KAR - Earnings call transcript Q1 2024 | KAR Auction Services, Inc.

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Operator

Good day, and welcome to the OPENLANE First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Mike Eliason, Treasurer and Vice President of Investor Relations. Please go ahead.

Mike Eliason

Thanks, Cindy.

you XXXX us Earnings thank OPENLANE's for and Quarter First Conference afternoon, for today joining the Good Call. XXXX. Today, of we'll XX, OPENLANE performance for the discuss quarter ended the financial March questions concluding from After we commentary, will participants. our take

Before uncertainties that Peter would remind that of results statements that Act disclaims and you Securities the forward-looking XXXX. discussion, such safe forward-looking conference affect are contains OPENLANE's such forward-looking are statements. and risks of statements company the of in any providing like Litigation may the business, prospects update call Private these filings. to of risks expressly this within involve to statements, off kicks the our I In and operations, obligation meaning our cautioned fully harbor detailed Investors SEC provision Reform

measure me and in non-GAAP Let both measures applicable referencing conference mention the of this we also the the section our issued Reconciliations Investor financial afternoon, throughout website. be also will the which financial available of this call, be we is press release that can non-GAAP to found that measures. Relations in financial GAAP GAAP

like to Peter Peter? call over turn to Kelly. OPENLANE's CEO, this I'd Now

Peter Kelly

and Thank everybody. you, good Mike, afternoon,

today here I'm delighted with on an update provide to be to you OPENLANE.

is for to to a and the financial OPENLANE Chief for over Then majority I discussion Joining growth. metrics and call Lakhia. me we the with OPENLANE's Brad positioning are quarter. Financial hand of of begin operating strategy will Brad Officer, how our company cover I'll our the

a we generated were These during from we $XX quarter. quarter. XX% cash free driven to the the grew $XXX On basis, million on results of significantly consolidated adjusted EBITDA operations. EBITDA XX% total QX year, compared volumes To that also marketplace, start, in grew the in by and OPENLANE performance grew XX% first with to basis, of results OPENLANE I'm our adjusted clean million, EBITDA and QX company in very adjusted a pleased largely last the which contributed flow by improved delivered

AFC EBITDA strong a results was company, and model, a the easy of preview value makes our I generating characteristics efforts strong the for also accelerated $XX of operating OPENLANE leaner, approximately These delivering. compelling more experience of positive a QX. brand believe that agile that our of and impact customers. QX adjusted a and differentiated of innovation demonstrate scalability contributor, platform also million is consolidation our is wholesale capable in that And the

and focused as on strategy we model OPENLANE business as this growth So as them our is well view complementary, has We in our several build and OPENLANE and these in years market goals momentum. let transforming our spent turn plan to advance simultaneously. share, me growth positive results. how highly to to on financial growth, volume

first, third, purpose segments; asset-light advantages opportunities enabled the volume our accelerate the second, and the and achieve vision us our further scalable model; growth. dealer These experience. focus help commercial our believe Our strategy to vehicles. anchored marketplace customers is guided our purpose, that can is is the be digital in which wholesale strategic for OPENLANE so I by successful advantages for which several will include: and digital by profitable, in our growth customer vision, on and share our and easy, greatest has expanding to used more world's and build our make

XX% and referenced billion a to financial also And address volume growth earlier, quarter, me These our $X these first the share. In dealer that start value heart by market is and at share. by gross XX%, of I'll that the marketplace coupled I grew results, its individually, inventory. share performance with the growth largely The of marketplace. and and the increased commercial merchandise strength of our and Let strength by business. increased driven demonstrate each were purely volume, U.S. OPENLANE with differentiated of volumes mix GMV

OPENLANE remains off-lease market commercial leader. of terms a In clear volumes,

commercial And based supply were is market. auction to the leases level Our and pressured off-lease second the still our given we remain and on of growth in pre-pandemic off-lease 'XX. industry at Commercial United well Canada in below data, outperformed volume and quarter. the volumes the the expect up meaningfully both States during levels, 'XX low half XXXX, year this of U.S. and volumes substantially commercial into written in

expected new throughout However, they're vehicles increased the first making current has a quarter, increase happened, where are quarter that rising. of again QX further XXXX. in row They lease fourth to originations and the in

So beneficiary will volumes be mature. leases these when a off-lease OPENLANE of future these

in the what given increase financial with just off-lease modest can about volumes increasingly even I'm off-lease more a QX optimistic results robust. Additionally, we OPENLANE are deliver volume, in when produced

customers, also higher as in particularly services We and well we conversion, consignment products see increasing in commercial including the repo that and as growth revenue from rental growing additional segment, the expanding new off-lease, opportunities channels. offer, vehicle

we dealer a perspective, growth. From are well positioned also for volume

First, and strong time we in for a to financial dealer of very outcomes. have customers our cost platform sale, results that excellent delivers terms dealer-to-dealer of sale

