Okay, good afternoon, everybody, or good late morning. I'm Jeff Lick, the auto ecosystem and consumer analyst here at Stephens. It's the 11:00 A.M. session, joined by the management team of OPENLANE, Peter Kelly, the CEO, and Brad Herring, the CFO. Just want to give me a little quick introduction, just give you some context, because obviously OPENLANE's done a great job this year. We started following and were doing work on the auction business. November of last year, my background is I had followed the auto dealers, probably going back around the early 2000s, and they used cars. And I'd always kind of followed the auction business, but not as much as I'd followed others. And we initiated coverage on OPENLANE and ACBA together, both with Neutrals, and did a couple of calls with Peter.
The first time they announced earnings under coverage, I'm sure a lot of you noticed when you build a model, you go and you update the numbers. We started to notice, geez, most of the metrics are going the right way. There's accelerating growth. We did more calls and eventually upgraded the stock. What we've highlighted is that there's really kind of three things going on, three parts of the OPENLANE story. One, obviously, is the one that everyone knows is the lease return story, which is kind of the big shiny object in the room. There's the secular dynamic in the digital D2D auction, which Peter and Brad are going to talk about.
The other thing that we started to try to uncover as we started to see these different metrics and different KPIs just consistently getting better was this company-specific self-help, which is really what I think Peter referred to as the OPENLANE unification. I think that's really underappreciated in terms of what Peter's done. Peter, maybe to start off, if you can maybe just give a little bit about your history and how you became the CEO, your journey, because it is unique. Most people don't sell their company and then stick around for 10 years and then ultimately end up being the CEO. Maybe you could kind of give a little detail about your journey and also the company-specific elements, I think, that are really driving a good chunk of your results.
Sure, thanks, Jeff. Appreciate that. First of all, can everybody hear me at the back? Yeah, okay. Yeah, so my background, I was a founder of a business that became the original OPENLANE. We were not called OPENLANE at the beginning. This was back in the dot-com era in 1999. I am dating myself here a little bit. We started a business with the goal of moving this large TAM, this wholesale used vehicle industry, moving it online. We felt online was going to be more efficient, create a lot of benefits for sellers and buyers, take cost out of the equation, create network effects. Candidly, Jeff, we were a little naive back then. We did not really understand the industry we were in. We learned quickly. I think what we learned is there was a segment that was ready to adopt that.
Most of the industry was not ready to adopt that, but there was one segment which was off-lease. We ended up focusing on that. Over, I would say, a seven, eight, nine-year period, we ended up winning exclusive relationships with the majority of OEMs and captive finance companies servicing their off-lease portfolio. We kind of became an off-lease remarketing business. A lot of that business is transacted in a private label setting. The business had grown. We were EBITDA positive. We were doing about $100 million in revenue. The Great Recession happened, right? That was a financing impacted new car sales. It also impacted leasing. Leasing compressed a lot. I guess in the wake of that, we sold the company to KAR Global. As you say, I did stick around. That really was not planned, but I did stick around.
It turns out once we got through that three-year bump of the Great Recession and the impact on off-lease, the business took off on a very strong growth trajectory. When we sold that business, we were selling around 300,000 cars. By 2019, right before COVID, that same business was selling close to one and a half million cars. It had been a big growth driver of Car's business in that intervening eight-year period and a great acquisition for them. I guess, Jeff, I became president. COVID happened. I became CEO. When I became CEO, it was clear to me that we had to continue to move this business in a more digital direction. That was certainly part of the thought process. I felt digital was going to be the future of the industry.
Now some of those other segments, particularly dealer to dealer, which is about half the TAM, that was now starting to migrate online. I could see that second chapter playing out just as I felt off-lease had 10 years earlier. We did not necessarily plan to divest of the physical, although we ultimately did. The biggest single thing probably I have done as CEO was divest of the physical assets. The rationale for that was, again, trying to lean into digital. It is hard to be a disruptor and grow a digital business when it is directly competitive with a legacy business that is half your revenue and three quarters of your earnings. There is an opportunity to divest of that, pay down debt, and focus the strategy on digital. That is what we did.
