OPENLANE : Fourth Quarter 2024 Supplemental Financial Information

Published: 2025-02-19 17:35:31 ET KAR

EXHIBIT 99.2

OPENLANE, Inc.

Q4 and YTD 2024 Supplemental Financial Information

February 19, 2025

OPENLANE, Inc.

EBITDA and Adjusted EBITDA Measures

EBITDA and Adjusted EBITDA as presented herein are supplemental measures of our performance that are not required by, or presented in accordance with, generally accepted accounting principles in the United States ("GAAP"). They are not measurements of our financial performance under GAAP and should not be considered as substitutes for net income (loss), operating profit (loss) or any other performance measures derived in accordance with GAAP.

EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings as described in our senior secured credit agreement covenant calculations. Management believes that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional information to investors about one of the principal measures of performance used by our creditors. In addition, management uses EBITDA and Adjusted EBITDA to evaluate our performance. EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of the results as reported under GAAP. These measures may not be comparable to similarly titled measures reported by other companies.

The following tables reconcile EBITDA and Adjusted EBITDA to income (loss) from continuing operations for the periods presented:

Three Months Ended December 31, 2024

(Dollars in millions), (Unaudited)

Marketplace

Finance

Consolidated

Income from continuing operations

25.9

26.4

52.3

Add back:

Income taxes

7.3

9.4

16.7

Finance interest expense

28.3

Interest expense, net of interest income

4.1

Depreciation and amortization

20.0

3.0

23.0

EBITDA

57.3

67.1

124.4

Non-cash stock-based compensation

0.9

0.2

1.1

Acquisition related costs

0.1

Securitization interest

(25.7)

Gain on sale of business

(31.6)

Severance

2.3

0.1

2.4

Foreign currency (gains)/losses

6.4

0.1

6.5

(Gain)/loss on investments

(0.4)

Impact for newly enacted Canadian DST related to prior years

(4.6)

Other

0.5

Total addbacks/(deductions)

(26.4)

(25.3)

(51.7)

Adjusted EBITDA

30.9

41.8

72.7

Three Months Ended December 31, 2023

(Dollars in millions), (Unaudited)

Marketplace

Finance

Consolidated

Income (loss) from continuing operations

(17.7)

31.3

13.6

Add back:

Income taxes

(2.5)

10.1

7.6

Finance interest expense

34.0

Interest expense, net of interest income

4.9

Depreciation and amortization

22.7

2.6

25.3

Intercompany interest

9.8

(9.8)

EBITDA

17.2

68.2

85.4

Non-cash stock-based compensation

2.7

0.9

3.6

Acquisition related costs

2.0

Securitization interest

(31.4)

Severance

2.0

0.1

2.1

Foreign currency (gains)/losses

(2.1)

(Gain)/loss on investments

(0.4)

Professional fees related to business improvement efforts

1.7

0.4

2.1

Other

0.2

0.3

0.5

Total addbacks/(deductions)

6.5

(30.1)

(23.6)

Adjusted EBITDA

23.7

38.1

61.8

Year Ended December 31, 2024

(Dollars in millions), (Unaudited)

Marketplace

Finance

Consolidated

Income from continuing operations

1.7

108.2

109.9

Add back:

Income taxes

11.3

36.7

48.0

Finance interest expense

123.5

Interest expense, net of interest income

20.2

Depreciation and amortization

83.3

11.9

95.2

Intercompany interest

13.3

(13.3)

EBITDA

129.8

267.0

396.8

Non-cash stock-based compensation

12.9

3.0

15.9

Acquisition related costs

0.6

Securitization interest

(112.7)

Gain on sale of business

(31.6)

Severance

10.5

1.1

11.6

Foreign currency (gains)/losses

5.8

(Gain)/loss on investments

(0.4)

Professional fees related to business improvement efforts

1.2

0.3

1.5

Impact for newly enacted Canadian DST related to prior years

5.4

Other

0.3

0.2

0.5

Total addbacks/(deductions)

4.7

(108.1)

(103.4)

Adjusted EBITDA

134.5

158.9

293.4

Year Ended December 31, 2023

(Dollars in millions), (Unaudited)

