OPENLANE Stock

OPENLANE, Inc. (OPENLANE) operates as a digital marketplace for used vehicles, connecting sellers and buyers across North America and Europe to facilitate fast, easy and transparent transactions.

The company’s portfolio of integrated technology, data analytics, financing, logistics, reconditioning and other remarketing solutions, combined with the company’s vehicle logistics centers in Canada, help advance its purpose: to make wholesale easy so the company’s customers can be more successful.

In 2023, the company’s marketplaces facilitated the sale of approximately 1.3 million used vehicles, making OPENLANE a leading digital-only wholesale marketplace for used vehicles in North America. Vehicles on the company’s marketplaces are typically sold by commercial sellers, including vehicle manufacturers and their captive finance companies, financial institutions, commercial fleet operators and rental car companies (collectively ‘commercial customers’), as well as used vehicle dealers, to franchised and independent used vehicle dealers (collectively ‘dealer customers’). The company generates revenue through auction fees charged to vehicle sellers and buyers, as well as by providing value-added ancillary products and services, including transportation logistics, reconditioning, vehicle inspection and certification, titling, administrative and collateral recovery services and floorplan financing. The company facilitates the transfer of ownership directly from seller to buyer and, generally, the company does not take title to, nor ownership of, vehicles sold through the company’s marketplaces. However, the company also sells vehicles that have been purchased, for which the company does take title and record the gross selling price of the vehicle sold through the company’s marketplaces as revenue.

For commercial sellers, the company’s software platform supports more than 40 private label digital remarketing sites and provides comprehensive solutions to the company’s commercial customers. For dealer customers, the company’s platform facilitates multiple sale formats, data-driven insights and integrated services to automotive dealers, coast-to-coast in the United States, Canada and Europe.

OPENLANE Europe is the company’s digital marketplace serving customers in the United Kingdom and Continental Europe through a consolidated online wholesale used vehicle platform. The company’s geographic network and diverse product offerings enable the company to leverage relationships with providers and buyers of used vehicles.

An important component of the company’s services to buyers is providing short-term inventory-secured financing, known as floorplan financing. This is provided primarily to independent used vehicle dealers (‘independent dealer customers’) through the company’s wholly-owned subsidiary, AFC, which has approximately 90 locations (hybrid of physical locations and a digital servicing network) throughout North America.

The company also operates a simulcast technology that supports marketplace sales at the company’s vehicle logistics centers in Canada. Access to this proprietary technology is also sold and licensed to other auction providers, including independent auctions in North America; generally, this revenue is generated on a per vehicle basis, but the company does not include these transactions in its vehicle sold numbers.

The company supports the majority of commercial sellers in North America with the company’s technology and digital applications may provide an opportunity to expand the total addressable market for dealer-to-dealer transactions.

In the North American wholesale used vehicle marketplace industry, the largest providers of physical auctions include Manheim by Cox Automotive (‘Manheim’), Carvana's used vehicle auctions operated as ADESA and America's Auto Auction.

Business Strategy

OPENLANE’s strategy is to build the world’s greatest digital marketplaces for used vehicles, and the company is advancing this strategy by fulfilling the company’s purpose, to make wholesale easy so the company’s customers can be more successful. This progressive strategy reflects the shifting landscape of the remarketing industry and automotive sector, the evolving needs and expectations of the company’s customers and the potential power and customer benefits inherent in a fully digital marketplace. The strategy builds on OPENLANE’s integrated technology, broad data analytics capabilities, and portfolio of financing, logistics, reconditioning and other remarketing solutions.

OPENLANE has identified five strategic priorities that will advance the company’s strategy and continue to position the company for the future. Those priorities are growing dealer consignment; expanding the company’s commercial business; delivering strong performance in the company’s floorplan business; digital innovation; and simplification.

Business Segments

The company operates through two reportable business segments: Marketplace and Finance.

