OPENLANE(KAR) - 2023 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents KAR Auction Services, Inc.'s unaudited consolidated financial statements for the three months ended March 31, 2023 and 2022, including statements of income, comprehensive income, balance sheets, stockholders' equity, and cash flows, along with condensed notes providing detailed explanations of accounting policies, business operations, segment information, and significant financial events Consolidated Statements of Income Consolidated Statements of Income (Three Months Ended March 31) | Metric (in millions) | 2023 | 2022 | | :------------------- | :--- | :--- | | Total operating revenues | $420.6 | $369.4 | | Total operating expenses | $355.2 | $355.7 | | Operating profit | $65.4 | $13.7 | | Interest expense | $38.3 | $25.6 | | Other (income) expense, net | $7.1 | $1.2 | | Income (loss) from continuing operations before income taxes | $20.0 | $(13.1) | | Income taxes | $7.3 | $(4.7) | | Income (loss) from continuing operations | $12.7 | $(8.4) | | Income from discontinued operations, net of income taxes | — | $8.1 | | Net income (loss) | $12.7 | $(0.3) | | Net income (loss) per share - basic | $0.01 | $(0.09) | | Net income (loss) per share - diluted | $0.01 | $(0.09) | Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income (Three Months Ended March 31) | Metric (in millions) | 2023 | 2022 | | :------------------- | :--- | :--- | | Net income (loss) | $12.7 | $(0.3) | | Other comprehensive income, net of tax | | Foreign currency translation gain | $2.4 | $1.1 | | Unrealized gain on interest rate derivatives, net of tax | — | $9.1 | | Total other comprehensive income, net of tax | $2.4 | $10.2 | | Comprehensive income | $15.1 | $9.9 | Consolidated Balance Sheets Consolidated Balance Sheets (as of) | Metric (in millions) | March 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :---------------- | | Assets | | Cash and cash equivalents | $219.6 | $225.7 | | Restricted cash | $32.2 | $52.0 | | Trade receivables, net | $340.3 | $270.7 | | Finance receivables, net | $2,385.4 | $2,395.1 | | Total current assets | $3,075.0 | $3,022.4 | | Goodwill | $1,466.3 | $1,464.5 | | Total assets | $5,147.9 | $5,119.8 | | Liabilities, Temporary Equity and Stockholders' Equity | | Accounts payable | $683.8 | $551.2 | | Obligations collateralized by finance receivables | $1,638.2 | $1,677.6 | | Current maturities of long-term debt | $225.8 | $288.7 | | Total current liabilities | $2,666.4 | $2,643.2 | | Long-term debt | $206.0 | $205.3 | | Total non-current liabilities | $343.1 | $345.8 | | Series A convertible preferred stock | $612.5 | $612.5 | | Total stockholders' equity | $1,525.9 | $1,518.3 | | Total liabilities, temporary equity and stockholders' equity | $5,147.9 | $5,119.8 | Consolidated Statements of Stockholders' Equity Consolidated Statements of Stockholders' Equity (Three Months Ended March 31) | Metric (in millions) | Dec 31, 2022 | Net Income | Other Comprehensive Income | Stock Issuance | RSU Surrender | Stock-based Comp | Preferred Dividends | Mar 31, 2023 | | :------------------- | :----------- | :--------- | :------------------------- | :------------- | :------------ | :--------------- | :------------------ | :----------- | | Total Equity | $1,518.3 | $12.7 | $2.4 | $1.3 | $(1.3) | $3.6 | $(11.1) | $1,525.9 | Key Changes (Q1 2023): * Net income contributed $12.7 million * Other comprehensive income added $2.4 million, primarily from foreign currency translation gain * Dividends on preferred stock totaled $11.1 million * Stock-based compensation expense was $3.6 million Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (Three Months Ended March 31) | Activity (in millions) | 2023 | 2022 | | :--------------------- | :--- | :--- | | Net cash provided by (used by) operating activities - continuing operations | $96.1 | $(22.6) | | Net cash provided by (used by) operating activities - discontinued operations | — | $(39.2) | | Net cash used by investing activities - continuing operations | $(13.6) | $(246.7) | | Net cash provided by (used by) investing activities - discontinued operations | $7.0 | $(11.8) | | Net cash (used by) provided by financing activities - continuing operations | $(116.5) | $276.7 | | Net cash provided by financing activities - discontinued operations | — | $22.0 | | Net decrease in cash, cash equivalents and restricted cash | $(25.9) | $(42.9) | | Cash, cash equivalents and restricted cash at end of period | $251.8 | $160.5 | Condensed Notes to Consolidated Financial Statements Note 1—Basis of Presentation and Nature of Operations - KAR is a leading digital marketplace for used vehicles, connecting sellers and buyers across North America and Europe. Its portfolio includes integrated technology, data