At to the of the in Story registrations to declines private Canada. label OPENLANE. saw is and multichannel volumes label transition OPENLANE to into volumes thousands buyers degree level, franchise growing independent in dealer and private Dealer greater U.S. number our across programs, we even the dealer nuanced. total through industry have an we And sold respect with unique buyers of an are sellers our We geographies. and ability QX on in franchise

in dealers commercially consigned a direct resulted the OPENLANE purchased we up growth our This supply dealer in consigned is saw our and is purchasing actually inventory of positive significant Additionally, effect, trend marketplace. vehicles instead. would diverse also vehicle recent in trading vehicles, have This commercial some a result for and periods who in in marketplace.

the we U.S., OPENLANE transactions DXD we supply market follows: the total the physical Canada United net-net grew network dealers, In saw dealer in the from this increased open auctions, during represented for of States. our the of all the versus our as share we increased our So of quarter. of and was of selling volume headwinds volume majority marketplace

future, there As are will dealer I volume to our growth. look key factors support that several the

customer country. First, of there expanding physical Many focused platform to auctions, industry addressable in we single will opened transacted but physical our door to wallet share sales the utilize with unified being And customers. as with with team, faster then our believe on at relationships have majority a and with now continue are outcomes. still and buying and we marketplace here better volumes large delivers have we Also, our a take and relationships. remains our focused still We the growing marketplace experience again, new capabilities highly easier new auctions. on opportunities market digital the a enables and share base groups the our also dealer digital existing many finally, already largest selling

and of the is with both commercial the is creates and customers, all evidence one buyers, sellers marketplace. well OPENLANE and all vibrant summary, there in vehicles active a positioned all growing in of So having place dealer that the and all of more

addition are the digital by we accelerate asset-light growth to by that enabled can opportunities, the In model. I our opportunities capitalizing on believe volume

and time. bring accelerates new the tools and we This our to combining our will continue more to can at disparate over single operating importantly, We speed which reduce But good also into innovations increases marketplace technology cost progress make market. a it platform. leverage

company, are core, basis. a developing and our we new launching on features At and a products technology digital regular

me the give from a you Let examples few quarter.

we report date, buyers which we're As on new our visualization in in launched still access and an that reports we To digital we technology, our Visual marketplace. every Boost the AI marketplace last earnings our is the AI-powered only call, believe listed vehicle condition condition dealer on improving at marketplace. to accuracy inspection of during gives previewed our the first quarter, aimed transparency

the many Our Visual data seller offers buyers achieving possible. bids has view. market vehicles the submit that and more more as And twice that leads who that best to AI they shown confidence we're outcome bids Boost on utilize

technology. AI it, right described it volume view of helps allows in Visual several said the Boost their them car dealerships standing more it as was that buyer and it mentioned with confidence. a if front game-changing buy Others large have as One to

and is trust OPENLANE AI us Boost differentiator Visual the increased marketplace. So powerful that is for a on transparency driving

submit bidding typically, increased engagement to this has the Another increasing is to all visible now our almost that -- the After an marketplace because feature. seller their Absolute Once Sale Absolute to Sale Sale the Absolute was the the that an to are click bidding participating marketplace. XXX% Sale has the deployed deployed have they that sellers see if reached the this on signal This bid, on vehicles, sales know they selling have buyers all vehicle. win buyer vehicle. button was that U.S. and we acceptable in because is and innovation now Sellers prices buyer they average point are rapidly Absolute to sellers seller, price buyers been feature. in to that QX Sale this $XXX by Absolute after they OPENLANE highest marketplace. activated the the like of guaranteed increases on is committed initiated, to available can process it seen

create innovation robust higher portfolio These a Based digital greatest the examples on investing vehicles. better is this, marketplace that of used are Absolute it's in marketplace X sale that increased just engagement, very also driving sellers. to outcomes evident Sale we're progressive for velocity and for of of and

help And believe differentiation believe then area will tremendous experience. let finally, area is meaningful that opportunity where an me there I and an customer is to growth. which for I turn drive

will that processes experience team advancing all OPENLANE a across known business. points broad centralized our customer customer During preferred products and best identify make address pain leverage First, any the issues initiatives X of practices the with from experience OPENLANE, and will a buyers team features the second, for customer of and help data, the and quarter, sellers. already formed main is that lead or portfolio we platform This our and strategy new a goals:

NPS a In ever and the consistently implemented industries. help framework delivery we and our other customer companies is us other will benchmark with being before business. also us designed across than that This monitor help experience, now quarter, first more new will

customer key prioritize experience that and We will also feedback in deployed of new way pipeline. a inform technology the to development enhance aspects aggregate our products help customer and

fronts when of these when volumes, progress our -- highly areas it's of improving in also combined, evident positive new are each the So on scalable that capable we deploying these growing quarter, It's a customer first strategic experience. innovation driving evident these and made that business.

