OPENLANE, Inc. ($OPLN)

So next up, we're really excited to have OPENLANE here with us today. OPENLANE is one of North America's leading digital automotive wholesale marketplace operators and a category leader in dealer floor plan financing. It's a compelling asset-light business that consistently generates good cash flows, maintains robust capital return strategy through share repurchases and executes strong growth investments to capture secular market share gains. Really, really pleased to have Peter Kelly, OPENLANE's Chief Executive Officer; and Brad Herring, Chief Financial Officer, here with us today.

So I guess, first, just sort of jump into it, but we're almost through the first quarter here. I think you just hosted an Investor Day. How are you thinking about the overall environment? I guess the off-lease volume environment gets talked a lot about with you guys relative to the growth you had thought coming into the year. What are you seeing so far that gives you confidence in the growth trajectory? And how is that sort of shaping activity on the platform?

Yes. Great. Thanks, Alex, delight to be here, first of all, and appreciate you all showing up. So thank you for that. Listen, we're excited about the growth setup for our company in '26 and '27 and beyond, and we'll get into that here this morning, I'm sure. But your question focused largely into the commercial off-lease space, so let me start there. We anticipate '26 to be a growth year, 2026 to be a growth year driven by the fact that lease maturities or lease originations, I should say, bottomed out in 2022 and started to increase in 2023 and automotive leases, for the most part, average around 36 months duration. So kind of take lease originations, add 3 years, that's lease maturities. That's a driver of our growth curve. So we're expecting good growth in lease maturities this year. And in our last earnings call, we spoke about how we expect. We saw an inflection in December of last year, and we expect to see commercial volume growth in Q1. That's still our position. So we fully expect that. There's a couple of other factors that add to that, frankly, that are a little unique. One is we added one brand, OEM brand customer launched in January as well. So there's like, if you like, a step function in our sort of core supply, customer migration to our platform. So that's going to be additive to Q1 as well. And that went live as planned. I mentioned that on our last earnings call as well. And then while lease maturities are increasing, and that's very positive for us, if you do go and look at the Investor Day materials, you'll see there is a second driver of off-lease volume growth as well, which is consumer payoffs are declining. So just speak on that for 30 seconds. Pre-COVID consumer payoffs represent around 30% of maturities. And we then get the opportunity to sell the remaining 70%, okay? Post-COVID, used values appreciated a lot. That created equity in the lease maturities that previously had not existed. So consumer payoffs increased from that 30% to like 70%, 80%, 90%. Okay? That meant our volume went from 70% down to as little as 10%. So we had a massive contraction. That is slowly unwinding. So consumer payoffs today around, I would say, 65%, 70% and slowly -- generally declining, let's just say. So there's a second driver of supply growth into our marketplace as we look out over the next '26, '27 and beyond as well.

Yes. And I guess just to double click on that. Can you talk us through sort of the cadence of the off-lease volume. So is it sort of the tail end of '26 we really start to see that and it builds into the outer years? Or how should we think about it?

I think if you look at maturities alone, the maturity curve, the lowest quarter where leases sort of bottomed out was Q1 of 2023. So we're exactly 3 years on from that. And then I think in Q2, they were essentially flat year-on-year. And in the back half of '23, they were increasing year-on-year. So sort of negative 5%, 0, plus 10%, plus 15%, some sort of -- something like that on a year-over-year basis as you take the 4 quarters. So if you're just looking at maturities, you do that sort of function. You put 3 years on top of that. But the consumer payoff kind of pulls it ahead. That's one of the reasons we expected growth in Q1 is because not -- it's not just a function of maturity, it's also a function of payoffs. And we're seeing that kick in, in a positive way for us.

Given the consumer lease equity is sort of hovering around the lows, what percentage of the off-lease volumes are now flowing to your open sell channel versus grounding dealers? And how is this mix shift impacting ARPU dynamics?

Yes. We went into quite a bit of detail on that in the Investor Day. Brad, do you want to speak to cover that?