Marketplace segment

OPENLANE is a leading digital-only wholesale used vehicle marketplace in North America. OPENLANE is committed to leading the digital transformation of the wholesale automotive remarketing industry and supporting the company’s customers by providing fast and transparent digital marketplaces for buying and selling used vehicles. The Marketplace segment serves a domestic and international customer base through digital marketplaces for wholesale vehicles that allow the buyers to inspect and compare vehicles. The company’s marketplace offerings allow it to offer vehicles for sale from any location. Digital marketplace sales are initiated online and include OPENLANE US, OPENLANE Canada and OPENLANE Europe sales.

Vehicles available on the company’s marketplaces include vehicles from commercial customers, such as off-lease vehicles, repossessed vehicles, rental vehicles and other fleet vehicles that have reached a predetermined age or mileage, as well as vehicles from dealer customers turning their inventory.

The company offers online and mobile wholesale vehicle marketplaces, as well as value-enhancing ancillary services in an effective and efficient manner to maximize returns for the sellers of used vehicles. The company transfers the vehicles and ownership to the buyer and the net funds to the seller. The company’s online marketplaces function 24 hours a day, 7 days a week, providing the company’s customers with maximum exposure for their vehicles and the flexibility to offer vehicles at ‘buy now’ prices or via marketplace sales that last for a certain amount of time. The company also provides customized ‘private label’ selling systems (including ‘buy now’ functionality, as well as other online sales formats) for the company’s customers. At OPENLANE Canada vehicle logistics center locations, vehicles are typically offered for sale on at least a weekly basis and the marketplace sales are streamed using a simulcast technology so that remote bidders can participate via the company’s online products.

The company generates revenue from auction fees paid by vehicle buyers and sellers, as well as fees from related services.

The company also sells vehicles that have been purchased, which represent approximately 1% of the total volume of vehicles sold. The vehicles that are purchased by the company (as opposed to consigned) are remarketed on the company’s own behalf through its marketplace platforms.

Customers

Suppliers of vehicles to the company’s digital marketplaces primarily include (i) commercial customers; and (ii) dealer customers. Buyers of vehicles on the company’s marketplace platforms primarily include dealer customers.

Services

The company’s digital marketplaces also provide a full range of innovative and value-added services to sellers and buyers that enable the company to serve as a ‘one-stop shop’ to service the company’s customers' needs. These services include pre and post-sale inspections, key replacement, transportation and logistics, title services and floorplan financing. For vehicles at the company’s vehicle logistics centers, the company can also provide reconditioning and mechanical work. Many of these services may be provided or purchased independently from the marketplaces, including:

Digital Marketplace Services: The company provides marketing and advertising for the vehicles on its marketplaces, dealer registration, storage and security of consigned inventory, marketplace vehicle registration, condition report processing, photo services, pre-sale lineups, sales of vehicles by licensed auctioneers, arbitration of disputes, post-sale inspections, title processing, clearing of funds and sales results reports.

Transportation Services: The company provides transportation services utilizing its own equipment and personnel, as well as licensed and insured third-party carriers. Through the company’s proprietary technology that provides automated vehicle shipping services, customers can instantly review price quotes and delivery times, and vehicle transporters can check available loads and also receive instant notification of available shipments.

Reconditioning Services: The company’s vehicle logistics centers provide detailing, body work, paintless dent repair (‘PDR’), light mechanical work, glass repair, tire and key replacement and upholstery repair. Key replacement services through a mobile field workforce are offered to digital marketplace participants, as well as other non-marketplace customers.

Inspection Services: The company inspects many of the vehicles that are offered for sale in the company’s marketplaces through a combination of the company’s employees and third parties using the company’s proprietary technologies. In addition, the company provides vehicle condition reporting, inventory verification auditing, program compliance auditing and facility inspections to non-marketplace customers. Field managers are equipped with handheld computers and digital cameras to record all inspection and audit data on-site. This technology is also utilized at the company’s vehicle logistics center locations, and the expanded utilization of comprehensive vehicle condition reports with pictures, video and sound facilitates dealers sourcing vehicles digitally.

