Good day and welcome to the KAR Auction Services First Quarter 2015 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jonathan Peisner, Treasurer and Vice President of Investor Relations. Please go ahead, sir.

Thanks, Jamie. Good morning, and thank you for joining us today for the KAR Auction Services first quarter 2015 earnings conference call. Today, we will discuss the financial performance of KAR Auction Services for the quarter ended March 31, 2015. After concluding our commentary, we will take questions from participants. Before Jim kicks off our discussion, I would like to remind you that this conference call contains forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties that may affect KAR's business prospects and results of operations, and such risks are fully detailed in our SEC filings. In providing forward-looking statements, the company expressly disclaims any obligation to update these statements. Lastly, let me mention that throughout this conference call, we will be referencing both GAAP and non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to the applicable GAAP financial measures can be found in the press release that we issued yesterday, which is also available in the Investor Relations section of our website. Now, I'd like to turn this call over to KAR Auction Services CEO, Jim Hallett. Jim? James P. Hallett - Chairman & Chief Executive Officer: Great. Thank you, Jon, and good morning, ladies and gentlemen and welcome to our call. This morning I would like to provide you with a review of our first quarter performance and outlook of each of our business segments and then speak to capital allocation. Looking at our financial results for the first quarter, our consolidated revenue grew 8%, and this was made up with ADESA growing at 10%, AFC growing 9%, and IAA at 6%, resulting in an overall increase of adjusted EBITDA of plus 10%. Before I speak…

Thank you And we'll take our first question from Matthew Fassler with Goldman Sachs. Matthew Jeremy Fassler - Goldman Sachs & Co.: Thanks a lot and good morning. James P. Hallett - Chairman & Chief Executive Officer: Good morning, Matt. Matthew Jeremy Fassler - Goldman Sachs & Co.: So we have almost an embarrassment of riches in the physical auction world, particularly from institutional where the volumes have surged, and the institutional mix has moved in the right direction. I am interested in the dealer consignment business, which on a unit basis looks like it essentially flattened out after a couple of years of pretty consistent growth. Any sense as to what's happening in the dealer channel from a physical perspective and what the pipeline looks like for that area of the business? James P. Hallett - Chairman & Chief Executive Officer: Yes, Matt. This is Jim. First of all, in absolute numbers, our dealer consignment business grew at about 1% year-over-year. But you're right, in terms of a percentage it is down a little bit, but this was very much expected. As you think about the influx of all these commercial vehicles coming to market, and we tend to have a higher percentage of commercial vehicles than we do the independent vehicles, we thought that this number would actually drop a little bit before it has. And quite frankly, I'm pleased that it's remained as high as it is. Matthew Jeremy Fassler - Goldman Sachs & Co.: And to the dealers, I mean is the strength in the institutional business and in the dealer business mutually exclusive? In other words, you have this flow off-lease vehicles. Does that, by definition, preclude the dealers from having excess supply that they would want to ultimately sell through you or would you…

And we'll take our next question from Ryan Brinkman with JPMorgan.

Hi. Thanks for taking my call. James P. Hallett - Chairman & Chief Executive Officer: Hi, Ryan.

I'm curious how the quarter – good morning. I'm curious how the quarter tracked relative your own expectations and how you feel you're currently positioned with regard to achieving your full year guidance relative to how you were positioned at the time of the 4Q call a few months back when you first established that guidance. James P. Hallett - Chairman & Chief Executive Officer: Yeah. Ryan, I think the quarter very much played out as we expected. I think that double-digit increase year-over-year was kind of what we had in mind, kind of what we were thinking. And I think as we look at the first quarter and we look going forward, things are playing out as we would expect.

Okay, thanks. And then relative to the $30 million to $35 million of CapEx for the Chicago greenfield, should we expect this to be entirely capitalized, almost entirely capitalized, partly expensed, how should we think that impacting EBITDA if at all? Eric M. Loughmiller - Chief Financial Officer & Executive Vice President: The number we're talking about, all of that is a capital project; it'll all be capital expenditures.

