OPLN Q3 2026 earnings call transcript, November 4, 2026

We'll be right back.

And welcome to Open Lane's third quarter 2026 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the button.

I'd like to turn the conference over to Bill Wright, Vice President, Investor Relations. Please go ahead.

Thank you, Operator. Good morning, everyone. Welcome to Open Lane's third quarter 2026 earnings call. With me today are Peter Kelly, CEO of Open Lane, and Brad Herring, CFO of Open Lane. 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...

...issued today and in our SEC filings. Certain non-GAAP financial measures as defined under 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. Please note that all financial and operational metrics presented during this call are on a year-over-year basis unless otherwise specifically noted. I'll turn the call over to Peter. Thank you, Bill, and thank you everyone for joining us today. I'm very pleased to report on another strong quarter at Openlane. Brad will cover most of the specifics around our financial and operational performance and our narrowed 2026 guidance. But first, I'll highlight a few accomplishments from the third quarter and provide you with an update on our strategy and outlook for the business.

I'll start by noting that despite what I would call a mixed-industry backdrop, Openlane continues to outperform. Our growth is consistent.

And the positive momentum we sustained in the third quarter reinforced the strength of our strategy, our focused execution, and the differentiated value that we're delivering to the market. During the third quarter, we grew consolidated revenue by 13% and adjusted EBITDA by 23% to $107 million. We also generated $97 million in cash from operations, an increase of 34%. In the marketplace segment, we grew overall vehicles sold by 28%.

We were slightly down due largely to macroeconomic issues. But in the US, we grew dealer volumes by 22% and set a new single quarter volume record. This marks the sixth straight quarter of double digit volume growth in US dealer sales. As I've stated on previous calls, while we expect some variability in our US dealer growth rate quarter to quarter, our aim is to consistently outperform the industry. And based on Q3 industry dealer volumes that were flat to negative, we mean... Meaningfully exceeded that goal. Switching to our commercial business, we grew volumes by 46% in the third quarter, or 17% when adjusting for the step function addition of our latest private label customer. Similar to dealer, Openlane's strong private label market position and the increasing off-lease volumes sold to our open sale channel helped us outperform the industry. We are still on the upward inflection of off-lease supply, and we expect continued year-on-year growth in off-lease volumes throughout the remainder of...

...perceivables, managing risk to a very low loss rate, and contributing significant adjusted EBITDA. There are many contributing factors at OpenLane that are driving these positive results, but the one I want to call out specifically is focus. We are laser-focused on our purpose, which is to make wholesale easy so our customers can be more successful. We are focused on a clear, consistent strategy, and we're focused on execution, supporting our customers with determination and without distraction. Our third...

As a reminder, our strategy is focused on three differentiating priorities. First, delivering the best marketplace, expanding our depth and breadth with more buyers and more sellers, and offering the most diverse commercial and dealer inventory available. Second, delivering the best technology, innovative products and services that help our customers make informed decisions and achieve better outcomes. And third, delivering the best customer experience, keeping our marketplace fast, fair, and... making it easy for customers to transact and making OpenLane the most preferred marketplace. I'll touch on each of these in a little more detail. First, in terms of offering the best marketplace, we are making significant progress leveraging OpenLane's unique crossover customer basis. The 15,000 independent dealers in AFC's network and the 15,000 franchise dealers in our private label programs. Starting with the independent dealers, the first step is enrollment. And I'm pleased... It means that nearly two-thirds of AFC's active North American dealer base is now registered on OpenLane. But the more valuable step is activation, motivating those dealers to log in, bid, buy, and floor plan on the OpenLane marketplace. Since the start of 2026, the number of North American AFC dealers transacting on OpenLane has increased by 19%. But this still only represents about one-third of AFC's total active dealer base.

So there is still a very large opportunity here, and we are implementing new sales. products and marketing strategies to more effectively cross-pollinate and engage this important customer segment. This progress, coupled with the still-maturing output of our recent go-to-market investments, helped deliver another great quarter of double-digit increases in new buyers, new sellers, and unique vehicles listed on the OpenLane U.S. marketplace. On the commercial side, we continue to partner closely with our commercial customers to find new and even more efficient ways to sell their growing off-lease portfolios online. Buyers on our private label programs grew 30% during the quarter, a positive signal of sustained demand for the off-lease inventory now available on OpenLane. And since the start of this year, private label buyers who also transacted in OpenLane's open sale channel have grown by over 45%. This helped drive a 90% year-on-year increase in the number of commercial vehicles sold in the OpenLane open sale, which is the most valuable level of the commercial waterfall. As an update on commercial mix, we did see some improvement in the U.S. during the third quarter, with fewer consumer payoffs and more vehicles flowing down the off-lease waterfall. And again, while this may vary slightly between quarters, we still expect consumer payoffs to continue declining as off-lease maturities increase and end-of-lease equity.