So if you go back and look at our Investor Day materials, which we posted, I think it does a really good job of outlining the different economics of the different categories on those lease returns because there's really 4 key categories. We get paid for consumer payoffs. We get paid for transactions at a grounding dealer. We get paid for a transaction at a nongrounding dealer, and then we get paid for a transaction that gets sold in our open marketplace. And what we've provided in those materials is kind of the relative ARPUs and relative yields we're going to get off of those different dynamics as it flows through into that waterfall. We're not disclosing the percentages, but we are disclosing going forward some yield information in aggregate. So it will capture as those blended yields move from those transactions pushing deeper down into that stack. We're going to be very vocal on what's happening with the yields in that commercial space. So we'll talk about that on a quarterly basis.

I just wanted to ask, how are the EV off-lease volumes performing relative to ICE vehicles in terms of conversion rates and revenue per unit, particularly given the equity challenges?

Yes. I guess, first of all, I'd say we're pleased with how they're performing, at least in our channel. So to put -- to size it for the audience here, EVs this year represent about 15% of off-lease maturities, okay? So there's a higher-than-average leasing percentage -- lease origination percentage on EVs. But also you talked about equity, the EVs that are maturing are heavily negative equity, right? So you can kind of look today in off-lease maturities, you've got an average off-lease equity of X, but it's kind of split into ICE vehicles that are generally still positive equity and EVs that are heavily negative equity. So the consumer buyout percentage -- payoff percentage on EVs is very low, like 10%, 15%. So most of those EVs are getting returned, right? They're entering our system. What we're finding is our sellers are very mindful of the fact that, yes, these EVs are in a residual loss situation. But they're not getting more valuable unless this war maybe drives up gas and maybe that adds a little bit. But they're focused on -- I need to convert those cars quickly. They're not becoming more valuable over time. So they're working, I would say, with us to make sure they convert. So our conversion rates on EVs are, I would say, broadly comparable to ICE. We're selling a very similar percentage. But we're selling them a little bit different place in the waterfall. They're not selling at that grounding dealer. They're not selling at the consumer payoff. They're selling a little deeper, which is actually great for us. And again, Brad's Investor Day materials will show you the relative ARPU. So you could -- from that infer, we're actually generating a slightly higher ARPU of the EV. So -- and again, my conversations with commercial sellers, they, again, recognize they've got these EVs in the portfolio for at least the next 2.5, 3 years, and they see OPENLANE as a great channel to help them convert those quickly.

Maybe for those that are maybe more unfamiliar with the story, can you just walk us through that waterfall and the different sort of ARPU sort of attached. And I think that may be helpful for people, just given you made that comment.

So when you think about the commercial waterfall, it all starts -- let's start with lease returns, right? That's the primary category. We're talking -- we're not talking about rentals, we're not talking about repos or some of the other ones. Let's talk about lease returns. So when a consumer sends that lease return back, their lease comes up in 3 years, they show up that 3-year mark, they go back to the dealership. And the first question the consumer will make is do I want to buy it or not based on the equity we just talked about. So that's step one. That's kind of our lowest yield channel, kind of pushing some paperwork that consummates that transaction between our commercial customer and the consumer. So the second step of that is now the commercial customer can set the same price and say, now does the grounding dealer want to buy it. So whatever dealership that, that consumer returned that car into, the grounding dealer now has the opportunity to take that car. So that's another kind of relatively lower yield transaction because it really doesn't even leave the building. It just stays right there. The next transaction should the grounding dealer not want to pick up that car, it goes with a nongrounding dealer. So what that means is if a person returns a Toyota lease, well, now if the grounding dealer -- Toyota dealer does not want that car, now all Toyota dealers across the country will have access to that car through our white label auction system. So they're going to open that car up to a number of franchise dealers still in the same family. But now they have the opportunity. That's a higher ARPU transaction, higher yield transaction, but it also has some attachment to it. For example, it would have the attachment of transport because in a lot of cases, these dealerships now might outsource to us to transport that vehicle from wherever it was returned to, to a franchise dealer that may be 200, 400, 600 miles away. So that's a higher yield transaction now when you start getting into the non-grounded dealer. And the final transaction for us then would go into the open marketplace. So if no Toyota dealers want to purchase that car, now it's going to go into our open network. Now all the independent dealers we have will have eyes on that car. So that's the last channel that would flow through for us, and that's our highest-yield channel. And that is not only our highest yield channel for buy fees and for sell fees, but also it's going to have a higher attach rate because these are mostly independent dealers that leverage more highly the use of transport capabilities that we'll provide. So that's our highest yield transaction. So it's all laid out in the Investor Day, we kind of put on the left-hand side of the chart, what those relative yields look like.