In growth, XX% of with first adjusted the on adjusted approximately EBITDA strong we volume, quarter, in a XX% saw the growth marketplace also case increase in flows. EBITDA XX% the cash

and technology on OPENLANE driving look go-to-market marketing, our foundation build to future, innovation lean strategy, growth. continue and this will to into the investing As further into heavily strong more I sales,

And line. contribute marketplace industry to responsibly in to remain strategic business, last leader finance and environment on It business. for and believe the an platforms remains our increases a risk Consistent meaningfully committed flattening AFC asset I our and and bottom buyer terms engagement is risk AFC our and of comments call, we in the managing with on our OPENLANE. growing stickiness

marketplace So and the in and we to key reinforce OPENLANE's used to grow that vehicles. terms stockholder was quarter. dealer an I value things large just for our and commercial There the Brad, hand is over deliver addressable wholesale to market positioned for OPENLANE opportunities our ability asset-light both of Europe, before a strengths investors capture to is well I digital volumes. to are America and North in proposition But leader value. want

platform and accelerate to us innovation development. product efforts enabling brand Our are consolidation and

invest on to headroom operational gives the innovation focus us in sacrificing financial efficiency results. financial without Our

and over to a sheet, flow balance cash the earnings has capability the with next years. positive our meaningful We we growth are several strong business believe generate

operational to in hand discussion for metrics the quarter. our With that, deeper Brad? I'll Brad a it financial on over and

Brad Lakhia

you, afternoon, and everyone. good Peter, Thank

basis, Before a are on to metrics net impact remind begin, like excludes marketplace comment level I that on I'd revenue specifically of which purchased consolidated total I all sales. a segment financial the vehicle level at everyone a and

basis be on otherwise. will unless quarter comments a In first addition, my I year-over-year state

the quarter fifth Consolidated our XX% on pleased fourth by results. as revenue we As margin growth $XX change you in accounting This for comparable and quarter improved basis in with segment. our transportation unit to to year. revenue million this realize the we gross the first impact resulted results, mentioned, to see impact volume quarter XX.X%. basis made row, consolidated reported from our very a year-over-year Marketplace $X a was net our gross up the will in In improved X% basis, year-over-year, our million of time continue revenue the are last net points in X% profit X% mainly in down was the by or XXX we Peter net a On quarter. driven a

benefited will million and last Gross up to year, continued our model service margin scale We digital continue of marketplace XX%. to and efforts ongoing cost profit at our SG&A in the to cost improvements allow we fees, the and and were SG&A to and was $XXX Consolidated believe from efficiently, year. structure. and our higher higher expect essentially though auction even flat to the our volumes levels for these quarter remainder us subsequently remain absolute volumes

EBITDA this, increase $XX related was of incurred million million, an up stage charge $X Accounting $XX adjusted million. early for Consolidated million. an EBITDA an to adjusted we $XX year, was Last investment.

segment. Marketplace the to Turning

were volumes up by primarily driven business. our U.S. total Our

dealer and buyers supply to primarily last continue to expect vehicles this volumes was norms. and pre-pandemic has we of business. overall wholesale by improved, as shifts Similar Our where towards late commercial to mix total see commercial Canadian continue driven dealer the declined, and to we Canadian year, Marketplace vehicles our migrate this

fee In repossession, quarter services strong X%, auction saw the was inspection auction growth. for revenue. year-over-year we terms in row, basis, revenue a revenue of and fees double-digit On rates. driven grow by a and comparable service higher driven fees, by at volume increased key third up XX% pricing Total

offerings. to greater We our continue driving our of to on ancillary focus attachment Marketplace services

Adjusting primarily prior first again, the this as accounting total year my is the adjusted EBITDA to transportation service to in The the cost Marketplace And revenues XX% and expect for to million. a year. last disciplined SG&A discussed volumes, want collective similar XX% consolidated our of show X%, of our reported in levels onetime down impact flat. change quarter positive adjusted of mentioned I pricing due of I EBITDA, charge, the the for balance resulted earlier. and revenue of that approximately increase note compared we earlier management of OPENLANE's comments, was the Marketplace XX% SG&A comments, in year. represents $XX

improvements to we Peter our these improved improvements importantly, we very But believe are pleased are these more capture us value and further from one results. As as said, deliver sustainable solution. incremental with we position Marketplace

were by lower relatively segment of we the Finance balance income, last quarter flat $X values transaction resulting Loan risk. continue in and X%, primary versus also the our year. driven Revenues interest our down to and down from increased vehicle Turning $XX lower units the losses quarter of segment. within EBITDA result portfolio. These Finance the adjusted were million, X factors were net to as growth million credit for driver primarily

used of tightening higher was credit versus X.X%, in to our which was availability. declines better rate continued is vehicle values, performance historical credit loss The pressures losses slightly The ongoing expectations. attributable the impact provision and than retail inflationary interest for consumer rates, higher

This actions seeing are have we improvements recent stabilizing we the of mitigation in last is over by proactive the fundamentals result year. and the encouraged risk are the We taken severity losses.