From a best technology perspective, we are advancing a broad pipeline of innovation by leveraging our vast data resources and AI expertise. And our three-year effort to simplify our infrastructure is nearing completion and is already generating positive results. A pilot of our new streamlined... ...registration process cut the onboarding time in half and reduced the time between activation and a dealer's first bid by over 75%. The accuracy of our price prediction feature continues to tighten, and it remains the only forward-looking 30-, 60-, 90-day pricing forecast tool in the market. In Canada... More than 900 dealers have enrolled in the MyLot, and we remain optimistic about the long-term growth potential of this subscription-based SaaS product. And we continued the Canadian rollout of our modernized auction management system, transitioning our largest operational hubs during the third quarter. This work makes us more efficient and... and enables faster technology deployment. And we expect to complete this project by the end of this year. Finally, on the customer experience front, we continue to advance human and AI capabilities aimed at improving every customer touchpoint with online. During the third quarter, we released a variety of new features, including... ...expanded seller condition disclosures, enhanced EV battery health information, improved in-transit vehicle tracking, and a redesigned and simplified checkout process. All of these initiatives have helped maintain our transactional NPS scores in the great to excellent range across all geographies. And once again...

Can our U.S. seller NPS achieve the highest scores, indicating exceptional customer loyalty and brand satisfaction? Now let me turn to our outlook for the remainder of 2026. During the third quarter, we did see dealer conversion rates start to come under pressure as used vehicle values exhibited a steeper-than-normal price decline throughout the quarter. We expect that trend to continue in Q4 and to begin improving again in early 2027. Notwithstanding, we believe open-lane strategy, execution, and value proposition will enable gains in volume and market share. In commercial, there is no change to our view that off-least supply will continue to scale throughout the year and beyond. And that open-lane will be a primary beneficiary of this cyclical recovery. In Canada, we continue to navigate a challenging economic landscape with declining vehicle values and transactions. So we're staying focused on increasing wallet share, managing our costs, and advancing new revenue-generating offerings that supplement our growth. We also continue to monitor the broader geopolitical and macro factors that could impact our industry. That said, I believe our business model is resilient, adaptable, and highly capable of navigating whatever new challenges may arise. And finally, we believe that the recent changes in the industry competitive environment, specifically... the acquisition of a primary competitor, provides Openlane with the unique opportunities to capture additional share. So we will be pulling forward some planned investments to help accelerate that effort. But to close, Openlane remains very well positioned, and our focus on our purpose, our strategy, and our customers continues to deliver market-leading results.

And because of that, I believe the key elements of our value proposition for investors remain very compelling. Openlane is a scalable digital marketplace leader, focused on making wholesale easy for automotive dealers, manufacturers, and commercial sellers. There is a large addressable market for our services, and Openlane is uniquely well positioned with commercial customers. And with franchise and independent dealers. Our technology advantage is a competitive differentiator. Our floor plan finance business, AFC, is a high-performing business that is synergistic with the marketplace. We generate significant cash flow and have a strong balance sheet. And we believe that our business has the capability to deliver meaning. Thinkful growth, profitability, and cash generation over the next several years. So with that, I will now turn the call over to Brad.

Thanks, Peter. And as we've done before, I'll start with the consolidated results and get into more detail within our operating segments. For the quarter, we reported total revenues of 560. $61 million, representing growth of 13%. Consistent with previous quarters, the growth was primarily concentrated in our marketplace segment. Consolidated adjusted EBITDA for the quarter was $107 million, which represents an increase of 23%. With respect to consolidated cash flows, our trail 12-month adjusted free cash flow totaled $345 million. This represents a trailing 12-month adjusted free cash flow conversion rate of 90%, which is higher than our expected range of 65% to 75%. The positive variance is related to $58 million that moved off our balance sheet as part of the renewal of... our securitization agreement that we completed in the quarter. This will result in a positive LTM adjusted free cash flow variance for the upcoming three quarters until the impact of the renewals roll off. Excluding the one-time step up from the renewal, our LTM free cash conversion was 75%. Following the performance of our business segments, I'll start with the marketplace. Starting with GMB, in Q3, our marketplace transacted GMB totaling $10.0 billion, which represents growth of 38%. Within that overall GMB growth, our dealer GMB grew 5% to $2.6 billion. U.S. dealer posted a 30% increase in GMB, which consisted of a 22% increase in units sold and a 7% increase in average vehicle values.