Really helpful. Maybe just lastly, can you quantify the pilot program expansions with commercial customers moving to online conversion? What's the target penetration rate and time line for broader rollout?

Yes. I guess what I'd say there is more thematically without going into specific numbers, but what is the objective? We see a future where our commercial sellers have more supply, right? They're focused on time. They're focused on reducing their marketing costs. They're focused on maximizing their outcome in terms of price achieved for the vehicle. We believe we can help them with all of those things. So we've got various, I'll say, pilot programs with a number of sellers to achieve those types of outcomes. I'd say generally, they're going well. We've just actually at the beginning of this month, beginning of March, we expanded one -- with 1 seller to 2 brands. They're -- essentially, they were doing a once-a-week off-lease auction. So they were kind of putting an extra open sale step on the waterfall, like the process Brad just outlined, they were doing that, but they'd say, well, I want $25,000 for this car. I'm offered here for $25,000, here for $25,000, here we're saying, if you don't get $25,000, let the marketplace do its work, see what the marketplace bids the car to. Maybe it's $24,200, but maybe that's a better price than putting on a truck, take it to an auction waiting 4 weeks. So they were doing that once a week, having good outcomes. They've now moved twice a week. We're looking to roll that out to other brands. So it's things like that. They're all, I'd say, incremental, but they're geared to driving strong conversion rate, higher sell-through, particularly in that open sale channel.

Switching to the dealer-to-dealer side. In the U.S., you guys had a really strong acceleration to 20-plus percent growth in the fourth quarter. What's enabling that level of acceleration? And is that sustainable throughout a couple more quarters or...

Yes. Well, we were very pleased with the growth rate, and we've seen acceleration in the dealer-to-dealer category, particularly in the United States, which is obviously the biggest sort of opportunity market for us. I guess, to give some context on that, we think our dealer-to-dealer offering is very, very strong. We think it delivers tremendous outcomes for the customers, sellers and buyers. Average days to sell is about a day. Our customers are getting -- particularly our sellers are getting great outcomes in terms of price achieved. I think that's fundamentally what drives the growth. Sellers are saying, I'm getting tremendous results there. I need to do more business here. I want to get more of my dealers. I've got 20 dealer groups -- or 20 dealerships in my group. 5 of them are using OPENLANE. They all need to be using OPENLANE. It's those types of things that are driving the growth. But listen, we put a lot of investment into the platform. The technology is really good. The inspections are really good. We've built tools that help with price discovery and price realization. We talked about on my earnings call, open our absolute sale feature, which has become very popular. I also think the commercial volume story drives the dealer story because if you think we have these OEM brands who've got more off-lease supply coming, that's going to bring more franchise dealers. Franchise dealers love to buy those off-lease cars, where franchise dealers are, for the most part, the supply side of the dealer-to-dealer marketplace, right? So they're coming to our site to buy off-lease, but they're also when they're there, saying, I can sell my wholesale units here and it's easy and it's the same relationship and it's a company I do business with. So that's driving that there, too. So we've been very pleased. Obviously, we want to sustain the highest possible growth rate in D2D. We still think we're relatively small market share. In our Investor Day materials, we calculated that digital, which is us and a few digital competitors, represents around 22% of the TAM -- the dealer TAM on the dealer side of the business. So there's a lot of growth opportunity there. And as I see it, we're the fastest-growing player in that category today.

