Openlane, Inc. · NYSE:OPLN
Openlane — KAR Auction Services — Investor Presentation (June 2019)
36 slides from Openlane's investor presentation, Jun 5, 2019
Slide 1: RemainCo Investor Presentation June 2019
1 RemainCo Investor Presentation June 2019
Slide 2: Disclaimer
2 Disclaimer This presentation is for informational purposes only. Neither the company nor any of its affiliates or representatives makes anyrepresentation or warranty, expressed or implied, as to the accuracy or completeness of this presentation or any of the information contained herein. The compa
Slide 3: Today’s Speakers
3 Today’s Speakers James P. Hallett Chairman and CEO, KAR Eric Loughmiller Executive Vice President and CFO, KAR •Executive Vice President and CFO since 2007 •Prior to KAR, served as Vice President and CFO of ThoughtWorks, Inc. from 2001 to 2006 •Also served as Executive Vice President and CFO of Ma
Slide 4: Highly Experienced Leadership Team
4 ` Highly Experienced Leadership Team Executive Officers James P. Hallett Chairman and CEO 40+ years of experience 22+ years with KAR Eric Loughmiller Executive VP and CFO 38+ years of experience 12+ years with KAR John Hammer President, ADESA 25+ years of experience 8+years with KAR Don Gottwald P
Slide 5: Powering the world’s most trusted automotive marketplaces
3.5mm vehicles sold in 2018 $40bn+ value of vehicles sold 57% vehicles sold online in 1Q19 Digital Assets Leading Market Positions $2.4bn Revenue $498mm Adjusted EBITDA Data & Analytics Optimize Customer Portfolios 200+ operating locations across the U.S., Canada, Mexico and U.K. ~80 countries in ou
Slide 6: Diversified Business Model
6 Diversified Business Model Auction Services ~45% of Revenue Body Shop Detail Shop Mechanical Shop Ancillary & Related Services~55% of Revenue
Slide 7: Consignment Revenue Model Provides Strong Free Cash Flows and Margins
7 Consignment Revenue Model ProvidesStrong Free Cash Flows and Margins Wholecar Sellers •Dealers •OEMs and their Captive Finance Arms •Commercial Fleets •Financial Institutions •Rental Car Companies Wholecar Buyers •Franchised Dealers •Independent Dealers •Wholesale Dealers Revenue: ~$600 / vehicle(
Slide 8: Transaction Platforms
8 Transaction PlatformsOPENLANE Physical TradeRev ADESA Global Sales Method Online Only In-Lane Online Online Only Online Only ASP(1) ~$19,000 ~$11,000 ~$11,000 ~$8,000 ~€8,700 Source Off-Lease All All D2D All Auction Fees(1) ~$110 ~$410 ~$410 ~$250 ~€300-€400 Brand
Slide 9: AFC Short-Term Floorplan Financing
9 AFC Short-Term Floorplan FinancingProvides Complementary Service to Buyers •Short-term (~65 day) secured financing to independent used car dealers •Portfolio managed through disciplined underwriting and consistent credit standards •Significant risk mitigation processes (local presence, lot checks,
Slide 10: TradeRev North America
10 TradeRev North America Total dealer-to-dealer addressable market of 9mm vehicles 2018 vehicles sold doubled over 2017 ~$250 RPU Strong gross profit improving with scale 2018A 2019E Markets 128 176 Vehicles Sold 117k 200k+ Operating Loss ($53mm) ($60mm)
Slide 11: Case Study: Off-Lease Car Online Only Sale
11 •arranges shipment of vehicle to designated drop-off location •Car title is transferred to new owner within two business days of payment clearance •powers OEM’s online auction platform •provides car inspection / condition reports to potential buyers Case Study: Off-Lease Car Online Only Sale Off-
Slide 12: Case Study: Off-Lease Car Physical Auction Sale
12 Case Study: Off-Lease Car Physical Auction Sale Condition ReportTransaction Economics Seller Fees (Includes Reconditioning Fees) ~$450 Buyer Transport and Other Fees ~50-100 Buyer Fees ~600 Total Fees toKAR ~$1,100-$1,150
