OPENLANE(KAR) - 2024 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION This section presents OPENLANE's unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures Item 1. Financial Statements (Unaudited) This section presents OPENLANE's unaudited Q1 2024 and 2023 consolidated financial statements, covering income, balance sheets, cash flows, and key accounting notes Consolidated Statements of Income Net income for Q1 2024 increased to $18.5 million from $12.7 million, with operating profit rising to $69.4 million despite slightly lower revenues Consolidated Statements of Income (in millions, except per share) | Metric | Three Months Ended March 31, 2024 (in millions) | Three Months Ended March 31, 2023 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Total operating revenues | $416.3 | $420.6 | | Total operating expenses | $346.9 | $355.2 | | Operating profit | $69.4 | $65.4 | | Net income | $18.5 | $12.7 | | Net income per share - basic | $0.05 | $0.01 | | Net income per share - diluted | $0.05 | $0.01 | Consolidated Statements of Comprehensive Income Comprehensive income decreased to $9.0 million in Q1 2024 from $15.1 million, mainly due to a $9.5 million foreign currency translation loss Consolidated Statements of Comprehensive Income (in millions) | Metric | Three Months Ended March 31, 2024 (in millions) | Three Months Ended March 31, 2023 (in millions) | | :------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Net income | $18.5 | $12.7 | | Foreign currency translation gain (loss) | $(9.5) | $2.4 | | Comprehensive income | $9.0 | $15.1 | Consolidated Balance Sheets Total assets increased to $4,818.4 million at March 31, 2024, driven by receivables, with liabilities rising to $2,875.7 million due to higher accounts payable Consolidated Balance Sheets (in millions) | Metric | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :------------------------------------ | :--------------------------- | :------------------------------ | | Total assets | $4,818.4 | $4,726.3 | | Cash and cash equivalents | $105.2 | $93.5 | | Trade receivables, net | $391.0 | $291.8 | | Finance receivables, net | $2,292.7 | $2,282.0 | | Total current assets | $2,958.3 | $2,841.9 | | Total liabilities | $2,875.7 | $2,786.8 | | Accounts payable | $744.1 | $556.6 | | Obligations collateralized by finance receivables | $1,597.2 | $1,631.9 | | Total stockholders' equity | $1,330.2 | $1,327.0 | Consolidated Statements of Stockholders' Equity Total stockholders' equity slightly increased to $1,330.2 million at March 31, 2024, influenced by $18.5 million net income, offset by comprehensive loss and preferred stock dividends Consolidated Statements of Stockholders' Equity (in millions) | Metric | Balance at Dec 31, 2023 (in millions) | Net Income (in millions) | Other Comprehensive Loss (in millions) | Dividends on Preferred Stock (in millions) | Balance at Mar 31, 2024 (in millions) | | :-------------------------------- | :------------------------------------ | :----------------------- | :------------------------------------- | :----------------------------------------- | :------------------------------------ | | Total Stockholders' Equity | $1,327.0 | $18.5 | $(9.5) | $(11.1) | $1,330.2 | Consolidated Statements of Cash Flows Net cash from operating activities increased to $100.2 million in Q1 2024, while net cash used in investing activities significantly rose to $39.7 million, driven by finance receivables Consolidated Statements of Cash Flows (in millions) | Cash Flow Activity | Three Months Ended March 31, 2024 (in millions) | Three Months Ended March 31, 2023 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Net cash provided by operating activities - continuing operations | $100.2 | $96.1 | | Net cash used by investing activities - continuing operations | $(39.7) | $(13.6) | | Net cash used by financing activities - continuing operations | $(63.6) | $(116.5) | | Net decrease in cash, cash equivalents and restricted cash | $(8.0) | $(25.9) | Condensed Notes to Consolidated Financial Statements These notes provide essential context for the financial statements, detailing business operations, accounting policies, recent updates, and specific financial items including compensation, receivables, debt, and segments Note 1—Basis of Presentation and Nature of Operations OPENLANE operates a leading digital used vehicle marketplace across North America and Europe, with Marketplace and Finance (AFC) segments, and prepares unaudited financial statements under U.S. GAAP - OPENLANE is a leading digital marketplace for used vehicles, connecting sellers and buyers across North America and Europe, offering integrated technology, data analytics, financing, logistics, reconditioning, and other remarketing solutions[27] - The company's operations are divided into two segments: Marketplace (digital marketplaces and vehicle logistics centers in Canada) and Finance (AFC, providing floorplan financing to independent used vehicle dealers in the U.S. and Canada)[27][33] - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and