KAR - Earnings call transcript Q2 2024 | KAR Auction Services, Inc.

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Operator

Good day, and welcome to the OPENLANE Second Quarter 2024 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Itunu Orelaru, Head of Investor Relations. Please go ahead, ma'am.

Itunu Orelaru

everyone. afternoon, Good Second OPENLANE's Earnings Call. Welcome Quarter to XXXX CEO me of Brad and are OPENLANE. Kelly, today Peter of Lakhia, OPENLANE, With EVP and CFO

and release the in or rules involve that differences risks today on financial to Our the call the Reconciliations With in the uncertainties statements. the that issued in Certain Act as measures Peter. forward-looking in Factors include our and Relations our to non-GAAP differ XXXX. Private actual over GAAP include available materially cause provided of such Investor our results SEC of website. will statements that, filings. section remarks our I'll defined under such Reform to and our Peter? Securities earnings those could forward-looking non-GAAP statements Such press cause of our turn may discussed SEC Litigation measures are performance discussed materials today be meaning call. of within from

Peter Kelly

good Thank Itunu, everyone. and you, afternoon,

Before working I just you Relations formally team, know looking of delighted the on to I our story. financial get to we to results, to of expertise she Head Investor strategy We're OPENLANE. our and I deep for forward our the started, Itunu welcome with role and of all and Itunu have as is wanted communicate the OPENLANE

the these a volumes more generated We revenue later. of Brad and reflect Digital negatively our generating OPENLANE's on XX% X% a growing in a million Similar grew by million adjusted Services to flow $XXX Marketplace AFC will business represents from QX, the of quarter. consistent $XX again pleased Year-to-date, EBITDA. enacted in we loan significantly delivered and the volume growth charge million adjusted first led of contributed adjusted marketplace. power on clearly offering million we profitable discuss of or in our growth, EBITDA, volumes of OPENLANE demonstrates which basis, Tax, Turning grew positive total the characteristics in which believe focus record performance adjusted Canada that half track also million to contributor, approximately very $X of DST, second in I'm results. the million EBITDA execution improved to our unit OPENLANE's operations. the performance was results delivered of and cash have newly which second our I detail and On in scalability for the quarter. the results $X charge $XX XXXX, in company. the a impacted strong the was and continued includes EBITDA, strong $XX we and consolidated DST differentiated

easy very accelerating even continue wholesale We deliver customer innovation, to these our financial stronger factors customers. of well improving are combination experience and The positions for the us in share gaining results making and future. the

me positive strategy our growth. let on and plan remains how to we build turn on focused momentum. So OPENLANE highly to this

simultaneously. We us our than share and I grow agile to are leaner, ever results and a our volumes, before, enables financial believe more market company this

previously used easy build to strategy our said, make world's our customers to growth so digital the purpose our is wholesale greatest I by vision more As be for marketplace in guided I'm can for successful. our anchored vehicles.

Our X by acceleration of strategic is OPENLANE's core pursuit goals enabled these growth profitable of and advantages.

share and segments. dealer in the both First, our commercial expanding and volume

digital the enabled our our third, opportunities focus customer asset-light and by model; experience. Second, the on

been volumes X,XXX negatively which year-on-year approximately the OPENLANE volumes by growth the individually, address me second growth attack would our without impacted I'll have in share. ransomware vehicles Let of the CDK quarter Despite marketplace In its each and by and X%. approximately grew with quarter, volume headwinds start that these our X%. volume and from

to volume This segment. X% was quarter, by the We this marks quarter similar first also again marketplace. year-on-year fifth And consecutive the $X the Marketplace billion. merchandise with growth our increased to in gross value driven nearly growth our by U.S. primarily

Our launch X Europe. a the The and in in over months the months for Canada year confidence since people investments strength discuss later increased U.S. OPENLANE-branded I we receive and and results of the approximately fueling that both And are my the give confidence marketplace me platform. delivering that just technology in increased is positive will to live that continue we in has in been our remarks. in and feedback

in OPENLANE meaningfully In off-lease increased United offered volumes the States This is unique off-lease volumes, and clear quarter. dealer commercial and both commercial commercial commercial our and inventory when we off-lease Canada effect sale the We into also consolidating who terms a and buyers the exactly OPENLANE. of are during remains leader, up market that our during and for for vehicles network marketplaces aimed the purchased quarter.

