OPENLANE(KAR) - 2025 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION This section provides the unaudited consolidated financial statements and management's detailed analysis of the company's financial condition and operational results Item 1. Financial Statements (Unaudited) Presents OPENLANE, Inc.'s unaudited consolidated financial statements for Q1 2025, covering income, balance sheets, cash flows, and related notes Consolidated Statements of Income OPENLANE reported Q1 2025 total operating revenues of $460.1 million, a 7.0% increase, with operating profit nearly doubling to $51.7 million and diluted EPS rising to $0.18 Consolidated Income Statement Highlights (Q1 2025 vs Q1 2024) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total operating revenues | $460.1M | $429.9M | +7.0% | | Operating profit | $51.7M | $36.8M | +40.5% | | Net income | $36.9M | $18.5M | +99.5% | | Net income per share - diluted | $0.18 | $0.05 | +260.0% | Consolidated Statements of Comprehensive Income Comprehensive income for Q1 2025 significantly increased to $41.3 million, driven by higher net income and a positive foreign currency translation gain Comprehensive Income (Q1 2025 vs Q1 2024) | Metric (in millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net income | $36.9 | $18.5 | | Foreign currency translation gain (loss) | $4.4 | $(9.5) | | Comprehensive income | $41.3 | $9.0 | Consolidated Balance Sheets As of March 31, 2025, total assets were $4,806.4 million, up from $4,622.3 million at year-end 2024, with increases in cash, receivables, liabilities, and stockholders' equity Balance Sheet Summary | Metric (in millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $220.5 | $143.0 | | Total current assets | $3,045.6 | $2,851.5 | | Total assets | $4,806.4 | $4,622.3 | | Total current liabilities | $2,720.7 | $2,565.5 | | Total liabilities | $2,821.5 | $2,667.1 | | Total stockholders' equity | $1,372.4 | $1,342.7 | Consolidated Statements of Cash Flows Net cash from operations increased to $122.6 million in Q1 2025, with reduced cash usage in investing and financing activities, resulting in a $72.8 million net cash increase Cash Flow Summary (Q1 2025 vs Q1 2024) | Cash Flow Activity (in millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $122.6 | $100.2 | | Net cash used by investing activities | $(31.9) | $(39.7) | | Net cash used by financing activities | $(18.9) | $(63.6) | | Net increase (decrease) in cash | $72.8 | $(8.0) | Condensed Notes to Consolidated Financial Statements These notes detail OPENLANE's operations as a digital used vehicle marketplace, accounting policies, and significant post-quarter events like a new $250 million share repurchase and property sale - OPENLANE is a digital marketplace for used vehicles, connecting sellers and buyers in North America and Europe. The company facilitates transactions and provides ancillary services like financing (through AFC), logistics, and reconditioning[26][29][33] - The company's operations are organized into two reportable segments: Marketplace (wholesale marketplaces) and Finance (inventory-secured financing via AFC)[82] - Subsequent to the quarter end, on April 30, 2025, the company sold excess property in Montreal for net cash proceeds of approximately $42 million[90] - On April 30, 2025, the board approved a new share repurchase authorization of up to $250 million through December 31, 2026, replacing the previous program[91] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial results, noting a 7% revenue increase to $460.1 million, significant operating profit growth, and strong liquidity to meet upcoming debt obligations Results of Operations Consolidated revenue increased 7% to $460.1 million in Q1 2025, with operating profit up 40.5% to $51.7 million, driven by Marketplace performance and reduced finance expenses Consolidated Results Overview (Q1 2025 vs Q1 2024) | Metric (in millions) | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total operating revenues | $460.1 | $429.9 | +7.0% | | Operating profit | $51.7 | $36.8 | +40.5% | | Income from continuing operations | $36.9 | $18.5 | +99.5% | - Interest expense decreased by 44% to $4.0 million due to lower borrowings on lines of credit[109] - The effective tax rate for Q1 2025 was 30.0%, compared to 36.6% for Q1 2024. The company maintains a valuation allowance against its U.S. net deferred tax asset[111][112] Marketplace Results Marketplace segment revenue grew 10% to $351.2 million in Q1 2025, with operating profit more than doubling to $12.0 million, despite a slight decrease in total vehicles sold Marketplace Segment Performance (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total Marketplace revenue | $351.2M | $318.3M | +10.3% | | Operating profit | $12.0M | $4.8M | +150.0% | | Total vehicles sold | 363,000 | 372,000 | -2.4% | | - Commercial vehicles | 191,000 | 222,000 | -14.0% | | - Dealer consignment vehicles | 172,000 | 150,000 | +14.7% | - Auction fees per vehicle sold increased 17% to $345, reflecting vehicle mix and price increases[118] - Provision for credit losses in the Marketplace segment decreased 86% to $0.3 million due to risk reduction initiatives[124] Finance Results Finance segment revenue decreased 2% to $108.9 million in Q1 2025, but operating profit increased 24% to $39.7 million due to lower interest expense and reduced credit loss provisions Finance Segment Performance (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Total Finance revenue | $108.9M | $111.6M | -2.4% | | Operating profit | $39.7M | $32.0M | +24.1% | | Finance provision for credit losses | $9.0M | $13.6M | -33.8% | | Annualized provision as % of avg. receivables | 1.5% | 2.4% | -0.9 p.p. | - The decrease in finance interest expense was due to a lower average interest rate on securitization obligations[130] LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2025, the company maintained strong liquidity with $220.5 million cash and $403.9 million available credit, sufficient to meet obligations including upcoming senior note maturity Liquidity Position | Metric (in millions) | March 31, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $220.5 | $105.2 | | Working capital | $324.9 | $384.6 | | Amounts available under Revolving Credit Facilities | $403.9 | $307.6 | - The company has $210.0 million of 5.125% senior notes due June 1, 2025, which are classified as current debt[149] - Capital expenditures are expected to be approximately $50 million to $55 million for fiscal year 2025[171] EBITDA and Adjusted EBITDA This section reconciles non-GAAP EBITDA and Adjusted EBITDA to net income, with consolidated Adjusted EBITDA reaching $82.8 million in Q1 2025 Adjusted EBITDA Reconciliation (Consolidated) | Metric (in millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Income from continuing operations | $36.9 | $18.5 | | EBITDA | $106.4 | $92.8 | | Adjusted EBITDA | $82.8 | $74.8 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are foreign currency and interest rate fluctuations, with minimal impact on Q1 2025 net income due to low variable rate debt activity - A hypothetical 1% change in the month-end Canadian dollar exchange rate for Q1 2025 would have impacted net income by $0.1 million[178] - A hypothetical 1% change in the month-end euro exchange rate for Q1 2025 would have impacted net income by $0.5 million[178] - A hypothetical 100 basis point increase in short-term interest rates would have had no significant impact on interest expense for Q1 2025 due to minimal borrowings on the Revolving Credit Facilities[180] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The principal executive and financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period[181] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[182] PART II—OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, other disclosures, and an index of exhibits filed with the report Legal Proceedings The company is involved in various legal proceedings, which management does not expect to have a material adverse effect on its financial condition or results - Management does not expect ongoing litigation to have a material adverse effect on the company's financials[184] Risk Factors This section refers investors to the detailed risk factors in the Annual Report on Form 10-K, with no new risk factors disclosed in this quarterly report - The report directs investors to the risk factors detailed in the Annual Report on Form 10-K for the year ended December 31, 2024[186] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales occurred; the company repurchased 2,900 shares for $0.1 million, with a new $250 million share repurchase authorization approved in April 2025 Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Value Remaining (end of period) | | :--- | :--- | :--- | :--- | | Jan 2025 | 0 | $ - | $100.0M | | Feb 2025 | 0 | $ - | $100.0M | | Mar 2025 | 2,900 | $19.98 | $99.9M | - In April 2025, the board approved a new share repurchase authorization of up to $250 million through December 31, 2026, which replaces the prior program[188] Other Information No directors or executive officers adopted, terminated, or modified Rule 10b5-1 trading plans or other trading arrangements during Q1 2025 - No directors or executive officers adopted or modified Rule 10b5-1 trading plans in Q1 2025[189] Exhibits This section provides an index of all exhibits filed with the quarterly report, including agreements, certifications, and interactive data files - The exhibit index lists all documents filed with the report, such as credit agreements, employment contracts, and required certifications[192][194][195]