That kicked off a bunch of stuff that you alluded to, Jeff, rebranding the platform, taking a lot of cost out, reengineering the whole management team to a more digital native management team, smaller management team. I'd say a leaner, more data-driven, more digital company. That took about a year and a half or two years. With hindsight, if I could do it again, I do try to do that even faster, but I felt at the time we were doing it as fast as we could. We rebranded the company. It was two years ago. In November of 2023, we rebranded our U.S. marketplace to OPENLANE. We put the dealer inventory and the commercial inventory together in one place, one digital marketplace, rebranded Canada, rebranded Europe. In early 2024, started leaning more into go-to-market investments.
By that point, I felt we've got a good platform here. This is working. We're getting good customer feedback. We can judiciously throw more gas on the fire and start to really take this thing to market more aggressively, which we've been doing. I guess what I neglected to say is COVID was kind of a repeat for different reasons of the whole off-lease sort of disaster scenario of the Great Recession. It was a different set of drivers, but the fundamentals were the same. Off-lease volumes compressed by more than half and bottomed out, frankly, this year. Anyway, fast forward to today. I feel very optimistic about the business. We have a commercial volume story that's poised to really start to ramp for us in 2026.
We still have all the market share leadership that we had before, except the industry is now even more digital than it was in 2019. I think there's a great long-term story there. On the D2D side, that industry, I really believe, is moving digitally. D2D volumes are about half of the TAM. Interestingly, in the D2D, you've got a fragmented seller-buyer equation, so you get more revenue per car. We're a significant player, and we're the fastest growing player in the industry at this point on a year-over-year volume basis. I feel like it's resonating. These two things don't operate in a vacuum. One reinforces the other. More commercial vehicles brings more franchise dealers, brings them to a marketplace they then can sell.
That is kind of why we're going to—I will highlight, look, it's an open forum. If anyone just wants to ask a question, just raise your hand, and we can jump on those questions as well. I think maybe one of the next level of the questions or trying to understand your business is, it is this kind of cohesive reinforcing system. I do not think people sometimes appreciate it does somewhat evolve around the franchise dealer. You guys have had these relationships with the franchise dealer. Obviously, we can talk about the AFC business and the relationship you have with the buyer, because you're a platform and there are sellers and buyers. It does feel like those things are all kind of starting to come together.
We could just talk about how the interplay between the franchise dealer, the lease units, the open auction, and then how that kind of maybe benefits your sales process for the D2D.
Yeah. There are a lot of ways to think about our business, but sometimes I think of it—half our volume is commercial. The other half is D2D. I do think of our commercial accounts, the OEMs, as kind of anchor tenants. The unit economics of any one car on the commercial side are maybe not as positive as on the dealer side, but at scale, they are very positive because there are lower touch points, fewer touch points per vehicle. It scales really well. I have had that experience, obviously, as we saw that ramp from 2011 to 2018 that I alluded to. I know that business scales really, really well. Those commercial relationships, again, why do I think of them as anchor tenants? Because when we sign up an OEM, all of their dealers, all of their franchise dealers become natural customers of ours.
It is in the dealer's best interest to be on our platform, to be buying those vehicles. They're three-year-old off-lease, high-quality used vehicles, perfect for a franchise dealer to retail. Once they're there, we can then sell them other parts of our marketplace. We have other commercial sellers on here. Their inventory might be of interest to you. You have a lot of wholesale inventory. You could sell that through us. Again, that anchor tenant relationship model, if you like, that's where I think the OEMs play for us. We try and bring their franchise dealers deeper into the funnel. For those of you that are new to the story, the commercial volume, I think of it as commercial sellers selling cars to franchise dealers. The D2D volume, think of it mainly as franchise dealers selling cars to independent dealers.