Yes. And on that penetration gain story, I think in your deck, you talked about 2025 had greater penetration gains than 2024. Can you unpack like what drove those accelerated penetration gains? And also, I'm curious, just in the U.S. versus Canada, is online still gaining share in Canada, even though it's been a tougher market for wholesale?

Yes. Online is gaining share in Canada, and I feel good about the trends we're seeing there. But to go to the U.S., what's driving it? I think a number of things. First of all, we went through a significant brand consolidation and rebranding of the platform and consolidation of different tech marketplaces into one. Prior to the end of 2023, our commercial off-lease cars were on one marketplace and our dealer cars were on a different branded marketplace, totally separate. Well, at the end of 2023, which is just over 2 years ago, we put those together under one brand, OPENLANE. So I think fundamentally, that rebranding and the consolidation of those marketplaces creates this scale and network effect benefit to us but also to our customers, right? Coupled then the investments in tech, better inspections, launched Absolute Sale, we launched one app. We have a fairly good cadence of innovation and tech being built into this marketplace to drive liquidity, drive supply, drive better outcomes for our customers. And then go-to-market investments. We put more boots on the ground, more people -- it's still a very relationship business. Dealers are relationship-oriented people. So I often say we're a digital marketplace in a relationship business, more boots on the ground, a stronger major dealer accounts team. All those things have played in to help drive this growth. I mean, I'll keep going another one on the demand side of the D2D market. Brad talked about our finance business, AFC. These independent dealers are the demand side of the dealer-to-dealer marketplace. Well, we've got 15,000 of them on our AFC platform, but only 35% of them were registered to buy on OPENLANE. So we've been actively working with the 65 that weren't registered, getting them registered, training them, showing them how to use it. That's now up into the mid-50s. So we're driving that adoption. So there's a whole bunch of tactics and go-to-market activities that are contributing to all this growth.

When you look in the U.S. specifically, one of your other competitors that's really online focused, online only, they reported single-digit growth and you're growing 20-plus percent. Are there any other competitive moats where even if you just focus purely online that you've really leaned into that have enabled those types of share gains?

I think long term, in a network effect marketplace business, the biggest moat is your buyer and seller audience and the network effect of your marketplace, right? And the fact that when a new seller comes and puts a vehicle in the marketplace, he will get a great outcome on day 1. So we're very focused on that. Again, in our Investor Day, our dealer -- both seller and buy-side dealer counts are up over 30% over the last 2 years. That stat is in there. We try to keep those in balance. But I think, again, our unique advantages, the fact that we have these off-lease relationships with 70% of the OEM retail brands represented that brings 70% of the franchise dealers who become natural customers of ours. And it's a shorter step to get them from there to be a full participant in our open sale than if you're just walking in cold, right? So we've got that natural advantage. You flip over to the independent side. We've got the finance business. We've got great technology. And our customers are having great outcomes. Again, the number and the adoption, in my view, has driven more than anything else by the fact that our customers put a car here on OPENLANE, they put a car into a competitor's channel, whether it's physical or digital, and they get a better outcome here. So next week, they put 2 cars here. And it's those types of effects that drive the growth.

Just get Brad involved here. We double-click on the kind of go-to-market investments that you've mentioned in 2025? Why are they so successful? And looking forward to this year, do we expect a similar cadence? Or are you in more of kind of a harvest phase?

