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What changed in OPENLANE, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of OPENLANE, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+408 added−432 removedSource: 10-K (2024-02-21) vs 10-K (2023-03-09)

Top changes in OPENLANE, Inc.'s 2023 10-K

408 paragraphs added · 432 removed · 328 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

75 edited+12 added−22 removed32 unchanged
Biggest changeGenerally, this revenue is generated on a per vehicle basis, but we do not include these transactions in our vehicle sold numbers. In May 2022, the ADESA U.S. physical auction business was sold to Carvana and included all auction sales, operations and staff at ADESA’s U.S. vehicle logistics centers and use of the ADESA.com marketplace in the U.S.
Biggest changeThe Company also operates a simulcast technology that supports marketplace sales at our 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 we do not include these transactions in our vehicle sold numbers.
We add buyer fees to the gross sales price paid by buyers for each vehicle, and generally customers do not receive title or possession of vehicles after purchase until payment is received, proof of floorplan financing is provided or credit is approved.
We add buyer fees to the gross sales price paid by buyers for each vehicle, and generally customers do not receive title and/or possession of vehicles after purchase until payment is received, proof of floorplan financing is provided or credit is approved.
None of our employees participate in collective bargaining agreements, but we have established a works council in Belgium pursuant to local law. In addition to the employee workforce, we utilize independent contractors and temporary labor services to provide certain services. Our people drive our business, so we strive to attract, develop and retain high-performing talent.
None of our employees participate in collective bargaining agreements, but we have a works council in Belgium pursuant to local law. In addition to the employee workforce, we utilize independent contractors and temporary labor services to provide certain services. Our people drive our business, so we strive to attract, develop and retain high-performing talent.
We also intend to continue to build on and diversify our data and analytics capabilities, providing our customers with actionable information to help them make better, more informed buying and selling decisions. • Talent : Our shift to a digital model has enabled us to become a more efficient organization.
We also intend to continue to build on and diversify our data and analytics capabilities, providing our customers with actionable information to help them make better, more informed buying and selling decisions. • Talent: Our digital model has enabled us to become a more efficient organization.
In addition, changes in working capital vary from quarter-to-quarter as a result of the timing of collections and disbursements of funds to consignors from marketplace sales held near period end. 11 Table of Contents Government Regulation Our operations are subject to regulation, supervision and licensing under various federal, state, provincial, local and foreign authorities, agencies, statutes and ordinances, which, among other things, require us to obtain and maintain certain licenses, permits and qualifications, provide certain disclosures and notices, limit interest rates, fees and other charges and protect personal data.
In addition, changes in working capital vary from quarter-to-quarter as a result of the timing of collections and disbursements of funds to consignors from marketplace sales held near period end. 10 Table of Contents Government Regulation Our operations are subject to regulation, supervision and licensing under various federal, state, provincial, local and foreign authorities, agencies, statutes and ordinances, which, among other things, require us to obtain and maintain certain licenses, permits and qualifications, provide certain disclosures and notices, limit interest rates, fees and other charges and protect personal data.
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. AFC's securitization facility has been in place since 1996. AFC Funding Corporation had a committed facility of $2.0 billion from a third-party facility for U.S. finance receivables at December 31, 2022.
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. AFC's securitization facility has been in place since 1996. AFC Funding Corporation had a committed facility of $2.0 billion from a third-party facility for U.S. finance receivables at December 31, 2023.
The underwriting of each line of credit requires an analysis, write-up and recommendation by the credit department and, in case of credit lines in excess of $600,000, final review by a credit committee. 10 Table of Contents Collateral Management Collateral management is an integral part of daily operations at each AFC location, including our corporate headquarters.
The underwriting of each line of credit requires an analysis, write-up and recommendation by the credit department and, in the case of credit lines in excess of $600,000, final review by a credit committee. 9 Table of Contents Collateral Management Collateral management is an integral part of daily operations at each AFC location, including our corporate headquarters.
The agreement expires on January 31, 2026. We also have an agreement in place for the securitization of Automotive Finance Canada Inc.'s ("AFCI") receivables. This securitization facility provides up to C$225 million in financing for eligible finance receivables through a third-party conduit (separate from the U.S. facility). The agreement expires on January 31, 2026.
The agreement expires on January 31, 2026. We also have an agreement in place for the securitization of Automotive Finance Canada Inc.'s ("AFCI") receivables. This securitization facility provides up to C$300 million in financing for eligible finance receivables through a third-party conduit (separate from the U.S. facility). The agreement expires on January 31, 2026.
The number of vehicles offered for sale on our marketplaces is the key driver of our costs incurred, and the number of vehicles sold is the key driver of the revenues generated by our marketplaces.
The number of vehicles offered for sale on our marketplaces is a key driver of our costs incurred, and the number of vehicles sold is the key driver of the revenues generated by our marketplaces.
Additionally, AFC maintains best-in-class safeguards and processes to identify, mitigate and manage risk across their portfolio. We believe AFC’s local presence, centralized services and processing, and their pipeline of innovation position the floorplan business well for continued growth and contribution to KAR’s overall results.
Additionally, AFC maintains best-in-class safeguards and processes to identify, mitigate and manage risk across their portfolio. We believe AFC’s local presence, centralized services and processing, and their pipeline of innovation position the floorplan business well for continued growth and contribution to OPENLANE’s overall results.
The information posted on our website is not incorporated into this Annual Report. The SEC maintains a website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that site is www.sec.gov. 12 Table of Contents
The information posted on our website is not incorporated into this Annual Report. The SEC maintains a website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that site is www.sec.gov. 11 Table of Contents
We generate a significant portion of our 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 encompasses settling lien holder payoff. We also provide title services for our customers.
We generate a significant portion of our 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. We also provide title services for our customers.
Our Business Strategy KAR’s strategy is to build the world’s greatest digital marketplaces for used vehicles, and we are advancing this strategy by fulfilling our purpose, to make wholesale easy so our customers can be more successful.
Our Business Strategy OPENLANE’s strategy is to build the world’s greatest digital marketplaces for used vehicles, and we are advancing this strategy by fulfilling our purpose, to make wholesale easy so our customers can be more successful.
We believe buyers benefit from digital platforms through greater transparency, access to inventory beyond their local market, and the ability to browse, bid and buy safely and conveniently from any location, on any device, at any time. For KAR, going digital enables a faster, more agile and asset-light operating model, which should in turn deliver greater value to our stakeholders.
We believe buyers benefit from digital platforms through greater transparency, access to inventory beyond their local market, and the ability to browse, bid and buy from any location, on any device, at any time. For OPENLANE, going digital enables a faster, more agile and asset-light operating model, which should in turn deliver greater value to our stakeholders.
Floorplan Financing An important component of the wholesale used vehicle industry is the availability of short-term inventory-secured financing, known as floorplan financing. By providing buyers (primarily independent used vehicle dealers) access to capital, the independent used vehicle dealers are able to place inventory on their lots.
Floorplan Financing An important component of the wholesale used vehicle industry is the availability of short-term inventory-secured financing, known as floorplan financing. By providing buyers (primarily independent dealer customers) access to capital, the independent dealer customers are able to place inventory on their lots.
Vehicles on our marketplaces are typically sold by commercial sellers including vehicle manufacturers and their captive finance companies, financial institutions, commercial fleet operators and rental car companies, as well as used vehicle dealers, to franchised and independent used vehicle dealers.
Vehicles on our 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").
AFC and its competitors play a significant role in the wholesale used vehicle industry by providing liquidity in our marketplaces. In addition, AFC's floorplan financing also supports independent used vehicle dealers with non-auction purchases and value-added services that generate fee-based, non-interest revenue.
AFC and its competitors play a significant role in the wholesale used vehicle industry by providing liquidity in our marketplaces. AFC's floorplan financing also supports independent dealer customers with non-auction purchases. In addition, AFC offers value-added services that generate fee-based, non-interest revenue.
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 used vehicle dealers in North America who purchase vehicles on our marketplaces or those of our competitors and for non-auction purchases.
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 our marketplaces or those of our competitors and for non-auction purchases.
The wholesale used vehicle industry is highly fragmented in Europe. Our digital marketplaces primarily compete with large European digital remarketers, including BCA Group and others. There are also a number of small independent auction operations throughout Europe. 9 Table of Contents Finance Overview AFC is a leading provider of floorplan financing to independent used vehicle dealers.
The wholesale used vehicle industry is highly fragmented in Europe. Our digital marketplaces primarily compete with large European digital remarketers, including BCA Group and others. There are also a number of small independent auction operations throughout Europe. 8 Table of Contents Finance Overview AFC is a leading provider of floorplan financing to independent dealer customers.
Collection specialists work closely with the field offices 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.
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.
Our Corporate History ADESA entered the vehicle remarketing industry in 1989 and first became a public company in 1992. In 1994, ADESA acquired AFC. ADESA remained a public company until 1995, and then became public again in 2004. KAR was incorporated in 2006 and acquired ADESA and IAA in 2007, taking ADESA private. KAR became a public company in 2009.
Our Corporate History ADESA entered the vehicle remarketing industry in 1989 and first became a public company in 1992. In 1994, ADESA acquired AFC. ADESA remained a public company until 1995, and then became public again in 2004. KAR Auction Services, Inc. ("KAR") was incorporated in 2006 and acquired ADESA and IAA in 2007, taking ADESA private.
KAR has identified five strategic priorities that we believe will advance our strategy and continue to position our company for the future. Those priorities are: • Digital transformation; • Growing dealer consignment; • Expanding our commercial business; • Delivering strong performance in our floorplan business; and • Simplification.
OPENLANE has identified five strategic priorities that we believe will advance our strategy and continue to position our company for the future. Those priorities are: • Growing dealer consignment; • Expanding our commercial business; • Delivering strong performance in our floorplan business; • Digital innovation; and • Simplification.
The receivables sold pursuant to both the U.S. and Canadian securitization agreements are accounted for as secured borrowings. Competition AFC provides short-term dealer floorplan financing of wholesale vehicles primarily to independent vehicle dealers in North America. At the national level, AFC's competition includes NextGear Capital, a subsidiary of Cox Enterprises, Inc., other specialty lenders, banks and financial institutions.
The receivables sold pursuant to both the U.S. and Canadian securitization agreements are accounted for as secured borrowings. Competition AFC provides short-term dealer floorplan financing of wholesale vehicles primarily to independent vehicle dealers in North America. At the national level, AFC's competition includes NextGear Capital by Cox Automotive ("NextGear Capital"), other specialty lenders, banks and financial institutions.
We are also working towards centralizing many key customer support and administrative functions to ensure a faster, more predictable and consistent experience for our customers. As these consolidation efforts progress, we expect increased engagement from our dealers, increased efficiency in our technology development and operations, and improved results across our marketplace business.
We have also been centralizing many key customer support and administrative functions to ensure a faster, more predictable and consistent experience for our customers. As these consolidation efforts progress, we expect increased engagement from our dealers, increased efficiency in our technology development and operations and improved results across our marketplace business.
The following are key industry highlights: 4 Table of Contents Wholesale Used Vehicle Industry Volumes We believe the U.S. and Canadian wholesale used vehicle industry has a total addressable market of approximately 20 million vehicles, which can fluctuate depending on seasonality and a variety of other macro-economic factors.
The following are key industry highlights: Wholesale Used Vehicle Industry Volumes 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.
Competition In the North American wholesale used vehicle industry, we compete with physical auction providers including Manheim and others. We also compete with several digital marketplace providers, including ACV Auctions and others. In addition, used car retailers, such as CarMax, have developed proprietary platforms for selling vehicles to other dealers.
Competition In the North American wholesale used vehicle industry, we compete with physical auction providers including Manheim and Carvana who now owns and operates ADESA. We also compete with several digital marketplace providers, including ACV Auctions and others. In addition, used car retailers, such as CarMax, have developed proprietary platforms for selling vehicles to other dealers.
Employees and Human Capital At December 31, 2022, we had approximately 4,500 employees, of which approximately 2,100 were located in the U.S. and approximately 2,400 were located in Canada, Europe, Mexico, Uruguay and the Philippines. Approximately 88% of our workforce consists of full-time employees.
Employees and Human Capital At December 31, 2023, we had approximately 4,500 employees, of which approximately 2,100 were located in the U.S. and approximately 2,400 were located in Canada, Europe, Uruguay and the Philippines. Approximately 85% of our workforce consists of full-time employees.
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 if the dealer makes payment towards principal and pays accrued fees and interest.
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.
Our online marketplaces function 24 hours a day, 7 days a week, providing our 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 few hours, days or even weeks.
Our online marketplaces function 24 hours a day, 7 days a week, providing our 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.
In 2019, IAA was separated from KAR through a tax-free spin-off and now operates as a separate public company (NYSE: IAA). In 2022, KAR sold the ADESA U.S. physical auction business to Carvana. Our Industry Wholesale used vehicles are generally sold through marketplaces that bring together sellers and buyers to facilitate transactions.
KAR became a public company in 2009. In 2019, IAA was separated from KAR through a tax-free spin-off. In 2022, KAR sold the ADESA U.S. physical auction business to Carvana. In 2023, KAR rebranded to OPENLANE. Our Industry Wholesale used vehicles are generally sold through marketplaces that bring together sellers and buyers to facilitate transactions.
The supply chain issues and current market conditions facing the automotive industry, 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.
The supply chain issues and 4 Table of Contents 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.
Many of these services may be provided or purchased independently from the marketplaces, including: Services Description Digital Marketplace Services We provide marketing and advertising for the vehicles on our 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. 7 Table of Contents Transportation Services We provide transportation services utilizing our own equipment and personnel as well as licensed and insured third party carriers.
Many of these services may be provided or purchased independently from the marketplaces, including: Services Description Digital Marketplace Services We provide marketing and advertising for the vehicles on our 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.
The foundation of KAR’s commercial offering is OPENLANE, the digital platform powering more than 40 private label websites for our commercial OEM and financial institution consignor customers. We continue to invest in staff and technology to enhance the digital experience for our commercial customers using any of our multiple platforms.
The foundation of OPENLANE’s commercial offering is our digital platform powering more than 40 private label websites for our commercial OEM and financial institution consignor customers. We continue to invest in technology to enhance the digital experience for our commercial customers and continue innovating on these platforms.
Our portfolio of integrated technology, data analytics, financing, logistics, reconditioning and other remarketing solutions, combined with our vehicle logistics centers in Canada, help advance our purpose: to make wholesale easy so our customers can be more successful. In 2022, our marketplaces facilitated the sale of approximately 1.3 million used vehicles.
Our portfolio of integrated technology, data analytics, financing, logistics, reconditioning and other remarketing solutions, combined with our vehicle logistics centers in Canada, help advance our purpose: to make wholesale easy so our customers can be more successful.
We provide short-term inventory-secured financing, known as floorplan financing, to independent used vehicle dealers through locations throughout North America. In 2022, AFC serviced approximately 1.6 million loan transactions, which includes both loans paid off and loans extended, or curtailed.
We provide 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.
As a result, revenues and operating expenses related to volume will fluctuate accordingly on a quarterly basis. The fourth calendar quarter typically experiences lower used vehicle marketplace volume as well as additional costs associated with the holidays and winter weather.
Wholesale used vehicle volumes tend to decline during prolonged periods of winter weather conditions. As a result, revenues and operating expenses related to volume will fluctuate accordingly on a quarterly basis. In North America, the fourth calendar quarter typically experiences lower used vehicle volume as well as additional costs associated with the holidays and winter weather.
Our offering also includes a comprehensive wholesale and retail market report for all markets in the United States. Sales and Marketing Our sales and marketing approach is to develop strong, mutually beneficial and long-lasting relationships with our customers. We have relationship managers for the various commercial customers, including vehicle manufacturers, fleet companies, rental car companies, finance companies and others.
Sales and Marketing Our sales and marketing approach is to develop strong, mutually beneficial and long-lasting relationships with our customers. We have relationship managers for the various commercial customers, including vehicle manufacturers, fleet companies, rental car companies, finance companies and others.
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 through our OPENLANE technology.
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 Marketplace segment serves a domestic and international customer base through digital marketplaces for wholesale vehicles that allow the buyers to inspect and compare vehicles. Our marketplace offerings allow us to offer vehicles for sale from any location. Our vehicle logistics centers in Canada facilitate on-premise marketplace sales utilizing primarily our ADESA Simulcast and Simulcast+ technology.
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. Our marketplace offerings allow us to offer vehicles for sale from any location.
The Company is integrating and leveraging technology, capabilities and staff from these businesses to deliver what we believe will be the best digital dealer-to-dealer solution in the market. Expanding our commercial business : The commercial consignment business represents approximately two-thirds of the Company’s historical transactional volume, and growing our share in this area remains a strategic priority.
Over the last few years, the Company has integrated and leveraged technology, capabilities and staff from these businesses to deliver what we believe is the best digital dealer-to-dealer solution in the market. 5 Table of Contents Expanding our commercial business: The commercial consignment business represents approximately one-half of the Company’s transactional volume, and growing our share in this area remains a strategic priority.