mentioned in to our overall continue to expect to the I first rate be the we half half As XXXX. call, of loss comparable second year-end

to -- loss result a of X% X.X% earnings I as expectations I'd for long-term our updated rate next provide that usual, unchanged. reiterate outlook an to second during will our like our target half call. As And XXXX remains

with I assets. OPENLANE's Peter portfolio we're of have As said very and and previously, pleased businesses

flow synergies and we our cash relates leading characteristics. it performance its AFC, AFC's marketplace As leadership, market to value financial the and with

our operating value with cash prior consolidated flow strong and Marketplace leverage This EBITDA. our quarter, generate net sheet continue combination adjusted with allocation. from in business. focused we Moving the $XXX to the approximately activities demonstrates was fore-planned the flow. cash and million level Xx digitally generation was business, quarters, leading of our balance capital Cash Consistent asset-light to of Finance in

remained our allocation priorities Overall, capital unchanged.

maturing return, we have the senior ensuring million strong along We for we June cash flexibility organic the investments position, $XXX by the share continue million repurchase to businesses, of our of our to And use flow while quarter, note business, future, complementary remaining have in $XXX a and on the We liquidity XXXX. generated intend prioritize end opportunities to continue fund this to funding shareholder the strategic returns. to looking digital high our authorization. core At maturity. of in with

Wrapping up, remain EBITDA unchanged. our XXXX adjusted expectations

We are earnings and summarize, our are pleased available growth. volume still $XXX guiding Other $XXX operations for and also unchanged quarter, pleased we with overall our remain To guidance release. with the million in We remain we to million financial adjusted EBITDA of metrics the and $XXX between performance. business generated million cash and in were from the year.

Finance well comparable we Marketplace basis, expected. better And are business our EBITDA believe than adjusted continue grew credit continued Our we to finally, losses to and positioned deliver were on XX%, approximately a improvement.

turn the call questions. for operator With that, I'll over the to

Operator

Instructions] of [Operator from Rajat first Our JPMorgan. question Gupta comes

Rajat Gupta

Can now? you hear me

Peter Kelly

Yes, Rajat.

Rajat Gupta

give you what little of provide would there? that the any the U.S., helpful. can business quarter? share growth was I volumes a relatedly, color color the market have in And as us on that be of on follow-up. Could your profitability on in trajectory dealer-to-dealer And the more a well you And rate any color

Peter Kelly

Thanks, Rajat.

terms growth grew dealer believe volume, guess, and we rate I industry all, of demonstrated. a overall XX%. just of commercial, So greater first than that We in the was

industry we think where we share overall. in So quarter the gained it's a

vast dealer-to-dealer of decline If auctions. majority share U.S. for of grew open our we showed And in marketplace number are quarter. we We physical look U.S., transactions vis-a-vis a in offered the dealer, in the transactions. of increased at growth vehicles the saw absolute consignment volume I the dealer sale. which auctions Physical

overall, least the segment. gained in is we We data only physical auctions, this had have believe we and which with share strong comparison we dealer-to-dealer believe quarter. at we compare At moment. we with gained share to a So the in

So generally with that. pleased

the break I'd business contribution units, saw profitability in by a of it business, results. And and overall we our of our in unprofitable also in is DXD model say, to say was still out was an I'd business this significant contributor. profitable don't the Rajat, year, Canada QX profitability, in while profitability it U.S. the a and making U.S. whereas the material improvement because positive a we year, QX in last

Rajat Gupta

cadence seasonally expected U.S. question. XQ And typically on the just profitability quarter. strong follow-up business, a the maybe Understood. is quick just a in Any previous given for DXD

continue seasonal if wondering the some can in despite growing profitability we So like there second of half? the dynamics

Peter Kelly

first well, positive of I Rajat, overall earnings to in Yes. believe. last of business all, contributor to be the transitioned year, the our middle

quarters it's So number now. been of a

expect That the plan we to certainly this So is the continue. strategy. and

low the a good getting mentioned This for remarks, -- again, model, high my customers, is cost of results And very conversion strength. digital fast sale, to -- of lot sale, DXD outcomes. price in has time very business great as I high rates,

by rates business So adoption, we're is strong. dealers from said, profitable. The are strong as is selling great consignment customers, increasing. feedback seeing I our Conversion of vehicles

about So good I'm Rajat. feeling that,

I was this and for evident Canada, quarter. and in we commercial overall, significant approximately volumes, quarter, the U.S. both will growth the XX% say that in in a saw

vehicles. the these And to is for say, So a of buyer buyers, the one business saw, for for more for see more of desirable the going they commercial that's sure. in a periods. our lot vehicles in impacts are than of But the positive prior that vehicles lot marketplace, commercial they're a

buyers rather lot buy commercial the would of dealer So consignment. other consignment than franchise from from a

might year, buying would supply saw up, dealer it bought there's there. dealers appetite last from commercial I have that more that consignment more from a describe we now buyer certainly perspective, trading So a more

strongest as as our a And the between said, Obviously, I things. on interplay They a So about But supply exist basis, don't by here U.S. I'm I said, driven, driven commercial of well. lot pleased growth, XX%. part again, very X volumes an in in that other. business isolation we which most was there's as grew between each of by combined QX. those that.