Slide 13: Case Study: Dealer-to-Dealer Sale Through TradeRev
13 Case Study:Dealer-to-Dealer Sale Through TradeRev •arranges shipment of vehicle to designated drop-off location •Car title is transferred to new owner within two business days of payment clearance •enables dealers to launch live, online, real-time auctions •provides car condition reports, perform
Slide 14: Large North American Addressable Market
14 Large North American Addressable Market 42mm Used Vehicle Sales 300mm Vehicles in Operation 10mm Units Physical Auctions 12mm Units Consumer-to-Consumer 30mm Units Retail Dealer Sales 5mm Units Dealer-to-Dealer 14mm Units Trade-Ins & Other 19mm Units New Vehicle Sales 13mm Units Removed From Oper
Slide 15: North American Wholecar Auction Industry
15 North American Wholecar Auction Industry 9.5 10.0 9.7 9.4 9.5 9.5 9.5 9.0 8.3 8.0 8.2 8.7 9.2 9.9 10.6 11.1 11.5 11.7 11.8 11.9 16.8 16.6 16.9 16.9 16.5 16.1 13.2 10.4 11.6 12.7 14.4 15.6 16.5 17.5 17.6 17.2 17.2 (20) (15) (10) (5) 0 5 10 15 20 0 2 4 6 8 10 12 14 2002 2003 2004 2005 2006 2007 200
Slide 16: Growth Strategies
16 GrowthStrategies Mobility •Align KAR service offerings •Long-term opportunity Data & Analytics •Expand use of facilities •Integrate throughout KAR platform Extend Digital Footprint International Expansion •UK •Europe •Asia / Australia •Integrate services ~9mm unit dealer-to-dealer TAM; ~$250 ARPU
Slide 17: Leverage Data & Analytics Across Platform
17 Leverage Data & Analytics Across Platform Recondition service penetration Dealer-to-Dealer market expansion Physical auction market share Retail & wholesale data value Transport service expansion Online auction market share
Slide 18: Extend Digital Footprint
18 Extend Digital Footprint 16% 20% 23% 24% 26% 29% 34% 2012 2013 2014 2015 2016 2017 2018 •ADESA revenue grew through online only sales growth •New online retailers will require “retail ready” vehicles which require reconditioning from a physical location •OPENLANE is the leading private label auct
Slide 19: International Expansion
19 International ExpansionMarkets Car Parc(in mm) NewCar Sales (in mm) Used Car Sales (in mm) U.S. 275 17 39 Canada 25 2 3 Europe (ex-U.K.) 223 12 25 U.K. 37 3 8 Asia 425 32 17 Australia 19 1 3
Slide 20: Financial History & Capital Allocation
Financial History & Capital Allocation
Slide 21: Financial Performance
21 Financial Performance Multiple Growth Drivers $657 $706 $781 $933 $1,030 $1,121 47% 46% 46% 45% 46% 46% 2013 2014 2015 2016 2017 2018 Gross Margin $ in mm Invested in Growth SG&A Margins Muted by Acquisition Growth Margin Pressured by Ancillary Service Growth $1,390 $1,521 $1,696 $2,052 $2,239 $2
Slide 22: Financial Outlook
22 Financial Outlook Industry Outlook •Continued online-only and simulcast sales growth •Market requires “retail ready” vehicles desiring reconditioning •Customers desire data and analytics to become more efficient •Independent used car retail activity expected to remain stable; floor plan lending c
Slide 23: 2019 Outlook
23 2019 OutlookANNUAL GUIDANCE 2019 Low 2019 High Net income from continuing operations $123.0 $137.0 Add back: Income taxexpense $50.0 $56.0 Interestexpense, net of interest income $192.0 $192.0 Depreciation and amortization $190.0 $190.0 EBITDA $555.0 $575.0 TotalAdjusted EBITDA addbacks, net ($25
Slide 24: Capital Allocation Framework
24 Capital Allocation Framework •Recurring dividends highlight strong free cash flowgeneration •Disciplined strategic investments represent best long-term risk-adjusted use of capital •Stock buyback if strategic investment opportunities not imminent –we will not accumulate cash •Maintain 3x or less