Right. So in the last couple of years, '24 and then again in '25, we did put some additional go-to-market. It's primarily related -- we talk about buyer and seller footprints. The way you go to market, invest for each of those is quite different. For example, when you go after more franchise dealers and more open market dealers, you tend to put feet on the street, you're going to go have people deployed in those specific geographies. And when we look at our footprint across the nation, we found that. There are some footprints we do really well at, right? We're really good in certain geographies. There were some other geographies we felt like we had some opportunities. So that's where those feet on the street investments were made, specifically was in those geographies where we were targeting some of the franchise-type dealers, open market dealers, buyer groups or dealer groups, et cetera. Then when you go into trying to create buyer networks, there are a little bit different investments. Those are more kind of phone-based agents that are doing outreach because there's a lot of independent dealers out there, right, put feet on the street to touch every one of those could be challenging. So it's a little bit of a more of a hybrid model of having some feet on the street, but also a lot of kind of centralized phone activity. So those investments we started making, we did a wave in '24, we did another wave kind of later into '25. There's typically about a 6-month lag, 3- to 6-month lag before those benefits really start to kick in. The question, we've kind of had internal debates about repeat in '26, but we're kind of we're going to wait and see. Let's see how these investments play out. We are starting to see some really good results out of the investments we made in '25. I think the '24 investments manifested themselves in '25 results. We're certainly seeing some of those '25 investments now manifest themselves in '26 results. So we're going to let that play out a little bit. But it's certainly a thread we're willing to pull on. As long as we're getting the returns and getting the responses we're getting from these investments, we'll continue to make them. There's still, like Peter mentioned, 75% of these transactions are still physical, right? That's a lot of runway. So I would be more than willing to throw some more go-to-market investments to drive that shift forward.

And then can you double-click earlier, you mentioned the Absolute Sale feature that you guys added, pricing discovery tools that you added in 2025. Can you talk about why those help so much? And then are there any similar types of incremental features in 2026, not to go too much into technology yet because I know Alex wants to talk about that as well, but anything on that pricing discovery type side?

Yes. Well, I can -- there are investments for sure. We've got -- we always have a pipeline or road map of tech investments. That's going to be part and parcel of what we do at OPENLANE. But Absolute Sale was really designed that a seller once they can put a car in the marketplace and once the bidding has attained a certain level, where they feel like, okay, if I'm willing to sell it for this price or higher, they can kind of just hit an Absolute Sale button and that then classifies the vehicle as Absolute Sale, which we find creates another -- it's like putting another layer of oxygen on the fire, right? Now the buyers -- because as buyers on there -- I want to look at cars they want to sell to me. So now it's flagged as an Absolute Sale. And we find there's another sort of an average $800 bid up from the moment to hit that button to what the ultimate sale price of the car turns out to be. So that's become very popular. We've launched updated OPENLANE market price guidance in our marketplace app at the beginning of this year. Our transaction database is robust enough that now we can show pretty much for any vehicle that we've got -- hey, we've got a series of very similar vehicles that have sold over the last 30 days, and here's what those transactions look like. And that's an effort to also close the gap between the seller's expectation and the buyer, like maybe the seller thinks I want 12, the bidding is -- gets you up to 11.2. Well, if they click on the OPENLANE market price guy, they can see the last 5 transactions of that year, make, model with similar mileage and say, maybe 11.2 is the right price. So put it on Absolute Sale. Those -- so we're tracking all of those, the adoption of those features. We're tracking how the impact conversion -- conversion is a core KPI for the marketplace because it's good for sellers, it's good for buyers, and it's good for our economics, too. So beyond that, I don't want to speak too much about stuff that's yet to come, but there will be a robust pipeline of stuff, I can assure you.

And can you provide an update on major dealer group wallet share gains and the pipeline for multi-store program expansions in 2026?

Yes, major dealer groups are a big category. Obviously, there's the public 6 dealer groups, but there's obviously big private dealer groups as well. So the category of major dealers, we look at the top 150 franchise dealer groups by retail volume. That's who we classify as major dealers. And we've kind of got a subcategory of the top 40 as well, the really big ones. But we've got -- one of the investments was a more sophisticated major dealer team. So go out and make sure we're out talking to all of those 150, make sure they know exactly, if they've got Hyundai and Honda and GM and Ford in their portfolio, which they all do, right, then they're using our systems already. Okay. Well, maybe we should have a national agreement. So all your dealers can have the same most favored nation pricing or whatever, right? So we're trying to put sort of umbrella agreements ahead with the corporate entity that gives us a calling card to call on everyone -- every store in their group, right? And here's what I'll say without -- we don't disclose the specifics, but our growth in major dealers has outpaced our growth overall. So the 20% we talked about D2D growth in Q4, our major dealer category would have been somewhat better than that.