Marketplace

Finance

Consolidated

Income (loss) from continuing operations

(277.5)

122.7

(154.8)

Add back:

Income taxes

(40.4)

48.7

8.3

Finance interest expense

130.6

Interest expense, net of interest income

21.7

Depreciation and amortization

92.2

9.3

101.5

Intercompany interest

33.9

(33.9)

EBITDA

(170.1)

277.4

107.3

Non-cash stock-based compensation

13.2

4.2

17.4

Loss on extinguishment of debt

1.1

Acquisition related costs

3.1

Securitization interest

(120.4)

Severance

5.1

0.4

5.5

Foreign currency (gains)/losses

(2.9)

Goodwill and other intangibles impairment

250.8

Contingent consideration adjustment

1.3

Professional fees related to business improvement efforts

5.4

1.2

6.6

Other

1.3

0.9

2.2

Total addbacks/(deductions)

278.4

(113.7)

164.7

Adjusted EBITDA

108.3

163.7

272.0

Certain of our loan covenant calculations utilize financial results for the most recent four consecutive fiscal quarters. The following table reconciles EBITDA and Adjusted EBITDA to net income for the periods presented:

Three Months Ended

Twelve

Months Ended

(Dollars in millions),

March 31,

June 30,

September 30,

December 31,

(Unaudited)

2024

Net income

18.5

10.7

28.4

52.3

109.9

Less: Income from discontinued operations

Income from continuing operations

18.5

10.7

28.4

52.3

109.9

Add back:

Income taxes

10.7

7.5

13.1

16.7

48.0

Finance interest expense

32.6

31.9

30.7

28.3

123.5

Interest expense, net of interest income

6.7

5.2

4.2

4.1

20.2

Depreciation and amortization

24.3

24.1

23.8

23.0

95.2

EBITDA

92.8

79.4

100.2

124.4

396.8

Non-cash stock-based compensation

7.0

3.7

4.1

1.1

15.9

Acquisition related costs

0.3

0.2

0.1

0.6

Securitization interest

(29.9)

(29.2)

(27.9)

(25.7)

(112.7)

Gain on sale of business

(31.6)

Severance

1.7

6.0

1.5

2.4

11.6

Foreign currency (gains)/losses

2.0

0.5

(3.2)

6.5

5.8

(Gain)/loss on investments

(0.4)

Professional fees related to business

0.8

0.7

1.5

improvement efforts

Impact for newly enacted Canadian DST

10.0

(4.6)

5.4

related to prior years

Other

0.1

(0.2)

0.5

Total addbacks/(deductions)

(18.0)

(8.0)

(25.7)

(51.7)

(103.4)

Adjusted EBITDA from continuing

74.8

71.4

74.5

72.7

293.4

operations

Results of Operations

OPENLANE Results

Three Months Ended

Year Ended

(Dollars in millions except per share amounts)

December 31,

2024

2023

2024

2023

Revenues from continuing operations

Auction fees

112.0

90.0

443.8

395.3

Service revenue

141.2

144.5

586.6

619.7

Purchased vehicle sales

95.6

60.2

327.0

236.7

Finance revenue

106.2

111.4

431.1

444.0

Total operating revenues

455.0

406.1

1,788.5

1,695.7

Operating expenses

Cost of services (exclusive of depreciation and amortization)

244.5

204.8

956.3

867.6

Finance interest expense

28.3

34.0

123.5

130.6

Provision for credit losses

12.1

17.2

54.3

59.2

Selling, general and administrative

99.7

101.4

408.6

421.8

Depreciation and amortization

23.0

25.3

95.2

101.5

Gain on sale of business

(31.6)

Goodwill and other intangibles impairment

250.8

Total operating expenses

376.0

382.7

1,606.3

1,831.5

Operating profit (loss)

79.0

23.4

182.2

(135.8)

Interest expense

4.6

5.3

21.8

25.2

Other expense (income), net

5.4

(3.1)

2.5

(15.6)

Loss on extinguishment of debt

1.1

Income (loss) from continuing operations before income taxes

69.0

21.2

157.9

(146.5)

Income taxes

16.7

7.6

48.0

8.3

Income (loss) from continuing operations

52.3

13.6

109.9

(154.8)

Income from discontinued operations, net of income taxes

0.7

Net income (loss)

52.3

14.3

109.9

(154.1)

Income (loss) from continuing operations per share

Basic

0.29

0.02

0.46

(1.83)

Diluted

0.29

0.02

0.45

(1.83)

Overview of OPENLANE Results for the Three Months Ended December 31, 2024 and 2023

Overview

For the three months ended December 31, 2024, we had revenue of $455.0 million compared with revenue of $406.1 million for the three months ended December 31, 2023, an increase of 12%. For a further discussion of our operating results, see the segment results discussions below.