Great. That's what I thought. And then just the last question on IAA pricing down 2% year-over-year in 1Q, probably a bit more benign than investors were thinking with the decline in scrap metal prices. So you've talked before about this bottom 20% of salvage vehicles that are bought for metal, the middle 60% for parts, right, and the top 20%, they're more like whole cars I guess. Presumably, the demand for and pricing of the bottom 20% has softened a lot, I would just guess, but this has been cushioned somehow by demand for and pricing of the other 80% of salvage cars. Can you talk about how these factors balanced out in the first quarter and then how they're likely to balance out going forward and what that might mean for IAA pricing and margin? James P. Hallett - Chairman & Chief Executive Officer: Well, again, with lower scrap metal prices, it's clear that even for the dismantlers that are parting out the car, they're going to scrap a portion of the vehicle when they're done dismantling. So I think it's having an impact, and foreign currency is the other. It's hard for us to separate because it's all bidding activity. But there is clearly, really, a reduction in average auction prices reflecting lower bids. And I would tell you, there is a great supply right now from the total loss vehicles, demand is in good shape, but I think you're seeing really us coming off of a multiyear cycle of really strong performance at IAA. We are not in any way below, what I would consider, normal levels for total loss vehicles and what the prices they're getting. They're just off of the relatively high levels we've had the last several years.

I see, that's helpful. Okay. Thanks so much. James P. Hallett - Chairman & Chief Executive Officer: You're welcome.

We'll take our next question from Bret Jordan with BB&T Capital Markets. James P. Hallett - Chairman & Chief Executive Officer: Good morning, Bret. David Lee Kelley - BB&T Capital Markets: Good morning, gentlemen. This is actually David Kelly on for Bret this morning. And I apologize, jumped on to the call a little late, if my questions have been answered already. But just wondering if I could get some more color on the 20% inventory increase at IAA, maybe some expectations on how that flows through auction over the next months or quarters or so, that'd be great. James P. Hallett - Chairman & Chief Executive Officer: Yeah. I think that, as you know, we announced last year that we did have one major insurance company that was going through a change of process and it was slowing down getting their vehicles to market. That has continued a little bit into the first quarter, but I would say that we see things on a relatively normal cycle now and the average days to sell for a salvage vehicle is somewhere in that 75 day range. And I would think that that would be more of the trend. I don't expect that we would see 20% increases quarter-over-quarter going forward, something less than that perhaps. Eric M. Loughmiller - Chief Financial Officer & Executive Vice President: And, David this is Eric. I would add to that. We were up 20% year-over-year at the end of the year. We were up 20% year-over-year at the end of the first quarter. You want to read into that that the cars that were entered into the auction that are being processed were equal to the cars we sold, that's a pretty good situation for us in terms of volume entered as we call it. So that sets us up well. We do believe that at some point that number will decline as we get past this high selling season and the volume in starts to decline as it typically does in the summer months with nicer weather, there are fewer accidents. So although with the mile driven going up, that could offset that. David Lee Kelley - BB&T Capital Markets: All right. Great. Thank you. Eric M. Loughmiller - Chief Financial Officer & Executive Vice President: You're welcome.

Our next question comes from Shreyas Patil with Credit Suisse. Shreyas Patil - Credit Suisse Securities (USA) LLC (Broker): Hi, thanks. So you had – looks like online only volumes were up 10% and physical up 7%. So, just wondering how we should think about the growth rate of online-only versus physical through this year and then for the next few years? Eric M. Loughmiller - Chief Financial Officer & Executive Vice President: Well, let me start. The online only has had high growth rate because it was coming off of a bottom, Shreyas. And I think most of our investors realized it was going to level – it may still grow, but at a much lower rate than when it was in the mid-20%s and even 30% growth year-over-year as we were coming off with the bottom in 2012. And the physical, it's really the cyclical recovery. So, I'm very proud of our performance in both segments relative to industry volumes. But I think again that – again, our representation in the commercial market, as Jim mentioned earlier, is stronger than it is in the dealer consignment market relative to the industry. So, as these commercial cars come back which we know they are doing over the next three years, I expect us to perform very well in that marketplace and that will result in more cars at physical auction in our opinion. James P. Hallett - Chairman & Chief Executive Officer: Right. And I think in conclusion, I mean – I think what I was at is, at some point in time with these commercial vehicles, I do expect them to level off in more of those cars to make the way to physical with the additional selection. Shreyas Patil - Credit Suisse Securities (USA) LLC (Broker): Okay.…

We'll take our next question from Craig Kennison with Baird. Craig R. Kennison - Robert W. Baird & Co., Inc. (Broker): Good morning. Thanks for taking my question. Could you give us an update on TradeRev and the roll out there? Eric M. Loughmiller - Chief Financial Officer & Executive Vice President: Yes, Craig. The roll out continues to do very well in Canada and it's a little bit behind where we'd like to be in the U.S., but I can tell you as we speak, we have stepped up our resources and our focus and we would expect things to improve here in next quarter as we move forward. Craig R. Kennison - Robert W. Baird & Co., Inc. (Broker): And then, regarding DataScan, can you give us a little more color on actually what that service is doing? And then, maybe more broadly, how many different types of services are there, out there that you could consolidate just to make a better overall platform for your customers? Eric M. Loughmiller - Chief Financial Officer & Executive Vice President: Well, let me start with DataScan. And first of all every off-lease car requires an inspection at the end of term. So at the end of term, we do an inspection of the vehicle. We are able to take images of the vehicle, assess the damage and collect for damage on the vehicle before these vehicles then get posted to a private label website. So if you think about it, these companies, these commercial sellers are going to require this inspection on these leased cars. And we can either provide that inspection for them through our business or they could look to do it with the competitor. We feel that if we can provide that inspection and provide the images…

Our next question comes from John Healy with Northcoast Research. James P. Hallett - Chairman & Chief Executive Officer: Good morning, John.