reflect all necessary adjustments for a fair statement of results[34] - The FASB issued ASU 2023-09 (Income Taxes) and ASU 2023-07 (Segment Reporting), requiring additional disclosures, and the company is currently evaluating the impact of these new accounting standards[36][39] 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, with its financial results classified as discontinued operations for all periods presented - The ADESA U.S. physical auction business was sold to Carvana in May 2022, and its financial results are classified as discontinued operations[40][42] - The company received net cash inflows of approximately $29.8 million and $30.0 million from commercial and transition services agreements with Carvana for the three months ended March 31, 2024 and 2023, respectively[40] Note 3—Stock and Stock-Based Compensation Plans Stock-based compensation expense increased to $6.6 million in Q1 2024, driven by PRSU grants. The share repurchase program has $125.0 million remaining, with no repurchases in Q1 2024 or 2023 Stock-Based Compensation Expense (in millions) | Stock-Based Compensation Type | Three Months Ended March 31, 2024 (in millions) | Three Months Ended March 31, 2023 (in millions) | | :---------------------------- | :--------------------------------------------- | :--------------------------------------------- | | PRSUs | $3.8 | $(0.1) | | RSUs | $2.9 | $2.8 | | Service options | $0.1 | $0.2 | | Market options | $(0.2) | $0.7 | | Total | $6.6 | $3.6 | - In Q1 2024, approximately 0.6 million PRSUs were granted, with vesting tied to Adjusted EBITDA and relative Total Shareholder Return goals over three years[45] - Approximately 0.6 million RSUs were granted in Q1 2024, vesting in three equal annual installments contingent on continued employment[48] - As of March 31, 2024, $125.0 million remained available under the share repurchase program, but no shares were repurchased during the three months ended March 31, 2024 or 2023[49] Note 4—Income from Continuing Operations Per Share Income from continuing operations attributable to common stockholders increased to $5.6 million in Q1 2024, with basic and diluted EPS rising to $0.05 Income from Continuing Operations Per Share (in millions, except per share) | Metric | Three Months Ended March 31, 2024 (in millions, except per share) | Three Months Ended March 31, 2023 (in millions, except per share) | | :------------------------------------------ | :---------------------------------------------------------------- | :---------------------------------------------------------------- | | Income from continuing operations | $18.5 | $12.7 | | Series A Preferred Stock dividends | $(11.1) | $(11.1) | | Income from continuing operations attributable to common stockholders | $5.6 | $1.2 | | Weighted average common shares outstanding | 108.3 | 109.3 | | Income from continuing operations per share - Basic | $0.05 | $0.01 | | Income from continuing operations per share - Diluted | $0.05 | $0.01 | - The company uses the two-class method for calculating income from continuing operations per share, allocating earnings between common stock and participating securities (Series A Preferred Stock)[50] - Approximately 0.4 million service options, all market options, and 1.3 million PRSUs were excluded from diluted EPS calculations for Q1 2024 due to anti-dilutive effects or unfulfilled performance conditions[53] Note 5—Finance Receivables and Obligations Collateralized by Finance Receivables AFC's total managed receivables increased to $2,313.7 million at March 31, 2024. Net credit losses rose to $15.5 million in Q1 2024, while the allowance for credit losses decreased to $21.0 million - AFC sells the majority of its U.S. dollar denominated finance receivables on a revolving basis to a wholly-owned, bankruptcy remote, consolidated, special purpose subsidiary (AFC Funding Corporation) with committed liquidity of $2.0 billion[54] Finance Receivables and Obligations Collateralized by Finance Receivables (in millions) | Metric | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :------------------------------------ | :--------------------------- | :------------------------------ | | Total receivables managed | $2,313.7 | $2,305.0 | | Delinquent receivables (31+ days past due) | $24.1 | $23.7 | | Net Credit Losses (3 months ended Mar 31) | $15.5 | $12.5 | | Allowance for Credit Losses (end of period) | $21.0 | $23.0 | | Obligations collateralized by finance receivables, gross | $1,609.1 | $1,645.4 | - AFC, AFC Funding Corporation, and AFCI must maintain certain financial covenants, including limits on debt and minimum tangible net worth, and were in compliance at March 31, 2024[59] Note 6—Goodwill Goodwill slightly decreased to $1,266.0 million at March 31, 2024, due to foreign currency translation adjustments, with annual impairment testing in Q2 Goodwill by Segment (in millions) | Segment | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :---------- | :--------------------------- | :------------------------------ | | Marketplace | $1,025.1 | $1,030.3 | | Finance | $240.9 | $240.9 | | Total | $1,266.0 | $1,271.2 | - Goodwill represents the excess cost over fair value of identifiable net assets of acquired businesses and is tested for impairment annually during the second quarter[60] - A valuation allowance of $38.3 million was recorded against the U.S. net deferred tax asset at March 31, 2024, due to a three-year cumulative loss related to U.S. operations[61] Note 7—Long-Term Debt Total debt decreased to $330.4 million at March 31, 2024, due to reduced Revolving Credit Facility borrowings, and a C$175 million Canadian Revolving Credit Facility was established in January 2024 Long-Term Debt (in millions) | Debt Type | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :------------------------ | :--------------------------- | :------------------------------ | | Revolving Credit Facility | $29.0 | $137.0 | | Canadian Revolving Credit Facility | $66.5 | — | | Senior notes | $210.0 | $210.0 | | European lines of credit | $24.9 | $17.6 | | Total debt | $330.4 | $364.6 | | Long-term debt (net of current portion and unamortized costs) | $200.5 | $202.4 | - The First Amendment to the Credit Agreement, effective January 19, 2024, introduced a C$175 million Canadian Revolving Credit Facility and a C$50 million sub-limit under the existing Revolving Credit Facility[64] - The company was in compliance with all applicable covenants in the Credit Agreement at March 31, 2024, including maintaining a maximum Consolidated Senior Secured Net Leverage Ratio not exceeding 3.5[66] - The estimated fair value of long-term debt was $327.0 million at March 31, 2024, based on broker-dealer quotes (Level 2 inputs)[74] Note 8—Other (Income) Expense, Net Other (income) expense, net, decreased to $0.5 million expense in Q1 2024 from $7.1 million, primarily due to the absence of a $11.0 million impairment charge from Q1 2023 Other (Income) Expense, Net (in millions) | Metric | Three Months Ended March 31, 2024 (in millions) | Three Months Ended March 31, 2023 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Change in realized and unrealized losses on investment securities, net | $0.0 | $0.1 | | Foreign currency losses | $2.0 | $0.1 | | Investment and note receivable impairment | $0.0 | $11.0 | | Other | $(1.5) | $(4.1) | | Other (income) expense, net | $0.5 | $7.1 | - The decrease in other expense was primarily due to a $11.0 million impairment of an equity security and note receivable in Q1 2023, which did not recur in Q1 2024[80][108] - The company holds other investments of $26.4 million at cost, which do not have readily determinable fair values[79] Note 9—Commitments and Contingencies The company is involved in ordinary course litigation, with management not expecting a material adverse effect on financial condition, results, or cash flows from their ultimate resolution - The company accrues estimated loss contingencies when a liability is probable and the amount can be reasonably estimated, adjusting accruals periodically as new information becomes available[81] - There has been no significant change in the legal and regulatory proceedings disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023[81] Note 10—Accumulated Other Comprehensive Loss Accumulated other comprehensive loss increased to $46.2 million at March 31, 2024, from $36.7 million, primarily due to foreign currency translation losses Accumulated Other Comprehensive Loss (in millions) | Metric | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :-------------------------------- | :--------------------------- | :------------------------------ | | Foreign currency translation loss | $(46.2) | $(36.7) | | Accumulated other comprehensive loss | $(46.2) | $(36.7) | Note 11—Segment Information OPENLANE operates Marketplace and Finance segments; Q1 2024 Marketplace revenue was $318.3 million with $4.8 million operating profit, while Finance revenue was $98.0 million with $64.6 million operating profit Segment Performance (Q1 2024, in millions) | Metric (in millions) | Marketplace (Q1 2024) | Finance (Q1 2024) | Consolidated (Q1 2024) | | :------------------- | :-------------------- | :---------------- | :--------------------- | | Operating revenues | $318.3 | $98.0 | $416.3 | | Operating profit | $4.8 | $64.6 | $69.4 | | Total assets | $2,159.3 | $2,659.1 | $4,818.4 | Segment Performance (Q1 2023, in millions) | Metric (in millions) | Marketplace (Q1 2023) | Finance (Q1 2023) | Consolidated (Q1 2023) | | :------------------- | :-------------------- | :---------------- | :--------------------- | | Operating revenues | $321.0 | $99.6 | $420.6 | | Operating profit (loss) | $(3.6) | $69.0 | $65.4 | | Total assets | $2,376.5 | $2,771.4 | $5,147.9 | - Approximately 54% of foreign operating revenues for Q1 2024 were from Canada, with most of the remainder from Continental Europe[88] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial performance, condition, and outlook, covering overall results, segment performance, industry trends, liquidity, and capital