Openlane Q3 2026 Earnings Call Transcript

Openlane (NYSE:OPLN) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Openlane reported strong Q3 financial results, with consolidated revenue growth of 13% and a 23% increase in adjusted EBITDA to $107 million. Cash from operations grew by 34% to $97 million.

The company achieved significant growth in vehicle sales across its marketplace segment, with a 28% increase in overall vehicles sold, driven by strong dealer-to-dealer and commercial performances.

Strategic initiatives include enhancing the marketplace through increased enrollment and activation of dealers, leveraging AI and technology advancements, and improving customer experience through new features.

The future outlook remains positive, with anticipated continued growth in off-lease vehicle volumes and strategic investments in sales and operational capacity to capture additional market share.

Management highlighted a focus on execution and strategy, with plans to accelerate some investments due to a changing competitive landscape and expressed confidence in sustaining growth and market leadership.

Full Transcript

OPERATOR

Good morning and welcome to Openlane’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 star key on your telephone keypad, star then zero on your telephone keypad. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two.

Please note this event is being recorded. I would now like to turn the conference over to Bill Wright, Vice President, Investor Relations. Please go ahead.

Bill Wright (Vice President, Investor Relations)

Thank you, operator. Good morning, everyone. Welcome to Openlane’s third quarter 2026 earnings call. With me today are Peter Kelly, CEO of Openlane, and Brad Herring, CFO of Openlane. Our remarks today include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties that may cause our actual results or performance to differ materially from such statements. Factors that could cause such differences include those discussed in our press release issued today and in our SEC filings.

Certain non-GAAP financial measures as defined under 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. With that, I’ll turn the call over to Peter.

Peter Kelly (Chief Executive Officer)

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 consistently outpacing the industry and we’re capturing meaningful market share and wallet share. Customers are choosing Openlane because we offer a fast and easy experience that delivers better outcomes. And the positive momentum we sustained in the third quarter reinforces 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% driven by strong performance in both dealer-to-dealer and commercial. In our dealer business we increased volumes by 10%. Overall, Canada was 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 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 volume sold through 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 2026 and beyond.

And finally, in our finance segment, AFC also had a strong third quarter, growing loan transactions and managed receivables, 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 quarter results are another compelling proof point to the power of this approach and to the scalability of our digital model.

So let me turn to our strategy and how we intend to keep building on this momentum. 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 transparent, 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 bases: 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 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 US 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 US 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 contracts.

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 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 Openlane. 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 our US seller NPS achieved 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 Openlane strategy execution and value proposition will enable gains in volume and market share. In commercial, there is no change to our view that off-lease supply will continue to scale throughout the year and beyond and that Openlane 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 unique opportunities to capture additional share. So we will be pulling forward some planned investments to help accelerate that effort. So 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 meaningful growth, profitability and cash generation over the next several years. So with that I will now turn the call over to Brad.

OPERATOR

We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a 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 two. At this time we will pause momentarily to assemble our roster. The first question comes from John Babcock with Barclays.

Please go ahead.

John Babcock (Analyst at Barclays)

Hey, good morning everyone. Just the first question. You talked about both pulling forward and I think potentially increasing go-to-market spending. Can you just clarify that also? What’s kind of the justification behind those moves?

Peter Kelly (Chief Executive Officer)

Yes, thanks, John. Appreciate the question. Listen, I guess what I’d say to that is the focus there in that part of the business is the U.S. dealer-to-dealer space. 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 USD. 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.

John Babcock (Analyst at Barclays)

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 27. And then like what does that mean then for. Because I mean it seems like you’ve been doing go-to-market spending each year, typically towards the end of the year. So should we expect that the timing of the go-to-market spending due next year will kind of keep pace or maybe be earlier in 27 because of this pull-forward?

How should we think about all that?

Peter Kelly (Chief Executive Officer)

It’s probably too early to talk about, you know, spending that we might do at the end of 2027. You know, our, our, 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 all, we’re all, 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. We, you know, when we hire a salesperson, it takes them a while to ramp up. 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 Openlane customers in that market.

John Babcock (Analyst at Barclays)

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, they were pretty flat and you talked about some mix impacts there. But when should we think that those off-lease volumes will start to hopefully help pull that higher?

