Slide 1: KAR Auction Services, Inc. Corporate Update
KAR Auction Services, Inc. Corporate Update December 2015
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
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
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 3.9mm vehicles sold in 2014 42% ADESA IAA 52% Revenue $2,365mm 38% Adj. EBITDA $599mm % margin 25.3% IAA 37% Whole Car Auctions Salvage Vehicle Auctions Vehicle
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 Operation Salvage Auctions 276 Million 3-4 Million Units units Used Vehicle Removed from Transactions in New Vehicle Sales Operation North America 18 Million Units 13 Million Units ~45 Million units Consumer-t
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 Wholesale Dealers Financial Institutions Revenue: Revenue: ~$555 / vehicle* ~$465 / vehicle
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 car auction volumes 12 20 U.S. Seasonally Adjusted Annual Rate (“SAAR”) (units in millions) − Average 2-4
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
Slide 9: Continued Positive Salvage Market Fundamentals
Continued Positive Salvage Market Fundamentals Positive Demand Drivers Increased use of alternative parts in collision repair Increasing vehicle complexity and technology content Increase in non-insurance supply, including charity, direct-to-consumer and dealer sales International demand Lar
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 $159 $156 $157 $155 $146 underwriting and control environment − Short-term secured financing Grow portfolio Consistent credit standards 2010 2
Slide 11: Financial Overview
KAR Financial Overview AUCTION SERVICES. > \ sy
Slide 12: Historical Financial Performance
Historical Financial Performance Revenue Gross Profit ($ in millions) ($ in millions) $2,365 $2,173 $250 $1,046 $1,963 $225 $876 $941 $1,823 $1,886 $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
Slide 13: Third Quarter 2015 Performance
Third Quarter 2015 Performance Revenue Gross Profit* $750 $667 $600 $589 ($mm) $450 $300 $261 $289 $300 ($mm) $200 $150 $100 44.3% 43.3% 43.3% 44.2% $0 $0 Q3 2014 Q3 2015 Q3 2014 Q3 2015 Adjusted EBITDA Adjusted Net Income Per Share $0.60 $200 $149 $163 $0.40 $0.42 $150 $0.40 ($mm) $100 $50 25.3% 24
Slide 14: September 30, 2015 Leverage
September 30, 2015 Leverage (US$ in millions) 9/30/2015 Maturity Term Loan B-1 $638.9 2017 Term Loan B-2* 1,098.7 2021 Revolving Credit Facility 130.5 2019 Capital Leases 43.2 ** Total 1,911.3 Less: Available Cash (86.9) Net Debt $1,824.4 Net Debt /Adjusted EBITDA 2.83X * Includes unamortized debt d
Slide 15: Capital Allocation Framework
Capital Allocation Framework Strategic Share Repurchase Dividends Investments Program Qtrly dividend of $0.27 per Priority for free cash flow $300M share Acquisitions that leverage the Two year authorization 45% - 50% of free cash flow cyclical recovery Tool for managing cash / Highl
Slide 16: Key Investment Highlights
Key Investment Highlights Poised to Benefit from Positive Cyclical Trends – Expected Increases in Forward Volumes Established Market Leader Across Core Businesses Multiple Avenues for Continued Organic and Acquisition Expansion Attractive Financial Model Generating Significant Free Cash Pr
Slide 17: Appendix
KAR Rovere AUCTION SERVICES. be \ sy
Slide 18: Non-GAAP Financial Measures
Non-GAAP Financial Measures EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings as
Slide 19: 2010 Adjusted EBITDA Reconciliation
2010 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2010 ADESA IAA AFC Corporate Consolidated Net income (loss) $80.1 $44.7 $38.4 ($93.6) $69.6 Add back: Income taxes 43.6 26.7 21.1 (64.2) 27.2 Interest expense, net of interest income 0.9 2.3 7.2 130.9 141.3 Depreciation and
Slide 20: 2011 Adjusted EBITDA Reconciliation
2011 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2011 ADESA IAA AFC Corporate Consolidated Net income (loss) $55.8 $65.5 $57.2 ($106.3) $72.2 Add back: Income taxes 17.9 36.1 29.6 (65.8) 17.8 Interest expense, net of interest income 0.7 2.1 12.0 128.0 142.8 Depreciation an
Slide 21: 2012 Adjusted EBITDA Reconciliation
2012 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2012 ADESA IAA AFC Corporate Consolidated Net income (loss) $38.4 $56.5 $64.1 ($67.0) $92.0 Add back: Income taxes 14.5 33.7 46.0 (34.6) 59.6 Interest expense, net of interest income 0.8 1.4 15.0 101.9 119.1 Depreciation and
Slide 22: 2013 Adjusted EBITDA Reconciliation
2013 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2013 ADESA IAA AFC Corporate Consolidated Net income (loss) $50.2 $56.6 $76.1 ($115.2) $67.7 Add back: Income taxes 40.1 32.8 40.2 (31.6) 81.5 Interest expense, net of interest income 0.6 0.8 16.7 86.2 104.3 Depreciation and
Slide 23: 2014 Adjusted EBITDA Reconciliation
2014 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2014 ADESA IAA AFC Corporate Consolidated Net income (loss) $86.4 $79.7 $76.6 ($73.4) $169.3 Add back: Income taxes 43.2 48.4 48.6 (44.5) 95.7 Interest expense, net of interest income 0.6 0.2 18.7 66.4 85.9 Depreciation and
Slide 24: Q3 2014 Adjusted EBITDA Reconciliation
Q3 2014 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended September 30, 2014 ADESA IAA AFC Corporate Consolidated Net income (loss) $22.3 $19.1 $20.0 ($13.9) $47.5 Add back: Income taxes 13.4 11.0 12.1 (8.1) 28.4 Interest expense, net of interest income 0.1 – 4.7 15.4 20.2 Depreciati
Slide 25: Q3 2015 Adjusted EBITDA Reconciliation
Q3 2015 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended September 30, 2015 ADESA IAA AFC Corporate Consolidated Net income (loss) $29.6 $19.9 $22.1 ($19.3) $52.3 Add back: Income taxes 16.0 11.4 13.6 (11.4) 29.6 Interest expense, net of interest income 0.1 – 6.6 17.6 24.3 Depreciat
Slide 26: LTM Adjusted EBITDA Reconciliation
LTM Adjusted EBITDA Reconciliation ($ in millions) (unaudited) Twelve months Three months ended ended December 31, March 31, June 30, September 30, September 30, 2014 2015 2015 2015 2015 Net income (loss) $50.3 $54.5 $59.5 $52.3 $216.6 Add back: Income taxes 27.4 34.6 34.8 29.6 126.4 Interest expens
Slide 27: Adjusted Net Income Per Share Reconciliation
Adjusted Net Income Per Share Reconciliation ($ 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 Swap termination, net of tax (2) – – – 9.
Slide 28: Adjusted Net Income Per Share Reconciliation (Q3 2015 & Q3 2014)
Adjusted Net Income Per Share Reconciliation (Q3 2015 & Q3 2014) 28
Slide 29: 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