Rajat Gupta

do return it. Got seeing play in the thoughts on retention off the dynamic, onwards? half rates think was like -- in return so drop once it. versus And updated like you're Got you based far lease from terms should how just second XXXX the any in just seeing that like in of what on are out dynamic How originations consumer. given here rates? start the on I how interplay the lease lap we you the to curious

Peter Kelly

Rajat, volumes the obviously, Well, off-lease is in the and you this, part of Great. most segment commercial know significant business. our

the of buyouts vehicles. that increase increase by consumer percentage Rajat, of QX in off-lease that driven, off-lease So driven a a saw in of we their lower was And volume. by really lot was

the normal like And in that drove In flows buyouts times, first model, you that and talked the Again, in now But that quarter, XX% seeing XX%, consumer few some how years, of again of that XX%. I'd increased be normal. I to that and We're increased we're we some through see volumes, last about might XX%, our increases XX%. supply. also profitability off-lease drove can the would say volume about. say drop still our actual that

characterize So would normal below well well below pre-pandemic what or we still levels. as

to that. be my marketing, year view suspect it, That's here, got from the I'm -- period difficult entering customers. to remarketing. And those suspect second in of of it we as and getting I've going our next feedback you But consumer percentage the funnel. the definitely and at of XXXX As also the that to cars I vehicles top our quarters own on we as from that's with customers. year, to or the to fewer sort will more of drop, continue understand and look mean higher of next be okay? buyout X bad there's expect predict next going what had XXXX endure don't the interplay few to year. clear this is the to on But cars precision. entering the into a of data And factors I that, We that's the percentage we half offsetting time

I lease I'm the hearing quarter, those row on And our very vehicles first continue. XX% positive and now obviously mature. positive in increased vehicles. new in be quarter we've fourth by note, the That's that QX for increase. approximately compared And we're increasing customers, a originations new from on incentives lease last seeing originations to of believe to year. new then lease And They expect to have more very expect will they as leasing seen that more us originations. a

So showing see off-lease some on positive certainly at see to the but this segment, end up point. volume tunnel in we're QX. I still quarters generally the That's in we this through, more the I get in increased have the light I a that of at very positive. recognize I category. think trajectory challenging

Operator

The America. comes Bank question John Murphy of next of from

John Murphy

your digital and I market the we So U.S. specifically wanted wanted a in about where what in -- then digital that? And ask the on your in in U.S.? auctions? gains in share physical in just digital the comment market physical gauge auctions, market question auctions, on is you Peter, then especially to the where closed to share about you also, shift versus share closed I just a your get guys here think here and are from from are to market

Peter Kelly

growth our I when of of all, overall first I the XX% I is greater at QX. John, again, the QX, that, guess industry are entirely at look total volume in if our digital It's say, digital. a we than look in volume volumes business. marketplace what volumes, growth And in Yes. our I'd believe,

in level based that is to look the category So then on much on the of commercial the overall of outperformed data United at. in estimate increasing And that that well. we during we're we basis possible States as versus a share in and sort the it's we of volume market how both would at dealer. to through sort or looking again, dealer subdivide it believe QX And when commercial lens, point

that terms speak share. positive in a market we We it's think what regard. to that's So, in quarter of

format. enable, what terms vehicles the of a off-lease sell for We that I about The of those in transition, obviously, talking majority a In digital of lot off-lease a was of vehicles. lot is pace customers. of

when vehicles still So and the A in going are auctions. a selling majority dealer-to-dealer in digital still States. to That quarter, we closed the versus mix physical see gained believe, the the But format, in format. QX category. our at is I vehicles volumes the the DXD United we category, our the customers' gaining online the of believe selling look In just are open. channels volumes And true, of majority physical we in again, digital share. share physical first

adoption and they a know new So, certainly, group think the It's does it acceptance and them, takes understanding to industry. this future, adopt I among an evolve offers evident. benefits is as channels I'm price of look to customer of trends John, become greater really industry that these future. -- terms over and you very receptive when digital the that realization, that a But think lot they're the talking technologies. digital digital time, increasing I to both franchise And customers, in there's time to to of cost, time, dealer and

John Murphy

share we're direction. that market more Sorry, sounds like it can you because to in closed your also in comment auctions going head on these

it I vehicles of market lease, ending in So coming vehicles off there. more closed auctions going than share pretty are like think as ever big maybe of those a more be seems you before. to have And

that you Just if could position. curious talk about

Peter Kelly

Yes, John, point. good

to selling today closed Sorry, off-lease marketplaces. that in -- The auction I vehicles within these your majority answer forgot of we're sell part. I missed that the

dealer to OEMs and their the dealer portfolio. because very they a high those very, support OEMs, brand vehicles keep is are franchise a and lot car networks network and of franchise to important want obviously within used fact. that And percentage So a the our of these

open, for for the our right, the important, into America. captive our flow customers very, liquidate of vehicles technology also supports in very we the closed auctions do have John, -- are there. they importantly, of finance us But companies as as the that's and opportunity North But you're well to auction some and closed majority and an OEMs

on I'd to want I just And -- customer say point retention. also

have volumes candidly. a years been has would way, segment, than I it imagined ever few and been down in lower have challenging While off-lease way levels down, the

have period. very lost captive those and through those have those We still OEM are our us that customers and relationships relationships, customers. for We for positive relationships, not finance