Canada dealer GMB decreased by 17%, which was split approximately one-third from lower units sold and two-thirds from a decline in average vehicle values. Our commercial GMB increased by 55% to $7.5 billion. The growth in commercial GMB was heavily weighted by a 76% increase in U.S. commercial, driven by both the new OEM that we launched in Q1 and an acceleration of U.S. lease maturities. Canada commercial GMB grew 5%, which was nearly all attributable to higher average vehicle values. Moving on to the financials, auction and related revenues were $253 million, which reflects growth of 18%. Starting with the dealer business, overall dealer yields were 6.10%, which reflects an increase of 45 basis points. The increase was largely driven by mix, as U.S. dealer grew its share of our overall dealer GMB by roughly 10 percentage points. U.S. dealer yields were down 9 basis points to 6.79%. The slight decline was driven by a 7% increase. in average vehicle value is partially offset by a 5% increase in revenue generated per unit sold. U.S. dealer yields this quarter showed a sizable increase over what we reported last quarter, mostly driven by a sequential quarter drop in average vehicle values. Canada dealer yields were up 66 basis points. to 4.86 percent, due mostly to 13 percent lower average vehicle values. Per unit revenues in Canada dealer were up 1 percent. Moving to our commercial category, overall commercial yields were 1.30 percent, which are down 29 basis points. The drop was driven by a continue.

The continued change in mix as the U.S. now makes up 79 percent of our commercial GMV compared to 69 percent a year ago. U.S. commercial yields increased approximately 2 basis points to 0.68 percent, which is up 5 basis points from what we discussed in Q2. The improvement over Q2 was related. to better mix in our commercial waterfall as the distribution of payoffs declined and a record number of commercial units were sold through our open sale channel. Canada commercial yields were largely flat at 2.83 percent, as a 4 percent increase in average vehicle values was offset by a 3 percent increase in unit revenue generation. SAS and other revenues were up 13 percent to $74 million, primarily driven by repossession services and increased SAS revenues in our Canadian marketplace. Rounding out the revenues in the marketplace segment, our purchase vehicle sales grew 10 percent to $119 million. Consistent with last quarter's comment, the increase was mostly concentrated in the U.S. where our vehicle sold revenues will largely track the growth in our U.S. dealer G&V. Adjusted EBITDA for the marketplace segment was $58 million, which represents an adjusted EBITDA margin of 13 percent. That represents growth of 30 percent. 33 percent in adjusted EBITDA and 170 basis points of expansion in adjusted EBITDA margin. I mentioned last quarter that the impact of volatile fuel prices negatively impacted our Q2 results by over 100 basis points.

While fuel prices remain high, decreases in short-term price swings have reduced the impact of volatile fuel prices. Brought our margin profile back in line with our expectations. Moving to our finance segment, our average outstanding receivables managed in the quarter was $2.70 billion, which is up 13%. Growth in the average balance was driven by a 9% increase in floor plans outstanding and a 3% increase in average. Vehicle values. Net finance margin for the quarter was 12.7%, which is down 70 basis points. The variance will be the same story as last quarter where the rising vehicle values dilute the yield attributable to fixed transaction fees. The annual provision for credit losses in Q3 was 1.14%, which is largely consistent with last quarter and 48 basis points lower than last year. Our low loss levels continue to reflect our prudent approach to growing the portfolio without compromising our overall risk profile. The culmination of changes in the receivable balance, yields, and credit losses is really important. Resulted in an adjusted EBITDA for the finance segment of $49 million, which is up 13%. Moving on to capital considerations, in the quarter, we repurchased 1.2 million shares at an average price of $35.23, bringing our year-to-date share repurchases to 2.8 million shares. Acquired at an average price of $32.72. Worth noting, with regard to stock repurchases, our board recently approved an increase to our stock repurchase authorization from $250 million to $400 million.

From a liquidity perspective, we ended the quarter with an unrestricted cash balance of $245 million and capacity of over $400 million on our existing revolver facilities. Now I'll talk about guidance for the... the remainder of the year. Given our current quarter performance, we are tightening our full-year adjusted EBITDA guidance from $385 to $400 million to $390 to $400 million. I'll remind investors that the fourth quarter tends to have the largest amount of adjusted EBITDA variability as weather and holiday scheduling... all influence both transaction volumes and costs. A few items I want to mention with respect to the change. Within our U.S. dealer business, we continue to see strong momentum in transaction growth, but it's worth noting that Q4 of last year was abnormally strong with Q4 volumes comparable to Q3. That was a very out-of-the-ordinary circumstance that we don't see recurring this year. For the upcoming quarter, we anticipate a more normal seasonal dip as we move into the winter months. Also related to our U.S. dealer business, I mentioned last quarter that our incremental go-to-market investments in the back half of 2026 were targeted at mid-single-digit millions of new spend. As Peter mentioned, the recent changes in the competitive landscape have provided us with an opportunity to lean in on these initiatives. We are therefore increasing our incremental go-to-market investments in the back half of 2026 to low double-digit millions of new spend.

