OPENLANE, Inc. (OPLN) June 23, 2026 Annual General Meeting Transcript

All right. Good morning, everyone, and thanks for joining us for our first Barclays U.S. Auto Retail Summit. My name is John Babcock, and I'm the lead analyst covering the sector. So today we're going to be hosting a number of sessions that we hope you will find valuable. Replays will be available later today. And 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. So, first, we're here to welcome Openlane and very pleased to have with us CEO Peter Kelly and CFO Brad Herring. As I mentioned, I'm going to go through a couple of questions with the team and, you know, hopefully address some of your questions. So, 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. So looking forward to the session here this morning. So Openlane, we are a leader in the digital marketplace for wholesale used vehicles. Okay, so 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. So that's the business we serve. It's a large TAM. You know, it ebbs and flows a little bit. It's pretty stable time 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, you know, number of years. And Openlane is focused on being a leader in the digital marketplace side of that business. Rough stats last 2025, close to one and a half 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, you know, 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 a marketplace business.

Okay, thanks for that. And now, as you look out over the balance of 26 and into 27, 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, you know, drive the digital transformation of the industry. So, in terms of the growth vectors for a business, I'd say underpinning 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 address of the market. Historically, it has been a heavily physical auction component of the industry. But 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. So 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. So 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. And leases are typically three years long. So we have just sort of crossed over that bottom of the curve. In early 2026. So as we look to the future, we're expecting significant growth in off-lease volumes, driven by higher lease penetration rates in late 23, 24, 25. And that's going to be a strong growth driver for our business as well. So we're focused on executing against that. Obviously, we're focused on continuing to drive an innovation agenda here at Open Lane. Leveraging, you know, the technologies that exist, including AI, to make the process easier and faster, more,

you know, higher trust, higher transparency for all our customers.

So there's a lot we're doing in that regard as well.

All right, thanks. 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 mean, I guess we'll see if that's achievable from here, but 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 to 24 months. I think 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. 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, and that's been very effective. So, 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 impact and what types of markets or geographical areas might be most receptive, given the data we're looking at. So, 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 10. Our market share in U.S. D2D is close to 10%. Okay, so yeah, we've had good growth, but we're still only 10% of the market. So 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 the customers will learn that over time by trial and usage. They'll learn those benefits. So 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.

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, you know, I guess, similarly for OpenLane, like, what's kind of the end game for them, or for you guys, rather?

Well, you're right. So again, digital is 22, and we're, you know, close to 10 is what I said, you know, so 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. So 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? So in that environment, there's a lot of trust. 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, etc. But if I look at off-lease, off-lease grew from 10%, 20% digital to today, more like 70% plus digital. You know, so I think the same outcome is possible on the dealer side. But listen, it's going to take time. We're focused on, you know, you know, one quarter at a time, one year at a time, continue to execute the playbook as best we can. But again, I think the segment ultimately is fully addressable.

Okay. And from a geographic standpoint, are there regions you think are most likely to be targeted over the next couple years or so that are maybe particularly intriguing relative to others? And also, if you could just broadly talk about where you're maybe most exposed within the U.S., that would be helpful.

Yeah, it's certainly not uniform across the US. I would say we've got markets that were, you know, particularly strong in and then markets where I think we're weaker than we really ought to be, you know, on a geographical basis. We're strong out west. We're strong in the south and like Texas, I'd say central south up into the Midwest, that sort of belt from, you know, the whole center, center, you know, central time zone, if you like. We actually have good share in the Northeast, despite having a competitor that's regionally very strong in the Northeast as well. And 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. So 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, you know, but what can we learn from the markets we're doing well in to help bring other markets, you know, further along.

Okay. And the next question is really on the broader market. So I was wondering if you could talk about the health of the vehicle wholesale market, 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. You know, the wholesale market took a bit of a beating during COVID. Volumes, well, volumes got hit really badly, actually, for a whole bunch of reasons across the different categories. And it's recovered a lot since then. So, you know, if we look at the market here in 2026, it's much better than it was in, say, 2021, you know, 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? And 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. So 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. It's been 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. So 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've maybe expected a little bit more than we saw. So 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.

I would add, it's one of the things we try to make sure, you know, investors understand is, you know, 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? So that was, you know, 10 years ago, that number was zero. So now we're, you know, call it below the mid-20s. You know, 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, you know, between 100,000, 150,000 cars a year that incrementally kind of come into our space for digital penetration. So 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, you know, a disproportionate share of those digital conversions. So 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. And separately, I did want to ask you about this. I mean, Carvana at their inspection reconditioning center tour that they hosted was like two weeks ago, talking about plans to potentially open up their Odessa Clear platform for free to dealers, and they're going to ultimately start out, it sounds like, keep that restricted to certain dealers, and so there won't necessarily be like full flow per se. But 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 among the management team on Friday. I guess what I'd say is Carvana bought Odessa 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 Odessa business that they acquired, has generally kind of declined. And I think that's, I think that was kind of... I don't think they were that concerned about that because their thesis was to use those facilities more for the retail reconditioning operations. But 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. A dealer is still, you know, if we look at franchise dealers. Still look at Carvana to the lens of these guys compete with us for retail business and retail customers. So I don't think franchise dealers are going to be super excited about participating there. But, you know, it remains to be seen. Obviously, we have competition, mix of physical and digital. Odessa Clear is, again, it's probably more of a hybrid. The cars are physically at the facilities. But we'll see how it plays. We're not that concerned about it at the present moment.

