OPENLANE Inc

Previous wording

We are dependent on the supply of used vehicles in the wholesale market, and our financial performance depends, in part, on conditions in the automotive industry. The automotive industry has experienced unprecedented market conditions, including global automotive production challenges. In recent years, these conditions have resulted in significant fluctuations in used vehicle values and declines in vehicle volumes in the wholesale market. More recently, new vehicle supply has begun to recover, and this has resulted in wholesale supply also starting to increase.

Current wording

We are dependent on the supply of used vehicles in the wholesale market, and our financial performance depends, in part, on conditions in the automotive industry. The automotive industry has experienced unprecedented market conditions, including global automotive production challenges. In recent years, these conditions have resulted in significant fluctuations in used vehicle values and declines in vehicle volumes in the wholesale market. More recently, new vehicle supply has begun to recover, and this has resulted in wholesale vehicle supply also starting to increase.

Previous wording

However, macroeconomic factors, including inflationary pressures, rising interest rates, volatility of oil and natural gas prices and declining consumer confidence continue to impact the affordability and demand for new and used vehicles. Declining economic conditions present a risk to our operations and the stability of the automotive industry. Given the nature of these factors, we cannot predict whether or for how long certain trends will continue, nor to what degree these trends will impact us in the future.

Current wording

However, macroeconomic factors, including inflationary pressures, interest rates, volatility of oil and natural gas prices and declining consumer confidence continue to impact the affordability and demand for new and used vehicles. Declining economic conditions present a risk to our operations and the stability of the automotive industry. Given the nature of these factors, we cannot predict whether or for how long certain trends will continue, nor to what degree these trends will impact us in the future.

Previous wording

We believe the U.S. and Canadian wholesale used vehicle industry has a total addressable market of approximately 15 million vehicles, which can fluctuate depending on seasonality and a variety of other macro-economic and industry factors. This wholesale used vehicle industry consists of the commercial market (commercial sellers that sell to franchise and independent dealers) and the dealer-to-dealer market (franchise and independent dealers that both buy and sell vehicles). The Company supports the majority of commercial sellers in North America with our technology and we believe digital applications may provide an opportunity to expand the total addressable market for dealer-to-dealer transactions. The supply chain issues and market conditions facing the automotive industry in recent years, including the disruption of new vehicle production, low new vehicle supply and historically high used vehicle pricing have had a material impact on the wholesale used vehicle industry. More recently, new vehicle supply has begun to recover, and this has resulted in wholesale supply also starting to increase.

Current wording

We believe the U.S. and Canadian wholesale used vehicle industry has a total addressable market of approximately 15 million vehicles, which can fluctuate depending on seasonality and a variety of other macro-economic and industry factors. This wholesale used vehicle industry consists of the commercial market (commercial sellers that sell to franchise and independent dealers) and the dealer-to-dealer market (franchise and independent dealers that both buy and sell vehicles). The Company supports the majority of commercial sellers in North America with our technology and we believe digital applications may provide an opportunity to expand the total addressable market for dealer-to-dealer transactions. The supply chain issues and market conditions facing the automotive industry in recent years, including the disruption of new vehicle production, low new vehicle supply and historically high used vehicle pricing have had a material impact on the wholesale used vehicle industry. More recently, new vehicle supply has begun to recover, and this has resulted in wholesale vehicle supply also starting to increase.

Previous wording

For the three months ended June 30, 2024, we had revenue of$431.8 million compared with revenue of $416.9 million for the three months ended June 30, 2023, anin crease of 4%. For a further discussion of revenues, gross profit and selling, general and administrative expenses, see the segment results discussions below.

Current wording

For the three months ended September 30, 2024, we had revenue of $448.4 million compared with revenue of $416.3 million for the three months ended September 30, 2023, an increase of 8%. For a further discussion of revenues, gross profit and selling, general and administrative expenses, see the segment results discussions below.

Previous wording

Depreciation and amortization decreased$2.7 million, or 10%, to$24.1 million for the three months ended June 30, 2024, compared with $26.8 million for the three months ended June 30, 2023. The decrease in depreciation and amortization was primarily the result of assets that have become fully depreciated and amortized.