This spend is largely concentrated in increasing sales and account management. coverage in selected markets, increased brand awareness programs, and increased operational capacity to support higher volumes. Our U.S. commercial business continues to perform in line with expectations as lease maturities continue to ramp up and overall mix in the waterfall slowly improves. We continue to see change. There are challenges in the Canadian market as overall macro conditions continue to evolve. The struggles in the Canadian economy are resulting in lower transaction volumes and lower vehicle values, both of which are headwinds to our overall marketplace financials. With respect to our finance segment, the revised guidance factors in a normal Q4 seasonal pattern that would... show a slight pulldown in the portfolio balance. In addition, we anticipate an increase in the loan loss rate to the low end of the targeted range of 1.5 to 2.0%. In summary, these results would not have been possible without the continued focus and relentless execution of our nearly 5,000 employees that worked tirelessly... on delivering the world's greatest digital marketplace for wholesale cars. We have strong confidence in the market position of our digital platform, and we are encouraged by the momentum we are seeing as commercial sellers, franchise dealers, and independent dealers continue to engage with Open Lane to solve their wholesale needs. To close out the prepared remarks, I would like to...

I would like to mention that we will be participating in several upcoming investor conferences, including the Stevens Annual Investment Conference in Nashville on November 17th through 19th, the UBS Global Technology and AI Conference in Scottsdale from November 30th through December 3rd, and the Wells Fargo TMT Summit at Rancho Palo Verdes from... December 7th through December 9th. With that, I'll turn it over to the operator for questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed...

and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from John Babcock with Barclays. Please go ahead.

Yeah, thanks, John. I appreciate the question. Listen, I guess... That's what I'd say to that is, you know, the focus there in that part of the business is U.S. dealer-to-dealer space. You know, I think we had another very good quarter in that business. U.S. dealer-to-dealer volumes grew 22% in the quarter. I think that's our sixth consecutive quarter of double-digit growth. The seller base is growing. The buyer base is growing. The volume of vehicles offered is growing. And obviously sales. So we feel really good about that momentum. But at the same time, we're approximately 10% market share. So clearly we're outperforming the industry in U.S. D-to-D. We believe the industry is pivoting, you know, shifting over time from physical to digital. We're benefiting from that. And we want to continue to lean into that. So what we talked about specifically was not, I'd say, additional investments. It was a pull forward of investments that were already contemplated in our 2027 plan. So these were, I'd say, headcount for the most part, boots on the ground, sales and operations headcount. Out in the, for the most part, the lower 48 states that we had contemplated hiring in sort of Q1, Q2, and we decided to pull that ahead into Q4. And John, just to reiterate that, we're going to pull it into Q4 of this year, but it will immaterially affect 2027 because all that was contemplated in the first.

For the first quarter and a half of 2027. Okay. So should we take that as basically you're growing maybe faster than expected, so you're pulling forward those investments to support the growth in 2027? And then, like, what does that mean then for – because, I mean, it seems like you've been doing go-to-market spending, you know, each year. Typically towards the end of the year, so should we expect that the timing of the go-to-market spending that you do next year will kind of keep pace or maybe be earlier in 2027 because of this pull forward? How should we think about all that? It's probably too early to talk about, you know, spending that we might do at the end of 2027. You know, our – All right. Our footprint, if you like, is more extensive than it was a year ago and certainly more extensive than it was two years ago. So I'm kind of hopeful that from a sales standpoint, you know, the people out there calling on franchise dealers, that we won't have to continue to scale that at the rate that we have because we've got, you know, much better geographic coverage today than we had two years ago. But that said, you know, we're always going to keep it under review and see what the productivity of the team is and see if there are gaps on the map and all that kind of stuff. But I don't want to commit at this point that there's a further wave in late 27. You know, we'll see how it plays.

You know, when we hire a salesperson, it takes them. But then, as they build out their network of relationships, you know, in the market, it doesn't, at least we hope not, plateau. You know, they can continue to call on their existing customers, but on the customers that aren't yet, you know, significant open lane customers in that market. Okay, thanks. That's very helpful. And then just one more question before I... Pass it over. You know, I was wondering if you might be able to clarify when you expect, like, off-lease volumes to start impacting commercial yields. Obviously, they were pretty flat, and you talked about some mixed impacts there. But when should we think that those off-lease volumes will start to hopefully help pull that higher?