At the corporate level, AFC employs full-time collection specialists and collection attorneys who are assigned to specific regions and monitor collection activity for these areas.
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.
At most ADESA Canada vehicle logistics center locations, vehicles are typically offered for sale on at least a weekly basis and the marketplace sales are streamed using our ADESA Simulcast and Simulcast+ technology so that remote bidders can participate via our online products.
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 our online products. We generate revenue from auction fees paid by vehicle buyers and sellers, as well as fees from related services.
Additionally, a more simplified business will help us focus our investments, accelerate the pace of innovation and manage our operating costs to the evolving market realities of our business. Our Business Segments We operate as two reportable business segments: Marketplace (formerly referenced as ADESA Auctions) and Finance (formerly referenced as AFC).
Additionally, a more simplified business will help us focus our investments, accelerate the pace of innovation and manage our operating costs to the evolving market realities of our business. Our Business Segments We operate as two reportable business segments: Marketplace and Finance. Our revenues for the year ended December 31, 2023 were distributed as follows: Marketplace 76% and Finance 24%.
Wholesale Used Vehicle Market In the North American wholesale used vehicle marketplace industry, the largest providers of physical auctions include Manheim, a subsidiary of Cox Enterprises, Inc., and the ADESA U.S. physical auction business. In the North American wholesale used vehicle marketplace industry, the largest providers of digital marketplaces include the Company and ACV Auctions.
Wholesale Used Vehicle Market 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. In the North American wholesale used vehicle marketplace industry, the largest providers of digital marketplaces include the Company and ACV Auctions.
In 2022, approximately 87% of the vehicles floorplanned by AFC were vehicles purchased by dealers on our marketplaces or through a competitor. Our ability to provide floorplan financing facilitates the growth of vehicle sales on our marketplaces. As of December 31, 2022, we serviced customers through approximately 100 locations in markets with a significant concentration of AFC customers.
In 2023, approximately 86% of the vehicles floorplanned by AFC were vehicles purchased by dealers on our marketplaces or through a competitor. Our ability to provide floorplan financing facilitates the growth of vehicle sales on our marketplaces.
Vehicles available on our 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 used vehicle dealers turning their inventory.
Digital marketplace sales are initiated online and include OPENLANE US, OPENLANE Canada and OPENLANE Europe sales. 6 Table of Contents Vehicles available on our 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.
We believe this combination of a centralized structure with decentralized resources enhances relationships with the local dealer community and may further increase dealer consignment business on our marketplaces.
We believe this combination of a centralized structure with decentralized resources enhances relationships with the local dealer community and may further increase dealer consignment business on our marketplaces. We also provide market analysis to our customers, as they use analytical techniques in making their remarketing decisions.
Field managers are equipped with handheld computers and digital cameras to record all inspection and audit data on-site. The same technology is utilized at our vehicle logistics center locations, and we believe that the expanded utilization of comprehensive vehicle condition reports with pictures, video and sound facilitates dealers sourcing vehicles digitally.
This technology is also utilized at our vehicle logistics center locations, and we believe that the expanded utilization of comprehensive vehicle condition reports with pictures, video and sound facilitates dealers sourcing vehicles digitally.
This progressive strategy reflects the shifting landscape of the remarketing industry and automotive sector, the evolving needs and expectations of our customers and the opportunities that emerged and accelerated with the onset of the global COVID-19 pandemic in 2020. The strategy builds on KAR’s integrated technology, broad data analytics capabilities, and portfolio of financing, logistics, reconditioning and other remarketing solutions.
This progressive strategy reflects the shifting landscape of the remarketing industry and automotive sector, the evolving needs and expectations of our 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.
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 wholesale used vehicle industry. Used vehicle marketplace volumes tend to decline during prolonged periods of winter weather conditions.
Seasonality The volume of vehicles sold through our 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.
Our revenues for the year ended December 31, 2022 were distributed as follows: Marketplace 75% and Finance 25%. Marketplace Overview KAR is committed to leading the digital transformation of the wholesale automotive remarketing industry and supporting our customers by providing fast and transparent digital marketplaces for buying and selling used vehicles.
Marketplace Overview 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 our customers by providing fast and transparent digital marketplaces for buying and selling used vehicles.
Our buyer fees are typically based on a tiered structure with fees increasing with the sale price of the vehicle, while seller fees are typically fixed.
Generally, we do not take title to, or bear the risk of loss for, vehicles sold on our marketplaces. Our buyer fees are typically based on a tiered structure with fees increasing with the sale price of the vehicle, while seller fees are typically fixed.
Geographic proximity to the customers gives our employees the ability to stay in close contact with outstanding accounts, thereby better enabling them to manage credit risk and build customer relationships.
As of December 31, 2023, we serviced customers through approximately 90 locations (hybrid of physical locations and a digital servicing network) in markets with a significant concentration of AFC customers. Geographic proximity to the customers gives our employees the ability to stay in close contact with outstanding accounts, thereby better enabling them to manage credit risk and build customer relationships.
Services Our digital marketplaces also provide a full range of innovative and value-added services to sellers and buyers that enable us to serve as a "one-stop shop" to service our customers' needs. These services include pre and post-sale inspections, key replacement, transportation and logistics, title services and floorplan financing.
Customers Suppliers of vehicles to our digital marketplaces primarily include (i) commercial customers; and (ii) dealer customers. Buyers of vehicles on our marketplace platforms primarily include dealer customers. Services Our digital marketplaces also provide a full range of innovative and value-added services to sellers and buyers that enable us to serve as a "one-stop shop" to service our customers' needs.
Reconditioning Services Our 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 are primarily provided by our subsidiary, High Tech Locksmiths ("HTL") and are also offered to digital marketplace participants and other non-marketplace customers.
Reconditioning Services Our vehicle logistics centers provide detailing, body work, paintless dent repair ("PDR"), light mechanical work, glass repair, tire and key replacement and upholstery repair.
We are committed to the digital transformation of wholesale automotive remarketing. We believe digital platforms benefit sellers by attracting a larger buyer-base, providing greater flexibility around when and where to launch sales, and enabling more advanced and targeted marketing techniques.
We believe digital platforms benefit sellers by providing greater flexibility around when and where to launch sales and attracting a larger, more engaged buyer-base, providing confidence that they are receiving the best market-based price available.
For vehicles at our vehicle logistics centers, we can also provide reconditioning and mechanical work.
These services include pre and post-sale inspections, key replacement, transportation and logistics, title services and floorplan financing. For vehicles at our vehicle logistics centers, we can also provide reconditioning and mechanical work.
Autoniq's 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. Autoniq 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.
Vehicle Research Services We provide 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.
We believe digital applications, such as BacklotCars and TradeRev, may provide an opportunity to expand the total addressable market for dealer-to-dealer transactions.
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.
At the local level, AFC faces competition from banks, credit unions and independent auctions who may offer floorplan financing to local customers. Such entities typically service only one or a small number of auctions.
At the local level, AFC faces competition from banks, credit unions and independent auctions who may offer floorplan financing to local customers. Some of our wholesale used vehicle marketplace competitors may endeavor to capture a larger portion of the floorplan financing market.
Sales and Marketing AFC approaches and seeks to expand its share of the independent dealer floorplan market through a number of methods and channels.
An average of approximately 15 vehicles per active dealer were floorplanned with an approximate average value outstanding of $12,800 per vehicle as of December 31, 2023. Sales and Marketing AFC approaches and seeks to expand its share of the independent dealer floorplan market through a number of methods and channels.
Field personnel are proactive in managing collateral by monitoring loans and notifying dealers that payments are coming due. In addition, approximately 60,000 routine audits, or inventory audits, are performed annually on the dealers' lots through our AutoVIN subsidiary.
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 our 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.
The platforms provide dealers with fast, easy, mobile-app solutions to sell and source inventory from other dealers. They also provide comprehensive vehicle condition reports, greater transparency into bidding activity, and real-time market price discovery on listed vehicles.
Our OPENLANE marketplaces provide comprehensive vehicle condition reports, greater transparency into bidding activity, and real-time market price discovery on listed vehicles.
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.
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.
Inspection Services We inspect many of the vehicles that are offered for sale in our marketplaces through a combination of our employees and third parties using our proprietary technologies. In addition, AutoVIN provides vehicle condition reporting, inventory verification auditing, program compliance auditing and facility inspections.
Key replacement services through a mobile field workforce are offered to digital marketplace participants as well as other non-marketplace customers. 7 Table of Contents Inspection Services We inspect many of the vehicles that are offered for sale in our marketplaces through a combination of our employees and third parties using our proprietary technologies.
Simplification : Ultimately, the transition to a fully digital business enables us to simplify our business which will benefit our customers, our employees and our stockholders. We are actively consolidating technology platforms to leverage the best features and capabilities from across our offerings, provide dealers with greater choice and flexibility, and deliver an easier, more streamlined customer experience.
Simplification also allows our business to more quickly develop and deploy innovation and better respond to changing customer needs and market conditions. Our marketplaces feature consolidated technology platforms that leverage the best features and capabilities from across our offerings, provide dealers with greater choice and flexibility and deliver an easier, more streamlined customer experience.
Through our subsidiary, CarsArrive, and its proprietary system which 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. The same system is generally utilized across our marketplaces; however, CarsArrive also arranges transportation for vehicles not sold on our marketplaces.
Transportation Services We provide transportation services utilizing our own equipment and personnel as well as licensed and insured third-party carriers. Through our 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.
As of December 31, 2022, AFC had approximately 12,400 active dealers with an average line of credit of approximately $370,000 and no one dealer representing greater than 1.1% of our portfolio. An average of approximately 15 vehicles per active dealer were floorplanned with an approximate average value outstanding of $13,500 per vehicle as of December 31, 2022.
In addition, the majority of U.S. titles are processed and held in a centralized location, enabling field personnel more time to focus on our dealers. As of December 31, 2023, AFC had approximately 12,000 active dealers with an average line of credit of approximately $370,000 and no one dealer representing greater than 1.3% of our portfolio.
Some of our industry competitors who operate wholesale used vehicle marketplaces on a national scale may endeavor to capture a larger portion of the floorplan financing market. AFC competes primarily on a relationship basis, focusing on quality of service, convenience of payment, scope of services offered to solve customer pain points and consistent commitment to the sector.
AFC competes primarily on a relationship basis, focusing on quality of service, convenience of payment, scope of services offered to solve customer pain points and consistent commitment to the sector. This and our long-term relationships with customers have been established over time and act as a competitive strength for us.
Title and Repossession Administration and Remarketing Services PAR provides end-to-end management of the remarketing process for repossession customers including titling, repossession administration, inventory management, marketplace selection, pricing and vehicle representation. Recovery Database Network, Inc. ("RDN") is a specialized provider of B2B software and data solutions for automotive lenders and repossession companies.
Title and Repossession Administration and Remarketing Services We provide end-to-end management of the remarketing process for repossession customers including titling, repossession administration, inventory management, marketplace selection, pricing and vehicle representation. We also operate 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.
In January 2023, ADESA U.K. and ADESA Europe were consolidated into one platform. We believe our geographic network and diverse product offerings enable us to leverage relationships with providers and buyers of used vehicles. Utilizing our proprietary technology, we also provide auction platforms for third parties.
OPENLANE Europe is our digital marketplace serving customers in the United Kingdom and Continental Europe through a consolidated online wholesale used vehicle platform. We believe our geographic network and diverse product offerings enable us to leverage relationships with providers and buyers of used vehicles.
We are transforming our operating model and enabling functions to support KAR’s digital future. 5 Table of Contents • Enabling capabilities : We understand that as transactions become more digital, our capabilities need to evolve to meet the increased customer needs and expectations in a digital marketplace.
Digital innovation: The cornerstone of OPENLANE's business is our digital technology, so we intend to continue investing in innovation in our digital platforms, data analytics capabilities and digital talent that power our marketplaces, make wholesale easy for our customers and differentiate our marketplace from our competitors. • Enabling capabilities: We understand that as transactions become more digital, our capabilities need to evolve to meet the increased customer needs and expectations in a digital marketplace.
Growing dealer consignment : The dealer consignment business represents approximately one-third of the Company’s historical transactional volume, and we believe this is an area with significant opportunity for growth. Over the past several years, KAR has completed three strategic acquisitions to help capture greater share in this space: BacklotCars, CARWAVE and TradeRev.
Growing dealer consignment: The dealer consignment business represents approximately one-half of the Company’s transactional volume, and we believe this is an area with significant opportunity for growth. Last year, we consolidated many of the marketplace platforms acquired in previous years as part of our OPENLANE marketplace launches in the U.S., Canada and the EU.
We facilitate the transfer of ownership directly from seller to buyer and, generally, we do not take title to, nor ownership of, vehicles sold through our marketplaces. For our commercial sellers, our OPENLANE software platform supports more than 40 private label digital remarketing sites and provides comprehensive solutions to our automobile manufacturer, captive finance company and other commercial customers.
We facilitate the transfer of ownership directly from seller to buyer and, generally, we do not take title to, nor ownership of, vehicles sold through our marketplaces. However, we also sell vehicles that have been purchased, for which we do take title and record the gross selling price of the vehicle sold through our marketplaces as revenue.
This is provided primarily to independent used vehicle dealers through our wholly-owned subsidiary, AFC, which has approximately 100 locations throughout North America. The Company also operates the ADESA Simulcast and Simulcast+ technology that supports marketplace sales at our vehicle logistics centers in Canada.
An important component of our 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 our wholly-owned subsidiary, AFC, which has approximately 90 locations (hybrid of physical locations and a digital servicing network) throughout North America.
Removed
For dealer customers, the Company also operates BacklotCars and TradeRev digital marketplace platforms that facilitate real-time transactions between automotive dealers, coast-to-coast in the United States and Canada.
Added
In 2023, our 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.
Removed
The CARWAVE digital auction platform was integrated with BacklotCars in the fourth quarter of 2022, adding additional features and functionality to the BacklotCars marketplace, including a live auction format that allows dealers to sell and source inventory in a fast-paced, head-to-head bidding environment. An important component of our services to buyers is providing short-term inventory-secured financing, known as floorplan financing.
Added
For commercial sellers, our software platform supports more than 40 private label digital remarketing sites and provides comprehensive solutions to our commercial customers. For dealer customers, our platform facilitates multiple sale formats, data-driven insights and integrated services to automotive dealers, coast-to-coast in the United States, Canada and Europe.
Removed
This proprietary technology is also sold and licensed to other auction providers, including independent auctions in North America. The Company also owns and operates ADESA U.K., an online wholesale used vehicle remarketing business in the United Kingdom and ADESA Europe, an online wholesale vehicle marketplace in Continental Europe.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

75 edited+13 added−26 removed168 unchanged
Biggest changeBribery Act; • compliance with various privacy regulations, including but not limited to the General Data Protection Regulation ("GDPR"); • compliance with data localization and/or data residency requirements and cross-border data transfer regulations; • dealing with unfamiliar regulatory agencies and laws, including those favoring local competitors; • dealing with political and/or economic instability, including the exit of the U.K. from the E.U.
Biggest changeBribery Act; • compliance with various privacy regulations, including but not limited to the General Data Protection Regulation ("GDPR"); • compliance with data localization and/or data residency requirements and cross-border data transfer regulations; • dealing with unfamiliar regulatory agencies and laws, including those favoring local competitors; • dealing with political and/or economic instability, including the effects of the exit of the U.K. from the E.U.; • geopolitical instability, terrorism, war and military conflicts, including the conflict between Ukraine and Russia; • the difficulty of managing and staffing foreign offices, as well as the increased travel, infrastructure, legal and compliance costs associated with international operations; • localizing our product offerings; and • adapting to different business cultures and market structures.
If we cannot make scheduled payments on our debt, we would be in default and, as a result, our debt holders could declare all outstanding principal and interest to be due and payable, the lenders under our Credit Facility could terminate their commitments to lend us money and foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.
If we cannot make scheduled payments on our debt, we would be in default and, as a result, our debt holders could declare all outstanding principal and interest to be due and payable, the lenders under our Revolving Credit Facility could terminate their commitments to lend us money and foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.
For example, certain systems sold to Carvana as part of the ADESA U.S. physical auction business sale transaction are integral to our ADESA Canada operations and other remaining parts of our business. Carvana has agreed to maintain and make those systems available to support retained Company businesses for a period of time post-closing.
For example, certain systems sold to Carvana as part of the ADESA U.S. physical auction business sale transaction are integral to our OPENLANE Canada operations and other remaining parts of our business. Carvana has agreed to maintain and make those systems available to support retained Company businesses for a period of time post-closing.
In addition, any financial difficulties, up to and including bankruptcy, faced by our service providers or any of their subcontractors, may have negative effects on our business, the nature and extent of which are difficult to predict. Our customers also rely on our information technology systems to conduct their operations.
In addition, any financial difficulties, up to and including bankruptcy, faced by our service providers or any of their subcontractors, may have negative effects on our business, the nature and extent of which are difficult to predict. Our customers and vendors also rely on our information technology systems to conduct their operations.