On that last piece, the independent dealer, that's a core audience, again, very fragmented. A natural advantage we have there vis-à-vis at least some of our competitors is we run the second largest floor plan finance business in the country. That is exclusively for independent dealers. We have 12,000 independent dealers using that, very tight relationships with them. We're a trusted business partner. We're getting those 12,000 dealers to participate on the buy side of our marketplace. You can think of our business as these sort of interlocking circles, if you like, Venn diagram with the marketplace, the open marketplace in the middle. That's sort of the execution play we're running out there.
One of the reasons I wanted to kind of give the preamble about the company-specific stuff is that this year has been interesting. As investors, companies will always tell us what they're going to do, and then we get the benefit of actually seeing what you did. What's been fairly unique and interesting about your 2025 is you've grown digital, D2D, double-digit now for four quarters in a row. There's been noise about conversion. There's been noise about arbitration. There's been noise about depreciation. Every time you guys announce numbers, they're pretty clean numbers, very clean numbers, not pretty clean numbers. There's no, well, we saw this, we saw that. I mean, maybe you are seen in the background, but can you maybe talk to what you think's driving your success in the double-digit dealer D2D?
Yeah. Let me comment on two things. One is the macro. The other is what's driving the success. On the macro, again, I've been in the industry now 25 years, so I've seen some good times and bad times. I consider what we have right now kind of normal times. This is not unusually good. This is not unusually bad. This is normal kind of volumes, normal gross profit margins at dealers, inventories kind of in a normal range. I don't see it as a particularly adverse market at all. If I look at the third quarter, D2D volumes in the industry actually grew. Physical auctions grew 2%. We have a public competitor who grew 10%. We grew our dealer volumes 14%. We said in our earnings call that our U.S. volumes grew high double-digit. Everybody grew, right?
It's not that the volumes in the industry contracted. I think it's a reasonable market. What's driving our success? I attribute it to three things. One, I think the strategic decisions we made, particularly to consolidate platform, simplify the business, rebrand, make it simpler for our customers to understand who we are, how we can add value to their business, and easy for them to sort of sign up. That sort of strategic repositioning of the company, I think, is item number one. Second item I'd say is technology investments to make the platform easier to use and more effective for our customers. Investing in better quality condition reports. Our condition reports are really good. We have a nationwide network of inspectors using proprietary technology, leveraging AI into those inspections as well.
I think a dealer looking at a car on our site is getting a great representation of what that vehicle is and can buy with confidence. Other technology investments, I'd say the one app. We talked about our private label, but now if you go to the OPENLANE app as a franchise dealer, you can go into our open marketplace. If you're a GM and a Ford store as well, or if they're in your family, you can seamlessly go into those two private labels from that same app. Little things like that. The absolute sale feature has been very popular. That's item number two, technology investments, product investments. Item number three is go-to-market. We have increased go-to-market resources. We started doing that the middle of last year.
Leveraging those two synergies that I talked about, getting more of these private label dealers migrated across to our open, getting more of these AFC dealers migrated across to our open. I put that in the realm of go-to-market. I think our go-to-market execution has been, we've made more investments there. We are committed, I think, a rational amount of incremental dollars to that, and then good execution alongside that.
I always want to keep these about the company that's presenting. In your industry, at least on the D2D, it's unique in terms of on the digital side, you are a bit of a duopoly at this point. When you hear things about increased arbitration or, "Hey, maybe we did some strategic fee reductions to drive volume," could you just talk to that? With respect to fees, on the seller fee, is that really a lever that the selling dealer cares about, or do they care more about, "Hey, look, the realization and liquidity and just keeping the units moving"?
You're right. I think on the digital—first of all, on the digital side of the business, I do think it is somewhat duopolistic, us and another player. There are some—I mean, there's a big physical player in our industry that has a digital platform, but it's not as competitive in this sort of more disruptive offsite model that we were executing on. On the fee stuff, here's what I think the selling dealers are most interested in, and it probably goes in this order of priority. First is value realization of the asset. You're trying to liquidate a $15,000 car. You need to get $15,000. If you get $14,000 it doesn't matter what the fees are. It doesn't matter how much good the customer service is. You just left $1,000 on the table. Right? I think realization, am I getting full value?