Let me jump in on AI for a second. You've got a high-tech business in a lot of ways. If we just look out 2, 3, 5 years in AI, I mean, nobody knows where it will be, where we'll be. But how could this impact your business? It feels like you're on the good side of that change.

Yes. That's -- we feel we're on the good side of that change, and we talked about that again also in our Investor Day. But I think fundamentally, we're leaning into AI in ways that benefit our customers and make the marketplace more liquid. So I talked about investments in the inspection. So we have 3 AI investments within the inspection, which weren't there 2 years ago. One is every photo we take, AI looks at it and tries to spot damage. So as the inspector is taking photos of the car, AI is saying, I think I see a chip. I think I see a wheel rash, whatever, and the inspector gets a prompt. Did you miss something here? He can accept it or he can say, no, that's just a bit of dirt. So it's kind of human, AI, human. And then when the buyer sees those photos, they can turn on that AI layer and it'll draw a little circle or a little squiggle around what the damage is. So it kind of concentrates their focus. That's one. We take a 30-second audio clip of the engine while it's running. We've got an AI listening to that, comparing it to -- this is an F-150, let's say, here's the last 20 F-150s we listen to. Yes, something sounds weird in this little 5-second snippet, and we'll just highlight that, listen to that, could be an engine knock. And the third one is we do the onboard diagnostic port. We read out all those codes. Well, it's a bunch of [ gobbledygook ] of codes and dealers can understand it, but we'll make it simple for them. We just have AI say, okay, these are the 4 codes to be focused on in this car. The rest of them you can kind of forget about. And these codes mean this. So there's all that type of stuff. There's AI and pricing guidance I talked about what we brought out there. But I think fundamentally, it's more of an enabler. We're leveraging in our software development for sure, like everybody is doing that now. We're writing code faster with smaller teams. And there's opportunity on the, I'll say, customer support transactional processing operational side. But I also think we have a high-value customer, repeat customer. I don't think our automotive dealers want to speak to chatbots yet. They like to speak to real live human. But maybe if things like where is my car, when is the car being delivered, maybe we put a chatbot in there. We haven't done that yet, but we're looking at those opportunities.

That was good. Perfect. We'll shift to technology, but I'll first do a scan in the room, see if we have any questions out there for the OPENLANE team. . Perfect. Well, just jumping to technology. So at your Investor Day, you outlined some new product innovations that you referred to as Horizons. I think Horizon 1 includes your Absolute Sale feature and a new AI Arbitration feature. Can you sort of describe this Horizon framework? And what are the biggest pieces of the Horizon basically for 2026 and then versus sort of multiyear Horizons?

Yes. So the framework on the Horizons would be -- Horizon 1 would be, hey, we have this business and it works this way and the technology enables these types of activities, but we're also getting customer feedback saying, hey, it'd be great if you could do that and great if the system could do this and salespeople are giving us the same feedback. And I'd say Horizon 1 would generally be incremental feature adds that are broadly aligned with the current business model, but just make it a little bit easier, faster, whatever. So most of our innovation falls into that category, making the condition reports better so on and so forth. Horizon 2 would be a little bit more substantial than that, like, okay, we're still in the automotive dealership world. We're still in the used car world, but maybe it's a little bit more of an adjacency than some of the just incremental feature development. So we highlighted 2 examples of that. One, I've spoken here already, which was the updated OPENLANE market pricing guidance. So kind of more an all-new sort of interface around historical transactions and also predictive pricing. So we offer an OPENLANE price guide we give you, here is the last 60 days of transactions or whatever, but here's also predicted pricing on this car over the next 90 days based on how we see the market doing the seasonality, whatever. So there's a predictive pricing. So the other Horizon 2, one we did was -- in Canada, we've launched, I'll say, a fairly rudimentary inventory management tool. And inventory management software is software that dealers use typically is a subscription product. And it sort of advises them why should I stock into my used car portfolio? What car should I wholesale? What car should I retail? How should I price them in the retail market? How should I buy them in the wholesale market? So we've got an inventory management tool, we call it, MyLot. It's been deployed in Canada. It's really targeted more to the independent dealer at this point in time, but we're pleased with adoption. It's been pretty strong in the first 2 months of -- and we don't have an immediate plan to bring that to the U.S. We'll see. We're going to iterate through it a few times in Canada. And then Horizon 3 would be something that's more of a more significant departure from our core business, and we're not focused there. We're not -- that would be like a different vertical or something more radically different. And I'd say we're keeping an eye. You asked about AI. We're keeping an eye out. Are there disruptive threats out there that we should be responding to. So we'd look at that in a Horizon 3 lens, but I don't see that yet.