resources, highlighting macroeconomic impacts Forward-Looking Statements The report includes forward-looking statements on future performance and market conditions, which are subject to risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are identified by words like 'should,' 'may,' 'will,' 'anticipates,' 'expects,' 'plans,' 'believes,' 'estimates,' and similar expressions[90] - These statements are not guarantees of future performance and are subject to risks and uncertainties, including adverse market conditions, economic impacts, and other factors discussed in the 'Risk Factors' section[90] Automotive Industry and Economic Impacts on our Business Financial performance is influenced by automotive industry conditions and used vehicle supply. Macroeconomic factors like inflation, rising interest rates, and declining consumer confidence continue to impact demand and affordability - The company's financial performance is dependent on the supply of used vehicles in the wholesale market and conditions in the automotive industry[91] - Recovery in new vehicle supply is expected to increase wholesale used vehicle supply over time[91] - Macroeconomic factors such as inflationary pressures, rising interest rates, and declining consumer confidence continue to impact vehicle affordability and demand, presenting risks to operations[92] Overview OPENLANE operates a leading digital used vehicle marketplace with two segments: Marketplace, offering platforms and logistics, and Finance (AFC), providing floorplan financing and related services to dealers - OPENLANE operates a digital marketplace for used vehicles across North America and Europe, facilitating transactions and providing integrated remarketing solutions[93] - The Marketplace segment serves commercial and dealer customers with digital platforms, value-added services like transportation, reconditioning, and inspection[94] - The Finance segment (AFC) provides short-term, inventory-secured floorplan financing primarily to independent used vehicle dealers in the U.S. and Canada, along with title services[94] Industry Trends The U.S. and Canadian wholesale used vehicle market, with an addressable 15 million vehicles, faces pricing volatility. The automotive finance sector faces demand fluctuations, rising interest rates, and competition, impacting credit losses - The U.S. and Canadian wholesale used vehicle industry has an addressable market of approximately 15 million vehicles, subject to macro-economic and industry factors[95] - Key challenges for independent dealer customers include demand for used vehicles, pricing disruptions, access to consumer financing, and increased interest rates[97] - Volatility in wholesale vehicle pricing impacts the value of recovered collateral on defaulted loans and the severity of credit losses for AFC[97] Seasonality Vehicle volumes in the company's marketplaces fluctuate quarterly due to weather, availability, holidays, and retail demand, with lower volumes and higher costs typically in the fourth quarter - Wholesale used vehicle volumes are seasonal, typically declining during prolonged winter weather conditions and in the fourth calendar quarter due to holidays and weather[98] - Changes in working capital also vary quarterly due to the timing of collections and disbursements for marketplace sales near period-end[99] Sources of Revenues and Expenses Revenues are primarily from auction fees, service revenue, purchased vehicle sales, and finance-related revenue from AFC. Operating expenses include cost of services, SG&A, and depreciation and amortization - Auction fees are earned from buyers and sellers on successful marketplace transactions for consigned vehicles, where the company generally does not take title[100] - Service revenue is recognized for activities like transportation, reconditioning, inspection, and titling[100] - Purchased vehicle sales revenue includes the gross selling price of vehicles where the company takes title, with the corresponding purchase price recorded as 'Cost of services'[100] - AFC's 'Finance-related revenue' comprises interest and fee income, provision for credit losses, and other revenues from finance receivables[100] - Operating expenses consist of cost of services (excluding depreciation and amortization), selling, general and administrative, and depreciation and amortization[102] Results of Operations Total revenues decreased by 1% to $416.3 million in Q1 2024. Net income increased to $18.5 million from $12.7 million, driven by higher operating profit and lower other expenses, despite increased interest and taxes Results of Operations (in millions, except per share) | Metric (in millions, except per share) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------- | :-------------------------------- | :-------------------------------- | | Total revenues from continuing operations | $416.3 | $420.6 | | Gross profit | $202.4 | $196.4 | | Operating profit | $69.4 | $65.4 | | Interest expense | $39.7 | $38.3 | | Other (income) expense, net | $0.5 | $7.1 | | Income