Current wording

Depreciation and amortization decreased $2.6 million, or 10%, to $23.8 million for the three months ended September 30, 2024, compared with $26.4 million for the three months ended September 30, 2023. The decrease in depreciation and amortization was primarily the result of assets that have become fully amortized.

Previous wording

For the three months ended June 30, 2024, we had other expense of $0.2 million compared with other income of $21.3 million for the three months ended June 30, 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 $1.5 million.

Current wording

For the three months ended September 30, 2024, we had other income of $3.6 million compared with other expense of $1.7 million for the three months ended September 30, 2023. The increase in other income was primarily attributable to an increase in foreign currency gains on intercompany balances of $2.0 million, a decrease in unrealized losses on investment securities of $0.5 million and a net decrease in other miscellaneous expense aggregating $2.8 million.

Previous wording

We had an effective tax rate of 38.4% for the six months ended June 30, 2024, compared with an effective tax rate of 6.2% resulting in a benefit on a pre-tax loss for the six months ended June 30, 2023. The effective tax rate for the six months ended June 30, 2024 was unfavorably impacted by an increase in the valuation allowance related to current year movement of the adjusted U.S. net deferred tax asset. The effective tax rate for the six months ended June 30, 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 $29.6 million deferred tax expense associated with the recording of valuation allowance against the U.S. net deferred tax asset.

Current wording

We had an effective tax rate of 31.6% for the three months ended September 30, 2024, compared with an effective tax rate of 50.0% for the three months ended September 30, 2023. The effective tax rate for the three months ended September 30, 2024 was unfavorably impacted by an increase in the valuation allowance related to current year movement of the adjusted U.S. net deferred tax asset. The effective tax rate for the three months ended September 30, 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.

Previous wording

For the three months ended June 30, 2024 compared with the three months ended June 30, 2023, the change in the Canadian dollar exchange rate decreased revenue by$1.8 million, operating profit by$0.5 million and net income by $0.2 million. For the three months ended June 30, 2024 compared with the three months ended June 30, 2023, the change in the euro exchange rate decreased revenue by$1.0 million, operating profit by$0.1 million and hadno impact on net income.

Current wording

For the three months ended September 30, 2024 compared with the three months ended September 30, 2023, the change in the Canadian dollar exchange rate decreased revenue by $1.6 million, operating profit by $0.3 million and had no impact on net income. For the three months ended September 30, 2024 compared with the three months ended September 30, 2023, the change in the euro exchange rate increased revenue by $0.8 million, operating profit by $0.1 million and had no impact on net income.

Previous wording

Revenue from the Marketplace segment increased$16.6 million, or 5%, to$336.0 millionfor the three months ended June 30, 2024, compared with $319.4 million for the three months ended June 30, 2023. The change in revenue included the impact of a decrease in revenue of$1.4 million due to fluctuations in the Canadian dollar exchange rate and$1.0 million due to fluctuations in the euro exchange rate. Thein crease in revenue was primarily attributable to thein crease in purchased vehicle sales and an increase in auction fees, partially offset by a decrease in service revenue (discussed below).

Current wording

Revenue from the Marketplace segment increased $37.7 million, or 12%, to $354.3 million for the three months ended September 30, 2024, compared with $316.6 million for the three months ended September 30, 2023. The increase in revenue was primarily attributable to the 6% increase in the number of vehicles sold. For the three months ended September 30, 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 $1.3 million due to fluctuations in the Canadian dollar exchange rate and an increase of $0.8 million due to fluctuations in the euro exchange rate.

Previous wording

The 7% increase in the number of vehicles sold was comprised of a 21% increase in commercial volumes and an 8% decrease in dealer consignment volumes. The gross merchandise value ("GMV") of vehicles sold for the three months ended June 30, 2024 and 2023 was approximately$6.8 billion and $6.4 billion, respectively.

Current wording

The 6% increase in the number of vehicles sold was comprised of an 8%increase in commercial volumes and a 3% increase in dealer consignment volumes. The gross merchandise value ("GMV") of vehicles sold for the three months ended September 30, 2024 and 2023 was approximately $6.7 billion and $6.0 billion, respectively.