Furthermore, the agreement governing our Credit Facility and the indenture governing our senior notes include, and future debt instruments may include, certain restrictive covenants which could limit our ability to enter into certain transactions in the future and may adversely affect our ability to operate our business.
Furthermore, the agreement governing our Revolving Credit Facility and the indenture governing our senior notes include, and future debt instruments may include, certain restrictive covenants which could limit our ability to enter into certain transactions in the future and may adversely affect our ability to operate our business.
Additional risks and challenges we face in connection with acquisitions include, but are not limited to: • incurring significantly higher capital expenditures, operating expenses and operating losses of the business acquired; • coordination of technology, research and development, and sales and marketing functions, along with integration of the acquired business’s accounting, management information, human resources, and other administrative systems; • incurring liability for pre-acquisition activities of the acquired business; • inheriting certain security or privacy vulnerabilities of the acquired business; • implementing or remediating the controls, procedures, and policies of the acquired business; • incorporating acquired technology and rights into our offerings and unanticipated expenses related to such integration; • retaining and integrating acquired employees, including cultural challenges associated with integrating employees from the acquired business into our organization; • maintaining important business relationships and contracts of the acquired business; and • integrating the acquired business onto our systems and ensuring the acquired business meets our financial reporting requirements and timelines.
Additional risks and challenges we face in connection with acquisitions include, but are not limited to: • incurring significantly higher capital expenditures, operating expenses and operating losses of the business acquired; • coordination of technology, research and development, and sales and marketing functions, along with integration of the acquired business’s accounting, management information, human resources, and other administrative systems; • incurring liability for pre-acquisition activities of the acquired business; • inheriting certain security or privacy vulnerabilities of the acquired business; • implementing or remediating the controls, procedures, and policies of the acquired business; • incorporating acquired technology and rights into our offerings and unanticipated expenses related to such integration; • retaining and integrating acquired employees, including cultural challenges associated with integrating employees from the acquired business into our organization; • maintaining important business relationships and contracts of the acquired business; and 15 Table of Contents • integrating the acquired business onto our systems and ensuring the acquired business meets our financial reporting requirements and timelines.
Our indebtedness could have important consequences including: • limiting our ability to borrow additional amounts to fund working capital, capital expenditures, debt service requirements, execution of our business strategy, acquisitions and other purposes; 20 Table of Contents • requiring us to dedicate a substantial portion of our cash flow from operations to pay principal and interest on debt, which would reduce the funds available for other purposes, including funding future expansion; • making us more vulnerable to adverse changes in general economic, industry and competitive conditions, in government regulation and in our business by limiting our flexibility in planning for, and making it more difficult to react quickly to, changing conditions; and • exposing us to risks inherent in interest rate fluctuations because a portion of our indebtedness is at variable rates of interest, which could result in higher interest expenses in the event of increases in interest rates.
Our indebtedness could have important consequences including: • limiting our ability to borrow additional amounts to fund working capital, capital expenditures, debt service requirements, execution of our business strategy, acquisitions and other purposes; • requiring us to dedicate a substantial portion of our cash flow from operations to pay principal and interest on debt, which would reduce the funds available for other purposes, including funding future expansion; • making us more vulnerable to adverse changes in general economic, industry and competitive conditions, in government regulation and in our business by limiting our flexibility in planning for, and making it more difficult to react quickly to, changing conditions; and • exposing us to risks inherent in interest rate fluctuations because a portion of our indebtedness is at variable rates of interest, which could result in higher interest expenses in the event of increases in interest rates.
In the United States and internationally, we have filed various applications for protection of certain aspects of our intellectual property, and we currently hold issued patents in the United States and Canada.
In the United States and internationally, we have filed various applications for protection of certain aspects of our intellectual property, and we currently hold issued patents in the United States, Europe and Canada.
Many U.S. and foreign jurisdictions have passed, or are currently contemplating, a variety of consumer protection, data privacy, and data security laws and regulations that impact our business or the business of our customers, including consumer notification and other requirements in the event that consumer information is accessed and/or acquired by unauthorized persons and regulations regarding the use, access, accuracy, security and retention of such data.
Many U.S. and foreign jurisdictions have passed, or are currently contemplating, a variety of artificial intelligence, consumer protection, data privacy, and data security laws and regulations that impact our business or the business of our customers, including consumer notification and other requirements in the event that consumer information is accessed and/or acquired by unauthorized persons and regulations regarding the use, access, accuracy, security and retention of such data.
Our marketplace businesses also sell vehicles that have been purchased (e.g., inherited vehicles, vehicles returned or vehicles purchased by ADESA Europe and others). When a vehicle is purchased and then resold, rather than sold on a consignment basis, we are exposed to inventory risks, including losses from theft, damage and obsolescence.
Our marketplace businesses also sell vehicles that have been purchased (e.g., inherited vehicles, vehicles returned or vehicles purchased by OPENLANE Europe and others). When a vehicle is purchased and then resold, rather than sold on a consignment basis, we are exposed to inventory risks, including losses from theft, damage and obsolescence.
As of December 31, 2022, 634,305 shares of our Series A Preferred Stock were outstanding, representing approximately 25% of our outstanding common stock, including the Series A Preferred Stock on an as-converted basis. Holders of Series A Preferred Stock are entitled to a cumulative dividend at the rate of 7% per annum, payable quarterly in arrears.
As of December 31, 2023, 634,305 shares of our Series A Preferred Stock were outstanding, representing approximately 25% of our outstanding common stock, including the Series A Preferred Stock on an as-converted basis. Holders of Series A Preferred Stock are entitled to a cumulative dividend at the rate of 7% per annum, payable quarterly in arrears.
The holders of our Series A Preferred Stock also have the right, subject to certain exceptions, to require us to repurchase all or any portion of the Series A Preferred Stock upon certain change of control events at the greater of (a) the consideration the holders would have received if they had converted their shares of Series A Preferred Stock into common stock immediately prior to the change of control event and (b) 105% of the sum of i) the liquidation preference thereof and ii) all accrued but unpaid dividends.
The holders of our Series A Preferred Stock also have the right, subject to certain exceptions, to require us to repurchase all or any portion of the Series A Preferred 24 Table of Contents Stock upon certain change of control events at the greater of (a) the consideration the holders would have received if they had converted their shares of Series A Preferred Stock into common stock immediately prior to the change of control event and (b) 105% of the sum of i) the liquidation preference thereof and ii) all accrued but unpaid dividends.
Adverse economic conditions may negatively affect our business and results of operations. Adverse economic conditions, including those resulting from the COVID-19 pandemic or otherwise, could increase our exposure to several risks, including: 19 Table of Contents • Fluctuations in the supply of used vehicles.
Adverse economic conditions may negatively affect our business and results of operations. Adverse economic conditions, including those resulting from the COVID-19 pandemic or otherwise, could increase our exposure to several risks, including: • Fluctuations in the supply of used vehicles.
As a result, lower volumes of off-lease vehicles available to the wholesale market is expected to continue and will likely continue to adversely affect our revenues and profitability. 14 Table of Contents Further, macroeconomic factors, including inflationary pressures, rising interest rates, volatility of oil and natural gas prices and declining consumer confidence impact the affordability and demand for new and used vehicles.
As a result, lower volumes of off-lease vehicles available to the wholesale market is expected to continue and will likely continue to adversely affect our revenues and profitability. Further, macroeconomic factors, including inflationary pressures, rising interest rates, volatility of oil and natural gas prices and declining consumer confidence impact the affordability and demand for new and used vehicles.
Our principal sources of competition historically have come from: (1) direct competitors (e.g., Manheim, ACV 13 Table of Contents Auctions, EBlock and NextGear Capital), (2) new entrants, including new vehicle remarketing venues and dealer financing services, and (3) other participants in the automotive industry with vehicle remarketing capabilities (e.g., rental car companies, automobile retailers and wholesalers).
Our principal sources of competition historically have come from: (1) direct competitors (e.g., Manheim, ACV Auctions, EBlock and NextGear Capital), (2) new entrants, including new vehicle remarketing venues and dealer financing services, and (3) other participants in the automotive industry with vehicle remarketing capabilities (e.g., rental car companies, automobile retailers and wholesalers).
Future dividend decisions will be based on and affected by a variety of factors, including our financial condition and results of operations, contractual restrictions, including restrictive covenants contained in our Credit Agreement, the indenture governing our senior notes and AFC’s securitization facilities, capital requirements and other factors that our board of directors deems relevant.
Future dividend decisions will be based on and affected by a variety of factors, including our financial condition and results of operations, 25 Table of Contents contractual restrictions, including restrictive covenants contained in our Credit Agreement, the indenture governing our senior notes and AFC’s securitization facilities, capital requirements and other factors that our board of directors deems relevant.
We may not be able to refinance our debt or sell additional debt or equity securities or our assets on favorable terms, if at all, particularly because of our high levels of debt and the restrictions imposed by the agreement governing our Credit Facility and the indenture governing our senior notes on our ability to incur additional debt and use the proceeds from asset sales.
We may not be able to refinance our debt or sell additional debt or equity securities or our assets on favorable terms, if at all, particularly because of the restrictions imposed by the agreement governing our Revolving Credit Facility and the indenture governing our senior notes on our ability to incur additional debt and use the proceeds from asset sales.
When used vehicle prices are high, used vehicle dealers may retail more of their trade-in vehicles on their own rather than selling them in the wholesale channel. A sustained reduction in used vehicle pricing could result in a potential loss of consignors, an increase in loan losses at AFC and decreased profitability.
When used vehicle prices are high, dealer customers may retail more of their trade-in vehicles on their own rather than selling them in the wholesale channel. A sustained reduction in used vehicle pricing could result in a potential loss of consignors, an increase in loan losses at AFC and decreased profitability.
These restrictions could materially and adversely affect our business, growth strategy, financial condition and results of operations. 24 Table of Contents Our ability to access capital in the future may be challenging. The sale of the ADESA U.S. physical auction business resulted in our being a smaller enterprise focused on our digital marketplaces.
These restrictions could materially and adversely affect our business, growth strategy, financial condition and results of operations. Our ability to access capital in the future may be challenging. The sale of the ADESA U.S. physical auction business resulted in our being a smaller enterprise focused on our digital marketplaces.
Aspects of our operations and businesses are subject to privacy regulations in the United States, including but not limited to the California Consumer Privacy Act (“CCPA”), as amended and expanded by the California Privacy Rights Act ("CPRA"), and around the globe, most notably the European Union’s General Data Protection Regulation (the “GDPR”).
Aspects of our operations and businesses are subject to privacy regulations in the United States, including but not limited to the California Consumer Privacy Act (“CCPA”), as amended and expanded by the California Privacy Rights Act ("CPRA"), and 17 Table of Contents around the globe, most notably the European Union’s General Data Protection Regulation (the “GDPR”).
If we fail to achieve some or all of the expected benefits of our cost reduction and business alignment initiatives, it could have an adverse effect on our competitive position and market share, business, financial condition and results of operations. We operate in a highly competitive industry.
If we fail to achieve some or all of the expected benefits of our cost reduction and business alignment initiatives, it 12 Table of Contents could have an adverse effect on our competitive position and market share, business, financial condition and results of operations. We operate in a highly competitive industry.
Furthermore, the program does not obligate the Company to repurchase any dollar amount or number of shares of common stock, and may be suspended or discontinued at any time, which could cause the market price of our stock to decline. 27 Table of Contents Item 1b. Unresolved Staff Comments None.
Furthermore, the program does not obligate the Company to repurchase any dollar amount or number of shares of common stock, and may be suspended or discontinued at any time, which could cause the market price of our stock to decline. Item 1B. Unresolved Staff Comments None.
As part of our initiative to reduce costs and align our business to our digital operating model, we have entered into several outsourcing arrangements with offshore third parties related to certain technology, back-office and customer support functions, and we will continue to evaluate additional outsourcing.
As part of our initiative to reduce costs and align our business to our digital operating model, we have entered into several outsourcing arrangements with offshore third parties related to certain technology, back-office and customer support functions, 18 Table of Contents and we will continue to evaluate additional outsourcing.
Typically, following the sale of a vehicle, we do not release the vehicle to a buyer until we have received full payment from the buyer or confirmation of arrangement for such payment.
Typically, following the sale of a vehicle, we do not release the vehicle and/or title to a buyer until we have received full payment from the buyer or confirmation of arrangement for such payment.
These factors have and could continue to adversely affect our revenues and profitability. • Decline in the demand for used vehicles. We may experience a decrease in demand for used vehicles from buyers due to factors including the lack of availability of consumer credit and declines in consumer spending and consumer confidence.
These factors have and could continue to adversely affect our revenues and profitability. • Decline in the demand for used vehicles. We may experience a decrease in demand for used vehicles from dealer customers due to factors including the lack of availability of consumer credit and declines in consumer spending and consumer confidence.
In addition, it may be suspended or discontinued at any time, which could result in a decrease in the trading price of our common stock. In October 2019, our board of directors authorized a repurchase of up to $300 million of the Company’s outstanding common stock through October 30, 2021.
In addition, it may be suspended or discontinued at any time, which could result in a decrease in the trading price of our common stock. In October 2019, our board of directors authorized a repurchase of up to $300 million of the Company’s outstanding common stock.
In addition, if we are unable to generate sufficient cash from operations to service our debt and meet other cash needs, we may be forced to reduce or delay capital expenditures, suspend or eliminate dividends, sell assets or operations, seek additional capital or restructure or refinance our indebtedness.
In addition, if we are unable to generate sufficient cash from operations to service our debt and meet other cash needs, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness.
If we lose the services of one or more of our key personnel, or if one or more key personnel joins a competitor or otherwise competes with us, we may not be able to effectively implement our business strategies and our business could be materially adversely affected.
If we lose the services of one or more of our key personnel, or if one or more key personnel joins a competitor or otherwise competes with us, we may not be able to effectively implement our business strategies or maintain customer relationships, and our business could be materially adversely affected.
As of December 31, 2022, the outstanding shares of our Series A Preferred Stock represented approximately 25% of our outstanding common stock, including the Series A Preferred Stock on an as-converted basis.
As of December 31, 2023, the outstanding shares of our Series A Preferred Stock represented approximately 25% of our outstanding common stock, including the Series A Preferred Stock on an as-converted basis.
Thus, holders of our common stock will bear the risk of our future offerings reducing the market price of our common stock and diluting the value of their stock holdings in us. 26 Table of Contents The market price of our common stock could be negatively affected by sales of substantial amounts of our common stock in the public market.
Thus, holders of our common stock will bear the risk of our future offerings reducing the market price of our common stock and diluting the value of their stock holdings in us. The market price of our common stock could be negatively affected by sales of substantial amounts of our common stock in the public market.
Further, Carvana has agreed to continue to allow AFC to occupy office space in the ADESA U.S. physical auction locations owned by Carvana. If Carvana is unable or unwilling to satisfy its obligations under these agreements, or if Carvana seeks bankruptcy protection, we could incur operational difficulties or losses.
Further, Carvana has agreed to continue to allow AFC to occupy office space in the ADESA U.S. physical auction locations owned by Carvana. 22 Table of Contents If Carvana is unable or unwilling to satisfy its obligations under these agreements, or if Carvana seeks bankruptcy protection, we could incur operational difficulties or losses.
Many of our customer agreements can be terminated by the customer for convenience on advance written notice, which provides our customers with the opportunity to renegotiate their agreements with us or to award more business to our competitors.
Many of our customer agreements can be terminated by the customer for convenience on 14 Table of Contents advance written notice, which provides our customers with the opportunity to renegotiate their agreements with us or to award more business to our competitors.
Changes in the value of foreign currencies, particularly the Canadian dollar and the euro relative to the U.S. dollar could negatively affect our profits from foreign operations and the value of the net assets of our foreign operations when reported in U.S. dollars in our financial statements.
Changes in the value of foreign currencies, particularly the Canadian dollar and the euro relative to the U.S. dollar could negatively affect our profits from foreign operations and the value of the net 20 Table of Contents assets of our foreign operations when reported in U.S. dollars in our financial statements.
Any of these risks, if realized, could materially and adversely affect our business, financial condition and results of operations. 16 Table of Contents Some of the same risks exist if and when we decide to sell a business or assets.
Any of these risks, if realized, could materially and adversely affect our business, financial condition and results of operations. Some of the same risks exist if and when we decide to sell a business or assets.
If such litigation were introduced against us, it could result in substantial costs and a diversion of our attention and resources, which could have a material adverse effect on our business.
If such litigation were introduced 23 Table of Contents against us, it could result in substantial costs and a diversion of our attention and resources, which could have a material adverse effect on our business.
A disruption in the financial markets may adversely affect our ability to raise, restructure or refinance indebtedness. Our indebtedness and the terms of our indebtedness could impair our financial condition and adversely affect our ability to react to changes in our business.
A disruption in the financial markets may adversely affect our ability to raise, restructure or refinance indebtedness. 19 Table of Contents Our indebtedness and the terms of our indebtedness could impair our financial condition and adversely affect our ability to react to changes in our business.
If we are unable to collect the vehicle sale price plus applicable buyer fees from buyers on a large number of vehicles, our revenue and cash flows may be negatively impacted resulting in a material adverse effect on our results of operations and financial condition.