Very helpful. Your one app in the U.S. is facilitating crossover enrollment from private label to open marketplace. How has that initiative been performing conceptually? And how should we think about its scalability across additional products and what geographies over time?

It's performing very well. I mean, again, the idea was going back to that 70% of franchise dealers who are sort of natural customers, going in, starting the conversation there, hey, you've got a Hyundai franchise. So do you use Hyundai Direct? I love Hyundai Direct. Well, that's us. And by the way, we love the fact you use Hyundai Direct. We know this, you don't use OPENLANE. It's the same technology, the same companies, the same process. There's other sellers on there. There's cars that could be great for your store. Let us show you how to use that, right, as a buyer. And let us show you how to use that as a seller. And by the way, all of this is available in one app. You can log on to the OPENLANE app and pull up via marketplace app and click into Hyundai Direct, right? You don't need to have 5 different icons on your phone. You can launch it all from OPENLANE. So that's kind of -- so it's been effective. It's been -- I talked about the 30-plus percent growth in franchise dealers. So it's been a contributor to that for sure.

Perfect. The ERP consolidation, I think, is underway through mid- to late 2027. How will this enhance data consistency? And what operational efficiency should investors expect out of this?

No, great question. So we mentioned that on a call. We have embarked down some ERP consolidation just through the course of acquisitions over a number of years. We've ended up as pretty common with firms that have gone through those acquiring phases with a handful of ERPs. We do have some internal inefficiencies now, basically, to your point of trying to consistently look at information. So we've embarked down this path. It will be a 2-year road map. We've already begun. So we've already signed contracts. We're already -- we have third parties that are helping us. So this is not an aspirational thing, this is an in-flight thing. We've got a pretty program phased piece of work. Right now, it's -- we're able to get the information we need. It's just kind of clunkier than I would like for it to be. So I think what's really going to manifest itself is in the efficiencies we'll create over time. I think that's probably a year out before we start to be able to monetize any of that just because of the time it takes. But our first phases are focused on our core activities here in the U.S., our core corporate functionality. We'll then expand that out to some of the other areas and some of the other geographies. But efficiencies is the main -- is really the main reason we did it. We've been able to kind of hold it together through a lot of our own internal processes, but we can do that much better.

Brad, at your Investor Day, you gave some additional guidance on marketplace versus finance EBITDA growth, I think. Can you just unpack what's new for investors on that? And then some of the key variables that could get you to the upper or lower end of those guidance ranges for the 2 segments?