Yeah, understood. And now I guess going to the off-lease side of things, you know, leasing activity was relatively slow in 25, at least to my understanding. What are your current expectations on when off-lease volumes will peak? I mean, should we expect that to occur in 27, 28? You're just given kind of a three-year lag, per se, from 25, or is there a 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, okay, so it starts with maturities. If we look at maturities, maturities are really a function of what were lease originations like three years ago. So we saw lease originations, I think, bottom out around 18%. Something like that, I'm going from memory here. And then they got into the 24%, 25% range in 24. They kind of stayed in that range in 25. They didn't really grow again in 25. They lost, I think, part of a point or something. So lease originations right now are somewhere around 24%, 25%. However, the second component for us is within that portfolio, what is the consumer payoff percentage likely to be? Okay, so historically, pre-COVID, that was around 30%. So consumers have buy up 30%, we would get about 70% back into remarketing. But then what we've seen with the run-up in used car values, that consumer payoff percentage increased from 30% to 60%, 70%, 80%, 90% at its peak. And it's been slowly eroding back, and now it's back around 65% again. Okay, so... From this point, looking forward, we're looking really at two variables. One is, what does the maturity curve look like? So that's going to ramp up, you know, from now through, you know, mid-28, and then it's going to kind of flatten out. Okay, so I'd say it's kind of flat looking forward after mid-28. But then within that, what's the consumer payoff percentage? I think that's going to continue to erode. It remains to be seen, right? But that's my thesis, that these cars are being leased with a bit more aggressive residuals. Used car prices aren't going to keep appreciating. I think the values are going to stay strong, but they're not going to go up another 50% from where they're at. So I think we'll see a lower consumer payoff percentage, meaning our volumes will tend to increase post over a longer term horizon. But we'll have to see, right? That's kind of my current. Theory of the case, and we'll see how it plays.

Okay. What is the typical payoff percentage? Is that what, 25% I think is the number I've seen historically? Is that right?

It seems to be more like 30% pre-COVID. But, you know, within different portfolios might vary a bit. I've seen it as low as 20 in certain portfolios and as high as 40. But it's been structurally higher the last few years, given high used car values, low volumes of lease maturities. So I think the next 12 months will be very interesting, John. As we see more off-lease vehicles start to come back, what does that consumer payoff percentage start to trend? And by the way, it's very much driven by the equity in the vehicle. So 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%. Then 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, 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 them, right?

Yep. And then that next question, I wanted to talk about AFC a little bit. Could you just talk about the progress you've had in getting users of AFC financing to transact in your marketplace? And then also, do those users have any notable differences in ticket size, frequency, or conversion rates in 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 contract or with an allocation, a floor plan allocation. $15,000. As of today, a little over 55% of those dealers are registered with Oakland Lane, and that's up from about 40% at the beginning of last year. So we're making progress getting more and more of these dealers to register and sign up for open lane and start to use the system. However, the number of dealers who are buying vehicles in open lane each month is a subset of that 55%. And even those dealers that are buying vehicles are not buying all of their vehicles there. So if you do the math on that, there's still a lot of opportunity here in this AFC portfolio to drive more future volume. And I feel good about that. In terms of the size of these dealers, these are independent dealers, okay? So think of the smaller used car stores that you see. They don't have a franchise. So typically, they're going to be much smaller than your typical franchise dealer. But that said, AFC's base of dealers is broad enough that their average size dealer would be equivalent to the average size for the industry, okay? Yep.

And 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. But if you could just give a refresher on that, that'd be great.

Yeah, sure. So 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. So what you end up getting is an impact that's really driven by the rate reset period, which really covers that 62-day window. So, you know, in a rising rate environment, it can be some tailwind for us. In a shrinking rate environment, it can be some headwind. But these are pretty small around the edges items just because of that rate, that really tight reset period. So we offer it up as... Grounding folks and 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 is so tight.

Gotcha. Thank you. And now from your interactions with customers, are there any products or services? And so this is more like on a go forward basis, product innovation type setup. But are there any products or service that they're asking you guys to provide? So, you know, I know you talked about the inventory management system that you're working on, and, you know, we'll get to that next. But 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, you know, other than the inventory management system?

Yeah, I think, first of all, you know, 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. So our system. You know, 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, you know, all of the technologies we can to continue to improve that. And that's a job that I don't think is ever fully done. So, you know, that's what we're focused on. And, uh, I think our customers are appreciative of that. Um, you know, I think there, a request we do, you know, here 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 at which to sell and buy vehicles. So 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? So we're investing in that, you know, again. We do all of this under the banner of open-lane 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.