Peter Kelly (Chief Executive Officer)

Maybe I’ll talk a little qualitatively and Brad, you can speak to the yields here more and 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, you know, 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 mix improvement overall in Q3 in terms of the U.S. off-lease, which is where 90% of our off-lease volume is in the U.S., and the other data point, I think it was in my remarks, we saw a 100% year-on-year growth in commercial vehicles sold in our U.S. Openlane 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 Openlane 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.

Brad Herring (Chief Financial Officer)

John? Yeah, 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 payoffs spiked a bit. Q3, those payoffs came down and that’s where the yield improvement kind of sequentially from Q2 to Q3 came from. We expect to see those kind of patterns continue. It’s really hard to project out 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 still remains 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 5 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 continue.

John Babcock (Analyst at Barclays)

All right, thank you.

Peter Kelly (Chief Executive Officer)

Yep. Thanks, John.

OPERATOR

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

Craig Kennison (Analyst at Baird)

Oh, hey, good morning. Thanks for taking my question, Peter. I wanted to understand your competitive positioning in the dealer-to-dealer space. There are franchise dealers and independent dealers. And I’m just wondering whether you perceive your strength to be stronger in one of those dealer groups.

Peter Kelly (Chief Executive Officer)

Yeah, thanks, Craig. That’s a very good question. You know, the dealer-to-dealer market, those two customer groups are critical, right? So you’ve got franchise dealers, 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, the exact opposite.

For the most part, they’re independent dealers. And 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 assign a vehicle, you can’t sell it, right. So you have to kind of get supply first. But you have to be a very fast follow with demand. And I do think that long term 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, independent dealer wants to go and search for the wholesale channel, that they start with Openlane. 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 entrée 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. So it gives us a lot of credibility and a great starting point with a 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 got to bring them along equally. And 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 or 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, with our buyer audience and I think they recognize that as well.

Craig Kennison (Analyst at Baird)

Thanks. And then as it relates to the competitive landscape, have you noticed any early change in behavior with your key competitor?

Peter Kelly (Chief Executive Officer)

I presume you mean our digital competitor 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.

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, I’ve been on the sell side where my company was acquired. I’ve been on the buy side where I’ve acquired companies. 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.

Craig Kennison (Analyst at Baird)

Thanks, Peter.

Peter Kelly (Chief Executive Officer)

Appreciate it. Thanks, Craig.

OPERATOR

The next question comes from Bob Labek with CJS Securities. Please go ahead.

Bob Labek (Analyst at CJS Securities)

Great, thanks. Good morning and thanks for taking our questions. Wanted to start on the dealer side. Obviously, you know, really strong growth in the U.S. And I know this will be difficult to parse out, but maybe if we could dig in a little, you know, obviously there’s the secular shift to digital. There’s new rooftops from transitioning your white-label customers, and then there’s greater share of wallet from already existing customers. Can you give us a sense of where the majority of the growth is coming?

Is it existing, greater wallet share, or is it new customers? How that’s playing out and how you expect that to change or to maybe stay the same over the next 12 to 18 months? Just the drivers of the outsized growth and the pockets where it’s coming from and the trends going forward, please.

Peter Kelly (Chief Executive Officer)

Yes. 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 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 0 to 100 on 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 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, but pleased 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 characterize it. Brad, anything to add to that?

Brad Herring (Chief Financial Officer)

Yeah, Bob, the way 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 been added in the last 12 months and about three quarters of it’s going to come from share of wallet, or growth within our existing customer base.

Bob Labek (Analyst at CJS Securities)

Okay, great. And all that sounds like 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 into the P&L.

Peter Kelly (Chief Executive Officer)

Yeah. Thanks, Bob. EVs have, I want to say, 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. So 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 across all of our customers, that might tick up a little bit again next year. Not a lot, I would say, but it’s in that 15-ish percent range of maturities.

But the consumer payoff percentage on EVs is much lower. So EVs are representing more like 30-plus percent of the vehicles getting returned, okay, 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 grounding and the franchise dealer closed 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 higher-revenue channels.