John Murphy

volumes we're wasn't quarter, you that but leverage these they the to mean, as off it's talk bottom, are the obviously, of I And coming still be all good huge. you vehicles. whatever these operating was bouncing volume leverage back Can is? in op a know I come so just about form what it digital, going process kind back, necessarily

were here of to But I kind I revenue changed What think mean, just if normal up should something might you're time. when know you be pipe if is. operating the curious that EBITDA do maybe that up and get at as I'm EBIT vaguely units, leverage It's you could think you're you say as fill to of level. units we -- or How just talk talking don't over things you what flow-through about and models selling or time, about over have the you kind X% XX%. change. return the

Peter Kelly

best sort to please of my John, do. worked in that having terms, answer qualitative of point. businesses part this color want if career sort and add any at But further Brad, might I digital Yes. you I that, in for guess, of to

these models the of marginal team. overhead, sales cost low. I for of operating leverage pretty cost structure cost strong is vehicles platform, really the the is is incremental in so of much of cost our the fixed, think And cost really, our the our sold essentially our because

EBITDA end really of Marketplace we we very very, strong think think the segment. operating XX% increase I increase leverage. I a day, strong. that's the frankly, had but of the a volume evidence And QX, And had XX% in At

leverage. do -- We out model continue doing. in consolidation the leverage. we business, adjusted deploy some innovation. reduces volume It talked the about new each platform and is we of operating we to to take frankly, at versus that cost. that increases our our operating month the our It can increases thing, I also we're which other EBITDA our performance That The steps speed increase

think has a leverage. of I this So business operating ton

below XX% volumes, of normal got I in we in a QX. commercial that reiterate, were view, my think QX. I still glimpse Again, would off-lease in

mental that What I look of really, do do So the here. look, volume at flowing believe, sort okay, we I They have XX% strong. point. the would like of experiment that really through returns why would is,

that's and I for exists. have wait to we're that obviously, that, going think to happen Now the but in opportunity going to quarter, work not next

Brad, want to I know if that. don't anything to add you

Brad Lakhia

No, mean, to last I SG&A. compared Yes. year, I'd commented, overall SG&A just say, I in on flat quarter, John, performance the our

And unit more the topline is was of growth revenue, the growth SG&A kind Peter volume certainly so as benefit fixed to. alluding -- that, of much

the year-over-year I can see So in think comparable. that you

also expense go inspections. just I more say, in if it category, the relates as you're to little direct maybe variable deeper we a level would to have do costs

variable, costs think I cost back, coming then And business. you if of -- private volumes say to so, call a legacy purely variable used more one. fixed that's about that's more think are I what would largely we more inspection So, the off-lease but purely not legacy label OPENLANE, in business,

there's back, come a lot volumes as of scalability So those there.

John Murphy

convert And one one. being everybody kind a far reserve mean of kicking of last then just may to frenzy What of about before that to there neat a forward than very think sort converted as do have that big converted basically something out business Sales, somewhat make the the that are to going the What vehicle other on. sort that But actually simple getting vehicle. how tariffs actually over other and sort higher? in little that very you as to would or this smart other it's how you tech to turn ultimately of Peter, stack? neat important not feeding create something around -- price are a does to I the -- mean? innovations does that many call disclosed just trick, Absolute feature feature drive of mentioned And you that Okay. many there a

Peter Kelly

Yes. Good John. point,

market, types of I been what agree. Absolute does. it on auctions it's Sale, all Listen, where of to the renewed see draws going this the interest like, First that's products and to it's sell, all, sale, happening. When in we've okay, different you of it's that

for become the already. less Absolute than our preferred selling Like franchise by mechanism in popular. And it's Sale U.S. since the now way, very marketplace deployment, X dealers most has the of in months

it, the massive seen we've for that a of and reason. So like sellers really adoption it

like real they the one seeing close $X,XXX suddenly, off. in of average only the that on and took do then experience That's button, one another to of the or seller, where that fact leaves once on moment terms aha to that a not realization. But minds a real And lasting platform. car, car, or where $XXX it the $X,XXX their of average, John, they're that they pressed I get terms of in hit just kind and of price up button of runs memory car kind that in the the the

easier improve think but across listen, improving so it's the of rather helping the we we're a improve we value conversion, positive. there without -- tech improve it, ways watching to whole helping eliminate our we -- And exist marketplace. And to helping point. obviously, into of specifics, a us to sort So we're create John, those can stickiness, that than listen, the stack. having looking looking add driving opportunities for going at deploy that's available -- reengineer think plenty sort price, pain or of we're it's all are

on future So of to forward the come. calls. look more about more speaking I to innovations

Operator

comes question Gary of Research. Barrington next Prestopino The from

Gary Prestopino

buckets come vehicle seeing bulk there also to the A were was questions really Was lease? couple you're of starting commercial for The in what that return off here. of other are you? that Or growth back sensational. in

