolidated net leverage stands at approximately 0.3 times. This level of cash generation demonstrates the value of our asset-light, digitally focused Marketplace business working in combination with our leading floor plan finance business. Overall, the core of our capital allocation framework remains the same. We continue to prioritize the funding of organic investments, while ensuring flexibility for high-return, complementary strategic opportunities and shareholder returns. In 2024, we bought back approximately 1.8 million shares as part of our share repurchase program. As of the end of 2024, we have approximately $100 million available for repurchase under the program. Our philosophy on share repurchases will remain principled and opportunistic. In addition, as mentioned in prior calls, we plan to use cash flow from operations and available liquidity to repay the $210 million senior note due in June of this year. Looking ahead to 2025, I'd like to provide some commentary on factors that we expect will impact our business performance this year. From an industry perspective, we are now in the midst of the most challenging period of off-lease maturities, and this low point will continue through 2025 until we expect to see improvements beginning in 2026. From a macro perspective, like all industries, we continue to experience a wide range of macro uncertainties. More recently, this has resulted in a strengthening U.S. dollar, which is creating some translation headwinds. In terms of our business portfolio, we completed the sale of our Automotive Key business in the fourth quarter. This service business was not core to our digital Marketplace business model and represented approximately 2% to 3% of OPENLANE’s 2024 consolidated net revenue and adjusted EBITDA. The sale advances our strategy, further simplifies our business model and enhances value for both our customers and investors. With regard to our go-to-market initiatives, we plan to continue to make investments in the first half of 2025 consistent with the second half of 2024. We are seeing the returns from these incremental investments and therefore we have further confidence that ongoing investments will not only drive growth, but will improve our customer experience. Given these factors and others, we expect our 2025 adjusted EBITDA to be between $290 million and $310 million. We expect our operating adjusted earnings per share to be between $0.90 and $1. Finally, we expect capital expenditures to be between $50 million and $55 million in 2025, which is in line with 2024. Further support for these guidance metrics is available in our earnings release published earlier today. To summarize our fourth quarter results: volumes grew by 9%, driven by 15% dealer growth. Consolidated adjusted EBITDA grew 18% with Marketplace adjusted EBITDA growth of 30%. And we generated $293 million of cash flow from operations for the year. As Peter mentioned earlier, this is my final OPENLANE earnings call. So I want to close by expressing my appreciation and gratitude. It's been a privilege and an honor to serve at OPENLANE. OPENLANE has the right strategy, the right business model, and a talented winning leadership team who are committed to our purpose. Therefore, I remain optimistic about OPENLANE's future. Peter, thank you and the entire OPENLANE team for supporting me and making me a better leader. And finally, I want to thank our entire investment community for your support, insights and trust. With that, I'll turn the call over to the operator for questions.

Thank you. Operator provided instructions. And the first question will be from Bob Labick from CJS Securities. Please go ahead.

Hi, this is Will in for Bob. With the industry decline in off-lease vehicles, how are dealers handling trade-ins? Are they keeping more and selling less, or have volumes been steady?

Thank you, Will. Volumes have been steady or strong. Our D2D volume growth in the fourth quarter was 15%—that's the strongest growth we had all year. So I'm very pleased with that number. We grew our active base of sellers and buyers. We had some really strong months of new dealer signups on the platform in the United States in the fourth quarter. So I'm not noticing any lack of inventory out there at dealers, at least not to this point. So I'm feeling good about that, Will. Thank you.

Thank you. Very helpful. And then just one more: do you expect Canadian wholesale volumes to be affected by tariffs or a trade war? Thanks.

Yeah. I guess what I'd say is, first of all, I think OPENLANE is very well positioned to prosper in any sort of environment we find ourselves in. If I look at the fourth quarter, we see strong progress on the commercial front, with commercial volume growth, new customer wins, and strong progress on the dealer front, which I mentioned earlier. So I feel good about how we're positioned exiting the year and starting the new year with our asset-light business model, with our strong balance sheet, and, frankly, with the management team that has been through some challenging macro environments over the last four years. There's a lot of speculation out there about tariffs—will they be applied, how will they apply, will they apply to used cars, what are the percentages—so there's a whole range of variables that I don't really want to speculate on. What I am confident in is that this company is well positioned to prosper in whatever environment we find ourselves in.

And the next question will be from Rajat Gupta from JPMorgan. Please go ahead.

Great. Thanks for taking the question. I just had one first question on the D2D volumes. Nice acceleration here, progress, so congrats on that. Curious if you could give us a sense of what you think the market did in the quarter and what your share gains were in the U.S. specifically? And then as a follow-up question, anything you could give us in terms of what's baked into your guidance? It's a wide range obviously, in terms of your outlook for both dealer and commercial volumes. Thanks.