And in consequence we’re selling a greater number and a greater percentage of them in that channel. So they’re accretive to the yield count. I don’t have a yield number for EVs specifically, and maybe that’s something we should pull. But that’s kind of how we see it. Obviously fuel prices and all that sort of stuff has given EVs a little bit of a boost over the last six months. But, you know, that’s also been to the detriment of some of the other vehicles. So it’s not that that by itself is not a win for Openlane. It’s a kind of a take with one hand, give with the other kind of thing. But EVs by themselves, I’ve been pleased with the performance.

Bob Labek (Analyst at CJS Securities)

Super, very helpful. Thank you so much.

Peter Kelly (Chief Executive Officer)

Thank you, Bob.

OPERATOR

The next question comes from Jeff Lick with Stephens. Please go ahead.

Jeff Lick (Analyst at Stephens)

Good morning. Thanks for taking my question and congrats on a nice quarter. Peter, I was wondering if you’d give any update on your discussions with the captive OEMs, just in terms of their willingness and desire to maybe want to transact more and quicker in the open segment. I think your assumptions in your analyst day yield for commercial were that you’d convert about 20% in the open segment, which obviously is a lot lower than what was average.

Just any updates on moving those guys across the line a little more and reducing the reserve prices so you get higher conversion?

Peter Kelly (Chief Executive Officer)

Yes, 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 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 something they got to focus on, you know, whereas for a few years they just didn’t have much volume.

So 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 Openlane presents — you know, to sell cars sooner, 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 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 we’ve had numerous quarters of pretty solid volume growth there. I used to say it’s off a 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 business in terms of conversion rate, not in terms of absolute volume, but conversion rate. So I feel really encouraged by that. We’ve obviously got some sellers well above that because that’s an average number. So what we’re trying to do is 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 — 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.

Jeff Lick (Analyst at Stephens)

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, greater than one year, less than one year. I’m just curious, on the sellers, when they get to that — 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?

Brad Herring (Chief Financial Officer)

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 has 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.

Peter Kelly (Chief Executive Officer)

Jeff, let me add some. It’s not a straight answer to the question you asked, but it’s in the same zip code thematically. You know, we talk about our overall volume growth of 22%. One thing I’m pleased about is if I sort of — if I look at, you know, who’s driving that growth, and 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. So I think we’ve got — there is some consolidation that’s going on in the franchise dealer world. It’s slow, it’s a slow trend. But I think we’re seeing the middle-sized operators, the guys who used to have 30 stores, starting to have 40 or 50 stores, that kind of thing. We do very well with that group of customers. So I think we’re seeing outsized growth with them, which I think is a very healthy and positive trend for the future.

Jeff Lick (Analyst at Stephens)

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 with you because, you know, your sales have to be staged on their real estate?

Peter Kelly (Chief Executive Officer)

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 an urban environment, very limited space, it can be more of a question. But, you know, we do very well in some of the more dense 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 be entrepreneurial and do the right thing for their store and their market, versus how do I balance that with the need for consistency and efficiency across the platform of 30 or 50 stores?

What are the technologies I 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. 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, or 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 offer, I think, a very compelling product that resonates with those owners and those, you know, corporate managers.

Jeff Lick (Analyst at Stephens)

Awesome. Thanks very much and best of luck in Q4.

Peter Kelly (Chief Executive Officer)

Thank you, Jeff.

OPERATOR

The next question comes from Gary Prestopino with Barrington Research. Please go ahead.

Gary Prestopino (Analyst at Barrington Research)

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?

Peter Kelly (Chief Executive Officer)

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. And 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 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 D-to-D. But that sort of inflected in late Q2 and through all of Q3, and frankly into Q4, used vehicle 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. D-to-D 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, so Anyway, conversion rates will ebb 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.

Gary Prestopino (Analyst at Barrington Research)

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 lease in the open auction?

Peter Kelly (Chief Executive Officer)

Yeah, you know, we may be 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 is actually a good thing for their model. OEMs are 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, 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 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, Gary.

OPERATOR

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

Peter Kelly (Chief Executive Officer)

Well, thank you very much for your time today and for your interest in Openlane. As I said at the beginning, Openlane 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 Openlane 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 to go 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.

OPERATOR

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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