Title and Repossession Administration and Remarketing Services: The company provides end-to-end management of the remarketing process for repossession customers, including titling, repossession administration, inventory management, marketplace selection, pricing and vehicle representation. The company also operates a proprietary digital platform for repossession management that helps repossession companies and agents manage their accounts by providing a secure, encrypted software platform to track repossession orders.

Vehicle Research Services: The company provides dealers real-time vehicle information, such as pricing, history reports and market guides. The mobile app allows dealers to scan VINs using their mobile device, view marketplace offered lists and instantly access vehicle history reports and market value reports. The company offers access to vehicle history resources, such as CARFAX and AutoCheck, as well as pricing guides, such as Black Book, Kelley Blue Book, J.D. Power and Galves. The company’s offering also includes a comprehensive wholesale and retail market report for all markets in the United States.

Sales and Marketing

The company’s sales and marketing approach is to develop strong, mutually beneficial and long-lasting relationships with the company’s customers. The company has relationship managers for the various commercial customers, including vehicle manufacturers, fleet companies, rental car companies, finance companies and others. These relationship managers focus on current trends and customer needs for their respective customers in order to better coordinate the company’s sales effort and service offerings.

The company also has local sales representatives who have experience in the used vehicle business and an intimate knowledge of local markets. These local representatives focus on the dealer sellers and buyers and are complemented by a centralized team of inventory consultants matching buyers and inventory. Both the local sales representatives and the inventory consultants are managed by a corporate-level team focused on developing and implementing standard best practices and expanding relationships with major dealer groups. This combination of a centralized structure with decentralized resources enhances relationships with the local dealer community and may further increase dealer consignment business on the company’s marketplaces.

The company also provides market analysis to its customers, as they use analytical techniques in making their remarketing decisions.

Competition

In the North American wholesale used vehicle industry, the company competes with physical auction providers, including Manheim and Carvana who now owns and operates ADESA. The company also competes with several digital marketplace providers, including ACV Auctions and others.

The company’s digital marketplaces primarily compete with large European digital remarketers, including BCA Group and others. The company also competes with EBlock and NextGear Capital.

Finance segment

AFC is a leading provider of floorplan financing to independent dealer customers. The company provides short-term inventory-secured financing, known as floorplan financing, to independent dealer customers through a hybrid of physical locations and a digital servicing network throughout North America. In 2023, AFC serviced approximately 1.6 million loan transactions, which includes both loans paid off and loans extended, or curtailed. The company sells the majority of its U.S. dollar-denominated finance receivables without recourse to a wholly-owned bankruptcy remote special purpose entity, which sells an undivided participation interest in such finance receivables to a group of bank purchasers on a revolving basis. The company also securitizes the majority of its Canadian dollar denominated finance receivables through a separate third-party facility. The company generate a significant portion of the company’s revenues from fees. These fees include origination, floorplan, curtailment and other related program fees. When the loan is extended or paid in full, AFC collects all accrued fees and interest.

In addition, AFC provides liquidity for customer trade-ins which can encompass settling lien holder payoff. The company also provides title services for its customers. These services are provided through AFC's digital servicing network, as well as its physical locations throughout North America.

Customers and Locations

Floorplan financing primarily supports independent dealer customers in North America who purchase vehicles on the company’s marketplaces or those of the company’s competitors and for non-auction purchases. In 2023, approximately 86% of the vehicles floorplanned by AFC were vehicles purchased by dealers on the company’s marketplaces or through a competitor. The company’s ability to provide floorplan financing facilitates the growth of vehicle sales on the company’s marketplaces. As of December 31, 2023, the company serviced customers through approximately 90 locations (hybrid of physical locations and a digital servicing network) in markets with a significant concentration of AFC customers. In addition, the majority of the U.S. titles are processed and held in a centralized location, enabling field personnel more time to focus on the company’s dealers.

As of December 31, 2023, AFC had approximately 12,000 active dealers.