Maybe I'll talk a little quality... quantitatively, and Brad, you can speak to the yields here more quantitatively. I guess what I'd say, John, is we are now in the period when off-lease maturities are increasing. So we saw a little increase in maturities in Q2 and then a more substantial increase in Q3. So we feel good about that. That's driving the top... of the funnel, if you like, the volume of maturities certainly is a key input. And we expect that to increase all through 2027 and into 2028. And then obviously, we've got the other factors of, you know, what's the consumer payoff percentage and how do these flow through the waterfall and all that kind of stuff. And that impacts yield. But let me... Highlight a couple of positives. You know, we did see a mixed improvement overall in Q3 in terms of the U.S. off-lease, which is where, you know, 90% of our off-lease volume is in the U.S. And, you know, the other data point, I think it was in my remarks, we saw a 2x, 100% year-on-year growth in commercial vehicles sold in our U.S. open sale. So that was very positive in my view. And that's, again, we've seen big increases in that number over multiple quarters now. But that tells me we're doing a better job of converting those commercial cars once they hit the open sale. So that's something we're continuing to lean into in partnership with. our seller customers and our dealers to drive more volume there.

Okay, thank you. John, I'll just quickly add on from a yield perspective. We did see, you know, remember in Q2, we actually lost some yield because the payoff spiked a bit. Q3, those payoffs came down. And that's where the yield improvement kind of sequentially from Q2 to Q2. Q3 came from. We expect to see those kind of patterns continue. It's really hard to project out, you know, all the influencing factors, but we do expect yields to continue to tick up off of this 68 basis point, 70 basis point-ish type number over time. Just consistent with what we talked about at Investor Day, I think our target for that is still remain. You know, that north of 100 basis point number. But that's going to be measured probably in years, not quarters. But what we were really happy about in Q3 was that pattern of improvement in the waterfall, about five percentage points of volume actually moved from the top two categories to the bottom two categories, which resulted in that yield improvement. So we do expect to see that to continue. All right. Thank you. Yep. Thanks, John. Thanks, all.

The next question comes from Craig Kennison with Baird. Please go ahead.

Yeah, thanks, Craig. That's a very good question. You know, the dealer-to-dealer market, those two customer groups are critical, right? Franchise dealers have got independent dealers. And I've often said that the dealer-to-dealer market is principally characterized by the sellers are franchise dealers, probably 80-ish percent of the time. We do also allow independent dealers to sell, but for the most part, the sellers are franchised. The buyers, it's the exact opposite. For the most part, they're independent dealers. Again, not exclusively. Franchise dealers also buy in that channel, but 80%, 75%, 80% of the buyers are independent. And that's because these cars are essentially making a journey. They've been traded in at a franchise dealer, but they're too old, too high mileage, the wrong brand, too damaged for a franchise dealer. They're better suited to an independent dealer. So that's the market that we facilitate. I guess given that both groups, it's hard for me to say one is more important than the other. They're both critical. You know, in the very short term, we always try to lead with supply because if you don't have a seller willing to sign a vehicle, you can't sell it, right? So you have to kind of get supply. But you have to be a very fast follow with demand. And I do think that long term, you know, what you really want to be is you want to be the platform of choice for most of the buyer audience.

So when a dealer comes in in the morning, an independent dealer wants to go and search for the wholesale channel, that they start with open lane. That's kind of the positioning you really want to get to. So they're both critical. I think we're really well positioned with both. And we've talked about how our strategy is uniquely differentiated. On the franchise side, we have all these private label programs, which serve as an entree or a foot in the door to a franchise dealership. They love those programs. They know that OpenLane is the company that powers those programs. It gives us a lot of credibility and a great starting point with the franchise dealer. And on the independent side, we have AFC and 15,000 independent dealer relationships. So they're both mission critical to our strategy. I don't prioritize one over the other. You know, I think we've got to bring them along equally.

You know, I also mentioned NPS scores. You know, I'm very pleased, you know, the NPS scores from both groups are very, very good. They tend to be a little bit stronger on the sell side. Because sometimes when a buyer buys a car, if there's a defect with the car, it's not exactly what they thought, you can see how that could be a little bit of a dissatisfier. But despite that, I think we do. A very good job with our buyer audience, and I think they recognize that as well. Thanks. And then as it relates to the competitive landscape, have you noticed any early change in behavior with your key competitor?