likely I supply over remain under XXXX level the pre-pandemic pressure levels leases will mentioned given commercial quarters several the XXXX. As of written below in quarter, last next and and low remains office well

higher of However, by the we purchased by entering to expressed commercial of the flowing lower of their grounding and beneficiary funnel, future in of funnels And those inventory To this a into a gap and new sales online. primary to dealer. then be both and customers maturing percentage straight are [indiscernible] volumes deeper percentage that continues, results will which of OPENLANE. trend leases for are narrow. positive fifth OPENLANE in off-lease it more mature. have This extent will remarketing and increased more these of continue Also, the the a off-lease as a our earliest result the to of and desire lease selling maturities the originations those the quarter. continue of percentage equity seeing for being volume the vehicles continuing vehicles higher off-lease vehicle increase being many returned new finally,

optimistic future auctions our or for opportunities programs this Switching with growth for using insights digital equally volumes. trend addressable data remains more physical So about a large to this deep customers. segment. wholesalers. leveraging our our design a in technology particularly market, new dealer dealers and support we're There to I am still that and

expand. easier the Our total aligned cost lower sellers continue better in and degree dealer even we and more and outcomes to wholesale base volumes declined first buyers to platform faster, greater quarter, Similar It volumes and OPENLANE has trends. industry U.S. to generates a convenient. that Ceadar to significantly of access national it the in an and sale provides is with those dealer Canada.

pleased However, dealer improving. volumes see of Many also of gap that that narrowed year-over-year progressed, for this second market fundamentals the are drive the year. quarter the half I as optimistic and I'm was to the

more is prices affordability vehicle is would declining, factors inventory for wholesale levels, to increased vehicle positive and returning prepandemic to Those very New be this for which trade-ins and consumers. are contribute transactions, OPENLANE. improving used should vehicle

in through of and a Shifting and The by innovation. sellers So dealer trending our more the one and favor in well summary, fundamentals vibrant in commercial to both growth OPENLANE the our marketplace. also core creates customers. our market model. we're differentiated growing place, cars active asset-light that accelerating deep is technology are of of having and positioned all all the believe evidence I of there's our with pipeline the and all digital opportunities all buyers, enabled

every you listed boost an buyers AI AI-powered our start vehicle on access give Last technology examples. visual marketplace. few me to a our I'll inspections. that visualization inspection dealer quarter, with announced provides vehicle in Let we

issues rich network allows are captured This transaction. of service accurately release with into buying differentiated This alert codes quarter, the bidding better through that of inspection million at which over which buyers easy data arbitration. codes to make understand Boost enhancing simplify informed to which decisions. Code we repairs, faster us banners the IQ. highest indicate lead pre top predict and intelligence or an our codes inspection aggregates probability our Code and capabilities to we've post X of the then that did IQ scans boost those through each We follows and OBDX report, and of helps may

providing Boost AI So vehicle data and industry-leading inside Cold on and every condition IQ, Boost we are comprehensive Visual out. between dealer

a on Next, absolute update brief you marketplace. to sale our feature I'd like the in also with U.S. provide

the generates and increases listing full United It to in Building As allows velocity OPENLANE's the continues the absolute and sellers the at sale time that lets increases adoption sale transactions their right week, rest automated marketplace discussed Absolute forget vehicle. States. share the commitment represents a finalize on indicate engagement, the outcomes Dealer absolute triggers significantly last launched sale. major a of allows on and grow to price call, This easily sales. and our do the vehicle overall absolute and sellers buyer sales of better of we to to last momentum, enhancement selling growing sale. technology set

the look turn our sharing we sales by other success are months detail And our forward week innovations finally, customer emerging then to growth metrics and and on the to absolute me let week, improving over experience. improving come. driver, additional Our this third to

During sale prioritized post opportunities operationalized customer the business. customer activities. we are The comprehensively awareness transaction and hundreds points many and the quarter, of the touch journeys, identifying registration of to remapped to identified being from in

feedback are tens exclusive faster new completely our OPENLANE for with these our from capabilities off-lease initiatives lots. help product OPENLANE, redesigned are customer customers. the I for cars preferred This and one and making example, during from will is believe agile dealers find receiving interviews, For second functionality sellers. and filters easier that example development, own thousands our of listings data to portfolio their marketplace for the search it most right and together Through the our on of platform we already positive buyers dealer And we marketplace just and of CX broad quarter. make

and OPENLANE versus on our meaningful commercial prior meaningful this and quarter, the the marketplace volume focus scalable adjusted contribution. positioning, In helped the drive experience second to the speed year customer our or increased are competition vehicles marketplace by our XX,XXX growth. innovation X%, our together, differentiating So segment our driving and EBITDA from and dealer

