OPENLANE(US:KAR)2025-08-06 13:58PART I—FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents OPENLANE, Inc.'s unaudited consolidated financial statements for Q2 2025, including income, balance sheets, cash flows, and condensed notes Consolidated Statements of Income The company reported significant growth in net income for both the three and six months ended June 30, 2025, compared to the same periods in 2024, driven by increased operating revenues and profit Consolidated Income Statement Highlights (in millions, except EPS) | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenues | $481.7 | $443.8 | +8.5% | $941.8 | $873.7 | +7.8% | | Operating Profit | $47.4 | $23.9 | +98.3% | $99.1 | $60.7 | +63.3% | | Net Income | $33.4 | $10.7 | +212.1% | $70.3 | $29.2 | +140.8% | | Diluted EPS | $0.15 | $0.00 | N/A | $0.33 | $0.05 | +560.0% | Consolidated Balance Sheets The balance sheet as of June 30, 2025, shows a stable total asset base compared to December 31, 2024, with key changes including decreased cash, increased receivables, and reduced long-term debt Key Balance Sheet Items (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Current Assets | | | | Cash and cash equivalents | $119.1 | $143.0 | | Finance receivables, net | $2,355.8 | $2,322.7 | | Total Assets | $4,638.3 | $4,622.3 | | Current Liabilities | | | | Current maturities of long-term debt | $0.0 | $222.5 | | Obligations collateralized by finance receivables | $1,724.8 | $1,660.3 | | Total Stockholders' Equity | $1,415.6 | $1,342.7 | Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash from operating activities increased significantly, while investing and financing activities primarily used cash for increased receivables and debt repayment Six Months Ended Cash Flow Summary (in millions) | Cash Flow Activity | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $194.2 | $137.7 | | Net cash (used by) provided by investing activities | $(29.4) | $5.9 | | Net cash used by financing activities | $(218.9) | $(166.5) | | Net decrease in cash, cash equivalents and restricted cash | $(34.9) | $(30.3) | Condensed Notes to Consolidated Financial Statements The notes provide crucial context to the financial statements, detailing accounting policies, debt structure, segment performance, and subsequent events, including a new share repurchase program and senior note repayment - The company reclassified its income statement to present finance interest expense and provision for credit losses as operating expenses, reducing operating profit but not impacting net income, with prior periods conformed3940 - In April 2025, a new share repurchase program of up to $250 million was approved, under which 413,188 shares were repurchased for approximately $9.3 million in Q2 202551 - The company repaid $210.0 million of its 5.125% senior notes upon maturity in Q2 2025 using cash on hand, significantly reducing long-term debt76 - The "One Big Beautiful Bill Act" (OBBBA), enacted July 4, 2025, is expected to decrease the company's deferred tax position and related valuation allowance in Q3 202595 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting an 8.5% revenue increase in Q2 2025 driven by strong Marketplace segment performance, alongside details on liquidity, capital resources, and non-GAAP measures Results of Operations Overall financial performance improved significantly in the first half of 2025, with Q2 2025 total revenue growing 9% and operating profit nearly doubling, driven by strong Marketplace segment volumes and improved Finance segment profitability Q2 2025 vs Q2 2024 Performance Overview (in millions) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $481.7 | $443.8 | +$37.9 (+9%) | | Operating Profit | $47.4 | $23.9 | +$23.5 (+98%) | | Net Income | $33.4 | $10.7 | +$22.7 (+212%) | - Interest expense decreased 44% to $3.1 million in Q2 2025, driven by lower borrowings and senior note repayment113 - The effective tax rate was 35.4% for Q2 2025, down from 41.2% in Q2 2024, with both periods unfavorably impacted by valuation allowance increases against the U.S. net deferred tax asset115 Marketplace Segment Results The Marketplace segment's revenue increased by 12% to $375.5 million in Q2 2025, with operating profit swinging to $11.9 million, driven by higher dealer consignment vehicle sales, increased auction fees, and lower Canadian Digital Services Tax expense Marketplace Segment Key Metrics (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenue (M) | $375.5 | $336.0 | +12% | | Operating Profit (Loss) (M) | $11.9 | $(8.2) | N/A | | Total Vehicles Sold (k) | 380 | 368 | +3% | | Dealer Consignment Vehicles Sold (k) | 182 | 151 | +21% | | Gross Merchandise Value (B) | $7.5 | $6.8 | +10% | - Auction fees per vehicle sold increased by 20% to $355, reflecting an improved vehicle mix and price increases123 - Canadian Digital Services Tax (DST) expense was $1.5 million in Q2 2025, significantly down from $12.0 million in Q2 2024 (which included $10 million for prior years), following the tax's rescission announcement128 Finance Segment Results The Finance segment's revenue slightly decreased by 1% to $106.2 million in Q2 2025 due to lower prime rates, but operating profit increased by 11% to $35.5 million, driven by reduced interest expense and a lower provision for credit losses Finance Segment Key Metrics (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Revenue (M) | $106.2 | $107.8 | | Operating Profit (M) | $35.5 | $32.1 | | Total Receivables Managed (M) | $2,347.4 | $2,210.2 | | Net Finance Margin % | 13.6% | 13.5% | | Annualized Provision for Credit Losses % | 1.5% | 2.1% | - Finance interest expense decreased due to an approximate 1.6% reduction in the average interest rate on securitization obligations136 Liquidity and Capital Resources As of June 30, 2025, the company maintained strong liquidity with $119.1 million in cash and $410.9 million available under revolving credit facilities, having repaid senior notes and initiated a new share repurchase program Liquidity Summary (in millions) | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $119.1 | $143.0 | | Working capital | $395.4 | $286.0 | | Available under Revolving Credit Facilities | $410.9 | $397.9 | - The company repaid $210.0 million of its 5.125% senior notes upon maturity in Q2 2025 using cash on hand187 - The AFC segment's committed liquidity for securitization facilities was $2.0 billion for U.S. receivables and increased to C$375 million for Canadian receivables as of June 30, 2025190191 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are foreign currency exchange rate fluctuations and interest rate changes, with minimal impact from interest rate risk in H1 2025 due to limited variable rate borrowings - A hypothetical 1% change in the month-end Canadian dollar exchange rate for H1 2025 would have impacted net income by $0.9 million215 - A hypothetical 100 basis point increase in short-term rates would have had no significant impact on interest expense for H1 2025 due to minimal borrowings on the Revolving Credit Facilities217 Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period218 - No material changes to internal control over financial reporting occurred during Q2 2025219 PART II—OTHER INFORMATION Item 1. Legal Proceedings The company is involved in ordinary course litigation and disputes, which management does not believe will have a material adverse effect on its financial condition, results of operations, or cash flows - Management does not believe the ultimate resolution of ongoing litigation will have a material adverse effect on the company's financial condition or results221 Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024, and investors are advised to consider those factors - No material changes to risk factors were reported during the quarter, referring investors to the Annual Report on Form 10-K for December 31, 2024223 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 413,188 shares of common stock at an average price of $22.64 per share under a new $250 million share repurchase authorization, with approximately $240.6 million remaining Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining (M) | | :--- | :--- | :--- | :--- | | April 2025 | 0 | $0.00 | $250.0 | | May 2025 | 332,898 | $22.62 | $242.5 | | June 2025 | 80,290 | $22.74 | $240.6 | | Total | 413,188 | $22.64 | $240.6 | Item 5. Other Information During the second quarter of 2025, none of the company's directors or executive officers adopted, terminated, or modified a Rule 10b5-1 trading plan or a non-Rule 10b5-1 trading arrangement - No directors or executive officers adopted, terminated, or modified any Rule 10b5-1 trading plans during Q2 2025226 Item 6. Exhibits This section provides an index of all exhibits filed with the Quarterly Report on Form 10-Q, including certifications by the CEO and CFO and financial data formatted in iXBRL