Okay, thank you. And next, now moving on to the MyLot inventory management system that you talked about at your investor day a couple 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, but just kind of 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, Viato, for example.

Yeah, well, thank you. First of all, it's inventory management. Yeah, so this is maybe going a little bit beyond what I was just talking about with data and creating a subscription product that sort of advises the dealer. I think, again, think maybe through the lens of an independent dealer now, you know, who might have, you know, 40 or 50 cars on the lot. What do we think are the best cars to stock, given your business model, given the market? You know, so what do you think is the ideal inventory mix to stock? What prices do we think you should stock them at? And then are there vehicles currently on your lot that we think aren't a good fit? And would they be better, you know, put into a wholesale market? So it's that kind of, you know, software to advise on those types of questions. You know, I would say we're targeting... We're probably targeting a smaller dealer than Viota would typically target. So we're targeting more of an independent dealer or a small franchise who is just not going to pay the kind of... The headline price that a V auto would cost them on a monthly basis, you know, so there's a lot of dealers that don't pay for that. So we're at a much lower price point and in with a simpler product. And then 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. So think of it as on the one hand, product extension, so putting additional digital tools in the hands of a customer. Converting some revenue to SaaS, so getting sort of recurring, predictable monthly revenue, and hopefully getting more share of wallet with that customer as well by the sort of having this combination of a sunk cost of sort 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. So that's kind of the equation there. It's proven to be quite popular, but it's probably too early to say yet. You know, what the long-term plans are. I would say we're getting good feedback from customers. The adoptions probably exceeded our expectations. And there's a number of things on the roadmap that we're focused on before pushing, you know, another wave of expansion for the product.

Understood. Have you done work in terms of what the potential TAM might be for this? Or, you know, maybe there's a TAM for the broader inventory management, you know, market that maybe is more appropriate to share?

No, there's nothing, nothing. Well, on this call, I would just say we've been pleased with the signups thus far. And I think a big decision would be, you know, we'll be bringing to the U.S. at some point. It is not currently on a roadmap to bring to the U.S. We're going to get this, you know, in really good shape in Canada before we make any decisions on the U.S. And frankly, the U.S., you know. In terms of market share, we already have much higher market share in Canada than in the US. So the US, I'm much more focused on growing the marketplace scale, the transactional volumes, etc. Canada, the business is more mature, so I'm more focused on trying to broaden the portfolio up there.

Okay. And I'll ask, I do ultimately want to get to capital allocation last, but before I do, while we're just talking about Canada, can you just give an update on that market, how it's doing? I mean, it seems like it's been, you know, a little bit of a challenge up there based on everything I've read out in the paper, but any updates you could share will be useful there.

Yeah, 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, etc. So it just hasn't been a good period for Canada. And that's played through into retail, new car sales, and some of those flow through into our industry too. But 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. And I also think that this phenomenon really started to become evident around about this time last year. You know, May, June of last year is when the problems first started to show up. So I feel like we're now starting, particularly as moving to Q3 and Q4, going to be lapping, you know, a different comp set for Canada. So our Canadian business is doing well. I wish the macro up there was a little stronger than it is, but nonetheless, we're doing well. And I'm hopeful that we'll be able to show some growth in Canada in the second half of the year. I would also say that, you know, if I look at our numbers on a two-year basis, like not comping to 25, but comping to 26, 24, rather. You know, on a two-year basis, our volumes are still up, you know, a decent amount in Canada. So I think, again, that speaks to business doing well, digital model has gained share, feel good about our position. Yeah, so that's kind of a summary on Canada.

What's a digital penetration in Canada? Is there a number around that, or is it similar to the US?

So it's considerably higher. And some of that was, you know, our market position in Canada, we were the leader in Canada, and we moved our business in a fully digital direction, you know, in the pandemic, and we never kind of went back, unlike the physical auctions in the US. So to some extent, we were able to move the market. So in my view, the digital penetration in Canada is well above 50%.

Okay, thanks for that. And now on capital allocation, could you just quickly talk about your capital allocation priorities for 26 and 27 to the extent you can talk about that?

Yeah, sure. So 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, but 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. So 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 26, 27, and probably beyond that. And the last piece we have is we do have a term loan outstanding of $500-ish million. Over time, we'll probably be paying that down, but we've got a really good deal on it. You know, it's not a strapping instrument for us, so we're going to leave that in the market for a little bit, and that would be third.

Okay. So M&A, not necessarily in like the purview at this point. How are you thinking about that broadly longer term?

I'll start off and hand it over to Peter. 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. Now, that said, we're always going to be opportunistic should the right opportunity come up. You know, we're fortunate, given our cash position, 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 up. While we're interested in because of, you know, these really high hurdle rates we have to go down that path. So I'll let Peter speak some more.

Yeah, 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. So 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... There's 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, so 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, so thanks again.

Perfect. Thank you, John. Have a good summit.