that these earlier, and mentioned are and And results on down confidence I we strategy of me future. our optimism our a confidence, doubling investments. with As give in our lot

accelerate plan executing further the quarter, a During to began we growth. multichannel

remains We savings customer-facing also across ease investments additional investing SG&A and know we're in greater features for business, our new this technology use products of our relationship platform, a customers. are into because team. funneling our we And and

into the existing in underserved During teams and some opportunities started here the new in see leaders markets wins where supplementing sales hiring in and to And significant in markets we we've made share. quarter. to investments gain quarter, early third see already we resources, staffing

to wholesale delivering for for capable a our leader of terms dealer hand and the deliver remain asset-light value the this proposition well commercial I OPENLANE our I is in to company what and and market surface value that and we over have of America it opportunities ability Before Brad, our momentum. positive to OPENLANE in of addressable stockholder believe marketplace vehicles. North strengths to reinforce is gaining want grow only key I There scratched Europe, capture is used is compelling. volumes. both to an digital we're and positioned large investors

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

I of results. on to Our of invest now this and gives headroom financial operational fabric be sacrificing financial focus to the in culture efficiency, the which part us believe company without innovation

We earnings strong over flow has operational hand growth a a the sheet, balance it that, to meaningful over with into generate to I'll we Brad? financial With discussion and metrics deeper quarter. are next the our the for capability several our and years. for believe cash positive Brad business

Brad Lakhia

Peter. you, Thank

quarter our are certainly very especially in the We second our segment. with continued pleased Marketplace results, improvement

certain consolidated and of net OPENLANE impact vehicles. make on revenue the which related Marketplace segment a usual, purchased comments are the excludes As to I basis,

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

auction Higher as was offset as to $XXX revenue quarter. net fourth in services segment. million, up the $XXX in in services volume Canadian related a down were was $XXX than XX%, by service realize impact change down the well charge and X% X% of last Marketplace impacted to was was million In up our you'll the continue digital million, gross mainly the revenue see $XX from by the cost consolidated change million more Our Total of tax. our quarter and revenue transportation unit million, pricing profit as accounting results, This of the newly X%, higher made $XX driven by growth volumes we X%. net our we enacted year.

this been have up approximately X%. Excluding gross tax, would profit

implemented second government revenues. further the to the applied which of a effective at This Canadian As is at background retroactively DST, applies became the end quarter end January and XXXX. the quarter, to of X% X, digital-based the

relates in million new million million approximately XXXX quarter. and million, the we XXXX. this of approximately charge relates of a XXXX As result $X a recorded tax, Of $XX to to this $XX and $XX

its estimate be per including the this related scope no cost ongoing application, of Assuming to annual $X will this the legislation, million changes tax to we year.

planning However, execution a primarily implement quarter and and do flow. cash compensation-related of mitigate significant was decline this to future SG&A in on we therefore, impact million, reflecting to impact, Consolidated in our we initiatives. down $XXX not The are successful compensation decreases which earnings of was SG&A the savings the was in actions years' result cost and X%, a expect expenses.

not scalability cost flat of for but our nature model. of of feature our the only an initiatives SG&A This relatively also impact quarters reflects cost Our asset-light our the last fixed the several is digital important SG&A. illustrates savings

our expect to we For at levels. SG&A spend the of similar remain balance XXXX,

our was the in EBITDA the year portion million charge. by DST earnings adjusted $X impacted note will million, you negatively release, was of which $XX current As

the million. to X% Revenue Marketplace segment. Turning $XXX to increased

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

volume Our due Reported to our also fee X down by our once by change by business driven revenue the primarily similar increased transportation for primarily call. my in the services primarily in growth. X%, remarks accounting declined, quarter discussed last was calls. our earlier revenue dealer volumes highlighted and mentioned Auction again first Canadian X%, driven during reasons

impact was change, to and Marketplace the by of the services portion overall the from Marketplace by $XX $X to performance ongoing was of Once contract driven our item and SG&A earlier. DST Marketplace driven mentioned accounting This be again, prior this of million very offering. this adjusted the of greater was drive Excluding the services. million pleased and charge. up X% This are early of XX% inspection, services our approximately EBITDA arose excluding $XX of represents reconditioning an marketplace an when that revenue our exclude increase the the of year $XX million, Canadian tax million current would year-over-year year X%, we focus we down attachment termination. our factors gain impact repossession the with result business. is

