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KAR Auction Services' CEO Discusses Q3 2011 Results - Earnings Call Transcript

I would also like to point out that with the merger of OPENLANE complete, we will begin reporting their volumes as part of ADESA in Q4. The virtual-only auctions are not included in the industry data, though OPENLANE's activity will be additional volume reported for our industry beginning in Q4 of 2011. So despite the challenges, KAR continues to generate 45% gross margins, adjusted EBITDA margins of nearly 27% year-to-date. And again, this is the result of the complementary nature of our business model that we continue to talk about.

Turning to OPENLANE. I've talked with you on a number of calls in the past that my major focus since becoming CEO of KAR in 2009 has been on technology for all of our business units. And I think that the acquisition of OPENLANE really addresses a lot of the concerns that I've had over this period of time.

OPENLANE at a high level expands our market capabilities. It gives us a toehold into the virtual auction market. That market is approximately 1 million vehicles, and we think we can continue to grow in that space. We also believe that OPENLANE will be in an enabler into the dealer-to-dealer trades and the dealer-to-wholesaler market as well. And then if you add up the virtual sales, the wholesaler transactions and the dealer-to-dealer transactions, that opportunity is a 17-million-unit opportunity.

Also, I'm very pleased with the management team that we have in place at OPENLANE. And really, what we've been able to do is we've been able to combine much of the existing management team at OPENLANE, and then we've moved a number of the ADESA managers onto the OPENLANE team to have the best of the best or, as I would say, field and all-star team.

Peter Kelly, the CEO of OPENLANE, will be a direct report to me. He will also be a member of the senior management team at KAR. And Peter got introduced, as they say, with a firehose last week. He attended our management meetings. He attended his first board meeting. He also spoke at a town hall meeting in Carmel, where we had over 500 employees at our corporate office, where he introduced OPENLANE and the management team of OPENLANE. So he's well engaged as we get it kicked off here.

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