Previous wording

Auction feesin creased$5.4 million, or 5%, to $108.7 million for the three months ended June 30, 2024, compared with $103.3 million for the three months ended June 30, 2023. The number of vehicles soldin creased 7%. Auction fees per vehicle sold for the three months ended June 30, 2024 decreased$6, or 2%, to$295, compared with $301 for the three months ended June 30, 2023. Thede crease in auction fees per vehicle sold reflects a larger mix of lower-fee commercial vehicles sold in the second quarter of 2024.

Current wording

Auction fees increased $11.1 million, or 11%, to $113.2 million for the three months ended September 30, 2024, compared with $102.1 million for the three months ended September 30, 2023. The number of vehicles sold increased 6%. Auction fees per vehicle sold for the three months ended September 30, 2024 increased $14, or 5%, to $315, compared with $301 for the three months ended September 30, 2023. The increase in auction fees per vehicle sold reflects the mix of vehicles sold in the third quarter of 2024 and the impact of price increases.

Previous wording

Service revenue decreased $8.6 million, or 6%, to $147.1 million for the three months ended June 30, 2024, compared with $155.7 million for the three months ended June 30, 2023, primarily as a result of a decrease in transportation revenue of $17.4 million, of which $20.9 million related to a change in a key customer contract that resulted in the customer's second quarter of 2024 revenue being recorded on a net commission basis instead of a gross basis, as it was recorded in the second quarter of 2023. This decrease was partially offset by increases in inspection service revenue of $3.1 million, repossession and remarketing fees of $3.0 million, reconditioning revenue of $1.2 million and a net increase in other miscellaneous service revenues aggregating approximately $1.5 million.

Current wording

Service revenue decreased $5.8 million, or 4%, to $148.1 million for the three months ended September 30, 2024, compared with $153.9 million for the three months ended September 30, 2023, primarily as a result of a decrease in transportation revenue of $6.4 million, of which $12.6 million related to a change in a key customer contract that resulted in the customer's third quarter of 2024 revenue being recorded on a net commission basis instead of a gross basis, as it was recorded in the third quarter of 2023. In addition, there was a net decrease in other miscellaneous service revenues aggregating $3.8 million, partially offset by increases in inspection service revenue of $2.8 million and reconditioning revenue of $1.6 million.

Previous wording

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 $19.8 million, or 33%, to $80.2 million for the three months ended June 30, 2024, compared with $60.4 million for the three months ended June 30, 2023, primarily as a result of an increase in purchased vehicles sold in Europe.

Current wording

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 $32.4 million, or 53%, to $93.0 million for the three months ended September 30, 2024, compared with $60.6 million for the three months ended September 30, 2023, primarily as a result of an increase in purchased vehicles sold in Europe.

Previous wording

For the three months ended June 30, 2024, gross profit from the Marketplace segment decreased $6.4 million, or 6%, to $106.9 million, compared with $113.3 million for the three months ended June 30, 2023. Gross profit decreased primarily as a result of a new digital services tax in Canada (see below), which represented a decrease of $12.0 million and a $2.4 million decrease in gross profit resulting from a higher mix of commercial volumes. Partially offsetting the decrease were gross profit improvements driven by a $5.9 million increase in auction and service volumes and $2.1 million from pricing.

Current wording

For the three months ended September 30, 2024, gross profit from the Marketplace segment increased $1.8 million, or 2%, to $119.1 million, compared with $117.3 million for the three months ended September 30, 2023. Gross profit improvements were driven by a $10.8 million increase in auction and service volumes and $0.4 million from pricing. These improvements were partially offset by a $9.4 million decrease in gross profit resulting from a higher mix of commercial volumes.

Previous wording

Gross profit from the Marketplace segment was 31.8% of revenue for the three months ended June 30, 2024, compared with 35.5% of revenue for the three months ended June 30, 2023. The new Canadian Digital Services Tax (see below) decreased gross profit as a percentage of revenue by 360 basis points for the three months ended June 30, 2024. Excluding purchased vehicle sales, gross profit as a percentage of revenue was 41.8% and 43.8% for the three months ended June 30, 2024 and 2023, respectively. Excluding purchased vehicle sales, gross profit as a percentage of revenue decreased for the three months ended June 30, 2024 as compared with the three months ended June 30, 2023, primarily due to a new Canadian Digital Services Tax (see below), partially offset by a change in a key customer contract (see discussion in "Service revenue" above).