will industry-leading committed customers, are our one our These in our key enhance Marketplace to investments capture We easier to prioritizing investments make go-to-market enables innovations initiatives. volume which including product and solution, margins. investment the wholesale growth in and us of for scalability

result lower driven for These credit down which the were our up for quarter factors last driver Finance X%. income were portfolio. Loan million, of transaction by from X our provision versus also primary segment. was interest vehicle the $XX units lower X%. The the to of Turning in was quarter X.X%, were values Finance Revenues segment losses the X%, improved adjusted within primarily EBITDA quarter. resulting down

actions. stabilizing the encouraged previously, our seeing of indicated are severity we in the risk combined result we I've losses. are As ongoing by This is of fundamentals improvements and management disciplined

to reiterate, financial we to loss overall, We with the in rate X%. remain expect the cash we flow of X.X% performance the year half To loan of continue year. be of to second pleased with loss And rate a AFC's target and half generation. line the first for long-term the

our balance allocation EBITDA. allocation. Consistent to our generate business. adjusted leading sheet leverage continued demonstrates working the priorities we strong level with generated Year-to-date, of cash our in finance focused $XXX quarters, prior of Overall, to combination generation cash flow operations digitally marketplace the million Xx and value flow. unchanged. at approximately business Moving from asset-light, with cash capital This and our stands consolidated plan of capital have floor remain we

remaining investments our we of the have prioritize and the quarter, the complementary funding opportunities repurchase ensuring continue end return, high to while on to for $XXX share authorization. returns. shareholder organic continue flexibility We million At strategic of

to have call, million EPS this strong in to per and there from no and intend change the our last adjusted $XXX maturing discussed our operations note maturity. no guidance, million of flow of June in cash a operating $X.XX $X.XX use of up million is share. As guidance XXXX, $XXX Wrapping senior liquidity we to we change $XXX to fund to position on with EBITDA to along adjusted our

guidance release income in today. DST issued XXXX summarize, performance. cash business generated X We we To with of These GAAP continuing flow and impact million the through operations earlier. our have EPS are and reflect the pleased earlier updates We remain the Canadian from updated reflected discussed of $XXX earnings operations to financial our from months.

marketplace Our grew X%. volumes

Our discussed early exclude EBITDA the adjusted prior termination approximately marketplace current have by would and contract we grown year DST gain XX% earlier. charge if year the

loss marketplace unify successfully to product confidence in strong digital OPENLANE innovations to beginning credit to to launch With us for the brand questions. is I we over taken Our rate turn to to And actions that, finally, gives operator the and our offerings call gradually moderate. our consolidate the will future. new the have

Operator

question the And Instructions]. with come Baird. first Kennison [Operator from will Craig

Craig Kennison

with your I volume I you to that start in dealer If X,XXX and it mentioned, looks digital that competitors been with pace closer add wanted Is flat. business keeping would wholesale to units, the market that have that dealer channel? broader like volume. the the CDK

Peter Kelly

Appreciate Craig. question. Thanks, the Yes.

as volumes were So mentioned, in down Canada. the most that dealer quarter, I was but of

if commercial was I'd So units all, mix the wasn't of all say and dealer dealer. first -- of a X,XXX you

So were in on volumes by sales the overall side to I because a turn also mix and commercial dealers assume purchase cars similar our couldn't impacted that cars. would couldn't

the sources volume. If principally So to was maybe look a Canada. other XX-XX what obviously see decline in volumes we We split are. the at on decline, check that

volumes our auction down physical in is in States data on year that based slightly outperformed first second that were the at the and the of at, quarters the understanding, volumes. physical United looking I'm and Our comparison, the dealer auction in volumes

of think a loss don't share. I it's So

down. volumes right, gain improving Craig, though small in on. share, impact, an even of trend saw our a impact. the But an quarter And were CDK the mentioned quarter, quarter I you're think had I then slight in we the we had a went as

the line of feel year in that this growth about second be back will I territory. optimistic trend more the year-over-year sort So in of the half

say Craig, offering, we pleased from dealer cars I'm we're that. the So selling and quickly, our guess excellent that, price our about strength will getting a at of I'll we the see customers feedback by lot customers. of watch their beyond very to anyway, talking cars selling spend outcomes. our I time their obviously

values the strong quarter so in see in And are in well. GMV having marketplace. You'll offering the differentiated our as was obviously, a up X%, our marketplaces strong