Our data would suggest that we're very strong on that dimension. When customers share their data with us, which some customers do of how we're doing versus other channels, that would reinforce our opinion there. Getting them full value on the car. I'd probably put next sort of speed, convenience, customer service. Our purpose statement embodies actually both of these. Make wholesale easy so our customers can be more successful. The successful, in my mind, embodies the profit, the retention, the value. The ease is the next one. Dealers are principally focused on their retail business. Wholesale is something they have to be good at, but they don't want to focus. It's got to be easy, a partner that I can trust, that's good to work with. We lean into that. I think cost matters too, right?
It's relevant, but it's probably not the deciding factor, Jeff. If I'm getting full value retention with a customer that does a great job taking care of my business, and I'm paying $50 more on a sale fee, it probably doesn't matter. I'll probably have a conversation around that, but I'm not going to move just because of that.
Let's shift gears to the commercial business, because obviously that is an exciting element of the story in 2026 and probably even just as much so, if not more, in 2027. Could you maybe just talk a little bit about the mechanics of how that works? Because I think there's always a little bit of confusion in terms of grounding dealer, private auction, the final OPENLANE.
Yeah. First of all, we talked about these relationships. What is the nature of these? We run online programs for about 70% of the OEM brands that you know, running their off-lease programs. That does not mean we sell 70% of all the cars out there, but it means we get the first opportunity to sell 70% of all the cars out there. We are running a program for OEM brand X. All their dealers are enrolled. As these cars come back from lease, they all get offered for sale with us first. They go through a waterfall process. It is a three-step waterfall. It is really a four-step, three steps with us. Step one, that vehicle has been returned to Nashville Honda. It is offered for sale exclusively to Nashville Honda. In fact, they do the turn-in on our tech. The consumer comes into the store.
They pull up this Honda-branded app. It's us. The car is turned in. The consumer signs. The consumer leaves. The car is offered for sale to Nashville Honda at a fixed price. If they buy it, we call that a grounding dealer sale. That's a transaction. We make a very small amount of revenue. If Nashville Honda doesn't buy it, the car now gets inspected and gets offered for sale to all Honda and Acura dealers nationwide. We call that a non—it's still a private label. It's still on the Honda-branded site. They're offering exclusively to their Honda network. That's another transaction for us. We make more revenue there. We also make the opportunity for transport revenue there, which also has a margin attached. If it doesn't sell there, it's then offered in our open sale, the openlane.com marketplace or the OPENLANE app.
There, it's offered for sale to Honda dealers, Ford dealers, GM dealers, CarMax, Carvana, independent dealers, anybody who's registered to buy with us. If it sells there, we make even more revenue, significantly more revenue, and we make also the opportunity for transport. If it doesn't sell there, that's maybe three or four days have passed. If we haven't sold it, it gets put on a truck and goes to a physical auction. It's lost to us at that point. We don't make any revenue at that point. What we're trying to do is obviously maximize our total conversion through that waterfall, particularly at the bottom two layers where we make more revenue. That's kind of what we're trying to do. That's how the process works. Mechanically, what drives business volumes? One is how many leases are maturing.
Typically, that's a function of how many leases were written three years ago, because leases are typically three years. Some are two years. Most are three. How many leases were written three years ago drives maturities. Those are going up. Maturities next year will be 20% + higher than this year. In 2027, 20% + higher than 2026. The lease maturity curve looks really healthy for us. The second thing is, of those lease maturities, how many are the consumers buying out? Pre-COVID, consumers would typically buy out about 30% of leases. That means 70% got returned, and that was our opportunity. We would then sell some fraction of that 70%. Post-COVID, used car prices ran up. The amount of equity in these leases skyrocketed, and the consumer buyout rate went from 30% to north of 80%. Our opportunity went from 70% to 15%. Right?
In the last two years, it started to expand again. It's now probably 65% buyout, 35% returned, something like that. One of the reasons our commercial volumes aren't down as much this year as you might have guessed, given the maturity curve, is yes, maturities have gone down, but consumer buyoffs have also gone down. As we look to next year and 2027 and 2028, my view is maturities are absolutely going to go up, but the consumer buyout is also continuing to go down. We're going to have a wider aperture of volume flowing to us. The question is, how much of that can we convert, and where in that waterfall can we convert it? There's a lot of complexity there, and I would advise folks not to get too ahead of their skis on modeling that.