Current wording

Gross profit from the Marketplace segment was 33.6% of revenue for the three months ended September 30, 2024, compared with 37.0% of revenue for the three months ended September 30, 2023. Excluding purchased vehicle sales, gross profit as a percentage of revenue was 45.6% and 45.8% for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

On June 28, 2024, Canada enacted a new 3% Digital Services Tax (“DST”) on certain online revenues, including online marketplace service revenues, of companies with consolidated revenues of at least €750 million. The Canadian DST is retroactive to January 1, 2022. The Company recorded $12.0 million of Canadian DST to cost of services in the second quarter of 2024. Approximately $2 million, $5 million and $5 million relates to Canadian DST for the six months ended June 30, 2024 and the years ended December 31, 2023 and 2022, respectively.

Current wording

On June 28, 2024, Canada enacted a new 3% Digital Services Tax (“Canadian DST”) on certain online revenues, including online marketplace service revenues, of companies with consolidated revenues of at least €750 million. The Company recorded $1.2 million of Canadian DST to cost of services in the third quarter of 2024, which was partially mitigated by corresponding price increases during the quarter.

Previous wording

For the three months ended June 30, 2024, the Finance segment revenue decreased $1.7 million, or 2%, to $95.8 million, compared with $97.5 million for the three months ended June 30, 2023. The decrease in revenue was primarily the result of a 5% decrease in revenue per loan transaction, partially offset by a 3% increase in loan transactions.

Current wording

For the three months ended September 30, 2024, the Finance segment revenue decreased $5.6 million, or 6%, to $94.1 million, compared with $99.7 million for the three months ended September 30, 2023. The decrease in revenue was primarily the result of a 6% decrease in revenue per loan transaction. Revenue per loan transaction, which includes both loans paid off and loans curtailed, decreased $14, or 6%, primarily as a result of a decrease in interest yields and a decrease in vehicle values, partially offset by an increase in floorplan fee per unit and an increase in average portfolio duration.

Previous wording

For the three months ended June 30, 2024, gross profit for the Finance segment decreased $2.0 million, or 2%, to $79.0 million, or 82.5% of revenue, compared with $81.0 million, or 83.1% of revenue, for the three months ended June 30, 2023. The decrease in gross profit as a percent of revenue was primarily the result of a 2% increase in cost of services and the 2% decrease in revenue. The increase in cost of services of $0.3 million was primarily the result of increases in credit checks and filing fees of $0.2 million and other miscellaneous expenses aggregating $0.4 million, partially offset by a decrease in lot check expenses of $0.3 million.

Current wording

For the three months ended September 30, 2024, gross profit for the Finance segment decreased $5.7 million, or 7%, to $77.3 million, or 82.1% of revenue, compared with $83.0 million, or 83.2% of revenue, for the three months ended September 30, 2023. The decrease in gross profit as a percent of revenue was primarily the result of the 6% decrease in revenue and a less than 1% increase in cost of services.

Previous wording

Selling, general and administrative expenses for the Finance segment decreased $0.7 million, or 6%, to $12.0 million for the three months ended June 30, 2024, compared with $12.7 million for the three months ended June 30, 2023 primarily as a result of decreases in stock-based compensation of $1.1 million and incentive-based compensation of $1.1 million, partially offset by increases in compensation expense of $1.3 million and other miscellaneous expenses aggregating $0.2 million.

Current wording

Selling, general and administrative expenses for the Finance segment decreased $0.9 million, or 7%, to $11.7 million for the three months ended September 30, 2024, compared with $12.6 million for the three months ended September 30, 2023 primarily as a result of decreases in information technology costs of $1.1 million and incentive-based compensation of $0.3 million, partially offset by increases in title handling costs of $0.3 million and other miscellaneous expenses aggregating $0.2 million.

Previous wording

Overview of Results of OPENLANE, Inc. for the Six Months Ended June 30, 2024 and 2023:

Current wording

Overview of Results of OPENLANE, Inc. for the Nine Months Ended September 30, 2024 and 2023:

Previous wording

For the six months ended June 30, 2024, we had revenue of $848.1 million compared with revenue of $837.5 million for the six months ended June 30, 2023, an increase of 1%. For a further discussion of revenues, gross profit and selling, general and administrative expenses, see the segment results discussions below.