Depreciation and Amortization

Depreciation and amortization decreased $2.3 million, or 9%, to $23.0 million for the three months ended December 31, 2024, compared with $25.3 million for the three months ended December 31, 2023. The decrease in depreciation and amortization was primarily the result of assets that have become fully amortized.

Gain on Sale of Business

In December 2024, the Company completed the sale of its automotive key business, resulting in a pretax gain on disposal of approximately $31.6 million for the three months ended December 31, 2024.

Interest Expense

Interest expense decreased $0.7 million, or 13%, to $4.6 million for the three months ended December 31, 2024, compared with $5.3 million for the three months ended December 31, 2023. The decrease in interest expense was primarily the result of a decrease in the borrowings on lines of credit.

Other Expense (Income), Net

For the three months ended December 31, 2024, we had other expense of $5.4 million compared with other income of $3.1 million for the three months ended December 31, 2023. The decrease in other income was primarily attributable to $6.5 million in foreign currency losses on intercompany loan balances for the three months ended December 31, 2024, compared with $2.1 million in foreign currency gains on intercompany loan balances for the three months ended December 31, 2023, partially offset by an increase in other miscellaneous income aggregating $0.1 million.

Income Taxes

We had an effective tax rate of 24.2% for the three months ended December 31, 2024, compared with an effective tax rate of 35.8% for the three months ended December 31, 2023. The effective tax rate for the three months ended December 31, 2024 was favorably impacted by a decrease in the valuation allowance related to current year movement of the adjusted U.S. net deferred tax asset, partially offset by the unfavorable impact of non-deductible goodwill recognized in the sale of the automotive key business. The effective tax rate for the three months ended December 31, 2023 was unfavorably impacted by an increase in the valuation allowance related to 2023 current year movement of the adjusted U.S. net deferred tax asset and tax expense related to current and planned distribution of foreign earnings.

We recorded a $35.8 million and $36.4 million valuation allowance against the U.S. net deferred tax asset at December 31, 2024 and 2023, respectively. The realization of the net deferred tax assets is dependent on our ability to generate sufficient future taxable income to utilize these assets. Depending on our current and anticipated future earnings, we may release a significant portion of our valuation allowance in a future period if there is sufficient positive evidence which would result in a corresponding decrease to income tax expense in such period. The actual timing and amount of the valuation allowance to be released is uncertain.

Additionally, the Organization for Economic Cooperation and Development has published a proposal to establish a new global minimum corporate tax rate of 15%, commonly referred to as Pillar Two. While the U.S. has not yet adopted the Pillar Two framework into law, numerous countries in which we operate have enacted tax legislation based on the Pillar Two framework with certain components of the minimum tax rules effective beginning in 2024 and further rules becoming effective beginning in 2025. These rules are not expected to materially impact the Company's consolidated financial statements. The Company will continue to monitor U.S. and global legislative action related to Pillar Two for potential impacts.

Income from Discontinued Operations

In May 2022, Carvana acquired the ADESA U.S. physical auction business from the Company. As such, the financial results of the ADESA U.S. physical auction business have been accounted for as discontinued operations for all periods presented. The $0.7 million in income from discontinued operations for the three months ended December 31, 2023 was comprised of an adjustment to income taxes.

Impact of Foreign Currency

For the three months ended December 31, 2024 compared with the three months ended December 31, 2023, the change in the Canadian dollar exchange rate decreased revenue by $2.7 million, operating profit by $0.7 million and net income by $0.4 million. For the three months ended December 31, 2024 compared with the three months ended December 31, 2023, the change in the euro exchange rate decreased revenue by $0.7 million and had no impact on operating profit and net income.