Peter Kelly

saw We North Good the Off-lease America. growth Canada sales. saw biggest rental category. We and is in question, in and our Europe, growth commercial geographies, in Gary. all consignment

in categories. off-lease it. be short the is saw -- of We answer. growth That the most it all So is would

Gary Prestopino

at I'm my X.X%. gross proceeds were looks Okay. about about your looking It proceeds That's XX%. And up like numbers looks like vehicle here, were fine. your almost it as per auction then, gross auction up

that's vehicle of down lot about commercial your a auction more X.X%. were yet, impact vehicles. selling per fees But the obviously, So

if maybe that fees selling auction car, some me? think higher-priced I your could mean, Canadian distortion purchased there or... business Is the going from there in a that higher. you square you're I with So you for vehicles be should

Peter Kelly

but observation. No. It's -- good

correct. You are

increased So GMV increased XX%, XX%. volume

of are whatever by what John have vehicles, I unit really So GMV of revenue those said, have a lower the lower it's cost revenue to, driven a higher we number -- lower X.X%, spoke the per we think up it's commercial well. fee percentage we auction was selling X%, unit. increased per a per vehicle as closed But probably in volume sales per where unit, Gary, that, also direct offsetting

higher tend but with profit cars come margin. commercial ARPU, those So with gross sometimes lower percentage to

I at so XX%. grew -- So as look think I volumes of kind it

I think the auction fees in grew quarter. XX%

vehicle. there bit fee So of auction a was little dilution in per

Operator

from comes Kennison The question Baird. next of Craig

Craig Kennison

Baird. from Craig It's

to Just to a feature I'm prior time? quick that on Absolute guessing real Sale. can to monitor sale? have something -- they Or that is set in the on seller the follow-up the to

Peter Kelly

Good hear Craig, you you. to again. thank from

So to matter the car the going no way the this at sort enough they got gives what, initially, action to of Absolute sell it's when manually Sale button deployed is confidence them least that of vehicle the seller the they've believe hey, activates okay? sort say, on

deployment. that was So initial our

this of a actively popularity, enable activated exploring the level to having attained been either we're set be price to has can auction once its the Craig, or in you some without up Given automated what engage. rules that certain immediately we exactly said, seller

know timeline It's plan. of all those them Craig. either items. of road -- are already, don't part I I may confess, possible the the be live exact these So map, of of but the one I don't that's X

Craig Kennison

the going get trying of And amount number your network sales you about do, turn those more for effort can cars dealers focusing of the growth add existing then you. the you to dollars. the off lease to some you're to see dealers? on if Are positive sales your naturally, where network? But of increasing more cycle are I'm you Or and focused we volume you're or curious

Peter Kelly

Craig, one very you. quarter in each is of geographies, network I a strong Listen, on thousands of dealers the each of thank month all the business of business. dealers and tens our our have active think of strengths we participating

mentioned the our we've the more dealers, lot network. that I sellers. given yet mentioned, would and say Craig, got efforts. buyers, private seeing increasing go-to-market leaning the in a are of into traction the who size not are marketplace we're I label one buyers franchise of principally, franchise I

we do place that well. a those their how work is So and vehicles OPENLANE as them great to sell convince with

there, buyers sellers. converting into So there's opportunities

customers of And with then already obviously, getting the wallet have. a greater we share

size and is side an network, those the the buy So we've and side got of all on addressing the scale initiatives really obviously, both of the aspects. one. important But sell obviously

Operator

I'm from Securities. next The Labick sorry, of -- question comes CJS Bob

Bob Labick

of has it's dig bit, since vehicles Equity on off-lease. I 'XX. been since down a lot in think, a lot is wanted little It's of in digging of But 'XX. further far. just to so obviously, stubbornly even the the off-lease kind but further, obviously in addressed ticked little I beginning high end the year, last a up a

and you retaining Or normalized? come of or Is for dealer factor negative? prior them leases there as vehicle and that revert to vehicle, leases going the kind that is the So buying how norms to that to equity to more auction? grounding does the meaning X were equity the benefit to lessee continues of from into low keeping enough now back

Peter Kelly

question. great Bob, Yes,

stubbornly that. very, and has your It declined, to I returned. that's is of high. been like view, but stubbornly with phrase I high, very being From it has it's So an my where been. that leading percentage high. increased vehicles stubbornly agree But

returned below However, is being the percentage way still normal.

as that's with QX. still XX% in our say, the still what said, increase So volumes, why even volume below about are is below our XX% about I I'd off-lease normal,

in typically industry, in a there's QX. in that of know, QX, and market spring in as timing, Bob, the phenomenon, terms supports our prices typically, Then, you

that the equity gap So much in really QX. didn't decline

a some by fact, again, it like little In last in bit year. of increased metrics, did QX

lot, on as cars more pressure vehicle prices, dealers put downward flows being on manufacturers more pressure into -- equity over our from this speaking downward Finance as think continue cars, new And of But continued gap to used time, reasons that for on customers X is I that used will, to One some vehicle prices. incentives the equity have through that. I think, on new their expectation, the is decline.