Good morning. Jim, I wanted to ask just a little bit more about the M&A side of things. The acquisition of the brick and mortar location in Pittsburgh is quite exciting. And I was curious to know what the – there are a good number of quality independents still out there. Is it likely that we see a couple of more those deals before year end and kind of what's the pipeline looks like in the brick and mortar side of the business? James P. Hallett - Chairman & Chief Executive Officer: Yeah. First of all, I would say to you that the pipeline – we feel there is a number of opportunities and number of good opportunities. There are some very good independents out there and I've always kind of sized it that there is probably 5 to 10 really good strong independents that we would be very interested in acquiring if the opportunity present itself. We know that we can buy these auctions at attractive multiples. And I can't promise you that we'll have a number of them done before the end of the year, but I can promise you that we are working on a number of them. And at some point in time, we would expect that we will get some of these over the goal line.

Got you. Great. And then, a question on the Insurance Auto Auctions business, coming out of the LKQ call last week, there was a lot of discussion about them not being as active at buying cars at salvage auctions in the recent quarter. With them pulling back, kind of what happens in the market? When the big buyers pull back, do the cars still sell and we see the fall off in prices? Or do you kind of have an inventory build by – just not as many buyers active? I was curious how it actually plays out on that side of the business. James P. Hallett - Chairman & Chief Executive Officer: Yeah. So for the most part, there's a buyer standing there at the end of the bidding line, right. So the car is normally going to get sold. But with that said, I think LKQ announced that they were seeing about a 4% reduction in sale price. I think that would be consistent with what we're seeing. So proceeds are down somewhere in that neighborhood of 3% or 4%, but there's still as many active buyers and there's still somebody bidding that's going to buy the vehicle. And in some cases, the conversion rate might be down a little bit where, let's say, you've seen sellers that perhaps in the past have been 100% seller across the board, maybe they are holding back a few more cars based on what the bidding is and based on what the dealers inventory capacity is. They could be holding a car maybe till next week or the next sale to see if they can achieve a little bit more. So we've seen a little bit of a dip in conversion rates.

Okay. Great. Thank you. James P. Hallett - Chairman & Chief Executive Officer: You're welcome.

Our next question comes from Bob Labick with CJS Securities.

Good morning. James P. Hallett - Chairman & Chief Executive Officer: Good morning, Bob. Eric M. Loughmiller - Chief Financial Officer & Executive Vice President: Hi. Good morning, Bob.

I wanted to shift back to online-only. The ARPUs ticked up sequentially the last few quarters. I know it's not huge, but it's the most in the last 12 months now. You've talked about in the past the desire to drive that going forward. Have you been able to implement plans yet or is this more of a mix? And what is the plan to get that ARPU to continue to keep increasing? James P. Hallett - Chairman & Chief Executive Officer: Well, one of the things – and I'll let Eric speak to this as well – but one of the things that we're very focused on is we're very focused on being able to sell more of those vehicles in the online open environment. So as those vehicles come out of the closed sale and then they go to the open sale, we're trying to sell more of those cars right there before they go off to a physical auction. Because, as you know, we get the first two opportunities to sell the car closed and open and then when it goes physical then we get about one in three cars. So as you think about it, we've been focused on providing our customers with good analytics, showing them perhaps if these cars were priced a little bit differently in the open sale and priced more towards market prices then we could get a higher conversion rate at the open, so that's been a focus. Eric, do you want to add to that? Eric M. Loughmiller - Chief Financial Officer & Executive Vice President: Yes. I'll just speak to the specific ARPU, Bob. What we're seeing is a mix issue in terms of less grounding dealer purchases processed through our systems. It's not yet substantial increases in the open environment, but we're focused on that. So what Jim said is our initiative, we do need more off of these cars to get into the system for that to work because the franchise dealers are going to buy all the inventory they need and you need cars that they don't need on their lot, right, Jim? James P. Hallett - Chairman & Chief Executive Officer: Right. Eric M. Loughmiller - Chief Financial Officer & Executive Vice President: But right now, I would tell you the big driver in this quarter, the $107 being up, we had two quarters in 2014 where we were below $100, that was driven by the grounding dealers making up a larger portion of the sale and we've seen that dissipate down towards now a more traditional mix of closed versus open without the grounding dealer.