If we are unable to collect the vehicle sale price plus applicable buyer fees from buyers on a large number of vehicles, our revenue and cash flows may be negatively impacted resulting in a material adverse effect on our results of operations and financial condition. Risks Related to the Sale of ADESA U.S.
This registration 25 Table of Contents facilitates the resale of such securities into the public market, and any such resale would increase the number of shares of our common stock available for public trading.
This registration facilitates the resale of such securities into the public market, and any such resale would increase the number of shares of our common stock available for public trading.
There is no guarantee that we will be successful in defending ourselves in legal and administrative actions or in asserting our rights under various laws. In addition, we could incur substantial costs in defending ourselves or in asserting our rights in such actions.
There is no guarantee that we will be successful in 21 Table of Contents defending ourselves in legal and administrative actions or in asserting our rights under various laws. In addition, we could incur substantial costs in defending ourselves or in asserting our rights in such actions.
Department of Transportation or similar regulatory agencies in the other locations in which we operate. • AFC is subject to laws in certain states and provinces which regulate commercial and small business lending activities and interest rates and, in certain jurisdictions, require AFC or one of its subsidiaries to be licensed.
Department of Transportation or similar regulatory agencies in the other locations in which we operate. • AFC is subject to certain federal, state and provincial laws which regulate commercial and small business lending activities and interest rates and, in certain jurisdictions, require AFC or one of its subsidiaries to be licensed.
Our compliance with global laws and regulations relating to privacy, data protection and information security may materially increase our costs or otherwise limit our 18 Table of Contents ability to continue or pursue certain business activities.
Our compliance with global laws and regulations relating to privacy, data protection and information security may materially increase our costs or otherwise limit our ability to continue or pursue certain business activities.
Acquisitions have been a significant part of our growth strategy and have enabled us to further broaden and diversify our service offerings. Our strategy generally includes acquisitions of companies, products, services and technologies to expand our online, digital and mobile capabilities and the acquisition and integration of additional facilities.
Acquisitions have been a significant part of our growth strategy and have enabled us to further broaden and diversify our service offerings. Our strategy generally includes acquisitions of companies, products, services and technologies to expand our online, digital and mobile capabilities.
In connection with the sale of the ADESA U.S. physical auction business, we entered into a transition services agreement whereby we will provide various services to Carvana following the closing.
Physical Auction Business The ADESA U.S. physical auction business sale transaction may result in increased costs. In connection with the sale of the ADESA U.S. physical auction business, we entered into a transition services agreement whereby we will provide various services to Carvana following the closing.
Our systems and the third-party systems with which we interact are subject to damage, failure or interruption due to various reasons, such as power or other critical infrastructure outages, facility damage, physical theft, telecommunications failures, malware, security incidents, cyber-attacks (including cyber-threats from nation-state actors), natural disasters and catastrophic events, and inadequate or ineffective redundancy measures.
Our systems and the third-party systems 16 Table of Contents with which we interact are subject to damage, failure or interruption due to various reasons, such as power or other critical infrastructure outages, facility damage, physical theft, telecommunications failures, malware, security incidents, cyber-attacks (including cyber-threats from nation-state actors), natural disasters and catastrophic events, legacy applications, integration delays, inadequate system hygiene and inadequate or ineffective redundancy measures.
Under our amended and restated certificate of incorporation, we are authorized to issue up to 400,000,000 shares of common stock, of which 108,914,678 shares of common stock were outstanding as of December 31, 2022.
Under our amended and restated certificate of incorporation, we are authorized to issue up to 400,000,000 shares of common stock, of which 108,040,704 shares of common stock were outstanding as of December 31, 2023.
Significant volatility or disruption of global financial markets, supply chains or commercial activity due to Russia’s invasion of Ukraine or other geopolitical events, inflation, the ongoing COVID-19 pandemic or other factors could negatively affect our industry and business and our ability to refinance our debt or sell additional debt or equity securities or our assets on favorable terms, if at all.
Significant volatility or disruption of global financial markets, inflation, supply chains or commercial activity due to Russia’s invasion of Ukraine or other geopolitical events, war, terrorism, natural disasters, public health issues (including pandemics such as the COVID-19 pandemic) or other factors could negatively affect our industry and business and our ability to refinance our debt or sell additional debt or equity securities or our assets on favorable terms, if at all.
Following the sale of the ADESA U.S. physical auction business, we continued to restructure our business to reflect the current market and asset-light digital model, reallocate our resources towards the highest growth initiatives, consolidate our platforms, transition to cloud-based solutions and leverage a global shared services model.
We have continued to restructure our business to reflect the current market and asset-light digital model, reallocate our resources towards the highest growth initiatives, consolidate our platforms, transition to cloud-based solutions and leverage a global shared services model.
These laws, directives, regulations and their interpretation and enforcement continue to evolve and may be inconsistent from jurisdiction to jurisdiction. • Certain of the Company’s subsidiaries may be deemed subject to the regulations of the Consumer Financial Protection Act of 2010 due to their vendor relationships with financial institutions. • PAR is subject to laws in certain states which regulate repossession administration activities and, in certain jurisdictions, require PAR to be licensed. • We are subject to various reporting and anti-money laundering regulations.
These laws, directives, regulations and their interpretation and enforcement continue to evolve and may be inconsistent from jurisdiction to jurisdiction. • We are subject to laws and regulations with respect to emerging technologies being incorporated into our business, including artificial intelligence, machine learning and data analytics. • Certain of the Company’s subsidiaries may be deemed subject to the regulations of the Consumer Financial Protection Act of 2010 due to their vendor relationships with financial institutions. • PAR is subject to laws in certain states which regulate repossession administration activities and, in certain jurisdictions, require PAR to be licensed. • We are subject to various reporting and anti-money laundering regulations.
Many factors could cause the market price of our common stock to rise and fall, including but not limited to the following: • our announcements or our competitors’ announcements regarding new products or services, enhancements, significant contracts, acquisitions or strategic investments; • changes in earnings estimates or recommendations by securities analysts, if any, who cover our common stock; • results of operations that are below our announced guidance or below securities analysts’ or consensus estimates or expectations; • fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in our capital structure, such as future issuances of securities, sales of large blocks of common stock by our stockholders or our incurrence of additional debt; • repurchases of our common stock pursuant to our share repurchase program; • investors’ general perception of us and our industry; • changes in general economic and market conditions (including as a result of the COVID-19 pandemic); • changes in industry conditions (including industry-wide volume challenges tied to the disruption of new vehicle production); and • changes in regulatory and other dynamics.
Many factors could cause the market price of our common stock to rise and fall, including but not limited to the following: • announcements by us or our competitors of significant business developments, new offerings, acquisitions or strategic investments; • changes in earnings estimates or recommendations by securities analysts, if any, who cover our common stock; • results of operations that are below our announced guidance or below securities analysts’ or consensus estimates or expectations; • fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in our capital structure, such as future issuances of securities, sales of large blocks of common stock by our stockholders or our incurrence of additional debt; • repurchases of our common stock pursuant to our share repurchase program; • investors’ general perception of us and our industry; • changes in general economic and market conditions; • changes in industry conditions (including changes in anticipated future market size and growth rate); and • changes in regulatory and other dynamics.
We expect to continue to take similar steps in the future as we seek to realize operating synergies, achieve our target operating model and profitability objectives, and more closely reflect changes in the strategic direction of our business.
We expect to continue to implement cost reduction and business alignment initiatives as we seek to realize operating synergies, achieve our target operating model and profitability objectives, and more closely reflect changes in the strategic direction of our business.
The unexpected or abrupt departure of one or more of our key personnel and the failure to effectively transfer knowledge and effect smooth key personnel transitions may have an adverse effect on our business resulting from the loss of such person’s skills, knowledge of our business, and years of industry experience.
The unexpected or abrupt departure of one or more of our key personnel and the failure to effectively transfer knowledge and effect smooth key personnel transitions may have an adverse effect on our business.
While we believe our transition to a more asset-light and lower overhead operating model will better position us going forward, we may face additional challenges to the extent we need to raise additional capital or restructure or refinance our indebtedness.
While we believe our transition to a more asset-light and lower overhead operating model will better position us going forward, we may face additional challenges when raising additional capital or restructuring or refinancing our indebtedness.
Our expansion into markets outside the U.S. and our non-U.S. based operations subject us to unique operational, competitive and regulatory risks. Acquisitions and other strategies to expand our operations beyond North America subject us to significant risks and uncertainties. As a result, we may not be successful in realizing anticipated synergies or we may experience unanticipated integration expenses.
Acquisitions and other strategies to expand our operations beyond North America subject us to significant risks and uncertainties. As a result, we may not be successful in realizing anticipated synergies or we may experience unanticipated integration expenses.
We might lack sufficient resources to continue to make the significant technology investments to effectively compete with our competitors. Certain technology initiatives that management considers important to our long-term success will require capital investment, have significant risks associated with their execution, and could take several years to implement.
Certain technology initiatives that management considers important to our long-term success will require capital investment, have significant risks associated with their execution, and could take several years to implement.
As of December 31, 2022, our total corporate debt was approximately $498.7 million, exclusive of liabilities related to our securitization facilities which are not secured by the general assets of KAR, and we had $161.0 million of borrowing capacity under our senior secured credit facilities (net of $19.0 million in outstanding letters of credit).
As of December 31, 2023, our total debt was approximately $364.6 million, exclusive of liabilities related to our securitization facilities which are not secured by the general assets of OPENLANE, and we had $133.3 million of borrowing capacity under our Revolving Credit Facility (net of $54.7 million in outstanding letters of credit).
In particular, the number of new and used vehicles that are leased by consumers affects the supply of vehicles coming to the wholesale market in future periods as the leases mature.
In recent years, these factors have resulted in significant fluctuations in used vehicle values and declines in vehicle volumes in the wholesale market. In particular, the number of new and used vehicles that are leased by consumers affects the supply of vehicles coming to the wholesale market in future periods as the leases mature.
Further, technology is being developed to produce automated, driverless vehicles that could reduce the demand for, or replace, traditional vehicles, including the used vehicles on our marketplaces. Additionally, ride-hailing and ride-sharing services are becoming increasingly popular as a means of transportation and may decrease consumer demand for the used vehicles that are offered on our marketplaces, particularly as urbanization increases.
Additionally, ride-hailing and ride-sharing services are becoming increasingly popular as a means of transportation and may decrease consumer demand for the used vehicles that are offered on our marketplaces, particularly as urbanization increases.
Volumes of off-lease vehicles in subsequent periods will be affected by total new vehicle sales and the future leasing behavior of manufacturers and lenders; therefore, we are not able to accurately predict the volume of vehicles coming to the wholesale market.
As manufacturers and other lenders decrease the number of new vehicle lease originations and extend the terms of some of the existing leases, the number of off-lease vehicles available for the wholesale industry declines. 13 Table of Contents Volumes of off-lease vehicles in subsequent periods will be affected by total new vehicle sales and the future leasing behavior of manufacturers and lenders; therefore, we are not able to accurately predict the volume of vehicles coming to the wholesale market.
Many of our customers, including our financial institution customers, are subject to significant and evolving regulations. We work to develop strong relationships and interactive dialogue with our customers to better understand current trends and customer needs.
Many of our customers, including our financial institution customers, are subject to significant and evolving regulations. We work to develop strong relationships and interactive dialogue with our customers to better understand current trends and customer needs. Our success will also depend, in part, on our ability to provide customers with a user-friendly digital experience.
At the national level, AFC's competition includes NextGear Capital, a subsidiary of Cox Enterprises, Inc., other specialty lenders, banks and financial institutions. At the local level, AFC faces competition from banks, credit unions and independent auctions who may offer floorplan financing to local auction customers. Such entities typically service only one or a small number of auctions.
In addition, our long-lived assets could also become subject to impairment. At the national level, AFC's competition includes NextGear Capital, a subsidiary of Cox Enterprises, Inc., other specialty lenders, banks and financial institutions. At the local level, AFC faces competition from banks, credit unions and independent auctions who may offer floorplan financing to local auction customers.
In addition, as cyber-threats continue to evolve, we may be required to expend significant additional resources to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.
In addition, as cyber-threats continue to evolve in both intensity and velocity, we may be required to expend significant additional resources to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. Further, the rapid evolution and increased adoption of artificial intelligence increases the risk of cyber-attacks and security incidences.
We may not be successful in managing these or any other significant risks that we encounter in divesting businesses or assets, and, as a result, we may not achieve some or all of the expected benefits of the divestitures.
We may not be successful in managing these or any other significant risks that we encounter in divesting businesses or assets, and, as a result, we may not achieve some or all of the expected benefits of the divestitures. Our expansion into markets outside the U.S. and our non-U.S. based operations subject us to unique operational, competitive and regulatory risks.
In addition, there may be tax inefficiencies in repatriating cash from our foreign subsidiaries. Approximately 35% of our revenues from continuing operations were attributable to our foreign operations for the year ended December 31, 2022.
In addition, there may be tax inefficiencies in repatriating cash from our foreign subsidiaries. Approximately 38% of our revenues from continuing operations were attributable to our foreign operations for the year ended December 31, 2023. The results of operations of our foreign subsidiaries are translated from local currency into U.S. dollars for financial reporting purposes.
We have experienced cyber-attacks and security incidences of varying degrees and believe we will continue to be a potential target of such threats and attacks. The technology infrastructure and systems of our suppliers, vendors, service providers and partners have also in the past experienced and may in the future experience such threats and attacks.
The technology infrastructure and systems of our suppliers, vendors, service providers and partners have also in the past experienced and may in the future experience such threats and attacks.
Acquisition of businesses requires substantial time and attention of management personnel and may also require additional equity or debt financings. Further, integration of newly established or acquired businesses is often disruptive.
Acquisition of businesses requires substantial time and attention of management personnel and may also require additional equity or debt financings. Further, integration of newly established or acquired businesses is often disruptive. We may incur various expenses in identifying, investigating and pursuing suitable opportunities, whether or not the transactions are completed.
If the number of vehicles sold through our marketplaces decreases due to these competitors or other industry changes, or if BacklotCars and TradeRev are unable to compete and gain market share in the dealer-to-dealer space, our revenue and profitability may be negatively impacted. In addition, our long-lived assets could also become subject to impairment.
The dealer-to-dealer space in particular is experiencing a digital disruption as competitors and new market participants introduce new technologies. If the number of vehicles sold through our marketplaces decreases due to these competitors or other industry changes, or if we are unable to compete and gain market share in the dealer-to-dealer space, our revenue and profitability may be negatively impacted.
Increases in the value of the U.S. dollar relative to these buyers’ local currencies may reduce the prices they are willing to pay at our marketplaces, which may negatively affect our revenues. 21 Table of Contents We are subject to a complex framework of federal, state, local and foreign laws and regulations, which have in the past, and could in the future, subject us to claims, challenge our business model, or otherwise harm our business.
We are subject to a complex framework of federal, state, local and foreign laws and regulations, which have in the past, and could in the future, subject us to claims, challenge our business model, or otherwise harm our business.
While no single customer accounted for 10% or more of our consolidated revenues in 2022, the loss of, or material reduction in business from, our key customers could have a material adverse effect on our business and operating results. 15 Table of Contents If we fail to attract and retain key personnel, or have inadequate succession planning, we may not be able to execute our business strategies and our financial results could be negatively affected.
While no single customer accounted for 10% or more of our consolidated revenues in 2023, the loss of, or material reduction in business from, our key customers could have a material adverse effect on our business and operating results.
The regulatory framework for privacy and data security issues has become increasingly burdensome and complex worldwide, and is expected to continue to be so for the foreseeable future.
These laws and regulations are quickly evolving, with new or modified laws and regulations proposed and implemented frequently and existing laws and regulations subject to new or different interpretations and enforcement. The regulatory framework for privacy and data security issues has become increasingly burdensome and complex worldwide, and is expected to continue to be so for the foreseeable future.
Robust information technology systems, platforms and products are critical to our operating environment, digital online products and competitive position. We may not be successful in structuring our technology or developing, acquiring, implementing or consolidating technology systems which are competitive and responsive to the needs of our customers.
We may not be successful in structuring our technology or developing, acquiring, implementing or consolidating technology systems which are competitive and responsive to the needs of our customers. We might lack sufficient resources to continue to make the significant technology investments to effectively compete with our competitors.
The automotive industry has experienced unprecedented market conditions, caused in part by supply chain issues, the shortage of semiconductors and associated delays in new vehicle production. These factors have resulted in significant fluctuations in used vehicle values and declines in vehicle volumes in the wholesale market. We expect this volatility to continue.
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 indu stry. The automotive industry has experienced unprecedented market conditions, caused in part by supply chain issues, the shortage of semiconductors and associated delays in new vehicle production.
Changes in law or governmental regulations or interpretations of existing law or regulations could result in increased costs, reduced vehicle prices and decreased profitability for us.
The foregoing description of laws and regulations to which we are or may be subject is not exhaustive, and the regulatory framework governing our operations is subject to evolving interpretations and continuous change. Changes in law or governmental regulations or interpretations of existing law or regulations could result in increased costs, reduced vehicle prices and decreased profitability for us.