Yes, right. So if you look at our EBITDA growth between '24 and '25, it was split largely equally between the marketplace and AFC. Marketplace had a lot of strong growth. AFC did a really good job of managing credit and there was a pretty steep decline in losses in '25, which generated a lot of EBITDA for us last year. When you go into '26, it's a little different dynamic. What we laid out at Investor Day was the EBITDA growth when we look at '25 growing into '26 from an EBITDA perspective, we see that highly concentrated in the marketplace for a lot of the reasons we talked about, dealers doing really well. Commercial has a really good tailwind coming from recoveries. So when you look at the growth for next year is largely concentrated there. The reason AFC, we've highlighted is going to be kind of in a relatively flat environment. There's 3 things happening in AFC different in '26 than happened in '25. We'll continue to see portfolio growth. The portfolio will grow low to mid-single digits year-over-year, which is a tailwind, which will help out AFC. But going the other direction, rate cuts tend to push a little bit of pressure on the net yields because of timing for AFC, you're going to see a little bit of a compression there. And we do see some normalization back to more normal loan loss rates, right? '25 was really low. So prudently, we've expected that number to kind of return to something more like a normal rate. We talked about 1.5% to 2%. We've covered last year in the low end of that range. We think it will normalize probably more in the middle of that range. So when you combine all that together, you end up with an EBITDA growth that's really strong in the marketplace, relatively flat in AFC. So we've tried to set investors up to expect that from a business segment perspective. What could drive differences in that on the marketplace, growth, right? It depends on how our marketplace grows. We get acceleration, whether it's dealer, whether it's commercial, that certainly could improve those results. And on the AFC side, if losses stay down, which we'll have to see how time plays out and the rate cut environment, which changes about every 46 hours, we'll see what the rate environment does. But either changes in both of those 2 environments could change the anticipated AFC results as well.

And then you're giving a couple of new disclosures on a quarterly basis that are very relevant for investors, gross merchandise value and then the yield data that you discussed earlier. Can you just talk about the framework that investors should consider when it comes to GMV growth and improving your yield?

Yes. So the reason -- kind of the rationale for some of the changes we made was we recognized that going into '26, we're going to have a pretty sizable shift in our mix between dealer and commercial. So we spent a lot of time for the last 12 months talking to investors, and there was a lot of discussions around how do I model that mix shift. So we took that away, and Bill and I sat down and came up with a framework that says, we're going to start providing that information separately. So you're not guessing on mix, right? We can look at dealer and the commercial customer categories independently, and we can grow and work through yields and work through unit economics for each one of those independently rather than try to do that in aggregate and guess what those mix dynamics would look like. So that was the real rationale for why we made the changes we did. But when you think about those independently now, you can think about when do we expect out of dealer GMV and what you expect out of commercial GMV independently. And that was really the framework. Trying to guess on mix is really hard, it's really hard. And what we found was, from our perspective, it's a little easier to spoon feed some of that rather than kind of in hindsight, try to keep everybody corrected. What we're going to do going forward on a quarterly basis, and you guys might have seen our Investor Day, we gave a sample slide of what we're going to provide. So we're going to give these calibration points. And the reason for those calibration points is to keep everybody largely in line with what we're seeing from a perspective of what's happening on the dealer side and what's happening with the commercial side independently. And we think it's going to be valuable. We got a lot of positive feedback. I recognize, for those of you who have built financial models, you kind of have to rewrite some of them and I'm going to say, I apologize for it, but you're going to get a better answer and we're going to help you guys with that, with the information we're going to provide kind of on an ongoing basis. So I think net-net, we're all going to be in a better place.

And then quickly, before we finish up, can you discuss your capital allocation priorities for 2026, whether it be organic growth or shareholder returns or...

So we laid that out in our Investor Day too, we put a slide in the back. We're always going to fund our organic growth. We talked about some of the go-to-market investments. Our CapEx is a relatively stable number in the $60-ish million number. But funding organic growth will always take top priority, but those are going to be really large numbers for us just from where we are in our evolution. The next 2 programs for us, we talk about share buyback programs. We mentioned in our Investor Day that those began in Q1. We're going to continue to work on share buyback programs, both open and closed windows. We'll have programs set aside for both of those. And we also talked about some debt pay down. We did a term loan for $550 million last October time frame to buy out a big portion of those preferred shares. That loan will start to look at paying that down probably towards the end of this year, early next year. You got to let these loans sit in the market for a minute to kind of season before you can really start aggressively paying them down. But that's on our horizon, but that's probably not until late '26, maybe early '27 time frame.

Perfect. Well, I think that is all the time we have. I want to thank both Peter and Brad for an excellent conversation, and thank you all for joining.