I'm by customers, increased go-to-market this is too. we the pleased in resources some very the quarter, our field into. I again, focused an late have some getting feeling put we're So in that. investing there, traction on good already seeing the feedback in about from remarks we're and how area my And very We're mentioned second

Craig Kennison

I you're to to need target CodeBoost? to a you're I'm you mean of with technology then doing curious what that good message or like if message getting marketing you you more that visual see And they if so have some effort, with feel innovations. Booster the out dealers dollars

Peter Kelly

question. Yes, good

I or I sometimes -- understand. there think say, in what investors misunderstood we're terms and technology a strength gap sometimes that is offer customers between of sort might or think of think there's Craig, analysts we there I what our the of

of dealers. you investing what we obviously roll time to to these on if this. dealer that So in. those for And the we speak power preparing sales go-to-market the bunch you'll that support is see spend materials any and We're they a launches, out testimonials these something Openlane.com, training do we're offerings of our When team. are

So on. area it's focused we're an

market to our July, but dealer of business, of that And thank month ran in we of their You the may seen have of appreciation a our customers, again, way saying appreciation you Dealer-fest. them kind was the event that also to that last to new of and over the educate end great market year. some we've the things X between months to now the we of plan on brought bring

from of going platforms, speed see very to to in us an strength think consolidate cetera, And come area I it's be on. as for we an more So dimension. think this innovation, increasing area we're I our Craig, it's business, et focused you'll

Operator

with question Securities. CJS Next from will Labick come Bob

Bob Labick

we I start you the but you could us sense of Could I Peter, of terms deeper. do want you And off-lease alluded off-lease give own auction? side. And of where And in in going progressing? remarks, you on a to now see process? little it terms in how kind the open it's your the of retained, was really of normalization right closed hoping dealer where in maybe go retained, just to are a mix

Peter Kelly

Yes. Great. question, Thank you that. Bob. Good for

I'm volumes don't on very growth. commercial I it our XX% but of a to the in were quarter I spoke up with directly, First know all, pleased commercial volume year-on-year basis. if

I I that's commercial trends again, volume feel there on So think quarters about that. I commercial. good believe X strong of very consecutive volume that's now growth.

come clearly think growth source off a X have over here we've the more. indicates bottom So the of strength and or volume been quarters I commercial past

we're we're percentage So a in returned. that's higher seeing, seeing terms portfolio higher percentage what maturing being of a of the of vehicles, off-lease

these so returned. because fewer happen. same being lot That's the of the fewer end positive purchase grounding percentage And the So their things for consumer, erosion to X lower the sort extent that One, in get dealers it's consumers vehicles as off-lease a slow the more equity lease, a -- it's by a buy out vehicles that have been them opportunity consumer continued declining, that lease, is Bob, these has. which dealers think And the of of of of that. at that secondly, So a but I grounding although purchased the decline, equity erodes, us. the equity okay? are gap,

that flow our cars deeper and these funnel. then So into percentage declines

will a it A I of but how their quarters on it period. the taking seeing that in I'm coming over business top perform vehicles will we're residual off-lease But that offset see funnel, volumes last accelerate cetera. those continue that few could maturities I'd continues. number of et continue will by something it's So the confidence in even are the though predicting gives fairly play the that But think And customers be values of It's increased out. our say, through portfolio, decline gradual, will that percentage the approach there's returned. -- think trends. been at fewer I to get based wait-and-see our me an that quarters, commercial to that to

as that's comes. now far, year-on-year So maturities, volume that month have lower so We each growth. But expectation. we're in where but it the obviously seeing period to commercial still take there's off-lease we're

So I that. about feel good

Bob Labick

Okay. market the Super. Very just talked helpful a mean, dealer then And I Canadian -- bit color. before. little you about

think acquisition don't I an the is that integration? that. the on I still for it of or of progress something Canada. integration how know thought back in facility was a Can in if December, Manheim that is I an works that's or you there progressing? made opportunity like talk about you potentially a sale

Peter Kelly

Yes.