Our success depends in large part on the talents and efforts of our executives and other key employees, including those with digital capabilities. Our future success will depend upon our ability to continue to identify, hire, develop, motivate and retain talented personnel.
Our future success will depend upon our ability to continue to identify, hire, develop, motivate and retain talented personnel.
For example, during the third quarter of 2021 we initiated a multi-year cost management project focused on making permanent changes in our operating model and our cost structure, reengineering the way we do business and ultimately reducing our costs to provide services.
For example, following the sale of the ADESA U.S. physical auction business, we implemented permanent changes in our operating model and our cost structure to reengineer the way we do business and ultimately reduce our costs to provide services.
Likewise, we have non-U.S. based buyers who participate in our marketplaces.
Likewise, we have non-U.S. based buyers who participate in our marketplaces. Increases in the value of the U.S. dollar relative to these buyers’ local currencies may reduce the prices they are willing to pay at our marketplaces, which may negatively affect our revenues.
Removed
The dealer-to-dealer space in particular is experiencing a digital disruption as competitors and new market participants introduce new technologies.
Added
Robust information technology systems, platforms and products are critical to our operating environment, digital online products and competitive position. We have made and continue to make investments to improve our information technology infrastructure. Such improvements are often complex, costly and time consuming.
Removed
As manufacturers and other lenders decrease the number of new vehicle lease originations and extend the terms of some of the existing leases, the number of off-lease vehicles available for the wholesale industry declines.
Added
If implementation of such improvements are delayed, or if we encounter unforeseen problems with our new systems and processes or in migrating away from our existing systems and processes, our operations and our ability to manage our business could be negatively impacted as we may experience disruptions in our business operations, loss of customers, loss of revenue or damage to our reputation.
Removed
For example, if consumer behavior and vehicle ownership trends move from vehicles with internal combustion engines to electric vehicles, the number of vehicles coming to the wholesale market could decline, the ancillary services we provide could decline or change, we could incur expenses associated with the purchase and installation of charging stations at our facilities and our revenues and profitability may be adversely affected.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn our Finance segment (formerly referenced as AFC), AFC has approximately 100 locations in North America at December 31, 2022, including 54 branches which are physically located at 9 ADESA Canada vehicle logistics centers and other competitor locations. Each of the remaining AFC offices is strategically located in close proximity to at least one of the auctions that it serves.
Biggest changeIn our Finance segment, AFC has approximately 90 locations in North America at December 31, 2023, including 51 branches which are physically located at 9 OPENLANE Canada vehicle logistics centers and other competitor locations (hybrid of physical locations and a digital servicing network).
The ADESA Canada facilities consist on average of approximately 60 acres of land per site and have parking areas to store vehicles and may have additional buildings for reconditioning, registration, maintenance, bodywork, and other ancillary and administrative services.
The OPENLANE Canada facilities consist on average of approximately 60 acres of land per site and have parking areas to store vehicles and may have additional buildings for reconditioning, registration, maintenance, bodywork, and other ancillary and administrative services.
Item 2. Properties Our corporate headquarters is located in Carmel, Indiana, where we lease office space pursuant to a lease that expires in 2034. At December 31, 2022, we also owned or leased other properties in the United States, Canada, Europe, the United Kingdom, Mexico, Uruguay and the Philippines.
Item 2. Properties Our corporate headquarters is located in Carmel, Indiana, where we lease office space pursuant to a lease that expires in 2034. At December 31, 2023, we also owned or leased other properties in the United States, Canada, Europe, the United Kingdom, Uruguay and the Philippines.
AFC generally leases its branches. We believe that our current facilities are suitable and adequate to meet our current needs, and if we require additional or substitute space, we anticipate we will be able to obtain additional suitable facilities.
We believe that our current facilities are suitable and adequate to meet our current needs, and if we require additional or substitute space, we anticipate we will be able to obtain additional suitable facilities.
Facilities utilized by the Marketplace segment (formerly referenced as ADESA Auctions) primarily include 14 vehicle logistics center locations across Canada, which are either owned or leased.
Facilities utilized by the Marketplace segment primarily include 15 vehicle logistics center locations across Canada at December 31, 2023, which are either owned or leased.
Added
Each of the remaining AFC offices is strategically located in close proximity to at least one of the auctions that it serves. AFC generally leases its branches.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAlthough the outcome of litigation cannot be accurately predicted, based on evaluation of information presently available, our management does not currently believe that the ultimate resolution of these actions will have a material adverse effect on our financial condition, results of operations or cash flows. Item 4. Mine Safety Disclosures Not applicable. 28 Table of Contents PART II
Biggest changeAlthough the outcome of litigation cannot be accurately predicted, based on evaluation of information presently available, our management does not currently believe that the ultimate resolution of these actions will have a material adverse effect on our financial condition, results of operations or cash flows. Item 4. Mine Safety Disclosures Not applicable. 27 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of February 15, 2023, there were 9 stockholders of record. Because many shares of our common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by the holders of record.
Biggest changeBecause many shares of our common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by the holders of record. Unregistered Sales of Equity Securities There were no unregistered sales of equity securities made by OPENLANE during the period covered by this report.
Repurchases may be made in the open market or through privately negotiated transactions, in accordance with applicable securities laws and regulations, including pursuant to repurchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.
Repurchases may be made in the open market or through privately negotiated transactions, in accordance with applicable securities laws and regulations, including pursuant to repurchase plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.
The timing and amount of any repurchases is subject to market and other conditions. 29 Table of Contents Stock Price Performance Graph The graph below shows the cumulative total stockholder return, assuming an investment of $100 and dividend reinvestment (and taking into account the value of the IAA, Inc. common shares distributed in the spin-off), for the period beginning on December 31, 2017 and ending on December 31, 2022, on each of KAR Auction Services' common stock, the Standard & Poor's SmallCap 600 Index and the Standard and Poor's 500 Index.
The timing and amount of any repurchases is subject to market and other conditions. 28 Table of Contents Stock Price Performance Graph The graph below shows the cumulative total stockholder return, assuming an investment of $100 and dividend reinvestment (and taking into account the value of the IAA, Inc. common shares distributed in the spin-off), for the period beginning on December 31, 2018 and ending on December 31, 2023, on each of OPENLANE's common stock, the Standard & Poor's SmallCap 600 Index and the Standard and Poor's 500 Index.
Issuer Purchases of Equity Securities The following table provides information about purchases by KAR Auction Services of its shares of common stock during the quarter ended December 31, 2022: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) (Dollars in millions) October 1 - October 31 3,909,406 $ 12.79 3,909,406 $ 126.9 November 1 - November 30 — — — 126.9 December 1 - December 31 — — — 126.9 Total 3,909,406 $ 12.79 3,909,406 (1) In October 2019, the board of directors authorized a repurchase of up to $300 million of the Company’s outstanding common stock, par value $0.01 per share, through October 30, 2021.
Issuer Purchases of Equity Securities The following table provides information about purchases by OPENLANE, Inc. of its shares of common stock during the quarter ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) (Dollars in millions) October 1 - October 31 — $ — — $ 125.0 November 1 - November 30 — — — 125.0 December 1 - December 31 — — — 125.0 Total — $ — — (1) In October 2019, the board of directors authorized a repurchase of up to $300 million of the Company’s outstanding common stock, par value $0.01 per share.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders of Record KAR Auction Services' common stock is traded on the New York Stock Exchange ("NYSE") under the symbol "KAR" and has been traded on the NYSE since December 11, 2009.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders of Record OPENLANE's common stock is traded on the New York Stock Exchange ("NYSE") under the symbol "KAR" and has been traded on the NYSE since December 11, 2009. As of February 15, 2024, there were 5 stockholders of record.
In October 2021, the board of directors authorized an extension of the Company's share repurchase program through December 31, 2022. On April 27, 2022, the board of directors authorized an increase in the size of the Company’s $300 million share repurchase program by an additional $200 million and an extension of the share repurchase program through December 31, 2023.
In October 2023, the board of directors authorized an increase in the size of the Company’s share repurchase program by an additional $20.3 million and an extension of the share repurchase program through December 31, 2024.
Removed
Unregistered Sales of Equity Securities The information required by Item 701 of Regulation S-K was previously disclosed (for the sale of Series A Preferred Stock) in the Company's Current Reports on Form 8-K, filed with the SEC on June 10, 2020 and June 30, 2020.
Added
Since October 2019, the share repurchase program has been amended from time-to-time through subsequent approvals by the board of directors. These amendments have served to increase the size of the share repurchase program and extend its maturity date.
Removed
On November 12, 2020, we issued 857,630 shares of our common stock to three individuals and one trust in connection with the BacklotCars acquisition in the fourth quarter of 2020. We received $15 million as consideration for the sale of such securities.
Added
Company/Index Base Period 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 OPENLANE, Inc. $ 100 $ 123.82 $ 107.18 $ 89.96 $ 75.16 $ 85.30 S&P 500 Index $ 100 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 S&P SmallCap 600 Index $ 100 $ 122.78 $ 136.64 $ 173.29 $ 145.39 $ 168.73 Item 6. [Reserved] 29 Table of Contents
Removed
On October 14, 2021, we issued 1,953,124 shares of our common stock to two individuals and one trust in connection with the CARWAVE acquisition in the fourth quarter of 2021. We received $30 million as consideration for the sale of such securities.
Removed
The issuance of these securities was exempt from registration under the Securities Act, in reliance upon Section 4(a)(2) of the Securities Act as transactions by an issuer not involving any public offering and/or the private offering safe harbor provision of Rule 506 of Regulation D promulgated under the Securities Act.
Removed
For the year ended December 31, 2022, we have also included the Standard and Poor's MidCap 400 Index to the comparison of cumulative total return as we utilized such index in the immediately preceding fiscal year.
Removed
For the years following 2022, we will no longer show the Standard and Poor's MidCap 400 Index as a comparable index because our market capitalization is no longer comparable to the average market capitalizations included in the index. We believe the Standard and Poor's SmallCap 600 Index provides a better comparison in terms of comparable market capitalization.
Removed
Company/Index Base Period 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 KAR Auction Services, Inc. $ 100 $ 96.90 $ 119.98 $ 103.86 $ 87.17 $ 72.83 S&P MidCap 400 Index $ 100 $ 88.92 $ 112.21 $ 127.54 $ 159.12 $ 138.34 S&P 500 Index $ 100 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 156.88 S&P SmallCap 600 Index $ 100 $ 91.52 $ 112.37 $ 125.05 $ 158.59 $ 133.06 Item 6. [Reserved] 30 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThese measures may not be comparable to similarly titled measures reported by other companies. 46 Table of Contents The following tables reconcile EBITDA and Adjusted EBITDA to income (loss) from continuing operations for the periods presented: Three Months Ended December 31, 2022 (Dollars in millions) Marketplace Finance Consolidated Income (loss) from continuing operations $ 5.8 $ 36.1 $ 41.9 Add back: Income taxes 4.5 13.4 17.9 Interest expense, net of interest income 6.8 28.1 34.9 Depreciation and amortization 22.2 1.8 24.0 Intercompany interest 5.3 (5.3) — EBITDA 44.6 74.1 118.7 Non-cash stock-based compensation (4.7) (1.0) (5.7) Loss on extinguishment of debt 0.2 — 0.2 Acquisition related costs 0.3 — 0.3 Securitization interest — (25.8) (25.8) Gain on sale of property (33.9) — (33.9) Severance 4.0 0.2 4.2 Foreign currency (gains)/losses (6.1) — (6.1) Net change in unrealized (gains) losses on investment securities — 0.6 0.6 Professional fees related to business improvement efforts 2.6 0.5 3.1 Other 0.7 0.2 0.9 Total addbacks/(deductions) (36.9) (25.3) (62.2) Adjusted EBITDA $ 7.7 $ 48.8 $ 56.5 Three Months Ended December 31, 2021 (Dollars in millions) Marketplace Finance Consolidated Income (loss) from continuing operations $ (13.8) $ 29.0 $ 15.2 Add back: Income taxes (31.5) 9.4 (22.1) Interest expense, net of interest income 21.2 10.5 31.7 Depreciation and amortization 25.9 2.3 28.2 Intercompany interest — — — EBITDA 1.8 51.2 53.0 Non-cash stock-based compensation 1.0 0.3 1.3 Acquisition related costs 2.1 — 2.1 Securitization interest — (8.3) (8.3) Loss on asset sales 0.1 — 0.1 Severance 1.3 0.2 1.5 Foreign currency (gains)/losses 1.1 — 1.1 Contingent consideration adjustment 4.2 — 4.2 Net change in unrealized (gains) losses on investment securities — 9.3 9.3 Other 0.1 (0.1) — Total addbacks/(deductions) 9.9 1.4 11.3 Adjusted EBITDA $ 11.7 $ 52.6 $ 64.3 47 Table of Contents Year Ended December 31, 2022 (Dollars in millions) Marketplace Finance Consolidated Income (loss) from continuing operations $ (105.7) $ 134.3 $ 28.6 Add back: Income taxes (36.4) 46.4 10.0 Interest expense, net of interest income 37.6 78.9 116.5 Depreciation and amortization 92.3 7.9 100.2 Intercompany interest 8.4 (8.4) — EBITDA (3.8) 259.1 255.3 Non-cash stock-based compensation 14.2 3.3 17.5 Loss on extinguishment of debt 17.2 — 17.2 Acquisition related costs 1.2 — 1.2 Securitization interest — (70.7) (70.7) Gain on sale of property (33.9) — (33.9) (Gain)/Loss on asset sales (0.1) — (0.1) Severance 11.7 0.7 12.4 Foreign currency (gains)/losses 2.5 — 2.5 Net change in unrealized (gains) losses on investment securities — 7.1 7.1 Professional fees related to business improvement efforts 13.3 1.9 15.2 Other 7.1 0.4 7.5 Total addbacks/(deductions) 33.2 (57.3) (24.1) Adjusted EBITDA $ 29.4 $ 201.8 $ 231.2 Year Ended December 31, 2021 (Dollars in millions) Marketplace Finance Consolidated Income (loss) from continuing operations $ (126.2) $ 125.4 $ (0.8) Add back: Income taxes (26.4) 41.5 15.1 Interest expense, net of interest income 85.3 39.5 124.8 Depreciation and amortization 100.5 9.4 109.9 Intercompany interest 0.2 (0.2) — EBITDA 33.4 215.6 249.0 Non-cash stock-based compensation 12.1 2.2 14.3 Acquisition related costs 7.1 — 7.1 Securitization interest — (29.8) (29.8) (Gain)/Loss on asset sales 0.1 (0.8) (0.7) Severance 2.9 0.4 3.3 Foreign currency (gains)/losses 3.8 — 3.8 Contingent consideration adjustment 24.3 — 24.3 Net change in unrealized (gains) losses on investment securities — (1.4) (1.4) Other 0.6 (0.3) 0.3 Total addbacks/(deductions) 50.9 (29.7) 21.2 Adjusted EBITDA $ 84.3 $ 185.9 $ 270.2 48 Table of Contents Certain of our loan covenant calculations utilize financial results for the most recent four consecutive fiscal quarters (total KAR results, including the ADESA U.S. physical auctions shown as discontinued operations).
