Openlane, Inc. · NYSE:OPLN

Openlane — KAR Auction Services — J.P. Morgan Auto Conference 2015

30 slides from Openlane's conference presentation, Aug 11, 2015

  1. Slide 1: KAR Auction Services, Inc. J.P. Morgan Auto Conference

    KAR Auction Services, Inc. J.P. Morgan Auto Conference August 11, 2015

  2. Slide 2: Forward-Looking Statements

    Forward‐Looking Statements This presentation includes forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward looking statements are subject to certain risks, trends, and uncertainties that could cause actual results to differ material

  3. Slide 3: Key Investment Highlights

    Key Investment Highlights  Poised to Benefit from Positive Cyclical Trends – Expected Increases in Forward Volumes  Established Market Leader Across Core Businesses  Multiple Avenues for Continued Organic and Acquisition Expansion  Attractive Financial Model Generating Significant Free Cash  Pr

  4. Slide 4: Leading Provider of Vehicle Auction Services in North America

    Leading Provider of Vehicle Auction Services in North America 2014 Revenue by Segment 2014 Adj. EBITDA by Segment(1) AFC 10% AFC 21% ADESA ADESA 3.9mm vehicles sold in 2014 42% IAA 52% 38% Revenue $2,365mm Adj. EBITDA $599mm % margin 25.3% IAA 37% Whole Car Auctions Salvage Vehicle Auctions Vehicle

  5. Slide 5: The North American Car Parc: Vehicle Remarketing is a Large and Growing Market

    The North American Car Parc: Vehicle Remarketing is a Large and Growing Market Vehicles in Salvage Auctions Operation 3-4 Million Units 276 Million units Used Vehicle Removed from New Vehicle Sales Transactions in Operation 18 Million Units North America 13 Million Units ~45 Million units Consumer-t

  6. Slide 6: Vehicle Flow – Whole Car and Salvage Markets

    Vehicle Flow – Whole Car and Salvage Markets Whole Car Consignors Whole Car Buyers  Dealers  Franchised Dealers  OEMs and their Captive Finance Arms  Independent Dealers  Commercial Fleet Customers Revenue: Revenue:  Wholesale Dealers  Financial Institutions ~$555 / vehicle* ~$465 / vehicle 

  7. Slide 7: Poised to Benefit from Volume Recovery in Whole Car

    Poised to Benefit from Volume Recovery in Whole Car Positive Demand Drivers North American Whole Car Auction Volume & New Vehicle Sales (Units in millions)  2013 was inflection point for whole 12 20 car auction volumes U.S. Seasonally Adjusted Annual Rate (“SAAR”) (units in millions) 10.0 9.9 10.1

  8. Slide 8: Off-lease Auction Funnel

    Off‐lease “Auction Funnel” Revenue Inventory Gross Per Unit Margin % ~$100 Higher “Online Only” – Private Label ~2-3 days “Online Only” – Open ~2-3 days ADESA In-lane buyer or Online buyer Competitors ~$700 Lower 8

  9. Slide 9: Continued Positive Salvage Market Fundamentals

    Continued Positive Salvage Market Fundamentals Positive Demand Drivers Large Aging North American Car Parc  Increased use of alternative parts in 269 271 271 270 271 272 275 276 11.5 collision repair 258 264 11.0 251 10.5 244 10.0 9.5  Increasing vehicle complexity and technology content 2003 2004

  10. Slide 10: AFC Presents a Significant Competitive Advantage for KAR

    AFC Presents a Significant Competitive Advantage for KAR AFC Highlights Revenue Per Loan Transaction(2)  Portfolio managed to short duration with strong underwriting and control environment $159 $156 $157 $155 $146 − Short-term secured financing  Grow portfolio  Consistent credit standards 2010 2

  11. Slide 11: Financial Overview

    Financial Overview | Ad AUCTION SERVICES.

  12. Slide 12: Historical Financial Performance

    Historical Financial Performance Revenue Gross Profit ($ in millions) ($ in millions) $2,365 $2,173 $250 $1,046 $1,886 $1,963 $225 $876 $941 $1,823 $815 $851 $136 $169 $194 $896 $830 $610 $700 $716 $1,076 $1,017 $1,053 $1,118 $1,219 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 ADESA IAA AFC Vis

  13. Slide 13: Second Quarter 2015 Performance

    Second Quarter 2015 Performance Revenue Gross Profit* $700 $658 $600 $586 $500 $400 $300 $264 $292 ($mm) ($mm) $300 $200 $200 44.2% $100 $100 45.0% 44.3% $0 $0 Q2 2014 Q2 2015 Q2 2014 Q2 2015 Adjusted EBITDA Adjusted Net Income Per Share $0.60 $200 $0.46 $154 $170 $0.42 $150 $0.40 ($mm) $100 $50 26.