course. Of

there, just your think which one I more is add last comment go important. let really on me I Before question,

dropped We 'XX. and in in and are lease that about been new XXXX originations significant on they've XXXX seeing but originations. increasing calls, increases also vehicle prior X, I I've lease but in talked know

consecutive lease positive. XX months origination for that. be very of very I but that quarters going through have look Again, to business, starts another really is maybe very us out think increases. that to to to will X our and of positive we're flow That confident again

going pleased So with to very acquisition. the Canada,

X the in metro acquisition. the We've operations all areas. made consolidated we've So

competitor. our So example, X been us, auction owned in of by for by properties, Toronto, there one the had one owned city

one. volume is into consolidated Now that

We're for strong, in greater commercial auctions part has So scalability, Canada. greater digitally we're side. the on the most the of running leverage these out been still Customer strong facilities. particularly getting retention

the organic So of of we commercial acquired in customer as sort had that obviously, very retention seeing volumes well. we're acquisition. growth customers, retention And Canada in we're through good addition some seeing, to in

I the on quarter. Again, we think, story. course entering a much as it's, were of in feel improved positioned like better that the than year overall, second January. good I I mentioned, we're second half had challenges, the in over some the dealer of So side We've the Canada.

trend in in half. dealer more for side second optimistic line a Canada the positive well on as I'm So the

Brad Lakhia

Yes. And is Bob, here. this Brad

We Just of to to the active have part do of process estate But to real there an our as we Difficult the an just play your any where that It's the a project regarding that. active key address for question for transaction. provide estate. us. second to some part real we're is real able in at it estate monetize market, opportunity acquired really have harmonizing an the timing of that do project the to it. specifics on me we amount to and in underway and given the continue be

Operator

Your John America. question will from next Murphy with Bank come of

Billy Healey

up up Billy for Healy XX% supply on calling little a to At just you John. least again a large environment to volumes X% year-over-year. wanted I ask on in dealers is more we other challenged This for the sourcing still bit talked on market used are and dynamic vehicles. players the the out right now. And are guys doing well

chalk you you channel? more vehicles auction market into do gains? the So would Or about share up flowing think that? do to this see you Or how

Peter Kelly

but to towards that, return the those dealer Well, normal. when Billy, massively be industry. standpoint, industry agree volumes not part industry normal, guess, divide I normal, below I into XX% from maybe I do normal pre-pandemic I good supply normal, consider below of still say, it. commercial below that's would though characterize at volumes, a high XX%, still think have I'd look the are strong, dealer be roughly below as and I below They're equation levels. volumes growth our Even in been And question. for would that volumes what are our

will consumer I last well. XX We've the on think seen months. wholesale think that trends have those the will vehicles dealer volumes as on vehicle their and improves, dealers I problem To those generally extent affordability to vehicle trade-ins new heading the more used upwards inventory. side improve lot, and increase volumes more extent the over the

sort there. readjust positive that. some of Billy, view on gradually, there's opportunities to expect I So them my be would

off On the are segment for calls, of quite us about a XX% below huge not commercial I've a What That's segment to are volumes lease on is us. Repo side, it's lease. is said pre-pandemic relative off strong prior And as volumes levels. big a still pre-pandemic. a bit mixed bag. for

a well So there. should significant segment. months be our for see on I X-year calls, be over of -- cycle in vehicle. very about expectations do really we'll positioned at I look volume leased do the prior the think a the But growth commercial when clear cycle, on opportunity Billy, for next we modest as XX off-lease the we I've been again,

again, I after acceleration strong I after been then But to I us. of the think the I've and that. And I for on very then -- be see quite coming those will do that. years in end open think follow XXXX volumes see

Billy Healey

Super And mean, Because CDK. gross the the But on some the and I ex segment just from accounting in at tax margins can expectations on going margin and into more of in you going the then maybe impact year-over-year just on sequentially maybe a Okay. of there's and with helpful. purchase your to the bit just the mean, a vehicles. year? trend I back the talk Canada know change noise half numbers looking down the Marketplace lot I the one for on quarter.

half back wanted the your on year. of to the I So get thoughts

Brad Lakhia

Thanks Yes. for Billy, the Brad here. question.

profit margins provide remarks. our in margin on highlighted Certainly, the in the to reflects charge quarter, the of our million just full added quarter. think $XX you I gross earlier the when look I some at the that impact in clarity that

you. to just that I So highlight would to want

in last normalize and margin Marketplace sequentially you fairly that, back looking kind if consistent really would think the few business for of the we especially performance see quarters. over I

reconciliation of So million. was highlight that in out $XX you'll which million $XX the an charge, margin see that adjust basis, our adjusted did component adjusted EBITDA EBITDA out-of-period the on we

if current period, $X smaller at transportation on an adjust adjusted you you the of know, basis then our amount So EBITDA would margins EBITDA are of we then revenue. And that as million for look and this our you highlighted sequentially. in that had impact margins, you yourself, consistent it see adjusted fairly again,