Overview of OPENLANE Results for the Year Ended December 31, 2024 and 2023

Overview

For the year ended December 31, 2024, we had revenue of $1,788.5 million compared with revenue of $1,695.7 million for the year ended December 31, 2023, an increase of 5%. For a further discussion of our operating results, see the segment results discussions below.

Depreciation and Amortization

Depreciation and amortization decreased $6.3 million, or 6%, to $95.2 million for the year ended December 31, 2024, compared with $101.5 million for the year ended December 31, 2023. The decrease in depreciation and amortization was primarily the result of assets that have become fully amortized.

Gain on Sale of Business

In December 2024, the Company completed the sale of its automotive key business, resulting in a pretax gain on disposal of approximately $31.6 million for the year ended December 31, 2024.

Goodwill and Other Intangibles Impairment

In the second quarter of 2023 the Company recorded non-cash goodwill impairment charges totaling $218.9 million related to our U.S. Dealer-to-Dealer reporting unit and $6.4 million related to our Europe reporting unit (both within the Marketplace segment). The goodwill impairment related to our U.S. Dealer-to-Dealer reporting unit was primarily driven by lower near-term and long-term revenue growth associated with a slower overall recovery in vehicle volumes. The goodwill impairment related to our Europe reporting unit was driven by combining two previously separate reporting units (ADESA U.K. and ADESA Europe) into a single reporting unit. Including ADESA U.K. in the reporting unit resulted in a reduction in the overall fair value of the combined reporting unit, resulting in an impairment charge. The impairment charges were reported as a component of "Goodwill and other intangibles impairment" in the consolidated statements of income (loss).

In addition, the second quarter 2023 announcement of the rebrand to an OPENLANE branded marketplace from the ADESA branded marketplaces resulted in a non-cash impairment charge totaling $25.5 million (within the Marketplace segment). The impairment charge was reported as a component of "Goodwill and other intangibles impairment" in the consolidated statements of income (loss).

The deferred tax benefits of $52.5 million and $6.5 million associated with the goodwill and tradename impairments in the second quarter of 2023, respectively, resulted in the U.S. being in a net deferred tax asset position. Due to the three-year cumulative loss related to U.S. operations, we recorded a $35.8 million and $36.4 million valuation allowance against the U.S. net deferred tax asset at December 31, 2024 and 2023, respectively.

Interest Expense

Interest expense decreased $3.4 million, or 13%, to $21.8 million for the year ended December 31, 2024, compared with $25.2 million for the year ended December 31, 2023. The decrease in interest expense was primarily the result of the partial repayment of senior note debt in 2023.

Other Expense (Income), Net

For the year ended December 31, 2024, we had other expense of $2.5 million compared with other income of $15.6 million for the year ended December 31, 2023. The decrease in other income was primarily attributable to the receipt of $20.0 million in connection with the early termination of a contractual arrangement that occurred during the second quarter of 2023 and a net decrease in other miscellaneous income aggregating $1.0 million, partially offset by the 2023 impairment of an equity security and note receivable with the same investee aggregating $10.3 million and a $1.3 million contingent consideration valuation adjustment in 2023. In addition, there were $5.8 million in foreign currency losses on intercompany loan balances for the year ended December 31, 2024, compared with $2.9 million in foreign currency gains on intercompany loan balances for the year ended December 31, 2023.

Loss on Extinguishment of Debt

In 2023, we replaced the Previous Revolving Credit Facility and also prepaid a portion of the senior notes. As a result of these items, we recorded a loss on extinguishment of debt totaling $1.1 million. The loss was primarily the result of the write-off of unamortized debt issuance costs associated with lenders not participating in the Revolving Credit Facility and unamortized debt issuance costs associated with the portion of the senior notes repaid.

Income Taxes

We had an effective tax rate of 30.4% for the year ended December 31, 2024, compared with an effective tax rate of -5.7% resulting in expense on a pre-tax loss for the year ended December 31, 2023. The effective tax rate for the year ended December 31, 2023 was impacted by the goodwill and other intangibles impairment charges and resulting $59.0 million deferred tax benefit recorded with respect to the impairment of tax deductible goodwill and

the impairment of other intangibles, partially offset by the $36.4 million deferred tax expense associated with the recording of valuation allowance against the U.S. net deferred tax asset.