I think if you take a long-term view, I think consumer buyout is going back to 30% at some point. I think we're going to convert more and more cars deeper in the funnel because we have more buyers online than we ever had before.
Can we talk about the buyers? Because you mentioned OPENLANE, the open auction. There is where you've got this on one side, you get buyers, and then on sellers, you have your dealer-to-dealer business, which is on OPENLANE. Your buyers, you could have a buyer that has been conditioned, "Hey, look, OPENLANE has these off-lease vehicles that are attractive to me." I go looking, but they're also going to see your dealer-to-dealer units. They might say, "Oh, geez, I was looking for a bunch of three-year-old Camrys, but I'm a Texas dealer, and boy, those are some nice-looking F-150s." Do you see that as a benefit to the whole kind of ecosystem that you've created?
Yeah, I do. I mean, ultimately, certainly long-term, I do. I mean, I think the network, if I think of how these two segments interplay, there is one potential negative, and it's a substitution negative. It's the idea that, "Okay, I'm a dealer, and this year I bought 300 cars from OPENLANE, and 200 of them were D2D, and 100 was commercial." Next year, our commercial volume goes up, so they buy that 100 commercial goes up to 200, but it substitutes, and they reduce their D2D volume. I mean, that could happen. I do think the more positive one is we have a lot more off-lease vehicles flowing through. Those are perfect for franchise dealers. That's the core buying audience for those cars. That means more franchise dealer participation in our marketplace.
While they're on there, they'll think, "Man, I see my competitor across the street selling on OPENLANE. I see his brand on it. Why aren't we selling on this platform?" We get that more positive effect. I actually think that's kind of what we are seeing. I think that's part of what's driving our results. Obviously, we need to keep leaning into that.
Some nuances here, because I think it's important about what is driving your results and differentiates you is ultimately, you're a platform, and you've got buyers and sellers, and you guys make money when buyers and sellers transact. The buyers, they want to know, "Okay, am I getting what you say, what the sellers have represented," which gets to the appraisal or inspections reports and could speak to the arbitration. They also want to know, "Hey, who am I buying from, and is this seller really serious?" You kind of have to educate the seller, and then you've got that nifty little button you can hit.
Yeah. I'll talk to that, and
I want to hear from Brad here.
I'm going to take all the questions, Jeff.
You can do that. Very good.
I guess, first of all, we inspect the car. We do not own the car, but we inspect the car. We do not allow the seller to represent what the car is because the seller has a bias in that. We do the car. It is our inspection. Our philosophy on that is we disclose everything. Right? We have people out there using proprietary technology. They know cars. We disclose everything we understand about the car. The seller understands the true value and the buyer. Right? We then try to stand behind that inspection. We have said the AC is good. If the car is delivered and the AC is not good, we will stand behind that. Either we will take the car back or we will reimburse you. Obviously, we do not want to do that, so our inspector needs to not say it is good if it is not good.
We'll stand behind our inspection. More than that, when the buyer buys a car, if they want complete peace of mind, they can buy a guaranteed buyback kind of policy, if you like, for an extra amount of money. Then it's kind of no questions asked. The car is dropped off. You got seven days. Any issue of any description, we'll take the car back. We find a lot of adoption of that. We're trying to engender a lot of peace of mind. Arbitration is a feature of the business. It was a feature of the business in the physical auction world. These are used products. They're high-value products. When there's an issue, you've got something that has to be worked on. I say simply, Jeff, arbitration is a great opportunity to lose two great customers.
We want to make sure that doesn't happen. When arbitrations happen, our philosophy is we're going to step in. We're going to make that okay. We're actually going to charge both the seller and the buyer an appropriate fee to give them that sense of confidence. Once they pay that fee, it's no questions asked. You had a return guarantee. We take the car back. Physically, we don't actually take the car back. We get another inspection of the car, put it up on OPENLANE, and sell it hopefully in 24 hours. We're not incurring a ton of risk or inventory as we take care of that.