Great. Thank you very much. James P. Hallett - Chairman & Chief Executive Officer: You're welcome.

The next question comes from Robert Higginbotham with SunTrust.

Good morning, everyone. Thanks for the question. James P. Hallett - Chairman & Chief Executive Officer: Good morning. Eric M. Loughmiller - Chief Financial Officer & Executive Vice President: Good morning.

So, first question, to revisit the salvage revenue per unit trend, could you give us a sense of how that progressed through the quarter? It looks like scrap metal pricing was weakening substantially towards the end of the quarter. I am just wondering how you started and how you finished on that front? James P. Hallett - Chairman & Chief Executive Officer: Obviously, you've got it right. It did weaken as the quarter went on, so there was a downward slope there.

In the proceeds that you saw? James P. Hallett - Chairman & Chief Executive Officer: In the bidding, yes.

Got it. Okay. That's helpful. And any color you can give us on what repo versus off-lease volume trends looked like in 1Q versus 4Q. Did they track pretty similar to last quarter? Did one outpace the other as far as you could tell? Eric M. Loughmiller - Chief Financial Officer & Executive Vice President: Robert, it's hard for us to measure. As I've mentioned to a lot of the analysts, we measured by the consignor, which means captive finance is a source of both off-lease and repo, and you don't always know which it is and that category was quite strong on the growth for us in the first quarter. I would tell you, though, based upon, again, what we look at in the field, I would tell you off-lease is outpacing repo still, but repo is growing and there is a lot of positive trends in terms of the subprime lending and default and it'll ultimately get to the repo activity. James P. Hallett - Chairman & Chief Executive Officer: I would just add that there is no shortage of financing available. And if that financing is available and car sales are strong, both new and used, we would expect that the repo business will continue to grow.

Is it fair to think that there is an upward bias to that more likely than a downward bias? James P. Hallett - Chairman & Chief Executive Officer: Yes, I believe there is.

And then last question on the new Chicago greenfield, what kind of volume should we expect out of that facility in year one versus your current average? And what's the general maturity curve for a greenfield unit like that? James P. Hallett - Chairman & Chief Executive Officer: Well, I'm a pretty optimistic guy, but I would say, first of all, let's talk about greenfields in general. In general, we would tell you that starting a greenfield site usually takes 12 months to 24 months to become cash flow positive. And our recent experience in Las Vegas, which was the last greenfield we done, was basically a cash flow positive in a year. I have some very high expectations for Chicago being the size of the market it is and not only size of the market, but being the location that we are in, in that Chicago market. As a matter of fact, that location, our competitor is – our major competitor is quite a significant difference in terms of miles to the south. So we think we've really got a prime location there. So without spitting out any specific numbers, the third largest market, we are well-positioned there with a great location. We know there is a huge buyer network out of that market. I would expect that we would see very strong results in the first 12 months comparatively speaking to a greenfield.

Great. Thank you. James P. Hallett - Chairman & Chief Executive Officer: You're welcome.

Our next question comes from Elizabeth Suzuki with Bank of America Merrill Lynch.

Good morning. James P. Hallett - Chairman & Chief Executive Officer: Good morning.

Are there any regional trends that are emerging so far in 2015? We've heard a lot of concern from investors regarding anything exposed to oil states. Are you seeing any slowdown in volume in Texas or other oil-dependent markets? James P. Hallett - Chairman & Chief Executive Officer: Not that I'm aware of. I think for the most part, our performance has been pretty consistent across all markets. I can't say I've spent a great deal of time studying it, but I'm not aware of any trend that that would be materially different.

Great. Thanks. And you mentioned that you thought foreign exchange would continue to be a headwind. What are your internal forecasts for how much the unfavorable Canadian foreign exchange would impact the rest of the year? And would most of that be felt in the second quarter or fading off somewhat in the back half or what do you think the cadence could be of that impact? James P. Hallett - Chairman & Chief Executive Officer: Yes. No question, it will. I think Eric spoke to it a little bit in his comments, but Eric I'd defer to you to... Eric M. Loughmiller - Chief Financial Officer & Executive Vice President: Yeah. Elizabeth, we were probably surprised by the strengthening of the dollar or the weakness in the Canadian dollar in Q1, but we've anticipated it to stay at these levels for the rest of the year. To the extent that the U.S. dollar would strengthen even further, it'd be a further negative. And to the extent that the U.S. dollar would weaken if, for example, interest rates were starting to increase, they expect that dollar could weaken, that would be a positive compared to what we're expecting for the rest of the year, because we're kind of holding it at this roughly C$0.80 to the U.S.$1 as kind of our expectation for the remainder of the year.