  14. Slide 14: June 30, 2015 Leverage

    June 30, 2015 Leverage (US$ in millions) 6/30/2015 Maturity Term Loan B-1 $641.9 2017 Term Loan B-2* 1,103.7 2021 Revolving Credit Facility - 2019 Capital Leases 39.0 ** Total 1,784.6 Less: Available Cash (136.7) Net Debt $1,647.9 Net Debt /Adjusted EBITDA 2.62X * Includes unamortized debt discount

  15. Slide 15: Capital Allocation Framework

    Capital Allocation Framework Strategic Dividends Investments  Priority for free  Qtrly dividend of  $300 Million $0.27 per share cash flow  Acquisitions that  45% - 50% of free leverage the  Two year cash flow cyclical recovery authorization  New geographies  Highlights strength / technologi

  16. Slide 16: Capital Allocation - YTD 2015

    Capital Allocation ‐ YTD 2015 Strategic Dividends Investments  Invested $115  $27 million  $77 million returned to million to purchase: returned to shareholders  Pittsburgh Auto Auction shareholders thru  MobileTrac LLC August 4th  DataScan Field Services  AutoNiq, LLC  46% of free cash  HB

  17. Slide 17: Key Investment Highlights

    Key Investment Highlights  Poised to Benefit from Positive Cyclical Trends – Expected Increases in Forward Volumes  Established Market Leader Across Core Businesses  Multiple Avenues for Continued Organic and Acquisition Expansion  Attractive Financial Model Generating Significant Free Cash  Pr

  18. Slide 18: Appendix

    KAR AUCTION SERVICES, Appendix I AUCTION SERVICES.

  19. Slide 19: Non-GAAP Financial Measures

    Non‐GAAP Financial Measures EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings as

  20. Slide 20: 2010 Adjusted EBITDA Reconciliation

    2010 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2010 ADESA IAA AFC Corporate Consolidated Net income (loss) $80.1 $44.7 $38.4 ($93.6) $69.6 Add back: Income taxes 43.6 26.7 21.1 (64.2) 27.2 Interest expense, net of interest income 0.9 2.3 7.2 130.9 141.3 Depreciation and

  21. Slide 21: 2011 Adjusted EBITDA Reconciliation

    2011 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2011 ADESA IAA AFC Corporate Consolidated Net income (loss) $55.8 $65.5 $57.2 ($106.3) $72.2 Add back: Income taxes 17.9 36.1 29.6 (65.8) 17.8 Interest expense, net of interest income 0.7 2.1 12.0 128.0 142.8 Depreciation an

  22. Slide 22: 2012 Adjusted EBITDA Reconciliation

    2012 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2012 ADESA IAA AFC Corporate Consolidated Net income (loss) $38.4 $56.5 $64.1 ($67.0) $92.0 Add back: Income taxes 14.5 33.7 46.0 (34.6) 59.6 Interest expense, net of interest income 0.8 1.4 15.0 101.9 119.1 Depreciation and

  23. Slide 23: 2013 Adjusted EBITDA Reconciliation

    2013 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2013 ADESA IAA AFC Corporate Consolidated Net income (loss) $50.2 $56.6 $76.1 ($115.2) $67.7 Add back: Income taxes 40.1 32.8 40.2 (31.6) 81.5 Interest expense, net of interest income 0.6 0.8 16.7 86.2 104.3 Depreciation and

  24. Slide 24: 2014 Adjusted EBITDA Reconciliation

    2014 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2014 ADESA IAA AFC Corporate Consolidated Net income (loss) $86.4 $79.7 $76.6 ($73.4) $169.3 Add back: Income taxes 43.2 48.4 48.6 (44.5) 95.7 Interest expense, net of interest income 0.6 0.2 18.7 66.4 85.9 Depreciation and

  25. Slide 25: Q2 2014 Adjusted EBITDA Reconciliation

    Q2 2014 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended June 30, 2014 ADESA IAA AFC Corporate Consolidated Net income (loss) $24.4 $21.5 $18.8 ($13.9) $50.8 Add back: Income taxes 13.4 13.1 11.7 (8.1) 30.1 Interest expense, net of interest income 0.1 0.1 4.6 16.0 20.8 Depreciation

  26. Slide 26: Q2 2015 Adjusted EBITDA Reconciliation

    Q2 2015 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended June 30, 2015 ADESA IAA AFC Corporate Consolidated Net income (loss) $32.0 $24.6 $18.7 ($15.8) $59.5 Add back: Income taxes 17.5 14.6 11.5 (8.8) 34.8 Interest expense, net of interest income 0.2 – 5.5 16.1 21.8 Depreciation an

  27. Slide 27: LTM Adjusted EBITDA Reconciliation

    LTM Adjusted EBITDA Reconciliation ($ in millions) (unaudited) Twelve months Three months ended ended September 30, December 31, March 31, June 30, June 30, 2014 2014 2015 2015 2015 Net income (loss) $47.5 $50.3 $54.5 $59.5 $211.8 Add back: Income taxes 28.4 27.4 34.6 34.8 125.2 Interest expense, ne

  28. Slide 28: Adjusted Net Income Per Share Reconciliation

    Adjusted Net Income Per Share Reconciliation ($ in millions, except per share amounts) Year ended December 31, 2014 2013 2012 2011 2010 Net income $169.3 $67.7 $92.0 $72.2 $69.6 (1) Loss on modification/extinguishment of debt, net of tax 19.3 3.2 – 33.2 20.3 (2) Swap termination, net of tax – – – 9.

  29. Slide 29: Adjusted Net Income Per Share Reconciliation (Q2 2015 & Q2 2014)

    Adjusted Net Income Per Share Reconciliation (Q2 2015 & Q2 2014) ($ in millions, except per share amounts) Three Months ended June 30, 2015 2014 Net income $59.5 $50.8 (3) Stepped up depreciation and amortization expense, net of tax 6.8 7.0 (4) Stock-based compensation, net of tax – 2.4 Adjusted net

  30. Slide 30: Adjusted Net Income – Explanatory Footnotes

    Adjusted Net Income – Explanatory Footnotes (1) In 2010 and 2011, there were losses on extinguishments of debt totaling $32.7 million ($20.3 million net of tax) and $53.5 million ($33.2 million net of tax), respectively. We incurred a loss on the extinguishment/modification of debt totaling $30.3 mi

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