Thanks, Rajat. So let me take the first part of that question first. In dealer, I’m pleased with the performance in the quarter—I mentioned it was our strongest quarter of 2024, 15% year-on-year growth. We saw solid growth in both the United States and Canada. So good growth in both markets. I feel good about that as well—not only volume growth, but volume growth on vehicles offered for sale and on participating sellers and buyers. In the United States, I feel really good about the additional investments we leaned into at the end of the second quarter and the beginning of the third quarter. That was a strategic decision we made coming off the OPENLANE rebranding and the integration of commercial inventory. We decided to hit the accelerator on our go-to-market approach. We made targeted and thoughtful investments in technology, sales and marketing to grow participation, and I see that paying off. I don't think we've seen the full payoff yet, but some of the impacts of those investments drove the improving performance through the end of the fourth quarter. I actually increased those investments slightly toward the end of the fourth quarter as well. We've got strong momentum going into 2025. Directionally, in the U.S., we are still a fairly small player market-share-wise in a very large TAM, so our market share in the U.S. is relatively small. But our offering is very strong; I hear that feedback from dealers, I see it in our NPS surveys, and I see it in repeat use and adoption on the platform. I feel bullish about the D2D market and I look at the D2D opportunity as a source of sustainable long-term growth for this company. On the commercial side, our footprint with off-lease sellers is a differentiator and a strong source of volume. 2025 will be a challenging year in terms of overall commercial off-lease volumes because of the low lease originations in 2022, and that's a known factor going in—our guidance reflects that. What gives me confidence is that despite that, our business delivered a very strong performance in Q4. I'm looking at a continued strong performance on the commercial side in 2025 and an acceleration in 2026, 2027 and beyond. Put together—a dealer business that's growing steadily where we can grow share, a commercial business that will accelerate starting in 2026, and a strong finance business delivering outstanding results—I see a very strong opportunity for OPENLANE and that's what excites me about the prospects for this company.

Understood. Great. Thanks for the color. I’ll jump back in queue.

And the next question will be from Craig Kennison from Baird. Please go ahead.

Hey, good afternoon. Thanks for taking my question. Brad, I want to start with you. I see a line item on the cash flow statement tied to about $80 million. Is that basically the Key business?

Yeah, that's accurate.

Okay. Thank you for that. And Peter, I think you mentioned on the off-lease side you had an award back. Maybe just add a little color to whether that's an incremental share gain or a customer that had left and come back or just a renewal of a customer that had already been with you?

Yeah, Craig, thank you. It's more a question of a customer that had left and come back. We don't typically talk about customer wins and losses, but I can recall in our prior earnings call that came up as a question with this specific customer. It was probably four years ago that customer left. They were on an alternative platform for about three years and ran an RFP late last year. We were successful. We will be onboarding that customer toward the end of this year. It won't have any real material volume impact in 2025—I'll be clear about that. In fact, we'll incur some cost in the implementation of the process in 2025 and that's reflected in our guidance. The volumes will start to show up in 2026 and beyond. So I would consider that an incremental share gain at this point, although it is a win back from four years ago.

Thank you. And Peter, you touched earlier on integrating Commercial inventory and the Dealer platform. Can you shed a little more light on exactly what that means?

Yeah, thanks Craig. The focus here is innovation and making the process easy, and our combined platform as we integrate digital assets enables us to innovate faster. Just over a year ago, when we launched the OPENLANE Marketplace brand in the U.S., we integrated the commercial off-lease inventory into the open cycle of the Marketplace and rebranded everything to OPENLANE. Since then, we've seen a significant increase in the volume of vehicles being purchased by franchise dealers, which is encouraging because leased vehicles typically appeal more to franchise dealers. We've seen strong growth in the number of franchise dealers logging on as buyers in our Marketplace. What we launched with One App last month allows a dealer—particularly a franchise dealer who has access to private-label programs—to have a seamless single sign-on experience to their private label within the OPENLANE app. The app becomes an anchor point: dealers can access their private-label, buy in the open Marketplace and sell, all in one place. That was the thinking behind One App and it is now live with customers. We're excited about that and its potential to increase engagement and simplify workflows for dealers.

And the next question will be from John Murphy from Bank of America. Please go ahead.

Good evening everybody. Peter—when we look at the adjusted EBITDA for 2024 full year, you mentioned the Key business was 2% to 3%. So if you adjust for the midpoint of that, you get about $286 million of EBITDA as the base versus the $290 million to $310 million guidance, or about $300 million at midpoint. That indicates about 5% organic EBITDA growth. Can you talk about where you see that growth coming from between Marketplace and AFC? It sounds like from a finance perspective there could be some challenges and AFC might not see much loan growth. So where do you expect that 5% EBITDA growth to be generated between the two segments?