from continuing operations before income taxes | $29.2 | $20.0 | | Income taxes | $10.7 | $7.3 | | Net income | $18.5 | $12.7 | | Diluted EPS | $0.05 | $0.01 | - Depreciation and amortization increased by $1.3 million (6%) to $24.3 million, primarily due to the amortization of the ADESA tradename[106] - Interest expense increased by $1.4 million (4%) to $39.7 million, mainly due to a higher average interest rate on AFC securitization obligations (7.6% in Q1 2024 vs. 6.8% in Q1 2023)[107] - Other expense, net, decreased by $6.6 million, primarily due to the absence of a $11.0 million impairment charge from Q1 2023, partially offset by increased foreign currency losses[108] - The effective tax rate was 36.6% for Q1 2024, unfavorably impacted by an increase in the valuation allowance related to the U.S. net deferred tax asset[109] - Foreign currency exchange rate changes (euro and Canadian dollar) had a minor positive impact on revenue and operating profit, with no impact on net income[110] Marketplace Results Marketplace revenue decreased by 1% to $318.3 million, mainly due to lower service revenue. Operating profit significantly improved to $4.8 million from a $3.6 million loss, driven by increased auction fees and gross profit percentage Marketplace Segment Performance (in millions, except volumes) | Metric (in millions, except volumes) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Total Marketplace revenue | $318.3 | $321.0 | | Auction fees | $109.9 | $99.9 | | Service revenue | $150.2 | $165.6 | | Purchased vehicle sales | $58.2 | $55.5 | | Operating profit (loss) | $4.8 | $(3.6) | | Total vehicles sold | 372,000 | 330,000 | | Gross profit percentage, excluding purchased vehicles | 46.6% | 42.6% | - Total vehicles sold increased by 13% (372,000 vs. 330,000), driven by a 33% increase in commercial volumes, partially offset by an 8% decrease in dealer consignment volumes[113] - Auction fees increased by 10% to $109.9 million, but auction fees per vehicle sold decreased by 3% to $295, reflecting a higher mix of lower-fee commercial vehicles[114] - Service revenue decreased by 9% to $150.2 million, primarily due to a $23.3 million decrease in transportation revenue, largely from a change in a key customer contract's revenue recognition from gross to net commission basis[115] - Gross profit increased by 7% to $121.2 million, with the gross profit percentage (excluding purchased vehicles) rising to 46.6% from 42.6%, driven by increased volumes, pricing, and cost savings initiatives[117][118] - Selling, general and administrative expenses decreased by 1% to $94.8 million, mainly due to lower incentive-based compensation and professional fees, partially offset by increased stock-based compensation and IT costs[119] Finance Results Finance segment revenue decreased by 2% to $98.0 million, primarily due to lower revenue per loan transaction. Operating profit declined by 6% to $64.6 million, impacted by increased credit loss provision and higher SG&A Finance Segment Performance (in millions, except volumes) | Metric (in millions, except volumes) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Total Finance revenue | $98.0 | $99.6 | | Interest income | $61.0 | $60.6 | | Fee income | $48.5 | $47.6 | | Provision for credit losses | $(13.6) | $(12.0) | | Operating profit | $64.6 | $69.0 | | Loan transactions | 422,000 | 420,000 | | Revenue per loan transaction | $232 | $237 | - Revenue per loan transaction decreased by $5 (2%), mainly due to lower loan values, increased net credit losses, and a shorter average portfolio duration, partially offset by higher interest yields[123] - The provision for credit losses increased to 2.3% of average managed receivables in Q1 2024, up from 2.0% in Q1 2023[124] - Gross profit decreased by 2% to $81.2 million, with the gross profit percentage declining to 82.9% from 83.5%, primarily due to a 2% increase in cost of services[125] - Selling, general and administrative expenses increased by 12% to $13.9 million, driven by higher stock-based compensation, title handling costs, and severance costs[126] LIQUIDITY AND CAPITAL RESOURCES The company's liquidity is supported by cash, operating cash flow, working capital, and Revolving Credit Facilities. It maintains debt covenant compliance and expects sufficient liquidity for operational and capital needs despite industry challenges Liquidity and Capital Resources (in millions) | Metric (in millions) | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :------------------------------------ | :------------- | :---------------- | :------------- | | Cash and cash equivalents | $105.2 | $93.5 | $219.6 | | Restricted cash | $45.7 | $65.4 | $32.2 | | Working capital | $384.6 | $363.1 | $408.6 | | Amounts available under the Revolving Credit Facilities | $307.6 | $133.3 | $241.0 | | Cash provided by operating activities (3 months ended) | $100.2 | | $96.1 | - Working capital is primarily generated from payments for services, with most needs being short-term (less than a week)[129] - The company's Consolidated