Current wording

For the nine months ended September 30, 2024, we had revenue of $1,296.5 million compared with revenue of $1,253.8 million for the nine months ended September 30, 2023, an increase of 3%. For a further discussion of revenues, gross profit and selling, general and administrative expenses, see the segment results discussions below.

Previous wording

Depreciation and amortization decreased $1.4 million, or 3%, to $48.4 million for the six months ended June 30, 2024, compared with $49.8 million for the six months ended June 30, 2023. The decrease in depreciation and amortization was primarily the result of assets that have become fully amortized.

Current wording

Depreciation and amortization decreased $4.0 million, or 5%, to $72.2 million for the nine months ended September 30, 2024, compared with $76.2 million for the nine months ended September 30, 2023. The decrease in depreciation and amortization was primarily the result of assets that have become fully amortized.

Previous wording

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$41.1 million and $36.4 million valuation allowance against the U.S. net deferred tax asset at June 30, 2024 and December 31, 2023, respectively.

Current wording

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 $42.9 million and $36.4 million valuation allowance against the U.S. net deferred tax asset at September 30, 2024 and December 31, 2023, respectively.

Previous wording

Interest expense decreased$1.4 million, or 4%, to$37.4 million for the three months ended June 30, 2024, compared with $38.8 million for the three months ended June 30, 2023. The decrease in interest expense was primarily the result of the partial repayment of senior note debt in 2023. In addition, interest expense decreased$0.2 million at AFC (to$31.9 million from $32.1 million).

Current wording

Interest expense decreased $4.1 million, or 4%, to $112.4 million for the nine months ended September 30, 2024, compared with $116.5 million for the nine months ended September 30, 2023. Interest expense decreased as a result of the partial repayment of senior note debt in 2023. In addition, AFC had a $1.4 million decrease in interest expense (to $95.2 million from $96.6 million) attributable to a decrease in the average balance on the AFC securitization obligations.

Previous wording

For the six months ended June 30, 2024, we had other expense of $0.7 million compared with other income of $14.2 million for the six months ended June 30, 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, a $2.1 million increase in foreign currency losses on intercompany balances and a net decrease in other miscellaneous income aggregating $5.1 million, partially offset by the 2023 impairment of an equity security and note receivable with the same investee aggregating $11.0 million and a $1.3 million contingent consideration valuation adjustment in 2023.

Current wording

For the nine months ended September 30, 2024, we had other income of $2.9 million compared with $12.5 million for the nine months ended September 30, 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 $1.9 million, partially offset by the 2023 impairment of an equity security and note receivable with the same investee aggregating $11.0 million and a $1.3 million contingent consideration valuation adjustment in 2023.

Previous wording

We had an effective tax rate of 41.2% for the three months ended June 30, 2024, compared with an effective tax rate of 9.1% resulting in a benefit on a pre-tax loss for the three months ended June 30, 2023. The effective tax rate for the three months ended June 30, 2024 was unfavorably impacted by an increase in the valuation allowance related to current year movement of the adjusted U.S. net deferred tax asset. The effective tax rate for the three months ended June 30, 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 $29.6 million deferred tax expense associated with the recording of valuation allowance against the U.S. net deferred tax asset.

Current wording

We had an effective tax rate of 35.2% for the nine months ended September 30, 2024, compared with an effective tax rate of -0.4% resulting in expense on a pre-tax loss for the nine months ended September 30, 2023. The effective tax rate for the nine months ended September 30, 2024 was unfavorably impacted by an increase in the valuation allowance related to current year movement of the adjusted U.S. net deferred tax asset. The effective tax rate for the nine months ended September 30, 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 $34.2 million deferred tax expense associated with the recording of valuation allowance against the U.S. net deferred tax asset.

Previous wording

For the six months ended June 30, 2024 compared with the six months ended June 30, 2023, the change in the Canadian dollar exchange ratede creased revenue by$1.4 million, operating profit by$0.4 million and net income by$0.1 million. For the six months ended June 30, 2024 compared with the six months ended June 30, 2023, the change in the euro exchange ratede creased revenue by$0.1 million and had no impact on operating profit and net income.