I presume you mean our digital... Competitors that was recently acquired, so I'm going to assume that's the reference there, Craig. But I guess what I'd say, we're focused on our organic growth strategy, which has been delivering the results for our customers and for the company and the investors as well. Six quarters of double-digit growth. Leadership position with commercial. All the stuff we talked about in the call. I haven't noticed any changes on the ground, Craig. You know, I think it's probably too early to say yet what the strategy there will be. I will say that from my own personal experience, you know, I've been on the sell sides where my company was acquired. I've been on the buy side. I know that transactions like this can be disruptive, can take time. I'm glad that we don't have to deal with those kinds of activities. We can stay focused on our customers and our business and delivering value for our customers. And that's what we're doing. And that feeds into the strategy and the things we talked about on our call. Thanks, Peter. Thanks, Craig. The next question comes from Bob Labick with CJS Securities. Please go ahead. Great. Thanks. Good morning. And thanks for taking our questions. I wanted to start on the dealer side.

Yeah, thank you, Bob. Again, I guess what I'd say, first of all, we're pleased with the growth that we're seeing. Another, I think, very solid quarter. In an industry that I would say has been flat or slightly negative in Q3 to grow 22%, I think we outperformed the industry by more than 22%. in the quarter. So I feel good about that. If I look at the sort of underlying drivers of that, I'd say the biggest single driver is the enrollment of new sellers and new buyers. You know, so our seller base has grown, our buyer base has grown. And in percentage terms, the growth in the seller and the buyer base is, you know, in the same zip code as the growth in transactions. Now, we also recognize that new sellers, when they sign up, they don't kind of hit, they don't go from zero to 100 in day one, you know, so there's generally a bit of a ramp. So there's a, you know, some growth as well in the cohort of dealers that were, you know, up on. Up and running on the platform, you know, a year ago. So we do look at that. I don't know if Brad has any more specific data on that, but fees with the growth in new sellers, new buyers, and, you know, those account for, I'd say, at least 50% of the incremental volume growth. In the quarter would be how I'd characterize it. Brad, anything to add to that? Yeah, Bob, the way, you know, we break it down to cohorts, kind of think of a front book, back book kind of model. If you look at customers that have been on the book for longer than a year, they make up about three quarters of the volume. The other quarter comes from new buyers. It's a little different.

On the seller side, to Peter's point, it's a little bit lower in terms of what the new sellers are providing just because they go through that ramp process. But think of the transactional volume flowing through our platform. Probably about a quarter of it's going to come from buyers that have added in the last 12 months and about three quarters of it's going to come from share wallet or growth. our existing customer base. Okay, great. And all that sounds like, you know, more outperformance to come. So that's wonderful. And then on the commercial side, obviously, we can see the off lease numbers coming back in very strong next quarter and through 27. You know, one of the underlying features is the increase in EVs coming off lease and obviously with the end of that subsidy and gas prices and everything. I was just wondering if you could give us a sense of as EVs are coming off lease, how they're impacting the market and where they're kind of coming out in the funnel and yields and, you know, how that. You know, underlying metric, which should grow pretty rapidly next year, you know, could play to the into the P&L.

Yeah, thanks, Bob. EVs have. I want to say, have been generally a good guy for us, you know, certainly they haven't been in any way detrimental to the overall performance of the business. Let me let me say, let's start at the top. EVs represent about 15 ish percent of the total off lease maturity portfolio. If you look, look across all of our customers, that might pick up a little bit again next year. Not a lot, I would say, but it's so it's in that 15 ish percent rate of maturity. But the consumer payoff percentage on EVs is. So EVs are representing more like, you know, 30 plus percent of the vehicles getting returned. OK, because of the consumer payoff characteristics between EVs and non EVs. So a lot of the vehicles flowing into our system are EVs. What we're seeing generally is the percentage of them that are being acquired in the ground. And the franchise dealer close sale is less than ICE vehicles or non EVs. So I'm not saying none of them are getting purchased. Some of them are getting purchased there, but a lower percentage. So a higher percentage is flowing into the bottom two channels, the non grounding dealer auction and the open lane open sale, which are a higher revenue. channels. And in consequence, we're selling a greater number and a greater percentage of them in that channel. So they're excited, sort of, they're accretive to the yield calc. I don't have a yield number for EVs specifically, and maybe that's something we should, we should pull, but, but, but that's kind of how we see it. Obviously, fuel prices.

All that sort of stuff has given EVs a little bit of a boost over the last six months, but, you know, but that's also been to the detriment of some of the other vehicles, so it's not, that by itself is not a win for open lane, it's a kind of a, you know, take with one hand, give with the other kind of thing, but EVs by themselves have been, I've been pleased with the. performance. Super. Very helpful. Thank you so much. Thank you, Bob. The next question comes from Jeff Lick with Stevens. Please go ahead. Good morning. Yeah. Thanks for taking my question and congrats on a nice quarter. Peter, I was wondering if you'd give any update on your.

