OPENLANE, Inc. Q4 FY2024 earnings call

• Fourth Quarter and Full Year 2024 Highlights: Consolidated revenue grew 12%, consolidated adjusted EBITDA grew 18%, Marketplace volumes grew 9% (7th straight quarter of year-over-year volume growth), Marketplace generated $31 million in adjusted EBITDA in Q4 (30% increase), full year adjusted EBITDA was $293 million, cash flow from operations was $293 million, and gross merchandize value grew 12% to $27 billion.
• Strategy Priorities: Anchored in making wholesale easy, focusing on delivering the best marketplace (expanding buyers/sellers and inventory), best technology (innovative products/services), and best customer experience (fast, fair, transparent).
• 2025 Strategy: Execution is key. 2025 is the bottom of the off-lease supply cycle, but new lease originations rose for 7th straight quarter in Q4, with volume expected to return in 2026 and beyond. Dealer business saw growth in 2024 and continues to have opportunity. Invested in products (e.g., One App), go-to-market approach (broader awareness campaigns, personalized journeys), and people (more sales resources, personal support for customers).
• Finance Segment Update: AFC grew floor plan originations, held loan loss rate to lowest in 8 quarters, and generated $159 million of adjusted EBITDA for the year.

Marketplace Segment: Fourth quarter revenue increased 8% to $349 million. Total volumes were up 9% with Dealer volumes up 15% and Commercial volumes up 5%. Auction fee revenue increased by 24% driven by volume growth, sales mix, and auction fee price increases. Services revenue was down 2% but excluding transportation accounting change, it increased by 1%. Gross profit was up 20% due to increased volumes and lower depreciation and amortization costs. Marketplace adjusted EBITDA was $31 million, up 30% in the fourth quarter, and full year Marketplace adjusted EBITDA was $135 million, up 24%. Finance Segment: For the quarter, total finance revenues were down 5% primarily driven by lower vehicle values, lower interest rates, and a decrease in days outstanding. Floor plan originations were up 6%, curtailments were down 7%, and total loan transactions were up 1%. Finance segment adjusted EBITDA was $42 million, up 10%, and the provision for credit losses was 1.9%, the lowest rate in eight quarters.

• 2025 adjusted EBITDA is expected to be between $290 million and $310 million.
• Operating adjusted earnings per share is expected to be between $0.90 and $1.
• Capital expenditures are expected to be between $50 million and $55 million in 2025, in line with 2024.

• Macro economic uncertainties.
• Strengthening US dollar creating translation headwinds.
• Uncertainty regarding tariffs and their impact on used cars.

Q: With the industry decline in off-lease vehicles, how are dealers handling trade-ins? Are they keeping more and setting less option or have volumes have been steady?

A: Volumes have been steady or strong. D2D volume growth in Q4 was 15% (strongest growth of the year), grew active base of sellers and buyers, and had strong months of new dealer sign ups. Not noticing lack of inventory at dealers.

Q: Do you expect Canadian wholesale volumes to be affected by tariffs or trade war?

A: OPENLANE is well positioned to prosper in any environment. Has strong balance sheet and management team. Won't speculate on tariffs but confident in prospering in any environment.

Q: Could you give us a sense of what the market did in the quarter and what your share gains were in the U.S. specifically in D2D volumes?

A: D2D volumes had 15% year-on-year growth in Q4, strong growth in US and Canada. Additional investments in US go-to-market in late Q2 and Q3 paying off. Bullish on D2D market as a source of sustainable long-term growth.

Q: Is there any confusion in the market as your changing this technology with dealers that are literally just trying to buy and sell at a wholesale level and then buy and sell on the retail side?

A: Dealers give high marks on ease and simplicity of platform. When changing stuff, get range of feedback. Try to be thoughtful with AB testing and rolling out features to smaller audiences first. Some dealers were buying on private-label side for years without knowing it was OPENLANE.

Q: If you look at 2025 and new entrants in the auction space, do you see the environment becoming more competitive?

A: Don't comment on specific competitors. Feel good about OPENLANE's positioning, rising ranks in dealer surveys, strong strategy in Marketplace, Commercial, and Finance segments, and relatively small market share in big TAM with strong offering.