Sales and Marketing

AFC approaches and seeks to expand its share of the independent dealer floorplan market through a number of methods and channels. The company targets and solicits new dealers through both direct sales efforts at the dealer's place of business, as well as location-based sales and customer service representatives, who service the company’s dealers at its vehicle logistics centers or competitors where they replenish and rotate vehicle inventory. These largely local efforts are handled by field personnel. AFC's corporate-level team and Business Development Center also provide sales and marketing support to AFC field personnel by helping to identify new dealer opportunities, generating new leads through digital channels, and coordinating promotional activity with the company’s marketplace platforms, competitor auctions and other vehicle supply sources. AFC also relies on the utilization of actionable data to drive the business forward (predictive modeling from historical and real-time data).

Credit

The company’s procedures, proprietary systems and data enable the company to manage its credit risk by tracking each vehicle from origination to payoff, while expediting services through the company’s field network. Typically, the company assesses a floorplan fee at the inception of a loan and the company collects all accrued fees and interest when the loan is extended or repaid in full. In addition, AFC generally holds the title or other evidence of ownership to all vehicles which are floorplanned. Typical loan terms are 30 to 90 days, each with a possible loan extension. For an additional fee, this loan extension allows the dealer to extend the duration of the loan beyond the original term for another 30 to 90 days, and generally requires the dealer to make payment towards the principal and payment of accrued fees and interest.

Collateral Management

Collateral management is an integral part of daily operations at each AFC location, including the company’s corporate headquarters. AFC's proprietary system facilitates this daily collateral management by providing real-time access to dealer information and enables field and corporate personnel to assess and manage potential collection issues. Restrictions are automatically placed on customer accounts in the event of a delinquency, payments by dealers from bank accounts with insufficient funds or poor audit results. Field personnel are proactive in managing collateral by monitoring loans and changes in payoff activity. In addition, over 58,000 routine audits, or inventory audits, are performed annually on the dealers' lots through the company’s AutoVIN subsidiary. The audit reconciliation process is centralized in order to better mitigate risk and make field personnel time available to focus on the customer. Poor results from inventory audits typically require personnel to take actions to determine the status of missing collateral, including visiting the dealer personally, verifying units held off-site and collecting payments for units sold. Audits also identify troubled accounts, triggering the involvement of AFC's risk department.

AFC operates three divisions, which are organized into ten regions in North America. Each division and region is monitored by managers who oversee daily operations. At the corporate level, AFC employs full-time risk specialists and collection attorneys who are assigned to specific regions and monitor collection activity for these areas. Risk specialists work closely with the field personnel to track trends before an account becomes a troubled account and to determine, together with collection attorneys, the best strategy to secure the collateral once a troubled account is identified. In addition, many of the company’s dealers with significant credit lines are managed by a centralized team to provide customized customer service, as well as enhanced risk oversight.

Securitization

AFC sells the majority of its U.S. dollar denominated finance receivables on a revolving basis and without recourse to a wholly-owned, bankruptcy remote, consolidated, special purpose subsidiary (‘AFC Funding Corporation’), established for the purpose of purchasing AFC's finance receivables. A securitization agreement allows for the revolving sale by AFC Funding Corporation to a group of bank purchasers of undivided interests in certain finance receivables subject to committed liquidity. The agreement expires on January 31, 2026.

The company also has an agreement in place for the securitization of Automotive Finance Canada Inc.'s (‘AFCI’) receivables. The agreement expires on January 31, 2026. The receivables sold pursuant to both the U.S. and Canadian securitization agreements are accounted for as secured borrowings.

Competition

At the national level, AFC's competition includes NextGear Capital by Cox Automotive, a subsidiary of Cox Enterprises, Inc. (‘NextGear Capital’).

Seasonality

The volume of vehicles sold through the company’s marketplaces generally fluctuates from quarter to quarter. This seasonality is caused by several factors, including weather, the timing of used vehicles available for sale from selling customers, holidays, and the seasonality of the retail market for used vehicles, which affects the demand side of the auction industry.

History

The company was founded in 2006. It was incorporated in 2006 and commenced its operations in 2007. The company was formerly known as KAR Holdings, Inc. and changed its name to KAR Auction Services, Inc. in 2009 and then to OPENLANE, Inc. in May 2023.