Slide 25: Clear Shareholder Friendly Capital Allocation History
25 Clear Shareholder Friendly Capital Allocation History •Historically ~18%-20% of Adjusted EBITDA, plus strategic investments •40%-50% of FCF •Highlights consistency & strength of free cash flow •Targeted acquisitions •Complementary technology •New geographies •Tool for managing cash and leverage 2
Slide 26: March 31, 2019 Pro Forma Leverage
26 March 31, 2019 Pro Forma Leverage(US$ in mm) Corporate Credit Ratings: S&P BB-, Moody’s B1 LIBOR Interest Rate Cap $800mm notional amt Expire 9/30/19 2.00% LIBOR cap(US$ in mm) Reported Adjustments(1) Pro Forma Maturity Term Loan B-4 (Adjusted LIBOR + 2.25%) $704 ($507) $197 2021 Term Loan B-5 (A
Slide 27: Appendices
27 Appendices
Slide 28: Non-GAAP Financial Measures
28 Non-GAAP Financial Measures EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings
Slide 29: 2013-2018 Adjusted EBITDA Reconciliation
29 2013-2018 Adjusted EBITDA Reconciliation($ in millions)201320142015201620172018Net income (loss)$67.7$169.3$214.6$222.4$362.0$328.0Add back: Income taxes81.5 95.7 125.9 132.9 36.0 107.7 Interest expense, net of interest income104.3 85.9 90.8 138.4 162.6 188.1 Depreciation and amortization194.4 19
Slide 30: Operating Adjusted Net Income per Share Reconciliation
30 Operating Adjusted Net Income from Continuing Operations per Share Reconciliation(in millions, except per share amounts) 2019 Outlook 2019 Low 2019 High Net income from continuing operations $123.0 $137.0 Acquired amortization expense 60.0 60.0 Income taxes (17.4) (17.4) Operating adjusted net in
Slide 31: ADESA Metrics – Annual
31 ADESA Metrics –Annual2014 2015 2016 2017 2018 Revenue(1) $1,271.0 $1,427.8 $1,765.3 $1,937.5 $2,101.9 Total Volume 2,198 2,465 2,885 3,180 3,472 Online Only Volume 495 592 743 938 1,304 TotalOnline Volume%(2) 38% 40% 42% 46% 54% Physical Conversion % 58% 58% 58% 60% 62% Dealer ConsignmentMix % (P
Slide 32: ADESA Metrics – Quarter
32 ADESA Metrics –Quarter1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 Revenue(1) $498.0 $489.2 $477.1 $473.2 $528.1 $538.3 $527.0 $508.5 $599.7 Total Volume 818 830 788 744 878 907 876 811 945 Online Only Volume 215 245 241 237 309 346 343 306 367 TotalOnline Volume%(2) 44% 46% 46% 49% 52% 54% 54% 5
Slide 33: AFC Metrics – Annual
33 AFC Metrics –Annual2014 2015 2016 2017 2018 Revenue $250.1 $268.4 $286.8 $301.3 $340.9 Loan TransactionUnits (LTU) 1,445 1,607 1,718 1,688 1,760 Revenue per Loan Transaction, Excluding “Other Service Revenue” $155 $150 $148 $159 $175 Ending Managed Finance Receivables $1,371.1 $1,641.0 $1,792.2 $
Slide 34: AFC Metrics – Quarter
34 AFC Metrics –Quarter1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 Revenue $71.2 $70.1 $78.2 $81.8 $85.1 $85.1 $85.4 $85.3 $89.9 Loan TransactionUnits (LTU) 456 416 402 414 464 435 433 428 461 Revenue per Loan Transaction, Excluding “Other Service Revenue” $138 $148 $174 $178 $166 $177 $177 $180 $1
Slide 35: AFC Provision for Credit Losses – Annual
35 AFC Provision for Credit Losses –Annual2014 2015 2016 2017 2018 Ending Managed Receivables $1,371.1 $1,641.0 $1,792.2 $1,912.6 $2,014.8 Average ManagedReceivables $1,208.4 $1,474.9 $1,732.5 $1,802.2 $1,959.8 Provision for Credit Losses $12.3 $16.0 $30.7 $33.9 $32.9 % of ManagedReceivables 1.0% 1.
Slide 36: AFC Provision for Credit Losses – Quarter
36 AFC Provision for Credit Losses –Quarter1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 Ending Managed Receivables $1,760.7 $1,736.5 $1,809.2 $1,912.6 $1,933.2 $1,958.6 $1,979.7 $2,014.8 $1,989.1 Average ManagedReceivables $1,776.5 $1,748.6 $1,772.9 $1,860.9 $1,922.9 $1,945.9 $1,969.2 $1,997.3 $2,00
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