Senior Secured Net Leverage Ratio was 0.2 at March 31, 2024, well below the maximum covenant of 3.5[138] - AFC's securitization facilities, with committed liquidity of $2.0 billion for U.S. finance receivables and C**$300 million** for Canadian receivables, are accounted for as secured borrowings[144][145] Cash Flow Activities (in millions) | Metric (in millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities - continuing operations | $100.2 | $96.1 | | Net cash used by investing activities - continuing operations | $(39.7) | $(13.6) | | Net cash used by financing activities - continuing operations | $(63.6) | $(116.5) | - Capital expenditures for Q1 2024 were $12.9 million, and are expected to be approximately $55 million to $60 million for fiscal year 2024[163] - Dividends of $11.1 million were paid on Series A Preferred Stock for both Q1 2024 and Q1 2023[164] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency fluctuations and variable interest rates on debt. It monitors these exposures and provides sensitivity analyses, though it does not currently use hedging instruments - Foreign currency exposure arises from transactions in foreign currencies (Canadian dollar, British pound, euro) and translation of foreign subsidiary results[171] - A 1% change in the month-end Canadian dollar exchange rate would impact foreign currency losses on intercompany loans and net income by $0.1 million[171] - A 1% change in the month-end euro exchange rate would impact foreign currency losses on intercompany loans by $0.6 million and net income by $0.4 million[171] - The company is exposed to interest rate risk on its variable rate borrowings but does not currently use interest rate contracts to manage this exposure[172] - A hypothetical 100 basis point increase in short-term rates (SOFR/CORRA) would increase interest expense by approximately $0.3 million for the three months ended March 31, 2024[173] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes in internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2024[174] - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2024[175] PART II—OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, other information, and a list of exhibits filed with the report Item 1. Legal Proceedings The company is involved in ordinary course legal proceedings, with management not expecting a material adverse effect on its financial condition, results of operations, or cash flows - The company is involved in litigation and disputes typical of its business operations, such as actions related to injuries, property damage, environmental laws, and employment matters[178] - Management does not anticipate a material adverse effect on financial condition, results of operations, or cash flows from the ultimate resolution of these legal actions[178] Item 1A. Risk Factors Investors should consider risk factors from the 2023 Annual Report on Form 10-K, as well as additional risks that could materially and adversely affect the business and financial performance - Investors are advised to consider risk factors from the Annual Report on Form 10-K for 2023, including those related to capital access and macroeconomic conditions[180] - Additional unknown or currently immaterial risks could also materially affect the company's business and financial performance[180] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity security sales occurred in Q1 2024. The company made no common stock repurchases, with $125.0 million remaining available under the share repurchase program - No unregistered sales of equity securities were made by OPENLANE during the quarter ended March 31, 2024[181] - No shares of common stock were repurchased during the quarter ended March 31, 2024, under the $300 million share repurchase program[182] - As of March 31, 2024, approximately $125.0 million of common stock remained available for repurchase under the program, which is authorized through December 31, 2024[182] Item 5. Other Information No directors or executive officers adopted, terminated, or modified any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the first quarter of 2024 - None of the company's directors or executive officers adopted, terminated, or modified a Rule 10b5-1 trading plan or non-Rule 10b5-1 trading arrangement in Q1 2024[183] Item 6. Exhibits, Financial Statement Schedules This section lists all exhibits filed with the Form 10-Q, including agreements, corporate documents, and certifications, noting that representations are for parties' benefit and may not reflect actual affairs - The exhibit index provides a comprehensive list of documents incorporated by reference or filed herewith, including the Credit Agreement, employment agreements, and stock plans[184][187][188][189][190] - Representations and warranties in exhibited agreements are solely for the benefit of the parties involved and may not be categorical statements of fact or reflect current conditions[185] SIGNATURE This section contains the required signatures for the filing of the quarterly report