-- improvements us That not in of there. comparability we're not in item, the of a of little delivering. driver the so And but favorability margin, our terms ongoing that does bit is a significant give particular,

Operator

Bret from with Jefferies. Jordan come will next Our question

Bret Jordan

think I auction market? there's at if On of question, in outperforming Or more share are all and various the performing or you obviously, you're physical? Are looked share, broader lots you the market physical the -- now you less volume. places. guess right traded you channels market said auction outperforming are cars at looked I you and the

Peter Kelly

market growth I [indiscernible] and has of quarters. share, past would seen say our strong in Brett, period fairly on flow commercial. We've a steady. some the bit There's over little been

the been volumes dealer last, XX-month more Our over say, period. have flattish

that against and challenged, has -- particularly I commercial on think that's environment the So of I again, a impactful been volume off-lease us. that's but think backdrop

market So I feel our share. about good

and the period We in to look have have you another -- from and to aggregate then category commercial to one the kind it shift dealer flex of category because the one quarter at in of then in kind another. mix

at it and So we then I it say share. the slightly think feel we're I look we where commercial over I stand. about be aggregate, pretty at would might held dealer, It look If also in in -- good we've up market and our period. we

Bret Jordan

base about at is is much then if And And the has credit changed customer within at sort you thought of now, number lower of some right Are of customers? following all? year-over-year. your out you Okay. taking guess, clients active AFC your that the AFC, I changed or

Brad Lakhia

the Brad question. Yes. here. Thanks for

of just here. say I couple would a things So

XX around been customer the intentional risk portfolio. and processes here management our the over pretty have around particularly been months last XX diligent, We to

us. risk were flagging some So that there's been customers proactive of takeout for

that's So there churn. business, for XX last been some business priority floor normal But us. is financing planning it's independent the In more ordinary. months, this and XX that a and the -- certainly, to in of would say, I

But are consistent able historically, pretty churn. we're normal of a there maintain that with to demonstrated we've base as So customers churn.

So able to grow we lose some as over we we're and some, on unit volumes time. the gain net,

where some than say So Obviously, a be relative this comments space very, credit a But there. target been performance. based to my continues in higher to know rates of that's on we have we in just on little our their basis, peers them business would like what perform this very bit but there feel we our performance well. our I are would loss

perspective only this margin attractive a The business. structure is fee performance business, but and very basis, like not relative this strong. net returns margin a of interest that Our also from very, from and is very there the yield

Bret Jordan

question. housekeeping quick A Great.

go-to-market Is that that the your not in also significant? obviously, you Or You that guide. that return increased it the in second you've something is Is commented late year? -- expense just timing a generate that, your resources maintained quarter. is there any going later is to

Peter Kelly

it's the all, say, of Brett, I context SG&A structure. of in significant I'd overall Yes. first that not guess,

the impacts immediately. increased margin. yes, happen it's investments volume say the you associated on fairly not near to more expect I'd with you and obviously, So see business is, staffing case some but in term, these But to

the volume case the So a second business envisions continuing XXXX. and of we've that half in yes, incremental year some here into got

the very analysis or have frankly, we've handle. of versus in ground here of sort can on the to massively. channels. feel markets also lead longer Those And that certain of are really characterize a presence lot of we're but don't I sophisticated, dealers, than the investments there's where whom and really would good bit on development. many we certain an product performing are we reasonably little share of person we're And salesperson about technology got a in We have. about where, in again, how more markets opportunity good our as feedback of the Some opportunity have in we a time, not probably terms getting offering a from a feel the do increase other

a So situation it's like that.

Operator

question next will Gupta JPMorgan. Your come Rajat with from

Rajat Gupta

I like couple and follow-ups. little your And I late. DXD gains the I the growth U.S. share in around joined you curious quarter? what if a was quick very have of Apologies, commented a were your call

Brad Lakhia

we so but was business. of far most the were total Yes, in to our Canadian Rajat, what volume, QX that in similar in were located those story commented declines some there dealer as