Current wording

For the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023, the change in the Canadian dollar exchange rate decreased revenue by $2.9 million, operating profit by $0.7 million and net income by $0.2 million. For the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023, the change in the euro exchange rate increased revenue by $0.8 million and had no impact on operating profit and net income.

Previous wording

Revenue from the Marketplace segment increased $13.9 million, or 2%, to $654.3 million for the six months ended June 30, 2024, compared with $640.4 million for the six months ended June 30, 2023. The change in revenue included the impact of a decrease in revenue of $1.1 million due to fluctuations in the Canadian dollar exchange rate and $0.1 million due to fluctuations in the euro exchange rate. The increase in revenue was primarily attributable to the increase in purchased vehicle sales and auction fees, partially offset by the decrease in service revenue (discussed below).

Current wording

Revenue from the Marketplace segment increased $51.6 million, or 5%, to $1,008.6 million for the nine months ended September 30, 2024, compared with $957.0 million for the nine months ended September 30, 2023. The increase in revenue was primarily attributable to the 8% increase in the number of vehicles sold. For the nine months ended September 30, 2024, there was an increase in purchased vehicle sales and auction fees, partially offset by the decrease in service revenue (discussed below). The change in revenue included the impact of a decrease in revenue of $2.3 million due to fluctuations in the Canadian dollar exchange rate and an increase of $0.8 million due to fluctuations in the euro exchange rate.

Previous wording

The 10% increase in the number of vehicles sold was comprised of a 27% increase in commercial volumes and an 8% decrease in dealer consignment volumes. The gross merchandise value ("GMV") of vehicles sold for the six months ended June 30, 2024 and 2023 was approximately$13.8 billionand $12.4 billion, respectively.

Current wording

The 8% increase in the number of vehicles sold was comprised of a 20% increase in commercial volumes and a 4% decrease in dealer consignment volumes. The gross merchandise value ("GMV") of vehicles sold for the nine months ended September 30, 2024 and 2023 was approximately $20.5 billion and $18.4 billion, respectively.

Previous wording

Auction fees increased $15.4 million, or 8%, to $218.6 million for the six months ended June 30, 2024, compared with $203.2 million for the six months ended June 30, 2023. The number of vehicles sold increased 10%. Auction fees per vehicle sold for the six months ended June 30, 2024 decreased $7, or 2%, to $295, compared with $302 for the six months ended June 30, 2023. The decrease in auction fees per vehicle sold reflects a larger mix of lower-fee commercial vehicles sold in the first six months of 2024.

Current wording

Auction fees increased $26.5 million, or 9%, to $331.8 million for the nine months ended September 30, 2024, compared with $305.3 million for the nine months ended September 30, 2023. The number of vehicles sold increased 8%. Auction fees per vehicle sold for the nine months ended September 30, 2024 increased $1, or 0%, to $302, compared with $301 for the nine months ended September 30, 2023.

Previous wording

Service revenue decreased $24.0 million, or 7%, to $297.3 million for the six months ended June 30, 2024, compared with $321.3 million for the six months ended June 30, 2023, primarily as a result of a decrease in transportation revenue of $40.8 million, of which $42.5 million related to a change in a key customer contract that resulted in the customer's revenue for the first six months of 2024 being recorded on a net commission basis instead of a gross basis, as it was recorded in the first six months of 2023. This decrease was partially offset by increases in repossession and remarketing fees of $5.4 million, inspection service revenue of $5.4 million, key service revenue of $2.2 million, reconditioning revenue of $1.8 million and a net increase in other miscellaneous service revenues aggregating approximately $2.0 million.

Current wording

Service revenue decreased $29.8 million, or 6%, to $445.4 million for the nine months ended September 30, 2024, compared with $475.2 million for the nine months ended September 30, 2023, primarily as a result of a decrease in transportation revenue of $47.2 million, of which $55.0 million related to a change in a key customer contract that resulted in the customer's revenue for the first nine months of 2024 being recorded on a net commission basis instead of a gross basis, as it was recorded in the first nine months of 2023. In addition, there was a net decrease in other miscellaneous service revenues aggregating approximately $1.8 million, partially offset by increases in inspection service revenue of $8.2 million, repossession and remarketing fees of $4.9 million, reconditioning revenue of $3.4 million and key service revenue of $2.7 million.