Biggest changeThese measures may not be comparable to similarly titled measures reported by other companies. 46 Table of Contents The following tables reconcile EBITDA and Adjusted EBITDA to income (loss) from continuing operations for the periods presented: Three Months Ended December 31, 2023 (Dollars in millions) Marketplace Finance Consolidated Income (loss) from continuing operations $ (17.7) $ 31.3 $ 13.6 Add back: Income taxes (2.5) 10.1 7.6 Interest expense, net of interest income 4.9 34.0 38.9 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 — 2.0 Securitization interest — (31.4) (31.4) Severance 2.0 0.1 2.1 Foreign currency (gains)/losses (2.1) — (2.1) Net change in unrealized (gains) losses on investment securities — (0.4) (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 Three Months Ended December 31, 2022 (Dollars in millions) Marketplace Finance Consolidated Income (loss) from continuing operations $ 5.8 $ 36.1 $ 41.9 Add back: Income taxes 4.5 13.4 17.9 Interest expense, net of interest income 6.8 28.1 34.9 Depreciation and amortization 22.2 1.8 24.0 Intercompany interest 5.3 (5.3) — EBITDA 44.6 74.1 118.7 Non-cash stock-based compensation (4.7) (1.0) (5.7) Loss on extinguishment of debt 0.2 — 0.2 Acquisition related costs 0.3 — 0.3 Securitization interest — (25.8) (25.8) Gain on sale of property (33.9) — (33.9) Severance 4.0 0.2 4.2 Foreign currency (gains)/losses (6.1) — (6.1) Net change in unrealized (gains) losses on investment securities — 0.6 0.6 Professional fees related to business improvement efforts 2.6 0.5 3.1 Other 0.7 0.2 0.9 Total addbacks/(deductions) (36.9) (25.3) (62.2) Adjusted EBITDA $ 7.7 $ 48.8 $ 56.5 47 Table of Contents Year Ended December 31, 2023 (Dollars in millions) Marketplace Finance Consolidated Income (loss) from continuing operations $ (277.5) $ 122.7 $ (154.8) Add back: Income taxes (40.4) 48.7 8.3 Interest expense, net of interest income 21.7 130.6 152.3 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 — 1.1 Acquisition related costs 3.1 — 3.1 Securitization interest — (120.4) (120.4) Severance 5.1 0.4 5.5 Foreign currency (gains)/losses (2.9) — (2.9) Goodwill and other intangibles impairment 250.8 — 250.8 Contingent consideration adjustment 1.3 — 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 Year Ended December 31, 2022 (Dollars in millions) Marketplace Finance Consolidated Income (loss) from continuing operations $ (105.7) $ 134.3 $ 28.6 Add back: Income taxes (36.4) 46.4 10.0 Interest expense, net of interest income 37.6 78.9 116.5 Depreciation and amortization 92.3 7.9 100.2 Intercompany interest 8.4 (8.4) — EBITDA (3.8) 259.1 255.3 Non-cash stock-based compensation 14.2 3.3 17.5 Loss on extinguishment of debt 17.2 — 17.2 Acquisition related costs 1.2 — 1.2 Securitization interest — (70.7) (70.7) Gain on sale of property (33.9) — (33.9) (Gain)/Loss on asset sales (0.1) — (0.1) Severance 11.7 0.7 12.4 Foreign currency (gains)/losses 2.5 — 2.5 Net change in unrealized (gains) losses on investment securities — 7.1 7.1 Professional fees related to business improvement efforts 13.3 1.9 15.2 Other 7.1 0.4 7.5 Total addbacks/(deductions) 33.2 (57.3) (24.1) Adjusted EBITDA $ 29.4 $ 201.8 $ 231.2 48 Table of Contents Certain of our loan covenant calculations utilize financial results for the most recent four consecutive fiscal quarters.
LIQUIDITY AND CAPITAL RESOURCES We believe that the significant indicators of liquidity for our business are cash on hand, cash flow from operations, working capital and amounts available under our Credit Facility. Our principal sources of liquidity consist of cash generated by operations and borrowings under our Revolving Credit Facility.
LIQUIDITY AND CAPITAL RESOURCES We believe that the significant indicators of liquidity for our business are cash on hand, cash flow from operations, working capital and amounts available under our Revolving Credit Facility. Our principal sources of liquidity consist of cash generated by operations and borrowings under our Revolving Credit Facility.
Consolidated Adjusted EBITDA is EBITDA (earnings before interest expense, income taxes, depreciation and amortization) adjusted to exclude among other things (a) gains and losses from asset sales; (b) unrealized foreign currency translation gains and losses in respect of indebtedness; (c) certain non-recurring gains and losses; (d) stock-based compensation expense; (e) certain other non-cash amounts included in the determination of net income; (f) charges and revenue reductions resulting from purchase accounting; (g) minority interest; (h) consulting expenses incurred for cost reduction, operating restructuring and business improvement efforts; (i) expenses realized upon the termination of employees and the termination or cancellation of leases, software licenses or other contracts in connection with the operational restructuring and business improvement efforts; (j) expenses incurred in connection with permitted acquisitions; (k) any impairment charges or write-offs of intangibles; and (l) any extraordinary, unusual or non-recurring charges, expenses or losses.
Consolidated EBITDA is EBITDA (earnings before interest expense, income taxes, depreciation and amortization) adjusted to exclude, among other things, (a) gains and losses from asset sales; (b) unrealized foreign currency translation gains and losses in respect of indebtedness; (c) certain non-recurring gains and losses; (d) stock-based compensation expense; (e) certain other non-cash amounts included in the determination of net income; (f) charges and revenue reductions resulting from purchase accounting; (g) minority interest; (h) consulting expenses incurred for cost reduction, operating restructuring and business improvement efforts; (i) expenses realized upon the termination of employees and the termination or cancellation of leases, software licenses or other contracts in connection with the operational restructuring and business improvement efforts; (j) expenses incurred in connection with permitted acquisitions; (k) any impairment charges or write-offs of intangibles; and (l) any extraordinary, unusual or non-recurring charges, expenses or losses.
Marketplace services such as inbound and outbound transportation logistics, reconditioning, vehicle inspection and certification, collateral recovery services and technology solutions are generally recognized at the time of service ("Service revenue" in the consolidated statement of income). The Company also sells vehicles that have been purchased, which represent approximately 1% of the total volume of vehicles sold.
Marketplace services such as inbound and outbound transportation logistics, reconditioning, vehicle inspection and certification, collateral recovery services and technology solutions are generally recognized at the time of service ("Service revenue" in the consolidated statement of income (loss)). The Company also sells vehicles that have been purchased, which represent approximately 1% of the total volume of vehicles sold.
The Company generally does not take title to these consigned vehicles and records only its auction fees as revenue ("Auction fees" in the consolidated statement of income) because it has no influence on the vehicle auction selling price agreed to by the seller and the buyer at the auction.
The Company generally does not take title to these consigned vehicles and records only its auction fees as revenue ("Auction fees" in the consolidated statement of income (loss)) because it has no influence on the vehicle auction selling price agreed to by the seller and the buyer at the auction.
We believe our sources of liquidity from our cash and cash equivalents on hand, working capital, cash provided by operating activities, and availability under our Credit Facility are sufficient to meet our operating needs for the foreseeable future.
We believe our sources of liquidity from our cash and cash equivalents on hand, working capital, cash provided by operating activities, and availability under our Revolving Credit Facility are sufficient to meet our operating needs for the foreseeable future.
After the occurrence of a termination event, as defined in the U.S. securitization agreement, the banks may, and could, cause the stock of AFC Funding Corporation to be transferred to the bank facility, though as a practical matter the bank facility would look to the liquidation of the receivables under the transaction documents as their primary remedy.
After t he occurrence of a termination event, as defined in the U.S. securitization agreement, the banks may, and could, cause the stock of AFC Funding Corporation to be transferred to the bank facility, though as a practical matter the bank facility would look to the liquidation of the receivables under the transaction documents as their primary remedy.
The cash used by operating activities for the year ended December 31, 2022 is primarily attributable to income taxes paid associated with the taxable gain on the sale of the ADESA U.S. physical auction business and a decrease in accounts payable and accrued expenses.
The cash used by operating activities for the year ended December 31, 2022 was primarily attributable to income taxes paid associated with the taxable gain on the sale of the ADESA U.S. physical auction business and a decrease in accounts payable and accrued expenses.
At December 31, 2022, we were in compliance with the covenants in the securitization agreements. EBITDA and Adjusted EBITDA 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, or GAAP.
At December 31, 2023, we were in compliance with the covenants in the securitization agreements. EBITDA and Adjusted EBITDA 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, or GAAP.
The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a market participant, is based upon the Company’s required rates of return, including consideration of both debt and equity components of the capital structure.
The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a market participant, is based on the Company’s required rates of return, including consideration of both debt and equity components of the capital structure.
In addition, our most significant accounting policies are discussed in Note 2 and elsewhere in the notes to the consolidated financial statements for the year ended December 31, 2022, which are included in this Annual Report on Form 10-K.
In addition, our most significant accounting policies are discussed in Note 2 and elsewhere in the notes to the consolidated financial statements for the year ended December 31, 2023, which are included in this Annual Report on Form 10-K.
The increase in cost of services was primarily the result of increases in compensation expense of $3.1 million, incentive-based compensation of $2.2 million, lot check expenses of $2.0 million and credit check expenses of $0.6 million, partially offset by a decrease in other miscellaneous expenses aggregating $0.2 million.
The increase in cost of services of $2.8 million was primarily the result of increases in compensation expense of $2.2 million, lot check expenses of $0.6 million and other miscellaneous expenses aggregating $1.3 million, partially offset by a decrease in incentive-based compensation of $1.3 million.
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. 31 Table of Contents Overview We are a leading digital marketplace for used vehicles, connecting sellers and buyers across North America and Europe to facilitate fast, easy and transparent transactions.
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. Overview We are a leading digital marketplace for used vehicles, connecting sellers and buyers across North America and Europe to facilitate fast, easy and transparent transactions.
The cash provided by investing activities for the year ended December 31, 2022 is primarily attributable to the proceeds from the sale of the ADESA U.S. physical auction business, partially offset by purchases of property and equipment.
The cash provided by investing activities for the year ended December 31, 2022 was primarily attributable to the proceeds from the sale of the ADESA U.S. physical auction business, partially offset by purchases of property and equipment.
While management can and has implemented strategies to address these events, changes in operating plans or adverse changes in the future could reduce the underlying cash flows used to estimate fair values and could result in a decline in fair value that would trigger future impairment charges of the goodwill within the U.S. Dealer-to-Dealer reporting unit described above.
While management can and has implemented strategies to address these events, changes in operating plans or adverse changes in the future could reduce the underlying cash flows used to estimate fair values and could result in a decline in fair value that would trigger future impairment charges of the goodwill within the U.S. Dealer-to-Dealer and Europe reporting units described above.
Funds held by our foreign subsidiaries could be repatriated, at which point state and local income tax expense and withholding tax expense would need to be recognized, net of any applicable foreign tax credits. The Company’s auction volumes have been adversely impacted by the supply chain disruptions and associated challenges in the automotive industry.
Funds held by our foreign subsidiaries could be repatriated, at which point state and local income tax expense and withholding tax expense would need to be recognized, net of any applicable foreign tax credits. 45 Table of Contents The Company’s auction volumes have been adversely impacted by the supply chain disruptions and associated challenges in the automotive industry.
Important factors that could trigger an impairment review include significant under-performance relative to historical or projected future operating results; significant negative industry or economic trends; and our market valuation relative to our book value.
Important factors that could trigger an impairment review include significant under-performance relative to historical or projected future operating results; significant negative industry or economic trends; and our market valuation relative to our carrying value.
Such statements, including statements regarding the potential impacts of the COVID-19 pandemic and adverse market conditions; our future growth; anticipated cost savings, revenue increases, credit losses and capital expenditures; contractual obligations; dividend declarations and payments; common stock repurchases; tax rates and assumptions; strategic initiatives, acquisitions and dispositions; our competitive position and retention of customers; and our continued investment in information technology, are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results projected, expressed or implied by these forward-looking statements.
Such statements, including statements regarding adverse market conditions; our future growth; anticipated cost savings, revenue increases, credit losses and capital expenditures; contractual obligations; dividend declarations and payments; common stock repurchases; tax rates and assumptions; strategic initiatives, acquisitions and dispositions; our competitive position and retention of customers; and our continued investment in information technology, are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results projected, expressed or implied by these forward-looking statements.
AFC, AFC Funding Corporation and AFCI must maintain certain financial covenants including, among others, limits on the amount of debt AFC and AFCI can incur, minimum levels of tangible net worth, and other covenants tied to the performance of the finance receivables portfolio. The securitization agreements also incorporate the financial covenants of our Credit Facility.
AFC, AFC Funding Corporation and AFCI must maintain certain financial covenants including, among others, limits on the amount of debt AFC and AFCI can incur, minimum levels of tangible net worth, and other covenants tied to the performance of the finance receivables portfolio. The securitization agreements also incorporate the financial covenants of our Previous Credit Agreement.
The cash provided by investing activities in 2022 was primarily from a decrease in finance receivables held for investments and proceeds from the sale of property and equipment, partially offset by purchases of property and equipment.
The cash provided by investing activities in 2022 was primarily from a decrease in finance receivables held for investment and proceeds from the sale of property and equipment, partially offset by purchases of property and equipment.
Key challenges for the independent used vehicle dealer include demand for used vehicles, disruptions in pricing of used vehicle inventory, access to consumer financing and increased used car retail activity of franchise and public dealerships (most of which do not utilize AFC or its competitors for floorplan financing).
Key challenges for the independent dealer customers include demand for used vehicles, disruptions in pricing of used vehicle inventory, access to consumer financing, increased interest rates and increased used car retail activity of franchise and public dealerships (most of which do not utilize AFC or its competitors for floorplan financing).
Cash provided by continuing operations for 2021 consisted primarily of cash earnings and an increase in accounts payable and accrued expenses, partially offset by an increase in trade receivables and other assets.
Cash provided by continuing operations for 2023 consisted primarily of cash earnings and an increase in accounts payable and accrued expenses, partially offset by an increase in trade receivables and other assets.
In addition, AFC provides liquidity for customer trade-ins which encompasses settling lien holder payoffs. AFC also provides title services for their customers. These services are provided through AFC's digital servicing network as well as its physical locations throughout North America.
In addition, AFC provides liquidity for customer trade-ins which can encompass settling lien holder payoffs. AFC also provides title services for their customers. These services are provided through AFC's digital servicing network as well as its physical locations throughout North America.
As a result, revenues and operating expenses related to volume will fluctuate accordingly on a quarterly basis. The fourth calendar quarter typically experiences lower used vehicle volume as well as additional costs associated with the holidays and winter weather.
As a result, revenues and operating expenses related to volume will fluctuate accordingly on a quarterly basis. In North America, the fourth calendar quarter typically experiences lower used vehicle volume as well as additional costs associated with the holidays and winter weather.
Cash provided by continuing operations for 2022 consisted primarily of cash earnings and a decrease in trade receivables and other assets, partially offset by a decrease in accounts payable and accrued expenses and the portion of contingent consideration payments classified in operating activities.
Cash provided by continuing operations 49 Table of Contents for 2022 consisted primarily of cash earnings and a decrease in trade receivables and other assets, partially offset by a decrease in accounts payable and accrued expenses and the portion of contingent consideration payments classified in operating activities.
The Company also pay s a commitment fee between 25 to 35 basis points, payable quarterly, on the average daily unused amount of the Revolving Facility based on the Company’s Consolidated Senior Secured Net Leverage Ratio, from time to time.
The Company also pay s a commitment fee between 25 to 35 basis points, payable quarterly, on the average daily unused amount of the Revolving Credit Facility based on the Company’s Consolidated Senior Secured Net Leverage Ratio.
In addition, the Credit Agreement and the indenture governing our senior notes (see Note 12, "Long-Term Debt" for addit ional information) contain certain limitations on our ability to pay dividends and other distributions, make certain acquisitions or investments, grant liens and sell assets, and the Credit Agreement contains certain limitations on our ability to incur 44 Table of Contents indebtedness.
In addition, the Credit Agreement and the indenture governing our senior notes (see Note 12, "Long-Term Debt" for addit ional information) contain certain limitations on our ability to pay dividends and other distributions, make certain acquisitions or investments, grant liens and sell assets, and the Credit Agreement contains certain limitations on our ability to incur indebtedness.
New Accounting Standards For a description of new accounting standards that could affect the Company, reference the "New Accounting Standards" section of Note 2 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. 54 Table of Contents
New Accounting Standards For a description of new accounting standards that could affect the Company, reference the "New Accounting Standards" section of Note 2 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
Specific collection matters can be impacted by the outcome of negotiations, litigation and bankruptcy proceedings with individual customers. AFC controls credit risk through credit approvals, credit limits, underwriting and collateral management monitoring procedures, including approximately 60,000 lot audits and holding vehicle titles where permitted.
Specific collection matters can be impacted by the outcome of negotiations, litigation and bankruptcy proceedings with individual customers. AFC controls credit risk through credit approvals, credit limits, underwriting and collateral management monitoring procedures, including over 58,000 lot audits and holding vehicle titles where permitted.
In addition, macroeconomic factors, including inflationary pressures, rising interest rates, volatility of oil and natural gas prices and declining consumer confidence 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.
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.
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. AFC offers short-term inventory-secured financing, also known as floorplan financing, to independent used vehicle dealers. Financing is primarily provided for terms of 30 to 90 days.
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. AFC offers short-term inventory-secured financing, also known as floorplan financing, to independent dealer customers. Financing is primarily provided for terms of 30 to 90 days.
We capitalized approximately $1.1 million of costs in connection with the Canadian Receivables Purchase Agreement. The receivables sold pursuant to both the U.S. and Canadian securitization agreements are accounted for as secured borrowings. AFC manage d total finance receiva bles of $2,416.6 million and $2,529.0 million a t December 31, 2022 and December 31, 2021, respectively.
We capitalized approximately $0.6 million of costs in connection with the Canadian Receivables Purchase Agreement. The receivables sold pursuant to both the U.S. and Canadian securitization agreements are accounted for as secured borrowings. AFC manage d total finance receiva bles of $2,305.0 million and $2,416.6 million a t December 31, 2023 and 2022, respectively.
The obligations of the Company under the Credit Facilities are guaranteed by certain of our domestic subsidiaries (the "Subsidiary Guarantors") and are secured by substantially all of the assets of the Company and the Subsidiary Guarantors, including but not limited to: (a) pledges of and first priority security interests in 100% of the equity interests of certain of the Company's and the Subsidiary Guarantors' domestic subsidiaries and 65% of the equity interests of certain of the Company's and the Subsidiary Guarantors' first tier foreign subsidiaries and (b) first priority security interests in substantially all other tangible and intangible assets of the Company and each Subsidiary Guarantor, subject to certain exceptions.