From the seller perspective, you've got the feature, was it a guaranteed sale?
Absolute sale, yeah.
Absolute sale, where it maybe sometimes takes a little educating of the seller of like, "Look, if you remove the reserve price, you're going to get a lot more bids." Obviously, that signals to the buyer, "Hey, this car is going to sell.
Actually, yeah, let me hit on those two things then. Good point, Jeff. I’ve talked about technology investments and things that differentiate us. One is, and you alluded to this earlier, in our marketplace, and we're a little unique in this regard, we tell the buyer who the seller is. This car is being sold by Nashville Honda. We've obviously inspected the car, which is showing we're very transparent to the buyer. We show them some key stats for Nashville Honda. Are they an elite seller? Elite sellers are high-volume sellers with high conversion rate. We’ll show you the conversion rate. This seller has posted 100 cars, sold 64. Average days to title. If you buy this car, this seller typically gets you the title in three days. Arbitration percentage.
What are some key stats in a little thumbnail tile that you can say, "Do I want to buy from this guy or not?" We allow the buyer to follow the seller. So the buyer, I might have bought from Nashville Honda, have a good experience. I'm like, "Hey, I just want to anytime that guy's got cars for sale, I want to know." I follow the seller. I get a push notification every time they put up a car. What that does, that builds stickiness with the seller. The seller now has a little kind of network in the marketplace. It's not really transferable. If that seller goes to a competitor, those buyers don't go. That followership doesn't go. Right? It creates a stickiness in our marketplace as well. What we say to our sellers is you can build your brand in our marketplace.
Our top-performing sellers absolutely do that. Absolute sale, this is something we introduced beginning of last year. It's really a feature kind of when cars are put in the marketplace, the seller gives us a reserve price. We don't display that. We just let the bidding take shape, see what the market will deliver. The seller can at any time in the process log into the seller's interface. Once they see, "I'm getting enough activity on this car," they can put it in absolute sale. Let's say that we put on the car five hours ago. We've had 20 people view it. We have 12 people bid. You've had 17 bids, and now it's $9,700.
The seller might say, "You know, let's just commit that I'm going to sell that car." They hit the absolute sale button, which means this car is now selling for $9,700 or above by 4:00 P.M. today because of the timer. That then, everybody who's looked at that car gets another push notification. This Honda Civic you looked at is now in absolute sale. That often brings them back to give one more look, one more bid. There are a bunch of buyers who log on saying, "I just want to see the absolute sale cars because I don't want to spend time looking at cars that aren't going to sell. I want to spend time looking at cars that." They just search absolute sale to see 2,000 cars, and they spend the time searching there.
Absolute sale, we track from when the seller hits the button, how many incremental dollars do they get. Right now, that's tracking about $800 incremental. When we launched it, it was $400. That absolute sale has also now become over 50% of our total D2D transactions. A lot of adoption. Sellers love it. What I find the most is they love the average $800, but what they really love is when they get that one car that gets $2,500 of a run-up. That's when they really think, "Man, that kind of brings home the power of the OPENLANE marketplace. I would never have achieved that in my local physical auction." Right? I thought it was worth 9. I got 11.5. That's when you really get a convert.
We give Brad a chance to talk. As they say on TV, "But wait, there's more." The other leg or straw that's stirring the drink is the AFC business. That's roughly half of your EBITDA. Brad, maybe you could talk to trends you're seeing there. Obviously, when the Tricular incident kind of everyone all of a sudden became experts on floor plan or interested in talk to how you guys run the floor plan business and how you use it as a strategic element to the whole business.
No, perfect. To keep in mind, one of the things we did on our earnings call, also with all of this news hitting the wires about floor planning, we kind of got ahead of that on earnings call. If you had to listen to the transcript, the fundamental premise is we want to describe our floor plan really having two characteristics. One is it's not a consumer loan. These are dealer loans. These are not consumer loans. All the commentary you may hear about subprime consumers, I'm not saying it's not accurate, but the ripple effect into our business is minimal to none. Right? We do not do consumer loaning. That was one element. The other element we mentioned on the call was that these are sub-60-day loans. Right?