Previous wording

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 $22.5 million, or 19%, to $138.4 million for the six months ended June 30, 2024, compared with $115.9 million for the six months ended June 30, 2023, primarily as a result of an increase in purchased vehicles sold in Europe.

Current wording

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 $54.9 million, or 31%, to $231.4 million for the nine months ended September 30, 2024, compared with $176.5 million for the nine months ended September 30, 2023, primarily as a result of an increase in purchased vehicles sold in Europe.

Previous wording

For the six months ended June 30, 2024, gross profit from the Marketplace segment increased $1.6 million, or 1%, to $228.1 million, compared with $226.5 million for the six months ended June 30, 2023. Gross profit improvements were driven by a $13.4 million increase in auction and service volumes and $4.4 million from pricing. These improvements were partially offset by a new digital services tax in Canada (see below), which represented a decrease of $12.0 million and a $4.2 million decrease in gross profit resulting from a higher mix of commercial volumes.

Current wording

For the nine months ended September 30, 2024, gross profit from the Marketplace segment increased $3.4 million, or 1%, to $347.2 million, compared with $343.8 million for the nine months ended September 30, 2023. Gross profit improvements were driven by a $24.2 million increase in auction and service volumes and $4.8 million from pricing. These improvements were partially offset by the Canadian DST, which represented a decrease of $13.2 million and a $12.4 million decrease in gross profit resulting from a higher mix of commercial volumes.

Previous wording

Gross profit from the Marketplace segment was 34.9% of revenue for the six months ended June 30, 2024, compared with 35.4% of revenue for the six months ended June 30, 2023. The new Canadian Digital Services Tax (see below) decreased gross profit as a percentage of revenue by 180 basis points for the six months ended June 30, 2024. Excluding purchased vehicle sales, gross profit as a percentage of revenue was 44.2% and 43.2% for the six months ended June 30, 2024 and 2023, respectively. Excluding purchased vehicle sales, gross profit as a percentage of revenue increased for the six months ended June 30, 2024 as compared with the six months ended June 30, 2023, primarily due to a change in a key customer contract (see discussion in "Service revenue" above), increased volumes and cost savings initiatives, partially offset by a new Canadian Digital Services Tax (see below).

Current wording

Gross profit from the Marketplace segment was 34.4% of revenue for the nine months ended September 30, 2024, compared with 35.9% of revenue for the nine months ended September 30, 2023. The Canadian DST decreased gross profit as a percentage of revenue by 130 basis points for the nine months ended September 30, 2024. Excluding purchased vehicle sales, gross profit as a percentage of revenue was 44.7% and 44.0% for the nine months ended September 30, 2024 and 2023, respectively. Excluding purchased vehicle sales, gross profit as a percentage of revenue increased for the nine months ended September 30, 2024 as compared with the nine months ended September 30, 2023, primarily due to a change in a key customer contract (see discussion in "Service revenue" above), increased volumes, increased prices and cost savings initiatives, partially offset by the Canadian DST.

Previous wording

On June 28, 2024, Canada enacted a new 3% Digital Services Tax (“DST”) on certain online revenues, including online marketplace service revenues, of companies with consolidated revenues of at least €750 million. The Canadian DST is retroactive to January 1, 2022. The Company recorded $12.0 million of Canadian DST to cost of services in the second quarter of 2024. Approximately $2 million, $5 million and $5 million relates to Canadian DST for the six months ended June 30, 2024 and the years ended December 31, 2023 and 2022, respectively.

Current wording

As a result of the Canadian DST being retroactive to January 1, 2022, the Company recorded $13.2 million of Canadian DST to cost of services for the nine months ended September 30, 2024. Approximately $3.2 million, $5 million and $5 million relates to Canadian DST for the nine months ended September 30, 2024 and the years ended December 31, 2023 and 2022, respectively. During the third quarter of 2024, the Company increased its prices to prospectively mitigate the Canadian DST.