Yeah, thanks, Jeff. Appreciate the question. Listen, I'd say. First of all, I feel good about our commercial seller relationships. I think, you know, we've had a lot of, me and the team had some, a lot of commercial seller interactions over the course of the quarter. I think relationships are strong. I think they see the value we're bringing and they're definitely. more attuned to the space now that they have more off lease vehicles coming back. This is now becoming more of a, something we got to focus on, you know, whereas for a few years, they just didn't have much volume. So that, that leads to a more engaged discussion. And obviously they're, you know, for the most part, I'd say interested in how do they maximize the opportunity here that, that open lane presents, you know, to sell cars soon. Less days to sale, lower direct costs, hopefully higher proceeds as well, based on the data we're showing them. So I think we've got a very good set of relationships, a very engaged set of customers. And, you know, we're working on all the stuff you talked about. There's no one silver bullet to kind of get those types of outcomes. But I've been pleased with the traction that we're seeing in aggregate. I talked about our U.S. commercial open sales were up approximately 100% year on year. And it's we've had numerous quarters of, you know, pretty solid volume growth there. I used to say it's off a pretty, pretty low number, but the number is actually getting bigger now, you know, so I feel really.

Good about that. And then the conversion rate, you mentioned 20%. I think in late Q3, we were hitting even higher numbers than that in aggregate in the open sale. And those are kind of all time highs for our for our business in terms of conversion rate, not in terms of absolute volume, but conversion rate. So I feel really encouraged by that. Obviously, got some sellers well above that because that's an average number. So we're trying to do is, you know, build on the learnings of the sellers that are sort of the top performers and try and propagate that to all our sellers in terms of how to best utilize the tools, the data, the opportunities that our channel presents. Again, Jeff, I don't think it's a this is a long run thing. If we can bump this conversion rate up a percent or two, you know, or, you know, a few percentage points every year, that'd be a pretty good result in my view. But it's something we're very focused on. And then just a quick one for you, Brad, I appreciate the context or the granularity on the basically it's kind of a same store concept with the buyers and the sellers. You know, greater than one year, less than one year. I'm just curious on the on the sellers, when they get to that, you know, call it in the same store base that greater than one year, are they comping positive? Are you seeing on a like for like each customer selling more units in year two and year three?

No, it's a good question. I don't have that in front of me, Jeff. It's a good question. We're starting to do more cohort analysis to understand those kind of dynamics, especially given that, you know, the volume is ramped so much here in the last, you know, call it 24 months. That's just another lens we're going to start to look at. So don't have that readily available, but certainly something we'll start to look at. Jeff, let me let me add some. It's not it's not a straight answer to the question you asked, but it's it's it's in the same zip code of thematically. You know, we talk about our overall volume growth of 22 percent. One thing I'm pleased about is if I sort of if I look at, you know, who's driving that growth and we. We kind of categorize major dealer accounts, you know, the largest franchise dealer groups. Then we talk about, you know, more, say, the smaller, more, you know, five store, six store, single store kind of operators, independent dealers. We're having the greatest growth with the largest dealers, you know, so I think. You've got, you know, there is some consolidation that's going on in the franchise dealer world. It's a slow, it's a slow trend, but I think we're seeing the middle, you know, the middle sized operators, the guys who used to have 30 stores starting to have 40 or 50 stores, you know, that kind of thing. We do very well with that group of customers, you know, so I think we're seeing outsized growth with them.

Which I think is a very healthy and positive trend for the future. I'm just curious, Peter, what is it that's resonating with the larger dealer group? And then is there any issue with your lack of real estate? Is that ever a reason for them to say no or to grow? Because, you know, your sales have to be staged on their real estate. Yeah. You know, the real estate thing, not really. I won't say it's never a question, but it's rarely a question. And again, if you've got a dealer in a, you know, urban environment, very limited space, it can be more of a question. But, you know. We do very well in some of the more denser urban environments in this country. So it's rarely an issue. Going back to the first part of the question, why do I think we do well with that cohort of customers? You know, I think when you've got a dealership group, I think they're always trying to balance, how do I give autonomy to my stores? My individual stores and my operators to enable them to, you know, be entrepreneurial and do the right thing for their store and their market versus how do I balance that with the need for, you know, consistency and efficiency across the platform of, you know, 30 or 50 stores? You know, what are the technologies they use? Who are the business partners I use? So there's always a little bit of tension there, but. I do think OpenLane can make a very good case for how we can help improve the efficiency of your wholesale operations. It's, you know, it's pretty light. There's no big API integrations. There's no long-term contracts. You can just engage with us. It works really well. We can also build these, what we call custom trading networks.