Great. Thank you. James P. Hallett - Chairman & Chief Executive Officer: You're welcome. Eric M. Loughmiller - Chief Financial Officer & Executive Vice President: You're welcome.

We'll take our next question from Gary Prestopino with Barrington Research. James P. Hallett - Chairman & Chief Executive Officer: Hey, Gary. Eric M. Loughmiller - Chief Financial Officer & Executive Vice President: Hey, Gary.

Hey, good morning, everyone. Hey, obviously, most of the questions have been answered since I got on late. But Jim, when you talk about you're seeing an uptick in these off-lease volumes, which you expected, do most of those start coming in at the beginning of the year, throughout the year, at the end of the year? Can you give us some idea of the cadence of what usually happens in this case? James P. Hallett - Chairman & Chief Executive Officer: Yeah, Gary. I think we would say to you, it's pretty much spread throughout the course of the year, I mean, I'm looking at a chart here, depending on when these leases were written... Eric M. Loughmiller - Chief Financial Officer & Executive Vice President: Let me – Gary, we've got a chart of lease originations by month and I would tell you in the first quarter they come in the second half of March and they stay strong really into the early summer. You probably then have a little, I would say, break in the retail sales that gets to like August, and then Labor Day and on it's quite strong. But when we look back to 2012, the leases that are coming now, it was part of the real recovery, it stayed pretty steady most of the year after February. So Jim's point is correct, but there's trends that could vary from year to year. But this year it's looking pretty good throughout the year after you got past February.

Okay. Thank you on that. And then on the Insurance Auto side, was there any impact – I know that the volumes were very strong, but as far as your sales, was there any impact from weather there, especially in the Northeast? Because I mean, I looked at it, you said your inventory was up 15% at the end of Q4, you're up 20% now, but yet you only sold 8% increase in volume. So was there any additional impact on there beyond pricing that impacted sell-through? James P. Hallett - Chairman & Chief Executive Officer: You know, Gary, as we've said in the past, we don't – we're always dealing with weather at some point in the year. If it's not the winter weather, it's other hurricanes and tornadoes and storms that take place over the course of the year. And I've always said that I really think weather becomes a wash over 12 months and I don't attribute anything to weather unless it's something significantly like what happened with Superstorm Sandy.

Okay. All right. Thank you. James P. Hallett - Chairman & Chief Executive Officer: You're welcome.

We'll take our next question from Bill Armstrong with C.L. King & Associates. James P. Hallett - Chairman & Chief Executive Officer: Hi, Bill. William R. Armstrong - C.L. King & Associates, Inc.: Good morning, Jim and Eric. So I want to get back on the foreign exchange impact on the salvage side. So we're hearing, and I think you've addressed this a little bit earlier, you've got some buyers who obviously are going to be exporting these vehicles to other countries and the stronger dollar makes that a more difficult transaction economically. How does that play out? Are there fewer buyers? Are they the same number of buyers, but maybe bidding on fewer number of vehicles or are they just making lower bids? How do you see that playing out? Eric M. Loughmiller - Chief Financial Officer & Executive Vice President: Generally, you'll see – again, specifically maybe there are buyers that dropped out, but we see the same level of activity. The difference is they stop bidding at a certain point, because again the economics start to get upside down for them on the export. So I think it's just consistent with a modest low-single digit reduction in average auction proceeds at the auction, and that's kind of the impact. And whether that be from scrap metal or foreign currency, both have that impact. There is a point at which they just can't make the economics work if they keep bidding higher, more so than they don't show up at the auction. William R. Armstrong - C.L. King & Associates, Inc.: That makes sense. And can you remind us what countries are the biggest export markets for salvage vehicles for you guys, or for your buyers I should say? James P. Hallett - Chairman & Chief Executive Officer:…

And it appears there are no further questions at this time. So I'll turn the call back over to Jim Hallett for any additional or closing remarks. James P. Hallett - Chairman & Chief Executive Officer: Okay. Well, great. Thank you very much for being on. We truly appreciate your interest in our company. And again, I would just say what I said with my closing remarks. I'm very pleased with the quarter. I think our businesses are very well positioned. It's a very positive environment. And I think we have an opportunity to really build on that first quarter and deliver the results that we've spoken to here for 2015. So with that, we continue to look forward to a good quarter to come and look forward to talking to you next time around. Thank you.

Thank you for your participation. This does conclude today's call.