The obligations of the Company under the Revolving Credit Facility are guaranteed by certain of our domestic subsidiaries (the "Subsidiary Guarantors") and are secured by substantially all of the assets of the Company and the Subsidiary Guarantors, including but not limited to: (a) pledges of and first priority security interests in 100% of the equity interests of certain of the Company's and the Subsidiary Guarantors' domestic subsidiaries and 65% of the equity interests of certain of the Company's and the Subsidiary Guarantors' first tier foreign subsidiaries and (b) first priority security interests in substantially all other assets of the Company and each Subsidiary Guarantor, subject to certain exceptions.
Off-Balance Sheet Arrangements As of December 31, 2022, we had no off-balance sheet arrangements pursuant to Item 303 of Regulation S-K under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that we believe are reasonably likely to have a current or future effect on our financial condition, results of operations, or cash flows.
Off-Balance Sheet Arrangements As of December 31, 2023, we had no off-balance sheet arrangements pursuant to Item 303 of Regulation S-K under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that we believe are reasonably likely to have a current or future effect on our financial condition, results of operations, or cash flows. 54 Table of Contents
AFC's allowance for losses wa s $21.5 million and $23.0 million at December 31, 2022 and December 31, 2021, respectively.
AFC's allowance for losses wa s $23.0 million and $21.5 million at December 31, 2023 and 2022, respectively.
Impact of Foreign Currency For the three months ended December 31, 2022 compared with the three months ended December 31, 2021, the change in the euro exchange rate decreased revenue by $6.0 million, operating profit by $0.3 million and net income by $0.2 million.
Impact of Foreign Currency For the three months ended December 31, 2023 compared with the three months ended December 31, 2022, the change in the euro exchange rate increased revenue by $3.6 million, operating profit by $0.3 million and net income by $0.2 million.
Estimates of revenue growth and operating expenses are based on internal projections considering the reporting unit’s past performance and forecasted growth, strategic initiatives and changes in economic conditions.
Estimates of revenue growth and operating expenses are based on management estimates considering the reporting unit’s past performance and forecasted growth, strategic initiatives and changes in economic conditions.
The revenues and expense growth rates are dependent on wholesale used vehicle supply, the competitive environment, inflation and our ability to pass price increases along to our customers, and business 53 Table of Contents activities that impact market share. As a result, the revenues growth rate could be adversely impacted by market conditions, macroeconomic factors or an increased competitive environment.
The revenue and expense growth rates are dependent on wholesale used vehicle supply, the competitive environment, inflation and our ability to pass price increases along to our customers, and business activities that impact market share. As a result, the revenue growth rate could be adversely impacted by market conditions, macroeconomic factors or an increased competitive environment.
The supply chain issues and current market conditions facing the automotive industry, 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.
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.
Consequently, actual results could differ from those estimates. Accounting measurements that management believes are most critical to the reported results of our operations and financial condition include: (1) allowance for credit losses; (2) business combinations; and (3) goodwill and other intangible assets.
Some of those judgments can be subjective and complex. Consequently, actual results could differ from those estimates. Accounting measurements that management believes are most critical to the reported results of our operations and financial condition include: (1) allowance for credit losses; (2) business combinations; and (3) goodwill and other intangible assets.
For these types of sales, the Company does record the gross selling price of purchased vehicles sold at auction as revenue ("Purchased vehicle sales" in the consolidated statement of income) and the gross purchase price of the vehicles as "Cost of services." AFC's revenue ("Finance-related revenue" in the consolidated statement of income) is comprised of interest and fee income, provision for credit losses and other revenues associated with our finance receivables, as well as warranty contract revenue prior to 2021.
For these types of sales, the Company does record the gross selling price of purchased vehicles sold at auction as revenue ("Purchased vehicle sales" in the consolidated statement of income (loss)) and the gross purchase price of the vehicles as "Cost of services." AFC's revenue ("Finance-related revenue" in the consolidated statement of income (loss)) is comprised of interest and fee income, provision for credit losses and other revenues associated with our finance receivables.
When evaluating goodwill for impairment, we may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired.
When evaluating goodwill for impairment, we may first perform a qualitative 52 Table of Contents assessment to determine whether it is more likely than not that a reporting unit is impaired.
For further discussion, reference the notes to the consolidated financial statements. The $4.8 million loss from discontinued operations for the three months ended December 31, 2022 was comprised of an adjustment to income taxes of $5.8 million, partially offset by a $1.0 million reduction to stock-based compensation expense resulting from the true-up of performance-based restricted stock units.
The $4.8 million loss from discontinued operations for the three months ended December 31, 2022 was comprised of an adjustment to income taxes of $5.8 million, partially offset by a $1.0 million reduction to stock-based compensation expense resulting from the true-up of performance-based restricted stock units.
The forward-looking statements in this document are made as of the date on which they are made and we do not undertake to update our forward-looking statements. Sale of ADESA U.S.
The forward-looking statements in this document are made as of the date on which they are made and we do not undertake to update our forward-looking statements.
We continue to invest in our core information technology capabilities and our service locations. Capital expenditures related to continuing operations are expected to be approximately $65 million for fiscal year 2023.
We continue to invest in our core information technology capabilities and our service locations. Capital expenditures related to continuing operations are expected to be approximately $55 million to $60 million for fiscal year 2024.
As set forth in the Credit Agreement, loans under the Revolving Credit Facility will bear interest at a rate calculated based on the type of borrowing (either adjusted LIBOR or Base Rate) and the Company’s Consolidated Senior Secured Net Leverage Ratio (as defined in the Credit Agreement), with such rate ranging from 2.25% to 1.75% for adjusted LIBOR loans and from 1.25% to 0.75% for Base Rate loans.
Loans under the Revolving Credit Facility bear interest at a rate calculated based on the type of borrowing (at the Company's election, either Adjusted Term SOFR Rate or Base Rate (each as defined in the Credit Agreement)) and the Company’s Consolidated Senior Secured Net Leverage Ratio (as defined in the Credit Agreement), with such rate ranging from 2.75% to 2.25% for Adjusted Term SOFR Rate loans and from 1.75% to 1.25% for Base Rate loans.
Changes in working capital vary from quarter-to-quarter as a result of the timing of collections and disbursements of funds to consignors from marketplace sales held near period end. 43 Table of Contents Approximately $164.1 million of available cash was held by our foreign subsidiaries at December 31, 2022.
Changes in working capital vary from quarter-to-quarter as a result of the timing of collections and disbursements of funds to consignors from marketplace sales held near period end. Approximately $31.6 million of available cash was held by our foreign subsidiaries at December 31, 2023.
Our operating expenses consist of cost of services, selling, general and administrative and depreciation and amortization. Cost of services is composed of payroll and related costs, subcontract services, the cost of vehicles purchased, supplies, insurance, property taxes, utilities, service contract claims, maintenance and lease expense related to the auction sites and loan offices. Cost of services excludes depreciation and amortization.
Cost of services is composed of payroll and related costs, subcontract services, the cost of vehicles purchased, supplies, insurance, property taxes, utilities, service contract claims, maintenance and lease expense related to the auction sites and loan offices. Cost of services excludes depreciation and amortization.
The Credit Agreement contains a financial covenant requiring compliance with a Consolidated Senior Secured Net Leverage Ratio not to exceed 3.5 as of the last day of each fiscal quarter if revolving loans are outstanding.
The Credit Agreement contains a financial covenant requiring compliance with a maximum Consolidated Senior Secured Net Leverage Ratio not to exceed 3.5 as of the last day of each fiscal quarter on which any loans under the Revolving Credit Facility are outstanding.
We had related outstanding letters of credit in the aggregate amount of $19.0 million and $27.6 million at December 31, 2022 and December 31, 2021, respectively, which reduce the amount available for borrowings under the Revolving Credit Facility. Our European operations have lines of credit aggregating $32.1 million (€30 million) of which $3.7 million was drawn at December 31, 2022.
We had related outstanding letters of credit in the aggregate amount of $54.7 million and $19.0 million at December 31, 2023 and 2022, respectively, which reduce the amount available for borrowings under the respective revolving credit facility. Our European operations have lines of credit aggregating $33.1 million (€30 million) of which $17.6 million was drawn at December 31, 2023.
Selling, General and Administrative Selling, general and administrative expenses for the Marketplace segment decreased $10.3 million, or 11%, to $82.8 million for the three months ended December 31, 2022, compared with $93.1 million for the three months ended December 31, 2021, primarily as a result of decreases in stock-based compensation of $5.6 million, compensation expense of $4.2 million, information technology costs of $3.3 million and reductions in other miscellaneous expenses aggregating $3.0 million, partially offset by increases in incentive-based compensation of $3.7 million and severance of $2.1 million.
Selling, General and Administrative Selling, general and administrative expenses for the Marketplace segment increased $8.9 million, or 11%, to $91.7 million for the three months ended December 31, 2023, compared with $82.8 million for the three months ended December 31, 2022, primarily as a result of increases in stock-based compensation of $7.4 million, information technology costs of $2.4 million and compensation expense of $1.6 million, partially offset by decreases in severance of $1.9 million and other miscellaneous expenses aggregating $0.6 million.
Gross profit from the Marketplace segment was 32.6% of revenue for the year ended December 31, 2022, compared with 36.5% of revenue for the year ended December 31, 2021. Excluding purchased vehicle sales, gross profit as a percentage of revenue was 38.8% and 45.1% for the years ended December 31, 2022 and 2021, respectively.
Gross profit from the Marketplace segment was 36.0% of revenue for the year ended December 31, 2023, compared with 32.6% of revenue for the year ended December 31, 2022. Excluding purchased vehicle sales, gross profit as a percentage of revenue was 44.3% and 38.8% for the years ended December 31, 2023 and 2022, respectively.
As of December 31, 2022 and December 31, 2021, $2,396.6 million and $2,482.2 million, respectively, of finance receivables and a cash reserve of 1 or 3 percent of the obligations collateralized by finance receivables served as security for the $1,677.6 million and $1,692.3 million of obligations collaterali zed by finance receivables at December 31, 2022 and December 31, 2021, respectively.
As of December 31, 2023 and 2022, $2,296.4 million and $2,396.6 million, respectively, of finance receivables and a cash reserve of 1 or 3 percent of the obligations collateralized by finance receivables served as security for the $1,631.9 million and $1,677.6 million of obligations collaterali zed by finance receivables at December 31, 2023 and 2022, respectively.
The amount of the cash reserve depends on circumstances which are set forth in the securitization agreements. There were unamortized securitization issuance costs of approximately $19.4 million and $15.1 million at December 31, 2022 and December 31, 2021, respectively.
The amount of the cash reserve depends on circumstances which are set forth in the securiti zation agreements. There were unamortized securitization issuance costs of approximately $13.5 million and $19.4 million at December 31, 2023 and 2022, respectively.
Selling, General and Administrative Selling, general and administrative expenses for the Finance segment increased $1.1 million, or 12%, to $10.2 million for the three months ended December 31, 2022, compared with $9.1 million for the three months ended December 31, 2021 primarily as a result of increases in professional fees of $0.7 million, information technology costs of $0.7 million, incentive-based compensation of $0.3 million and other miscellaneous expenses aggregating $0.8 million, partially offset by a decrease in stock-based compensation of $1.4 million.
Selling, General and Administrative Selling, general and administrative expenses for the Finance segment increased $1.9 million, or 19%, to $12.1 million for the three months ended December 31, 2023, compared with $10.2 million for the three months ended December 31, 2022 primarily as a result of increases in stock-based compensation of $1.9 million, postage expense of $1.1 million and information technology costs of $0.2 million, partially offset by decreases in compensation expense of $0.2 million, incentive-based compensation of $0.2 million and other miscellaneous expenses aggregating $0.9 million.
Cash flow from investing activities (continuing operations) Net cash provided by investing activities (continuing operations) was $70.0 million for the year ended December 31, 2022 , compared with net cash used by investing activities of $1,186.4 million for the year ended December 31, 2021.
Cash flow from investing activities (continuing operations) Net cash used by investing activities (continuing operations) was $90.5 million for the year ended December 31, 2023 , compared with net cash provided by investing activities of $70.0 million for the year ended December 31, 2022.
Selling, General and Administrative Selling, general and administrative expenses for the Finance segment increased $11.3 million, or 32%, to $46.5 million for the year ended December 31, 2022, compared with $35.2 million for the year ended December 31, 2021 primarily as a result of increases in professional fees of $2.4 million, compensation expense of $1.7 million, incentive-based compensation of $1.7 million, information technology costs of $1.5 million, stock-based compensation of $1.1 million and other miscellaneous expenses aggregating $2.9 million. 38 Table of Contents Overview of Results of KAR Auction Services, Inc. for the Year Ended December 31, 2020: An overview of the results of KAR Auction Services, Inc. for the year ended December 31, 2020 was included in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 23, 2022.
Selling, General and Administrative Selling, general and administrative expenses for the Finance segment increased $3.3 million, or 7%, to $49.8 million for the year ended December 31, 2023, compared with $46.5 million for the year ended December 31, 2022 primarily as a result of increases in postage expense of $2.8 million, information technology costs of $0.8 million, stock-based compensation of $0.8 million and other miscellaneous expenses aggregating $0.1 million, partially offset by decreases in professional fees of $0.4 million, incentive-based compensation of $0.4 million and contract labor of $0.4 million. 38 Table of Contents Overview of Results of OPENLANE, Inc. for the Year Ended December 31, 2021: An overview of the results of OPENLANE, Inc. for the year ended December 31, 2021 was included in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 9, 2023.
We incurred a loss on the extinguishment of the senior notes of $9.5 million in 2022 primarily representative of the early repayment premium and the write-off of unamortized debt issuance costs associated with the portion of the senior notes repaid.
We incurred a loss on the extinguishment of the senior notes of $9.5 million in 2022 primarily representative of the early repayment premium and the write-off of unamortized debt issuance costs associated with the portion of the senior notes repaid. As of December 31, 2023 there was $210.0 million of senior notes outstanding.
Cash flow from financing activities (continuing operations) Net cash used by financing activities (continuing operations) was $1,621.9 million for the year ended December 31, 2022 , compared with net cash provided by financing activities of $204.0 million for the year ended December 31, 2021.
Cash flow from financing activities (continuing operations) Net cash used by financing activities (continuing operations) was $279.9 million for the year ended December 31, 2023 , compared with $1,621.9 million for the year ended December 31, 2022.
Cash flow from investing activities (discontinued operations) Net cash provided by investing activities (discontinued operations) was $2,077.4 million for the year ended December 31, 2022, compared with net cash used by investing activities of $32.2 million for the year ended December 31, 2021.
Cash flow from investing activities (discontinued operations) Net cash provided by investing activities (discontinued operations) was $7.0 million for the year ended December 31, 2023 , compared with $2,077.4 million for the year ended December 31, 2022.
As of December 31, 2022, $145.0 million was drawn on the Revolving Credit Facility and is classified as current debt based on the Company’s past practice of using the Revolving Credit Facility for short term borrowings. However, the terms of the Revolving Credit Facility do not require repayment until maturity at September 19, 2024.
Liquidity As of December 31, 2023, $137.0 million was drawn on the Revolving Credit Facility and is classified as current debt based on the Company’s past practice of using the Revolving Credit Facility for short term borrowings. However, the terms of the Revolving Credit Facility do not require repayment until maturity at June 23, 2028.
December 31, (Dollars in millions) 2022 2021 Cash and cash equivalents $ 225.7 $ 177.6 Restricted cash 52.0 25.8 Working capital 379.2 382.5 Amounts available under the Revolving Credit Facility 161.0 297.4 Cash provided by operating activities for the year ended 4.1 233.9 We regularly evaluate alternatives for our capital structure and liquidity given our expected cash flows, growth and operating capital requirements as well as capital market conditions.
December 31, (Dollars in millions) 2023 2022 Cash and cash equivalents $ 93.5 $ 225.7 Restricted cash 65.4 52.0 Working capital 363.1 379.2 Amounts available under the Revolving Credit Facility 133.3 161.0 Cash provided by operating activities for the year ended 237.0 4.1 We regularly evaluate alternatives for our capital structure and liquidity given our expected cash flows, growth and operating capital requirements as well as capital market conditions.
(e) Contingent consideration related to acquisitions represents the maximum amount of contingent payments. 51 Table of Contents Dividends The Series A Preferred Stock ranks senior to the shares of the Company’s common stock, par value $0.01 per share, with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.
Dividends The Series A Preferred Stock ranks senior to the shares of the Company’s common stock, par value $0.01 per share, with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.
The amounts due with respect to the services provided by us related to certain consigned vehicles are generally deducted from the sales proceeds upon the eventual auction or other disposition of the related vehicles. Accounts payable include amounts due sellers from the proceeds of the sale of their consigned vehicles less any fees.
The amounts due with respect to the services provided by us related to certain consigned vehicles are generally deducted from the sales proceeds upon the eventual auction or other disposition of the related vehicles.