U.S. at over in stronger believe, relative in U.S. of I U.S. than volume dealer terms. volumes first was physical information decline the growth was the growth a have, on volume year. Based we our stronger Our the in were physical half auction. auction, it Actually,

bit switches in stronger a commercial that just dealer of So vehicle, is a have we buy to a [indiscernible] effect growth worth quarter, the yes, might normal there where network part trends trend our little that's mentioning. buyer of cannibalization the car amount I and U.S. think our Commercial growth, a than volume of over side, similar couple business. on A things of about. -- and overall in dealer-to-dealer so you talked the bought we XX% volume previously buys strong QX, commercial aggregate the when other are

the the I So guess thing improving understood. I over I Canada. to of we said, is think that's be an U.S. quarter, trend the both in course and Rajat, other saw

extent there the declines I as about set were of for saw went declines, those diminish to quarter line of up feel on, the sort that's So and the good second the the half year. we trend

Rajat Gupta

be Got with I as about to Or -- we on through opportunity share. that noticed our prices raised June. like did competitors digital month it. you're the use take some mean curious, that? one I like an a more and of And going that of side was we follow saw cautious the to maybe you little in

around curious the that. around process thought Just

Peter Kelly

review same in the dealers. commercial times we noticed all our We Rajat. pricing thing. business Obviously, all marketplaces is something under Thanks keep and at the just Yes. in

we that's an was than all, of dealer-to-dealer our X to listen, is our first appropriately. and profitable, will So we ago. something offering. observed important to profitable It is I years guess react this, of say significantly something it part what I'd more business

vehicle So probably a to through marketplace. competing to I we've I vehicle physical our a really than believe, channels. is got that. mean through the efficient good I the to a put cost lower some cost it lower a the than marketplace about and very believe by feel I put which to put cost auction

So very a attractive the in got to have I we've growing enabled a efficient market, business has marketplace, a pricing and and that think business. us profitable

going listen, keep at. to actively It's under that we're we're looking So review. something

Canada, spoke about. also alluded tax services in We Brad the that had digital Brad to,

a to that's function way So to need obviously find address we a Canada well. as in that

as So we're in that regard looking at well. pricing

look this things I in don't have the we time. anything Rajat, to particular these on are terms So all say but timing, at of call

Rajat Gupta

Understood.

Just through went one last on with one, the that this. [indiscernible], CDK the dealers experience the

You're you way, the I with obviously of in very experience more deeper an does terms already have deeper opportunity for was their your up and participate maybe like well platform connected. already dealer systems of this much those in in open and to given getting integrated curious, a systems and partnerships. kind products network, you you're

just was about curious I you how So opportunity. that on think

Peter Kelly

Yes. Thanks, Rajat.

the any information our not all, quarter. knock-on was clear, First in am of impact in compromised I a were very volume systems of The impact. way sort

I really and robust are impacted impacted they cars were systems the couldn't Listen, Our meant operations we've they in whole Rajat, and by what really That our process. second information the it unaffected about and that take volumes security good our important. dealers late home but by that we're trade-ins outage. couldn't through quarter, got. feel is sort wholesale it the of brings implication

little operations product dealership different. to dealer the part we of core dealers. like opportunities tied the innovation as for make system as a of process But are is. management systems easy of don't Our the wholesale We -- a into we're not our sort have is

product things decisions a expanding as part with Canada. of our beyond the sale dealers like but both So purchase helping vehicle, offering and that, we U.S. guidance that, of pricing in and stocking and are just vehicle and

So exciting works. we've some in got the initiatives

in to think products I talk So bring have market. we more calls to as we'll about future these

Operator

concludes would the closing remarks. to go question-and-answer our This like Mr. Peter back any Please I conference session. for ahead. turn to over Kelly

Peter Kelly

optimism just a Listen, reinforce very my few key Thank OPENLANE's that I'd to themes future. like for you much. support

that of to growth accelerate delivering our the asset, performance of our and a earlier, the further strong year than leaning more this mentioned characteristics marketplace our to the enabling the AFC I investments We're EBITDA the power As scalability be continues adjusted our OPENLANE and we're into already company. clearly strategy strategic demonstrates before. first that meaningful half in of ever seeing. offering and

think share provides you and profitable accelerate vision to best positioned Our improving are today's for We and And off commercial fundamentals. in Marketplace soon. market business look profitable future. business to seeing. the our you're forward positioned combination our our capture delivering recovery. all leasing leader all you When I OPENLANE's is factors industry and on lease joining compelling of we're from growth Thank together, remarketing opportunities a pipeline, benefit the to volumes investing and the innovation remain well dealer continue and clear to these the viewed our current that us growing, call. again grow I and we're the for the in very to speaking adherence

Operator

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

You disconnect. may now

KAR Auction Services (KAR) 7 Aug 242024 Q2 Earnings call transcript