Closed trading networks where you can trade vehicles within your own stores to allocate vehicles that otherwise might just leave your internal network. So I think we just, we offer, I think, a very compelling product that resonates with those owners and those, you know, corporate managers. Awesome. Thanks very much and best of luck. Thank you, Jeff.

The next question comes from Gary Prestofino with Barrington Research.

Please go ahead.

Hey, good morning, Peter and Brad. Hey, Peter, I couldn't write it down fast enough. You had some comments on conversion rates. Can you just go through that again, please?

Well, I can't remember exactly what the comment was, Gary, but conversion rates, I guess I'll just break it into commercial and dealer. On the commercial side, our conversion rates were quite strong in the 70-ish percent level. I'm pleased. This is off-lease here I'm talking about. I'm pleased with that because what that tells me is that despite an increase in maturities, our conversion rates are holding strong, right? Meaning that there's an appetite in our buyer base to absorb that extra volume, right? So I feel really good about that. Oh, yeah, I made a comment on the U.S. open. Conversion rate being sort of at record levels, which I feel really good about because that's selling those commercial cars to our open buyer audience. And those are very high-value transactions to us. On the dealer side, it was actually a little bit of a different story. You know, we talked about U.S. dealer growth of 22%. That was a good question. That was a little bit below what we saw in the first half of the year, if I look at the average of Q1 and Q2. But underlying that story is, if I look at sort of volume of vehicles consigned for sale, the growth in Q3 was very similar to the growth in the first half. Almost identical. Okay? What was different is that in the first half, of the year, there was an unusually strong run-up in used vehicle values, a very strong spring market. That drove a conversion rate that was a little bit higher than the same period of the prior year.

So we had conversion rate as a sort of a good guy driving an accelerated sales performance in D2D. But that sort of inflected in late... Q2 and through all of Q3 and frankly into Q4, you feel the values have been declining at a pretty steep clip. I would say a steeper than normal pace. And that's been a little bit of a headwind to conversion rates. So, you know, our U.S. D2D of 22%, I feel really good about because it was accomplished in an environment where conversion rates were actually... a little bit below what they were a year ago. You know? Okay. So anyway, conversion rates will add and flow. You know, we'll have good quarters, less good quarters. On an annual basis, they tend to average out. That's been my experience. But that's how it's played so far this year. Okay. That's helpful. And then just a follow-up question. Are you starting to feel, I mean, your open sales were pretty strong on the commercial side. And I would assume a lot of that is a function of more vehicles coming through. But are you starting to see that inventories, particularly of used vehicles or high-end used vehicles, for franchise dealers, are starting to normalize from where they were a couple of years ago, where there was definitely a shortage? And we should continue to see more of these vehicles sold that come off-leaf in the open auction? Yeah. Maybe seeing some signs of that, Gary, it's a good question. I don't think, you know, if I look at sort of inventory overall on franchise dealers' lots, I still think we're not back to where it was pre-COVID, but I don't ever expect it to get back to that level at this point. I think dealers have recognized, you know, managing with lower inventory.

It's actually a good thing for their model. OEM is kind of the same. So everybody's very focused on days to sale and keeping a reasonable amount of inventory on their lot.

So inventory has been fairly stable, I'd say, I'm talking about used car inventory in aggregate. I don't expect to see a significant shift. Now, I will say that in the quarter, and really over the last six months, because of high fuel prices, there's been different impacts on different types of inventory. So you mentioned high value trucks there. Those have been, because of high fuel prices, those have been under more pressure from a valuation standpoint than, say, EVs. And, you know, more fuel-efficient vehicles. So we do see those kind of secondary impacts, and those will affect, you know, the value and the appetite that customers have for those vehicles in our market. Again, those things tend to average out over time as well. Okay. Thank you very much.

Okay. This concludes our question-and-answer session. I would like to turn the conference back over to Peter Kelly for any closing remarks.

Well, thank you very much for your time today and for your interest in Open Lane. As I said at the beginning, Open Lane remains highly focused on our purpose, our strategy, on our execution. The focus is delivering positive results. I think Q3 was very positive. And I think those results are further differentiating Open Lane in the market. I believe the company is well positioned for the opportunities ahead. I believe we've got an excellent team and an excellent platform. We'll capitalize on the opportunities in front of us. I look forward to updating you again on how we close out the year and our expectations for 2027 on our next call. Have a great rest of your day.

The conference is now concluded. Thank you for attending today's presentation. Good night.