As things evolve, and whether it's a macro condition or secular conditions, whatever may change in the markets, we have very short-term durations on these loans that allows us to dial up and dial back. If we do see changes in macro, we can change accordingly. If we see a macro getting really good, we can change that upsize the same way. Those are really two elements about the financing business. We want to make sure people leave understanding it's not a consumer loan, and it's very short-term. There's some peripheral elements when we think about our AFC business. We do floor plan about 12,000-13,000 independent dealers. We don't floor plan all independent dealers. We've cut a segment off that we're very comfortable and very confident in servicing, and we don't go below that.
That's one of the reasons you'll see our loan loss provision rates as low as they are. You see we report a range of 1.5%-2%. We've been on the lower end of that range for the last couple of quarters. If you look across some of our competitors who may dip a little bit deeper, you're going to see loan losses in the 3%-5%, even as high as 6% or 7% range. We don't play in that space. Right? We have no intentions of playing in that space. One of the things to keep in mind about AFC, and Peter, I like kind of I'm going to use this three-circle overlap chart a lot going forward. It's the notion of how AFC does interact with the other sides of the business. It's not a standalone carve it off, put it over here. It's managed independently.
It's how do we start interacting that with the marketplace? What that means is we don't have to rely on AFC to be some big growth engine for OPENLANE consolidated. If I wanted to treat it as a big growth engine, I would have to go down market, make some compromise risk decisions. We don't do that, right? We use AFC as an augmentation to our marketplace business. That's how we look at it. It generates a lot of cash for us. That cash gives us a lot of latitude in terms of capital planning from my seat. Whether I want to consider internal investments, whether I want to look at share repurchase programs or debt paydown capabilities, a lot of that is generated through the marketplace or through AFC, through our financing business.
The way we manage it and kind of the real takeaway there is we don't look at that as if we're growing the marketplace, double-digit growth. We don't look at AFC to something to match that. We look at how it augments that. That's the real fundamental way we look at AFC. We're very proud of it. We've been doing it a long time. Quite frankly, I think we're very good at it. We get this question a lot, like, "How are you guys managing credit and risk the way we are?" It's because we're very good at it from an underwriting and a monitoring perspective. We don't see that changing.
Now we get to kind of the fruits of your success is that it generates a lot of cash. Your business generates a lot of cash. You recently did a transaction with a preferred with the private equity shareholder. Can you talk a little bit about capital allocation, maybe also just the rationale behind that transaction and what you thought that brought to the table?
The transaction, for those not familiar, going back a ways, we had a convertible preferred that when converted would have generated, would have accommodated about 25% of our opening kind of fully diluted share balance. We had an opportunity with the members that owned, two of the members that owned that instrument to buy back 53% of it. We did that transaction. It was post-close, so you actually do not see it in the Q3 results. It will show up in the Q4 results when this transaction was completed. We did buy out 53% of it. It did a couple of things for us. One is it allowed us to take a fair amount of the overhang from these preferred shares out of the market. 25% is a big number. Right? 25% is a big overhang number.
We dropped that down to more like a 13% number now. We felt at the end of the day, and we still fundamentally believe that the price at which we bought the shares back, plus we bought out a portion of the outstanding dividends, puts us in a really good spot going forward. What you're going to see when we get into June of next year, that remaining 13% is likely to convert to common. There are some few nuances around what triggers that convert. Essentially, if it's in the money over about $18 a share on the common, it will technically convert. We felt like that was a great transaction for us. It was a great transaction for the investors. Their timeframe had come up on the five, six-year mark. It really was a good combination of our objectives and their objectives.