For the three months ended December 31, 2022 compared with the three months ended December 31, 2021, the change in the Canadian dollar exchange rate decreased revenue by $5.5 million, operating profit by $3.9 million and net income by $2.7 million. 40 Table of Contents Marketplace Results Three Months Ended December 31, (Dollars in millions, except per vehicle amounts) 2022 2021 Auction fees $ 80.8 $ 100.8 Service revenue 146.3 125.8 Purchased vehicle sales 45.0 51.9 Total Marketplace revenue from continuing operations 272.1 278.5 Cost of services* 186.3 179.8 Gross profit* 85.8 98.7 Selling, general and administrative 82.8 93.1 Depreciation and amortization 22.2 25.9 Gain on sale of property (33.9) — Operating profit (loss) $ 14.7 $ (20.3) Commercial vehicles sold 151,000 162,000 Dealer consignment vehicles sold 138,000 180,000 Total vehicles sold 289,000 342,000 Auction fees per vehicle sold $ 280 $ 294 Gross profit per vehicle sold* $ 297 $ 288 Gross profit percentage, excluding purchased vehicles* 37.8% 43.6% * Exclusive of depreciation and amortization Total Marketplace Revenue Revenue from the Marketplace segment decreased $6.4 million, or 2%, to $272.1 million for the three months ended December 31, 2022, compared with $278.5 million for the three months ended December 31, 2021.
For the three months ended December 31, 2023 compared with the three months ended December 31, 2022, the change in the Canadian dollar exchange rate decreased revenue by $0.3 million, operating profit by $0.1 million and had no impact on net income. 40 Table of Contents Marketplace Results Three Months Ended December 31, (Dollars in millions, except per vehicle amounts) 2023 2022 Auction fees $ 90.0 $ 80.8 Service revenue 144.5 146.3 Purchased vehicle sales 60.2 45.0 Total Marketplace revenue from continuing operations 294.7 272.1 Cost of services* 188.5 186.3 Gross profit* 106.2 85.8 Selling, general and administrative 91.7 82.8 Depreciation and amortization 22.7 22.2 Gain on sale of property — (33.9) Operating profit (loss) $ (8.2) $ 14.7 Commercial vehicles sold 183,000 151,000 Dealer consignment vehicles sold 135,000 138,000 Total vehicles sold 318,000 289,000 Gross profit percentage, excluding purchased vehicles* 45.3% 37.8% * Exclusive of depreciation and amortization Total Marketplace Revenue Revenue from the Marketplace segment increased $22.6 million, or 8%, to $294.7 million for the three months ended December 31, 2023, compared with $272.1 million for the three months ended December 31, 2022.
For a further discussion of revenues, gross profit and selling, general and administrative expenses, see the segment results discussions below. Depreciation and Amortization Depreciation and amortization decreased $4.2 million, or 15%, to $24.0 million for the three months ended December 31, 2022, compared with $28.2 million for the three months ended December 31, 2021.
For a further discussion of revenues, gross profit and selling, general and administrative expenses, see the segment results discussions below. Depreciation and Amortization Depreciation and amortization increased $1.3 million, or 5%, to $25.3 million for the three months ended December 31, 2023, compared with $24.0 million for the three months ended December 31, 2022.
Revenue per loan transaction, which includes both loans paid off and loans curtailed, increased $25, or 11%, primarily as a result of an increase in interest yields driven by an increase in prime rates (Federal Reserve raised interest rates 125 basis points in the fourth quarter), an increase in average portfolio duration and an increase in floorplan fees and other fee income per unit, partially offset by an increase in net credit losses and a decrease in loan values.
Revenue per loan transaction, which includes both loans paid off and loans curtailed, increased $1, or less than 1%, primarily as a result of an increase in interest yields driven by an increase in prime rates (Federal Reserve raised interest rates 100 basis points in 2023), and an increase in other fee income per unit, partially offset by an increase in net credit losses and a decrease in loan values.
The increase in gross profit as a percent of revenue was primarily the result of a 30% increase in revenue, partially offset by a 14% increase in cost of services.
The increase in gross profit was primarily the result of a 5% increase in revenue, partially offset by a 4% increase in cost of services.
For the year ended December 31, 2022, the holders of the Series A Preferred Stock received cash dividends aggregating $22.2 million and for the years ended December 31, 2022 and 2021, the holders of the Series A Preferred Stock received dividends in kind with a value in the aggregate of approximately $21.6 million and $41.1 million, respectively.
For the year ended December 31, 2023, the holders of the 50 Table of Contents Series A Preferred Stock received cash dividends aggregating $44.4 million. For the year ended December 31, 2022, the holders of the Series A Preferred Stock received cash dividends aggregating $22.2 million and dividends in kind with a value in the aggregate of approximately $21.6 million.
The increase was attributable to an increase in the average balance on the AFC securitization obligations and an increase in the average interest rate on the AFC securitization obligations to approximately 6.2% for the three months ended December 31, 2022, as compared with approximately 2.3% for the three months ended December 31, 2021.
Interest expense increased $5.8 million at AFC and the increase was attributable to an increase in the average interest rate on the AFC securitization obligations to approximately 7.7% for the three months ended December 31, 2023, as compared with approximately 6.2% for the three months ended December 31, 2022.
The following table summarizes our contractual cash obligations as of December 31, 2022 (in millions) : Payments Due by Period Contractual Obligations Total 1 year or Less More than 1 Year Long-term debt $325 million Revolving Credit Facility (a) $ 145.0 $ 145.0 $ — Senior notes (a) 350.0 140.0 210.0 European lines of credit 3.7 3.7 — Finance lease obligations (b) 2.9 2.0 0.9 Interest payments relating to long-term debt (c) 39.3 23.5 15.8 Operating leases (d) 117.2 15.4 101.8 Contingent consideration related to acquisitions (e) 15.0 15.0 — Total contractual cash obligations $ 673.1 $ 344.6 $ 328.5 ________________________________________ (a) The Company has historically included the Revolving Credit Facility in current debt based on its intent to repay the amount outstanding within one year; however, the Company is not contractually obligated to repay the borrowings until the maturity of the Revolving Credit Facility (September 2024).
The following table summarizes our contractual cash obligations as of December 31, 2023 (in millions) : Payments Due by Period Contractual Obligations Total 1 year or Less More than 1 Year Long-term debt $325 million Revolving Credit Facility (a) $ 137.0 $ 137.0 $ — Senior notes (a) 210.0 — 210.0 European lines of credit 17.6 17.6 — Finance lease obligations (b) 0.9 0.9 — Interest payments relating to long-term debt (c) 32.1 24.8 7.3 Operating leases (d) 103.7 15.4 88.3 Total contractual cash obligations $ 501.3 $ 195.7 $ 305.6 ________________________________________ (a) The Company has historically included the Revolving Credit Facility in current debt based on its intent to repay the amount outstanding within one year; however, the Company is not contractually obligated to repay the borrowings until the maturity of the Revolving Credit Facility (June 2028).
Finance Results Three Months Ended December 31, (Dollars in millions except volumes and per loan amounts) 2022 2021 Finance-related revenue Interest income $ 59.7 $ 39.7 Fee income 44.7 36.4 Other revenue 3.3 2.2 Net recovery (provision) for credit losses (7.0) 0.9 Total Finance revenue 100.7 79.2 Cost of services* 15.7 14.4 Gross profit* 85.0 64.8 Selling, general and administrative 10.2 9.1 Depreciation and amortization 1.8 2.3 Operating profit $ 73.0 $ 53.4 Loan transactions 392,000 342,000 Revenue per loan transaction $ 257 $ 232 * Exclusive of depreciation and amortization 42 Table of Contents Revenue For the three months ended December 31, 2022, the Finance segment revenue increased $21.5 million, or 27%, to $100.7 million, compared with $79.2 million for the three months ended December 31, 2021.
Finance Results Three Months Ended December 31, (Dollars in millions except volumes and per loan amounts) 2023 2022 Finance-related revenue Interest income $ 62.9 $ 59.7 Fee income 46.0 44.7 Other revenue 2.5 3.3 Provision for credit losses (14.8) (7.0) Total Finance revenue 96.6 100.7 Cost of services* 16.3 15.7 Gross profit* 80.3 85.0 Selling, general and administrative 12.1 10.2 Depreciation and amortization 2.6 1.8 Operating profit $ 65.6 $ 73.0 Loan transactions 397,000 392,000 Revenue per loan transaction $ 243 $ 257 * Exclusive of depreciation and amortization Revenue For the three months ended December 31, 2023, the Finance segment revenue decreased $4.1 million, or 4%, to $96.6 million, compared with $100.7 million for the three months ended December 31, 2022.
Cash flow from financing activities (discontinued operations) Net cash provided by financing activities (discontinued operations) was $10.8 million for the year ended December 31, 2022, compared with $6.4 million for the year ended December 31, 2021.
Cash flow from financing activities (discontinued operations) There were no financing activities (discontinued operations) for the year ended December 31, 2023 , compared with net cash provided by financing activities of $10.8 million for the year ended December 31, 2022.
The cash provided by financing activities in both periods is primarily attributable to a net increase in book overdrafts. 50 Table of Contents Capital Expenditures Capital expenditures for the years ended December 31, 2022 and 2021 approximated $60.9 million and $64.2 million, respectively. Capital expenditures were funded from internally generated funds.
The cash provided by financing activities for the year ended December 31, 2022 was primarily attributable to a net increase in book overdrafts. Capital Expenditures Capital expenditures for the years ended December 31, 2023 and 2022 approximated $52.0 million and $60.9 million, respectively. Capital expenditures were funded from internally generated funds.
The Company pays interest on the senior notes semi-annually in arrears on June 1 and December 1 of each year. The senior notes may be redeemed at 101.281% currently and at par as of June 1, 2023. The senior notes are guaranteed by the Subsidiary Guarantors.
Senior Notes On May 31, 2017, we issued $950 million of 5.125% senior notes due June 1, 2025. The Company pays interest on the senior notes semi-annually in arrears on June 1 and December 1 of each year. The senior notes may be redeemed at par as of June 1, 2023. The senior notes are guaranteed by the Subsidiary Guarantors.
At December 31, 2022, cash totaled $225.7 million and there was an additional $161.0 million available for borrowing under the Revolving Credit Facility (net of $19.0 million in outstanding letters of credit).
At December 31, 2023, cash totaled $93.5 million and there was an additional $133.3 million available for borrowing under the Revolving Credit Facility (net of $54.7 million in outstanding letters of credit).
Impact of Foreign Currency For the year ended December 31, 2022 compared with the year ended December 31, 2021, the change in the euro exchange rate decreased revenue by $24.5 million, operating profit by $0.8 million and net income by $0.5 million.
Impact of Foreign Currency For the year ended December 31, 2023 compared with the year ended December 31, 2022, the change in the Canadian dollar exchange rate decreased revenue by $13.9 million, operating profit by $3.5 million and net income by $1.5 million.
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 through our OPENLANE technology.
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).
However, the actual losses in any particular quarter could deviate from this range. Gross Profit For the three months ended December 31, 2022, gross profit for the Finance segment increased $20.2 million, or 31%, to $85.0 million, or 84.4% of revenue, compared with $64.8 million, or 81.8% of revenue, for the three months ended December 31, 2021.
However, the actual losses in any particular quarter or year could deviate from this range. Gross Profit For the three months ended December 31, 2023, gross profit for the Finance segment decreased $4.7 million, or 6%, to $80.3 million, or 83.1% of revenue, compared with $85.0 million, or 84.4% of revenue, for the three months ended December 31, 2022.
Selling, General and Administrative Selling, general and administrative expenses from the Marketplace segment increased $13.1 million, or 3%, to $398.6 million for the year ended December 31, 2022, compared with $385.5 million for the year ended December 31, 2021, primarily as a result of increases in selling, general and administrative expenses associated with businesses acquired since the fourth quarter of 2021 of $12.7 million, professional fees of $8.9 million, severance of $5.4 million, bad debt expense of $4.4 million, stock-based compensation of $2.3 million, incentive-based compensation of $2.0 million and travel expenses of $1.2 million, partially offset by decreases in compensation expense of $5.1 million, information technology costs of $4.0 million, medical expenses of $3.3 million, telecom expenses of $1.1 million and reductions in other miscellaneous expenses aggregating $12.4 million.
Selling, General and Administrative Selling, general and administrative expenses from the Marketplace segment decreased $18.0 million, or 5%, to $380.6 million for the year ended December 31, 2023, compared with $398.6 million for the year ended December 31, 2022, primarily as a result of decreases in professional fees of $9.8 million, severance of $5.9 million, fluctuations in the Canadian exchange rate of $5.5 million, telecom expenses of $3.0 million, information technology costs of $1.6 million and stock-based compensation of $1.0 million, partially offset by increases in incentive-based compensation of $3.4 million, marketing costs of $2.8 million, compensation expense of $1.3 million and other miscellaneous expenses aggregating $1.3 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeForeign currency losses on intercompany loans were approximately $2.5 million and $3.8 million for the years ended December 31, 2022 and 2021, respectively. Canadian currency translation negatively affected net income by approximately $2.8 million for the year ended December 31, 2022 and positively affected net income by approximately $3.6 million for the year ended December 31, 2021.
Biggest changeForeign currency gains on intercompany loans were approximately $2.9 million for the year ended December 31, 2023 and foreign currency losses on intercompany loans were approximately $2.5 million for the year ended December 31, 2022. Canadian currency translation negatively affected net income by approximately $1.5 million and $2.8 million for the year ended December 31, 2023 and 2022, respectively.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Foreign Currency Our foreign currency exposure is limited and arises from transactions denominated in foreign currencies, particularly intercompany loans, as well as from translation of the results of operations from our Canadian and, to a lesser extent, United Kingdom, Continental Europe and Mexican subsidiaries.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Foreign Currency Our foreign currency exposure is limited and arises from transactions denominated in foreign currencies, particularly intercompany loans, as well as from translation of the results of operations from our Canadian and, to a lesser extent, United Kingdom and Continental Europe subsidiaries.
Currency exposure of our U.K., European and Mexican operations is not material to the results of operations. Interest Rates We are exposed to interest rate risk on our variable rate borrowings. Accordingly, interest rate fluctuations affect the amount of interest expense we are obligated to pay.
Currency exposure of our U.K. and European operations is not material to the results of operations. Interest Rates We are exposed to interest rate risk on our variable rate borrowings. Accordingly, interest rate fluctuations affect the amount of interest expense we are obligated to pay.
We received $16.7 million to settle and terminate the swaps, which was recognized as a realized gain in "Interest expense" in the consolidated statement of income.
We received $16.7 million to settle and terminate the swaps, which was recognized as a realized gain in "Interest expense" in the consolidated statement of income (loss).
However, fluctuations between U.S. and non-U.S. currency values may adversely affect our results of operations and financial position. We have not entered into any foreign exchange contracts to hedge changes in the Canadian dollar, British pound, euro or Mexican peso.
However, fluctuations between U.S. and non-U.S. currency values may adversely affect our results of operations and financial position. We have not entered into any foreign exchange contracts to hedge changes in the Canadian dollar, British pound or euro.
A 1% change in the month-end euro exchange rate for December 31, 2022 would have impacted foreign currency losses on intercompany loans by $0.7 million and net income by $0.5 million. A 1% change in the average Canadian dollar exchange rate for the year ended December 31, 2022 would have impacted net income by approximately $1.0 million.
A 1% change in the month-end euro exchange rate for the year ended December 31, 2023 would have impacted foreign currency losses on intercompany loans by $0.7 million and net income by $0.5 million. A 1% change in the average Canadian dollar exchange rate for the year ended December 31, 2023 would have impacted net income by approximately $0.5 million.
In January 2020, we entered into three pay-fixed interest rate swaps with an aggregate notional amount of $500 million to swap variable rate interest payments under our term loan for fixed interest payments bearing a weighted average interest rate of 1.44%. The interest rate swaps had a five-year term, each maturing on January 23, 2025.
In January 2020, we entered into three pay-fixed interest rate swaps with an aggregate notional amount of $500 million to swap variable rate interest payments under our term loan for fixed interest payments bearing a weighted average interest rate of 1.44%. The interest rate swaps had a five-year term.
A 1% change in the month-end Canadian dollar exchange rate for December 31, 2022 would have impacted foreign currency losses on intercompany loans by $0.1 million and net income by $0.1 million.
A 1% change in the month-end Canadian dollar exchange rate for the year ended December 31, 2023 would have impacted foreign currency losses on intercompany loans by $0.2 million and net income by $0.2 million.
A sensitivity analysis of the impact on our variable rate corporate debt instruments to a hypothetical 100 basis point increase in short-term rates (LIBOR) for the year ended December 31, 2022 would have resulted in an increase in interest expense of approximately $2.2 million. 55 Table of Contents
A sensitivity analysis of the impact on our variable rate corporate debt instruments to a hypothetical 100 basis point increase in short-term rates (LIBOR/Prime/SOFR) for the year ended December 31, 2023 would have resulted in an increase in interest expense of approximately $0.7 million. 55 Table of Contents

Other OPLN 10-K year-over-year comparisons