Thanks, John. Let me comment at a high level on the guidance and then address contribution. There are four factors to think about in our guidance: first, the sale of the Automotive Key business, which you noted at 2% to 3% of revenue and EBITDA; second, the strengthening U.S. dollar creating a modest headwind on Canadian and European profits; third, the commercial volume headwinds for 2025 due to low lease originations in 2022; and fourth, increased investments in the U.S. go-to-market. We made investments in late Q2, added to that in late Q4, and we'll carry those investments through 2025. Notwithstanding those headwinds, we forecast a strong year with increased EBITDA. In terms of where the incremental dollars in our model come from, most are on the Marketplace side. I was pleased with AFC's performance in Q4, but given the known commercial headwinds and our increased go-to-market investments, most of the incremental EBITDA in our guidance is expected to come from Marketplace improvements rather than AFC.

Understood. Second question: you keep talking about changes to the product and One App—baking private-label auctions into the app so dealers have one landing spot. That sounds intuitive, but is there any confusion in the market as you change the technology for dealers who just want to buy and sell wholesale? Are there growing pains, or are dealers receptive and tech-savvy enough to absorb these changes?

That's a very good question. Dealers give us high marks on the ease and simplicity of our platform. Many dealers tell us our Marketplace is their favorite because it's easy to use. We build a lot of sophistication behind the scenes but aim to make the user experience simple. Of course, dealers form habits; the app works a certain way and when you change things you'll get a range of feedback. To manage that, we do A/B testing and roll out features to smaller audiences first and iterate. So we try to be thoughtful about changes. One of the benefits of the way we've built the business is that some dealers who thought OPENLANE was invisible because they knew us by a private-label are now realizing they've been transacting with our technology for years. Our goal with the One App is to make dealers realize they already have an established relationship and to give them more opportunity to participate in the open Marketplace.

Last question from me: you mentioned dealer-to-dealer growth. Can you give any directional sense of franchise dealer versus independent dealer participation? Is franchise growth driving the buy side or sell side more?

We don't report a strict breakout, but directionally: most commercial volume we sell is purchased by franchise dealers—roughly 70% or so. Within the dealer-to-dealer market, most of the volume offered for sale is from franchise dealers—again, roughly 70% to 80%—and most of the volume purchased is purchased by independent dealers—also roughly 70% to 80%. That's rough math but directionally accurate to give you an understanding. There is opportunity to increase franchise dealer participation on both the sell side and the buy side.

Operator provided instructions. The next question is from Bret Jordan from Jefferies. Please go ahead.

Hey guys. If you look at 2025 and there are a couple of new entrants in the auction space that used to be primarily salvage and other legacy whole-car guys, do you see the environment becoming more competitive from a promotional standpoint or a struggle for market share, particularly on the commercial side given cyclicality? Or is the current competitive state what we should expect to see for 2025?

Bret, we don't comment on any specific competitor. I actually see the choices becoming more clarified for customers rather than a dramatic shift in competitive dynamics. I feel really good about OPENLANE's positioning—both with commercial sellers and with franchise and independent dealers. That strength is reflected in internal and third-party surveys asking dealers about preferred wholesale auctions—OPENLANE has been rising in those rankings and we've only been in market with the OPENLANE brand in the U.S. for 16 months. I feel good about our strategy of delivering a better marketplace, better technology and improved customer experience. We have a strong differentiation on the commercial seller side as the leader in off-lease remarketing. 2025 will be a challenge, but those volumes will grow in 2026 and beyond. I view dealer-to-dealer as a growth area where we can gain share over time.

Okay. And related to lease originations troughing in 2022, was there any notable quarter that was the low point for originations, or was it a trough across several quarters?

If you look at the year, the quarterly year-on-year decline in lease originations was at its maximum in Q1 and Q2 of 2022, then started to diminish in Q3 and Q4, and returned to growth around Q2 of 2023. We generally think of roughly a three-year lag for maturities to flow through to remarketing, so keep that profile in mind. The wild card is the consumer payoff percentage—which has been declining slowly but remains higher than pre-COVID; if that continues to decline faster it could accelerate the pace of return, but I wouldn't bet on that change right now.

If tariffs change and the cost of a new vehicle goes up by, say, $5,000 on average, do you think that drives up used values and creates a more attractive environment for remarketing?

It probably wouldn't help much, Bret. If new vehicle values go up by X, used vehicle values typically move up by about half of X. The off-lease equity gap has been narrowing, which has led to declining consumer payoff percentages. Tariffs might cause a small delay in that trend, maybe push it out a quarter, but I don't think it changes the overall narrative materially. We'll have to see how it plays out.

And ladies and gentlemen, this concludes today's question-and-answer session. I will turn the conference back to Peter Kelly for any closing remarks.

Well, thank you, Chad, and thank you everybody for your questions and your continued interest and support of OPENLANE. As I mentioned during the call, I believe we've entered 2025 with positive momentum. Our Marketplace is well positioned for long-term sustained growth in both Dealer and Commercial. We have a category-leading Finance business and we're continuing to extend our technology advantage on multiple fronts. So I remain very optimistic for OPENLANE’s future and I look forward to updating you on our progress and our first quarter performance later this spring. Thank you everybody. Have a good evening.

And thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.