then they residual here. leased higher of we're level at that at sort written, will that of prices some probably there's sold take were prices, still that higher as secondly, new So higher values. average place and leases cohorts lapping of And transaction were

that all time. expectation, normal, the kind ultimately, Bob, to to is think take I it's going this So will of revert but

that that obviously that but exist maximize -- saw in we're But QX. least performance with dealing the given to the I'm we with some constraints and the breaks moment. our at obviously pleased of And trying at

Bob Labick

of the you so Great. Okay. potential mentioned could car, dealer state equity. get volume the car. And take kind despite a commercial car, trade-off higher then the commercial dealer commercial you if to you this related growth. It fantastic on know and someone's the was I that,

cars as has well. So a up by it's But for come while What you to What that will little to volume? to impact will now. change volumes going guys to change? in what and growth dealer dealer dealer-to-dealer -- been for car hard for change what's absolute get

Peter Kelly

Yes.

agree I Listen, So with your comment. good question, Bob.

come I level been industry to say the the think at I has industry, the in dealer probably would -- hard well. as growth volume volume an in been And has more flat growth dealer by.

on physical volumes, QX, based data down In we have. in were the auctions fact, as an industry dealer

what say, QX. is our -- Bob, I'd in Marketplace we OPENLANE launched in one late listen, So

the performance So last QX offering really, grew of first aggregate We year. open sales was transactions in our in QX full we pleased compared with quarter that of the where had I'm that Marketplace. to market.

positive. that's So

dealer dealers. growth physical Obviously, consignment driven of consignment vis-a-vis a gained that was saw by was QX. But in We commercial. from strong. We lot very increased share auctions also

to customer by the reaction So I'm also from encouraged encouraged getting customers. getting we're that. I'm -- by

dealer and focus largest marketing I we we're increasing at are there our dialogue some operations. And report. like some things that we're with in condition the are positive looking well. Those Absolute things making and We're improving sales the think of progress our industry, mentioned, what doing. groups as doing? I Sale, So

who still brand a dealer-to-dealer a you this to had great We've OPENLANE. Oh, brand awareness change really know OPENLANE. solution. bit There's of had is didn't I a

ground extra research. certain we've maybe X on got the could country. that use areas regions we've And heard some we we've an as where So in person the done some or of

of And this of these of an we of to being all think the direction. in continue digital a a mine top particularly company more and in things grow era business, industry addressed. where the So obviously, fundamentally shifting this are focus to it's is part

for have more I we time think one question.

Operator

Okay. last from question The is Jordan Jefferies. of Bret

Bret Jordan

quick. it make I'll

'XX, are off-lease guess As your you and lower some see likely in business the given you with off-lease is assumptions about buyouts next volumes it's you growing look buyout equity lease year units, the at in in the and I returns, trough Do a made and that year rates. coming trough offset but gap year that?

Peter Kelly

a with where confidence, you it's it's I So Bret, This thank to difficult it's it. and and great very that. possible to is scenario predict model for question, how describe

what consumer So we planning. the the assessment the lower say, and current around a scenario -- Bret, my mentioned, guess of funnel, this And that is various interplay of lower buyouts. quite you of is sort obviously but at top modeling also the the percentage of have just amount I things volumes of the the that detailed hot done X I'd

still can maybe scenarios scenarios a where what flat. it's it's But model, situation, scenarios our us. positive I think in wash, a is I a where are direction. most think that reasonable the of a net some that will more be there more if in of positive for apply you volumes to There are we plenty maybe judgment move

do to it this we we're planning, Now of through not be lot that and remains committing But seen. call. lens. obviously, that that a looking I'm on to at

just originations. want that lease quarters QX, is to into news, again, QX of originations last XX% year. lease increasing X positive we're now versus in about believe I the by reiterate And that I then, And increased

trough to an but the it end. So rebounding. a leasing is And also is fact comes

that dealers' this on end I and think is Number at We are far company. the light too will incentives away positive will very off-lease and at see volumes tunnel, increase. can of vehicles be increasing. not vehicle of frankly, of this lots for New the vehicles point. new that the are increasing And

as think volumes customer base I serve we're market. come in to a our great to position those

questions. I think concludes our that So

been our and the Vice Mike and updated community this through earnings to with acknowledge performance of end we kept for before investor before Investor Treasurer be Mike our So the always OPENLANE retiring the transactions would gone OPENLANE's all Eliason, next informed Michael over just from President of call. call, years we've and Relations. years. our that and on company transformations will has and has like XX past I

your wish well very best. many thank for the as you to we OPENLANE, investors, So Mike, and to contributions a our all sincere you as

I To our about sharing OPENLANE the you easy speaking again you next look thank Thank is more making call for successful. joining to you and us can so our how today. on customers be much. more to wholesale very forward audience,

Operator

today's attending The has concluded. conference now you presentation. for Thank

disconnect. may You now

KAR Auction Services (KAR) 1 May 242024 Q1 Earnings call transcript