We did raise a $550 million term loan B to pay for that. Investors love our term loan offerings because of our cash flow generation. Everybody knows how good quality that's going to be. We do generate a lot of cash, to Jeff's point. Our primary considerations for that cash always kind of go through the waterfall in my mind. One, it's fund our incremental organic investments. Right? We're making some, we talked about some go-to-market investments. We're continuing to make specifically on the U.S. D2D side. We're going to continue to make those as long as they bear the fruits that they are continuing to bear. Secondarily, prior to the term loan B, we were in a share repurchase program, which we opportunistically buy shares in the market. Now it's really a combination of buying shares and paying down that term loan.
We want to be cognizant of a term loan. You have to let it sit in the market for a little bit. You can't pay it all down the next day you issue it, or you won't be able to go back to market. We are going to do combinations of those two things, combinations of share buybacks and some debt paydown. Finally, we are always active in the market in the M&A space. Peter and I talk about it a lot. There is nothing that is really compellingly staring us in the face right now. There is not a hole in our digital marketplace we are trying to solve for by going and buying, whether it is a capability or buying distribution. There is nothing out there that is staring at us in the face, but it is certainly something we keep on the radar.
I would put that as the last tier on our capital program.
Anyone want to jump in with any questions? We're getting pretty close to the end here. I guess one thing, Brad, just from your background, you've brought in, talked about cash conversion. I know that's something that's kind of how you're North Star. Maybe you want to just talk a little bit about how you see cash conversion.
Yeah. So my background, I've been at OPENLANE for about six months now. I came primarily from fintech. But it's interesting, I've been very much a part of this ongoing digital transformation. I was part of online bill payment. I was part of Fiserv when we did the online bill payment. So you don't write checks anymore, right? You do it through your bank. That's a digitization event. I did payments for a number of years where we went from card present to card not present transactions. So I'm a huge believer of this digital transformation that takes away these old clunky processes and replaces them with something that's much more effective and efficient. That's why I'm here. Right? I think this is a great opportunity for OPENLANE as we stare down this continued digitization. And I'm a car guy, which helped.
First time in my career I actually get to work in something I'm interested in. So when it comes to the way we look at the business, it's really important to me to focus on what really drives our business. Right? And one of the things we've talked a lot with sell side and we've talked a lot of buy side investors is how do we start to more talk about this digital platform as a digital business, right? Not necessarily as a, we sell cars. We want to talk about it in the context of how digital investors and digital thinkers understand how a digital marketplace works. So there's some transformation that we're working through internally to work down that path. One of those elements is cash. Right? This is a very scalable business. Right?
We've talked about the scalability of the marketplace and the really high scalability of the commercial elements. What we want to do is now focus on what does that cash generation look like? You're going to see us talk about, we're going to talk about revenue generation. We're going to talk about incremental economics and incremental contributions. We're going to talk about cash. How do we convert EBITDA into cash? Subsequently, what we just talked about, what are we going to do with it? That's a general transformation you're going to see from us over time. It's exciting for us. I think it's going to hopefully resonate with a lot of folks in the room.
Great. I think we're close to the end here. I mean, Peter, if there's any kind of closing comments or things we didn't cover, feel free to jump in, but don't feel obligated.
Yeah. No, I think I'd close by saying very optimistic about how this company is positioned. I think underlying fundamentally, we've had a great year. I think ahead of the expectations I might have had at the start of this year in terms of our trajectory, both on the dealer and the commercial side. As we look to the future, I'll start with the commercial. I think we're now entering that cyclical growth recovery and off-lease. I think it will be substantial and will be sustained over many years with a secular shift towards digital there as well. On the dealer side, I estimate we're roughly 10% maybe on the high side of share of total dealer transactions, but growing in the high teens, sustained growth rate now for four quarters.
I think we've got a very strong, powerful platform that customers are waking up and seeing the benefits that that can drive for their business. We're going to be focused on executing on both of those. Obviously, as Brad said, we've got a finance business that we have a little bit more of a conservative stance on, but it's a wonderful business. It's a lower growth, but very, very strong cash generator. You put all those together, I think we've got a great opportunity here ahead for OPENLANE as we look to the future.
Great. Thank you very much. Thanks for being here. Have a great day, everybody.
Thank you, Jeff.