Previous wording

Selling, general and administrative expenses from the Marketplace segment decreased $5.3 million, or 3%, to $188.8 million for the six months ended June 30, 2024, compared with $194.1 million for the six months ended June 30, 2023, primarily as a result of decreases in compensation expense of $6.6 million, incentive-based compensation of $4.5 million, professional fees of $1.3 million and other miscellaneous expenses aggregating $0.6 million, partially offset by increases in severance of $4.8 million, stock-based compensation of $1.6 million and information technology costs of $1.3 million.

Current wording

Selling, general and administrative expenses from the Marketplace segment decreased $12.4 million, or 4%, to $276.5 million for the nine months ended September 30, 2024, compared with $288.9 million for the nine months ended September 30, 2023, primarily as a result of decreases in compensation expense of $7.8 million, incentive-based compensation of $5.0 million, professional fees of $2.9 million, information technology costs of $1.8 million and other miscellaneous expenses aggregating $1.9 million, partially offset by increases in severance of $4.1 million, marketing costs of $1.5 million and stock-based compensation expense of $1.4 million.

Previous wording

For the six months ended June 30, 2024, the Finance segment revenue decreased $3.3 million, or 2%, to $193.8 million, compared with $197.1 million for the six months ended June 30, 2023. The decrease in revenue was primarily the result of a 3% decrease in revenue per loan transaction, partially offset by a 2% increase in loan transactions.

Current wording

For the nine months ended September 30, 2024, the Finance segment revenue decreased $8.9 million, or 3%, to $287.9 million, compared with $296.8 million for the nine months ended September 30, 2023. The decrease in revenue was primarily the result of a 4% decrease in revenue per loan transaction, partially offset by a 1% increase in loan transactions. Revenue per loan transaction, which includes both loans paid off and loans curtailed, decreased $10, or 4%, primarily as a result of a decrease in vehicle values, partially offset by an increase in interest yields and an increase in floorplan fee per unit.

Previous wording

The provision for credit losses increased to 2.2% of the average managed receivables for the six months ended June 30, 2024 from 2.0% for the six months ended June 30, 2023. The provision for credit losses is expected to be approximately 2% or under, on a long-term basis, of the average managed receivables balance. However, the actual losses in any particular quarter or year could deviate from this range.

Current wording

The provision for credit losses increased to 2.2% of the average managed receivables for the nine months ended September 30, 2024 from 2.0% for the nine months ended September 30, 2023. The provision for credit losses is expected to be approximately 2% or under, on a long-term basis, of the average managed receivables balance. However, the actual losses in any particular quarter or year could deviate from this range.

Previous wording

For the six months June 30, 2024, gross profit for the Finance segment decreased $4.0 million, or 2%, to $160.2 million, or 82.7% of revenue, compared with $164.2 million, or 83.3% of revenue, for the six months ended June 30, 2023. The decrease in gross profit as a percent of revenue was primarily the result of a 2% increase in cost of services and the 2% decrease in revenue. The increase in cost of services of $0.7 million was primarily the result of increases in professional fees of $0.4 million, travel expenses of $0.3 million and other miscellaneous expenses aggregating $0.6 million, partially offset by a decrease in lot check expenses of $0.6 million.

Current wording

For the nine months September 30, 2024, gross profit for the Finance segment decreased $9.7 million, or 4%, to $237.5 million, or 82.5% of revenue, compared with $247.2 million, or 83.3% of revenue, for the nine months ended September 30, 2023. The decrease in gross profit as a percent of revenue was primarily the result of a 2% increase in cost of services and the 3% decrease in revenue. The increase in cost of services of $0.8 million was primarily the result of increases in professional fees of $0.5 million, travel expenses of $0.4 million and other miscellaneous expenses aggregating $0.7 million, partially offset by a decrease in lot check expenses of $0.8 million.

Previous wording

Approximately $56.1 million of available cash was held by our foreign subsidiaries at June 30, 2024. If funds held by our foreign subsidiaries were to be repatriated, state and local income tax expense and withholding tax expense would need to be recognized, net of any applicable foreign tax credits.

Current wording

Approximately $84.1 million of available cash was held by our foreign subsidiaries at September 30, 2024. If funds held by our foreign subsidiaries were to be repatriated, state and local income tax expense and withholding tax expense would need to be recognized, net of any applicable foreign tax credits.