As ADESA volume jumped 10 percent year-over-year during the second quarter, KAR Auction Services chief executive officer Jim Hallett described how much online-buying activity is climbing, too.

Hallett said during the company’s quarterly conference call on Wednesday that approximately 35 percent of the units ADESA sold during Q2 went to Internet buyers. Hallett noted that of that amount, about half of those vehicles were sold via ADESA.com and the remainder went to an online bidder who was participating in a sale conducted at a physical ADESA location.

The rising tide of off-lease vehicles showed up in ADESA’s second-quarter performance, as well. Hallett mentioned the 25-percent increase in online-only volume was primarily driven by the increase in off-lease supply.

That off-lease and online activity helped to lift ADESA’s Q2 sales conversion percentage to 57.1 percent, up from 55.5 percent a year earlier.

Despite the rise in off-lease volume, the company’s level of dealer consignment volume stayed almost flat year-over-year, ticking up to 51 percent of total volume after settling at 50 percent during the second quarter of last year.

When reflecting on the overall volume rise, Hallett said, “This is the type of increase that we’ve been expecting and we believe is just the beginning of the cyclical recovery our industry will experience over the next several years.”

That volume helped ADESA grow its second-quarter revenue by 8 percent year-over-year to $285.3 million. And the division’s Q2 gross profit margin improved 120 basis points over the prior year as gross profit climbed by $12.7 million to $129.1 million

Update on PWI Acquisition

While KAR did not conduct a question-and-answer session with investment analysts on Wednesday because of a secondary offering of common stock that Auto Remarketing reported here, Hallett did give a brief update on the company’s acquisition of Preferred Warranties, which markets vehicle service contracts through independent dealers in 2,200 locations in 15 states throughout the Mid-Atlantic, Midwest and South.

Hallett indicated KAR closed on the acquisition in the second quarter, a transaction he called, “small” since the purchase price came in less than $30 million. Nonetheless, he insisted PWI is an important addition to KAR’s product offerings to the independent dealers.

“We have only owned Preferred Warranties for a couple of months but the early results are very encouraging,” Hallett said. “We believe the combination of Preferred Warranties’ products and the underwriting process combined with the distribution capabilities of the (Automotive Finance Corp.) network will provide an opportunity to grow this business over the next few years.”

Upbeat About Overall Performance

Hallett wrapped up his conference-call comments by highlighted that for the first time since the beginning of 2008, all three parts of KAR’s enterprise — ADESA, AFC and Insurance Auto Auctions, posted improved performances year-over-year.

“The bottom line is I’m pleased with our performance in the second quarter, but I feel it is just the start of good things to come,” Hallett said. “I recognize that the future will include things that we can’t anticipate today, but I feel that our management team has used the last few years to learn valuable lessons from the challenges that we have faced.

“As a team, we are well-prepared and focused on delivering results that will enhance shareholder value,” he added.

Nick Zulovich can be reached at nzulovich@autoremarketing.com. Continue the conversation with Auto Remarketing on both LinkedIn and Twitter.