analytics, financing, logistics, reconditioning, and remarketing solutions, supported by vehicle logistics centers in Canada[28] - The Marketplace segment serves commercial sellers via the OPENLANE platform and dealer customers through BacklotCars and TradeRev digital marketplaces. AFC (Finance segment) provides floorplan financing to independent used vehicle dealers[29][31][35] Note 2—Sale of ADESA U.S. Physical Auction Business and Discontinued Operations - The ADESA U.S. physical auction business was sold to Carvana in May 2022 for approximately $2.2 billion in cash. Its financial results are reported as discontinued operations for all periods presented[39][41] - For the three months ended March 31, 2023, KAR received a net cash inflow of approximately $30.0 million from commercial and transition services agreements with Carvana[39] Income from Discontinued Operations (Three Months Ended March 31, in millions) | Metric | 2023 | 2022 | | :----- | :--- | :--- | | Operating revenues | $— | $220.0 | | Operating profit (loss) | $— | $6.3 | | Income from discontinued operations | $— | $8.1 | Note 3—Stock and Stock-Based Compensation Plans Stock-Based Compensation Expense (Three Months Ended March 31, in millions) | Award Type | 2023 | 2022 | | :--------- | :--- | :--- | | PRSUs | $(0.1) | $1.9 | | RSUs | $2.8 | $1.4 | | Service options | $0.2 | $0.2 | | Market options | $0.7 | $1.5 | | Total | $3.6 | $5.0 | - In Q1 2023, approximately 0.5 million PRSUs were granted, vesting based on three-year cumulative Adjusted EBITDA and relative TSR. Approximately 0.6 million RSUs were granted, vesting in three equal annual installments contingent on continued employment[46][47] - The share repurchase program was extended through December 31, 2023, with approximately $126.9 million remaining available. No shares were repurchased during the three months ended March 31, 2023 and 2022[48] Note 4—Income (Loss) from Continuing Operations Per Share Income (Loss) from Continuing Operations Per Share (Three Months Ended March 31, in millions except per share amounts) | Metric | 2023 | 2022 | | :------------------------------------------------ | :--- | :--- | | Income (loss) from continuing operations | $12.7 | $(8.4) | | Series A Preferred Stock dividends | $(11.1) | $(10.7) | | Income (loss) from continuing operations attributable to common stockholders | $1.2 | $(19.1) | | Weighted average common shares outstanding | 109.3 | 121.4 | | Effect of dilutive stock options and restricted stock awards | 0.6 | — | | Weighted average common shares outstanding and potential common shares | 109.9 | 121.4 | | Basic EPS from continuing operations | $0.01 | $(0.16) | | Diluted EPS from continuing operations | $0.01 | $(0.16) | - Diluted EPS for Q1 2022 excluded potential common shares due to an anti-dilutive effect from the period's undistributed loss[51] Note 5—Finance Receivables and Obligations Collateralized by Finance Receivables - AFC sells most of its U.S. dollar-denominated finance receivables on a revolving, non-recourse basis to AFC Funding Corporation, with committed liquidity of $2.0 billion at March 31, 2023. AFCI's Canadian facility increased to C$300 million in March 2023[52][53][142] Finance Receivables and Net Credit Losses (in millions) | Metric | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Total receivables managed | $2,406.4 | $2,416.6 | | Receivables delinquent (31+ days past due) | $19.6 | $17.5 | | Net Credit Losses (3 months ended March 31) | $12.5 | $1.4 | | Allowance for Credit Losses (end of period) | $21.0 | $21.5 | - AFC, AFC Funding Corporation, and AFCI were in compliance with all financial covenants in their securitization agreements as of March 31, 2023[59][145] Note 6—Long-Term Debt Long-Term Debt (in millions) | Debt Type | Interest Rate | Maturity | March 31, 2023 | December 31, 2022 | | :------------------------ | :------------ | :------- | :------------- | :---------------- | | Term Loan B-6 | Adjusted LIBOR + 2.25% | Sep 19, 2026 | $— | $— | | Revolving Credit Facility | Adjusted LIBOR + 1.75% | Sep 19, 2024 | $65.0 | $145.0 | | Senior notes | 5.125% | Jun 1, 2025 | $350.0 | $350.0 | | European lines of credit | Euribor + 1.25% | Upon demand | $20.8 | $3.7 | | Total debt | | | $435.8 | $498.7 | | Current portion of long-term debt | | | $(225.8) | $(288.7) | | Long-term debt | | | $206.0 | $205.3 | - The $950 million Term Loan B-6 was fully prepaid in May 2022 using proceeds from the ADESA U.S. physical auction business sale, resulting in a $7.7 million non-cash loss on extinguishment of debt[61] - In August 2022, $600 million of the 5.125% senior notes due 2025 were prepaid via a cash tender offer, also using Transaction proceeds, incurring a $9.5 million loss on extinguishment[66] - As of March 31, 