Income from Discontinued Operations

In May 2022, Carvana acquired the ADESA U.S. physical auction business from the Company. As such, the financial results of the ADESA U.S. physical auction business have been accounted for as discontinued operations for all periods presented. The $0.7 million in income from discontinued operations for the year ended December 31, 2023 was comprised of an adjustment to income taxes.

Impact of Foreign Currency

For the year ended December 31, 2024 compared with the year ended December 31, 2023, the change in the Canadian dollar exchange rate decreased revenue by $5.6 million, operating profit by $1.3 million and net income by $0.5 million.

Marketplace Results

Three Months Ended

Year Ended

December 31,

(Dollars in millions)

2024

2023

2024

2023

Auction fees

112.0

90.0

443.8

395.3

Service revenue

141.2

144.5

586.6

619.7

Purchased vehicle sales

95.6

60.2

327.0

236.7

Total Marketplace revenue

348.8

294.7

1,357.4

1,251.7

Cost of services*

245.6

208.8

964.0

883.6

Gross profit

103.2

85.9

393.4

368.1

Provision for credit losses

1.5

2.4

6.7

8.6

Selling, general and administrative

88.3

89.3

359.6

372.0

Depreciation and amortization

1.9

2.4

8.2

10.3

Gain on sale of business

(31.6)

Goodwill and other intangibles impairment

250.8

Operating profit (loss)

43.1

(8.2)

50.5

(273.6)

Commercial vehicles sold

192,000

183,000

826,000

710,000

Dealer consignment vehicles sold

155,000

135,000

620,000

621,000

Total vehicles sold

347,000

318,000

1,446,000

1,331,000

* Includes depreciation and amortization

Overview of Marketplace Results for the Three Months Ended December 31, 2024 and 2023

Total Marketplace Revenue

Revenue from the Marketplace segment increased $54.1 million, or 18%, to $348.8 million for the three months ended December 31, 2024, compared with $294.7 million for the three months ended December 31, 2023. The increase in revenue was primarily attributable to the 9% increase in the number of vehicles sold. For the three months ended December 31, 2024, there was an increase in purchased vehicle sales and an increase in auction fees, partially offset by a decrease in service revenue (discussed below). The change in revenue included the impact of a decrease in revenue of $2.8 million due to fluctuations in the Canadian dollar and euro exchange rates.

The 9% increase in the number of vehicles sold was comprised of a 5% increase in commercial volumes and a 15% increase in dealer consignment volumes. The GMV of vehicles sold for the three months ended December 31, 2024 and 2023 was approximately $6.6 billion and $5.7 billion, respectively.

Auction Fees

Auction fees increased $22.0 million, or 24%, to $112.0 million for the three months ended December 31, 2024, compared with $90.0 million for the three months ended December 31, 2023. The number of vehicles sold increased 9%. Auction fees per vehicle sold for the three months ended December 31, 2024 increased $40, or 14%, to $323, compared with $283 for the three months ended December 31, 2023. The increase in auction fees per vehicle sold reflects the mix of vehicles sold in the fourth quarter of 2024 and the impact of price increases.

Service Revenue

Service revenue decreased $3.3 million, or 2%, to $141.2 million for the three months ended December 31, 2024 compared with $144.5 million for the three months ended December 31, 2023, primarily as a result of a decrease in repossession fees of $6.5 million, partially offset by increases in transportation revenue of $2.7 million and other miscellaneous service revenues aggregating approximately $0.5 million.

Purchased Vehicle Sales

The entire selling and purchase price of the vehicle is recorded as revenue and cost of services for purchased vehicles sold, which represent approximately 2% of total vehicles sold. Purchased vehicle sales increased $35.4 million, or 59%, to $95.6 million for the three months ended December 31, 2024, compared with $60.2 million for the three months ended December 31, 2023, primarily as a result of an increase in purchased vehicles sold in Europe.

Disclaimer

Openlane Inc. published this content on February 19, 2025, and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on February 19, 2025 at 22:33:31.553.