2023, $140.0 million of the remaining senior notes are classified as current debt, as the Company is required to offer to redeem or repay them within 365 days of the Transaction close[67][137] - The estimated fair value of long-term debt was $430.6 million at March 31, 2023, based on Level 2 broker-dealer quotes[69] Note 7—Derivatives - In January 2020, the Company entered into three pay-fixed interest rate swaps with an aggregate notional amount of $500 million, maturing January 23, 2025, to hedge variable rate interest payments[70] - Hedge accounting was discontinued in February 2022 due to the expected repayment of Term Loan B-6. The swaps were terminated in May 2022, resulting in a $16.7 million realized gain recognized in interest expense[71] Note 8—Other (Income) Expense, Net Other (Income) Expense, Net (Three Months Ended March 31, in millions) | Item | 2023 | 2022 | | :------------------------------------------------ | :--- | :--- | | Change in realized and unrealized (gains) losses on investment securities, net | $0.1 | $3.0 | | Foreign currency (gains) losses | $0.1 | $1.2 | | Investment and note receivable impairment | $11.0 | — | | Other | $(4.1) | $(3.0) | | Total Other (income) expense, net | $7.1 | $1.2 | - The increase in other expense in Q1 2023 was primarily due to an $11.0 million impairment of an equity security and note receivable with a single investee that filed for bankruptcy[73][76] Note 9—Commitments and Contingencies - The Company is involved in various litigation and disputes in the ordinary course of business. Management does not currently believe the ultimate resolution of these actions will have a material adverse effect on financial condition, results of operations, or cash flows[77] Note 10—Accumulated Other Comprehensive Loss Accumulated Other Comprehensive Loss (in millions) | Item | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Foreign currency translation loss | $(47.1) | $(49.5) | | Accumulated other comprehensive loss | $(47.1) | $(49.5) | Note 11—Segment Information - KAR operates in two reportable segments: Marketplace and Finance. Results of the ADESA U.S. physical auctions are reported as discontinued operations[80] Segment Financial Information (Three Months Ended March 31, 2023, in millions) | Metric | Marketplace | Finance | Consolidated | | :------------------------------------------ | :---------- | :------ | :----------- | | Operating revenues | $321.0 | $99.6 | $420.6 | | Operating profit (loss) | $(3.6) | $69.0 | $65.4 | | Income (loss) from continuing operations | $(21.1) | $33.8 | $12.7 | | Total assets | $2,376.5 | $2,771.4 | $5,147.9 | Segment Financial Information (Three Months Ended March 31, 2022, in millions) | Metric | Marketplace | Finance | Consolidated | | :------------------------------------------ | :---------- | :------ | :----------- | | Operating revenues | $285.2 | $84.2 | $369.4 | | Operating profit (loss) | $(42.9) | $56.6 | $13.7 | | Income (loss) from continuing operations | $(39.4) | $31.0 | $(8.4) | | Total assets | $2,630.3 | $3,103.5 | $5,733.8 | - Approximately 60% of foreign operating revenues for Q1 2023 were from Canada, with most of the remainder from Continental Europe[84] Note 12—Subsequent Event - Effective May 15, 2023, the Company will change its name to OPENLANE, Inc., reflecting a transformation to an asset-light, digital marketplace company. OPENLANE will serve as both the parent company and go-to-market brand[85] - The name change may result in a potential non-cash impairment charge in Q2 2023 for the $122.8 million ADESA tradename and other definite-lived tradenames, and the useful life of the ADESA tradename will be reassessed[85] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on KAR Auction Services, Inc.'s financial condition and results of operations for the three months ended March 31, 2023, compared to the same period in 2022. It covers industry trends, segment performance, liquidity, capital resources, and non-GAAP financial measures like EBITDA and Adjusted EBITDA Forward-Looking Statements - The report contains forward-looking statements regarding future performance, growth, cost savings, revenue, credit losses, capital expenditures, and strategic initiatives, which are subject to risks and uncertainties[86] Automotive Industry and Economic Impacts on our Business - The automotive industry faces unprecedented market conditions due to supply chain issues, semiconductor shortages, and new vehicle production delays, leading to significant fluctuations in used vehicle values and declining wholesale market volumes[87] - Macroeconomic factors like inflation, rising interest rates, and volatile energy prices impact vehicle affordability and demand, posing risks to operations and industry stability[88] Overview - KAR is a digital marketplace for used vehicles, operating two segments: Marketplace (digital platforms, logistics, reconditioning) and Finance (floorplan financing for dealers)[89][90] - The ADESA U.S. physical auctions are now reported as discontinued operations[91] Industry Trends - The U.S. and Canadian wholesale used vehicle market is approximately 20 million vehicles, with digital applications like BacklotCars and TradeRev expanding the dealer-to-dealer segment[92] - AFC's independent used vehicle dealer base was approximately 15,200 in 2022. Key challenges include demand, pricing volatility, consumer financing access, and increased interest rates, which could negatively impact AFC's results[93][94] - Wholesale used vehicle volumes are seasonal, typically declining in Q4 due to holidays and winter weather, affecting revenues and operating expenses[95] Sources of Revenues and Expenses - Marketplace revenues primarily consist of auction fees from buyers and sellers for consigned vehicles (where KAR does not take title) and service revenue from logistics, reconditioning, and inspection. Purchased vehicle sales (where KAR takes title) are recorded at gross selling price[97] - AFC's Finance-related revenue includes interest and fee income, provision for credit losses, and other revenues from finance receivables[97] - Operating expenses include cost of services (payroll, subcontract, purchased vehicles, supplies) and selling, general and administrative expenses (payroll, sales & marketing, IT, professional fees)[100] Results of Operations Consolidated Results of Operations (Three Months Ended March 31, in millions except per share amounts) | Metric | 2023 | 2022 | Change (%) | | :------------------------------------------ | :--- | :--- | :--------- | | Total revenues from continuing operations | $420.6 | $369.4 | 13.9% | | Operating profit | $65.4 | $13.7 | 377.4% | | Net income (loss) | $12.7 | $(0.3) | N/A | | Basic EPS from continuing operations | $0.01 | $(0.16) | N/A | | Diluted EPS from continuing operations | $0.01 | $(0.16) | N/A | - Depreciation and amortization decreased by $3.0 million (12%) to $23.0 million, primarily due to fully depreciated assets and a reduction in assets placed in service[104] - Interest expense increased by $12.7 million (50%) to $38.3 million, mainly due to an increase in the average interest rate on AFC securitization obligations to 6.6% (from 2.3% in 2022), partially offset by debt repayments[105] - Other expense, net, increased to $7.1 million from $1.2 million, primarily due to an $11.0 million impairment of an equity security and note receivable[106] - The effective tax rate was 36.5% for Q1 2023, compared to 35.9% on a pre-tax loss for Q1 2022[107] - Foreign currency fluctuations (Canadian dollar and Euro) negatively impacted revenue by $9.0 million and net income by $1.1 million for Q1 2023[109] Marketplace Results Marketplace Segment Results (Three Months Ended March 31, in millions except per vehicle amounts) | Metric | 2023 | 2022 | Change (%) | | :------------------------------------------ | :--- | :--- | :--------- | | Total Marketplace revenue | $321.0 | $285.2 | 12.6% | | Auction fees | $99.9 | $101.4 | -1.5% | | Service revenue | $165.6 | $137.5 | 20.4% | | Purchased vehicle sales | $55.5 | $46.3 | 19.9% | | Operating profit (loss) | $(3.6) | $(42.9) | N/A | | Total vehicles sold | 330,000 | 351,000 | -6.0% | | Auction fees per vehicle sold | $303 | $289 | 4.8% | | Gross profit percentage, excluding purchased vehicles | 42.6% | 37.4% | +5.2 pp | - The 6% decrease in total vehicles sold was due to an industry-wide lack of wholesale used vehicle supply, affecting both commercial (down 4%) and dealer consignment (down 8%) volumes[112] - Service revenue increased by $28.1 million (20%), driven by higher repossession and remarketing fees ($10.5M), transportation revenue ($8.2M), and third-party platform fees ($6.6M)[114] - Selling, general and administrative expenses decreased by $12.8 million (12%) to $95.6 million, primarily due to lower professional fees, IT costs, severance, and stock-based compensation[118] Finance Results Finance Segment Results (Three Months Ended March 31, in millions except volumes and per loan amounts) | Metric | 2023 | 2022 | Change (%) | | :------------------------------------------ | :--- | :--- | :--------- | | Total Finance revenue | $99.6 | $84.2 | 18.3% | | Interest income | $60.6 | $43.2 | 40.3% | | Fee income | $47.6 | $40.2 | 18.4% | | Provision for credit losses | $(12.0) | $(1.4) | N/A | | Operating profit | $69.0 | $56.6 | 21.9% | | Loan transactions | 420,000 | 372,000 | 12.9% | | Revenue per loan transaction | $237 | $226 | 4.9% | | Provision for credit losses (% of average managed receivables) | 2.0% | 0.2% | +1.8 pp | - Revenue per loan transaction increased by $11 (5%), driven by higher interest yields due to a 450 basis point increase in prime rates since March 31, 2022, and increased floorplan and other fee income[121] - Gross profit as a percentage of revenue increased to 83.5% from 82.2%, primarily due to the 18% revenue increase outpacing the 9% increase in cost of services[123] - Selling, general and administrative expenses increased by $1.9 million (18%) to $12.4 million, mainly due to higher information technology costs and compensation expense[124] LIQUIDITY AND CAPITAL RESOURCES Liquidity Indicators (in millions) | Metric | March 31, 2023 | December 31, 2022 | March 31, 2022 | | :------------------------------------------ | :------------- | :---------------- | :------------- | | Cash and cash equivalents | $219.6 | $225.7 | $134.2 | | Restricted cash | $32.2 | $52.0 | $26.3 | | Working capital | $408.6 | $379.2 | $1,023.2 | | Amounts available under the Revolving Credit Facility | $241.0 | $161.0 | $224.0 | | Cash provided by (used by) operating activities (3 months ended) | $96.1 | | $(22.6) | - The Company believes its liquidity sources (cash, working capital, operating cash flow, and Credit Facility availability) are sufficient to meet operating needs, capital requirements, and debt service for the foreseeable future[140] - The Revolving Credit Facility had $65.0 million drawn at March 31, 2023, with $241.0 million available for borrowing (net of $19.0 million in outstanding letters of credit)[132][139] - AFC's securitization facilities provide committed liquidity of $2.0 billion for U.S. finance receivables and C$300 million for Canadian receivables, both expiring January 31, 2026[141][142] EBITDA and Adjusted EBITDA - EBITDA and Adjusted EBITDA are non-GAAP measures used by management and creditors to evaluate performance, with Adjusted EBITDA including specific adjustments for non-recurring items, stock-based compensation, and other non-cash amounts[146][147] Consolidated EBITDA and Adjusted EBITDA (Three Months Ended March 31, in millions) | Metric | 2023 | 2022 | | :------------------------------------------ | :--- | :--- | | Income (loss) from continuing operations | $12.7 | $(8.4) | | EBITDA | $80.4 | $38.4 | | Adjusted EBITDA | $58.9 | $49.1 | Consolidated Adjusted EBITDA from Continuing Operations (Twelve Months Ended March 31, 2023, in millions) | Metric | Amount | | :------------------------------------------ | :----- | | Adjusted EBITDA from continuing ops | $241.0 | Summary of Cash Flows Summary of Cash Flows (Three Months Ended March 31, in millions) | Activity | 2023 | 2022 | | :------------------------------------------ | :--- | :--- | | Operating activities - continuing operations | $96.1 | $(22.6) | | Investing activities - continuing operations | $(13.6) | $(246.7) | | Financing activities - continuing operations | $(116.5) | $276.7 | | Net decrease in cash, cash equivalents and restricted cash | $(25.9) | $(42.9) | - Operating cash flow from continuing operations significantly improved to $96.1 million (provided) in Q1 2023 from $(22.6) million (used) in Q1 2022, driven by changes in operating assets and liabilities and reduced contingent consideration payments[152][153] - Investing cash flow from continuing operations decreased to $(13.6) million (used) in Q1 2023 from $(246.7) million (used) in Q1 2022, primarily due to a smaller increase in finance receivables held for investment[155] - Financing cash flow from continuing operations shifted to $(116.5) million (used) in Q1 2023 from $276.7 million (provided) in Q1 2022, mainly due to decreased borrowings from lines of credit and obligations collateralized by finance receivables, and preferred stock dividends[156] Capital Expenditures - Capital expenditures for Q1 2023 were $12.0 million, down from $13.5 million in Q1 2022. Expected capital expenditures for fiscal year 2023 related to continuing operations are approximately $65 million[160] Dividends - Holders of Series A Preferred Stock received $11.1 million in cash dividends for Q1 2023, compared to $10.7 million in in-kind dividends for Q1 2022[161] - The Company has suspended its quarterly common stock dividend, with future decisions dependent on financial condition, contractual restrictions, and capital requirements[162] Contractual Obligations - Contractual obligations for long-term debt, interest, finance leases, operating leases, and contingent consideration are detailed in the Annual Report on Form 10-K for December 31, 2022, with operating lease obligations changing in the ordinary course of business[163] Critical Accounting Estimates - Critical accounting estimates are discussed in the Annual Report on Form 10-K for December 31, 2022[164] Off-Balance Sheet Arrangements - As of March 31, 2023, the Company had no off-balance sheet arrangements deemed reasonably likely to have a material current or future effect on its financial condition, results of operations, or cash flows[165] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details KAR Auction Services, Inc.'s exposure to market risks, specifically foreign currency and interest rate fluctuations, and the strategies used to manage these risks Foreign Currency - Foreign currency exposure primarily arises from transactions in Canadian dollars, British pounds, and Euros. Foreign currency losses on intercompany loans were $0.1 million in Q1 2023, down from $1.2 million in Q1 2022[167] - A 1% change in the month-end Canadian dollar exchange rate would impact foreign currency losses on intercompany loans by $0.8 million and net income by $0.5 million[167] Interest Rates - The Company is exposed to interest rate risk on variable rate borrowings. Interest rate swap agreements were previously used to manage this exposure but were terminated in May 2022 following the repayment of Term Loan B-6[168][170] - A hypothetical 100 basis point increase in short-term rates (LIBOR) would have increased interest expense by approximately $0.3 million for the three months ended March 31, 2023[171] Item 4. Controls and Procedures This section outlines the evaluation of the Company's disclosure controls and procedures, the remediation of a previously identified material weakness, and any changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures - As of March 31, 2023, management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective[173] Remediation of Material Weakness - A material weakness in internal controls over financial reporting related to cash flow presentation for discontinued operations and contingent consideration was identified in Q4 2022[174] - Management performed a risk assessment and implemented controls, successfully remediating the material weakness during Q1 2023[174] Changes in Internal Control over Financial Reporting - Except for the remediation efforts, there were no other changes in internal control over financial reporting during Q1 2023 that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[175] PART II—OTHER INFORMATION Item 1. Legal Proceedings This section addresses the Company's involvement in legal proceedings and disputes arising in the ordinary course of business - Management does not believe that the ultimate resolution of current litigation and disputes will have a material adverse effect on the Company's financial condition, results of operations, or cash flows[177] Item 1A. Risk Factors This section refers investors to the comprehensive discussion of risk factors in the Company's Annual Report on Form 10-K, along with additional risks that may arise - Investors should carefully consider the risk factors discussed in the Annual Report on Form 10-K for December 31, 2022, and other filings, as these could materially and adversely affect the business[179] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides information on the Company's unregistered sales of equity securities and details of its share repurchase program - The Company previously issued common stock in connection with the BacklotCars (857,630 shares for $15 million) and CARWAVE (1,953,124 shares for $30 million) acquisitions, exempt from registration under Section 4(a)(2) of the Securities Act[181] Issuer Purchases of Equity Securities (Three Months Ended March 31, 2023) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) | | :------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------- | :------------------------------------------------------------------------------------------------- | | January 1 - January 31 | — | $— | — | $126.9 | | February 1 - February 28 | — | — | — | $126.9 | | March 1 - March 31 | — | — | — | $126.9 | | Total | — | $— | — | | - The share repurchase program, authorized for up to $500 million, was extended through December 31, 2023, with approximately $126.9 million remaining available for repurchase. No shares were repurchased during Q1 2023[182][183] Item 6. Exhibits This section provides a comprehensive index of exhibits filed with the Quarterly Report on Form 10-Q, including agreements, certificates, and other documents incorporated by reference or filed herewith - The exhibit index lists various agreements, including separation, merger, and purchase agreements, as well as corporate governance documents, debt instruments, and compensation plans[186][187][188][189][190] Signature This section contains the signature of the duly authorized officer, confirming the filing of the report - The report was signed by Brad S. Lakhia, Executive Vice President and Chief Financial Officer, on May 3, 2023[195]