Slide 1: First Quarter 2019 Earnings Slides
First Quarter 2019 Earnings Slides May 7, 2019
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: Q1 Highlights
Q1 Highlights Revenues Highlights Fundamentals $950.5 $1,046.8 • Revenue growth +10% • Diversified and complementary 89.9 85.1 • Operating Adjusted EPS -15% business services model 357.2 337.3 KAR • Adjusted EBITDA +1% 528.1 599.7 2018 2019 • Revenue +14% • Off-lease supply driving volume growth AFC
Slide 4: 2019 Outlook
2019 Outlook ANNUAL GUIDANCE 2019 Low 2019 High 2018 Net income $330.0 $355.5 $328.0 Add back: Income tax expense $122.0 $131.5 $107.7 Interest expense, net of interest income $220.0 $220.0 $188.1 Depreciation and amortization $281.0 $281.0 $269.9 EBITDA $953.0 $988.0 $893.7 Total Adjusted EBITDA ad
Slide 5: Separation of IAA Salvage Auction Business Unit Update
Separation of IAA Salvage Auction Business Unit Update Next Steps Capital Structure • Issue Spinco debt • Maintain BB-/B1 corporate credit rating • Equity roadshow and when-issued trading • 3.5x Net debt / Adjusted EBITDA • Effective with SEC • Targeted debt structure • Distribution • ~$1.3B total d
Slide 6: KAR Q1 2019 Highlights
KAR Q1 2019 Highlights ($ in millions, except per share amounts) Q1 Q1 KAR Highlights* 2019 2018 Total operating revenues $1,046.8 $950.5 $31.8M acquisitions Gross profit** $434.5 $415.5 % of revenue 41.5% 43.7% SG&A $207.6 $187.4 TradeRev +$8.0M, $4.6M acquired SG&A EBITDA $228.3 $228.0 Adjusted EB
Slide 7: ADESA Q1 2019 Highlights
ADESA Q1 2019 Highlights ($ in millions, except RPU) Q1 Q1 ADESA Highlights* 2019 2018 Revenue $599.7 $528.1 $31.8M acquisitions Gross profit** $229.0 $222.1 Increased purchased vehicles from COTW and ADESA % of revenue 38.2% 42.1% Assurance reduced margins ~2% SG&A $126.6 $108.8 TradeRev +$8.0M, $4
Slide 8: IAA Q1 2019 Highlights
IAA Q1 2019 Highlights ($ in millions) Q1 Q1 IAA Highlights* 2019 2018 Revenue $357.2 $337.3 +5% RPU growth Gross profit** $138.8 $130.6 % of revenue 38.9% 38.7% Excluding HBC 39.3% in Q1 2019 and 39.2% in Q1 2018 SG&A $31.3 $30.5 EBITDA $106.8 $100.1 Adjusted EBITDA $109.6 $101.7 8% increase % of r
Slide 9: AFC Q1 2019 Highlights
AFC Q1 2019 Highlights ($ in millions, except for revenue per loan transaction) Q1 Q1 AFC 2019 2018 Highlights* Interest and fee income $86.9 $81.9 Other revenue $2.8 $2.9 Provision for credit losses ($8.2) ($7.7) Other service revenue $8.4 $8.0 PWI revenue Total AFC revenue $89.9 $85.1 +7% revenue
Slide 10: Historical Data Appendix
AUCTION SERVICES. HISTORICAL DATA
Slide 11: ADESA Metrics - Annual
ADESA Metrics - Annual 2018 2017 2016 2015 2014 Revenue2 $2,101.9 $1,937.5 $1,765.3 $1,427.8 $1,271.0 Total Volume 3,472 3,180 2,885 2,465 2,198 Online Only Volume 1,304 938 743 592 495 Total Online Volume %3 54% 46% 42% 40% 38% Physical Conversion % (N.A.) 61.6% 60.4% 58.0% 58.3% 58.2% Dealer Consi
Slide 12: ADESA Metrics - Quarter
ADESA Metrics - Quarter 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 Revenue2 $599.7 $508.5 $527.0 $538.3 $528.1 $473.2 $477.1 $489.2 $498.0 Total Volume 945 811 876 907 878 744 788 830 818 Online Only Volume 367 306 343 346 309 237 241 245 215 Total Online Volume %3 57% 54% 54% 54% 52% 49% 46% 46%
Slide 13: IAA Metrics - Annual
IAA Metrics - Annual 2018 2017 2016 2015 2014 Revenue $1,326.8 $1,219.2 $1,098.0 $994.4 $895.9 Total Volume 2,480 2,369 2,184 1,970 1,732 Inventory Growth (North America) 1% 3% 25% 14% 20% Purchased Vehicle Mix % 4% 5% 7% 7% 6% Gross Profit $505.6 $441.1 $390.0 $360.8 $340.2 Gross Margin (IAA) 38.1%
Slide 14: IAA Metrics - Quarter
IAA Metrics - Quarter 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 Revenue $357.2 $335.2 $321.1 $333.2 $337.3 $335.4 $287.7 $298.7 $297.4 Total Volume 649 617 597 623 643 635 562 580 592 Inventory Growth (North 10% 1% -9% 2% 4% 3% 12% 9% 17% America) Purchased Vehicle Mix % 4% 4% 4% 4% 4% 4% 5% 5% 5
Slide 15: IAA Q1 2019 Gross Profit
IAA Q1 2019 Gross Profit ($ in millions) Three Months Ended Three Months Ended March 31, 2019 March 31, 2018 IAA HBC Total IAA HBC Total Revenue $349.0 $8.2 $357.2 $327.6 $9.7 $337.3 Cost of Services** $211.9 $6.5 $218.4 $199.1 $7.6 $206.7 Gross Profit** $137.1 $1.7 $138.8 $128.5 $2.1 $130.6 % of Re
Slide 16: AFC Metrics - Annual
AFC Metrics - Annual 2018 2017 2016 2015 2014 Revenue $340.9 $301.3 $286.8 $268.4 $250.1 Loan Transaction Units (LTU) 1,760 1,688 1,718 1,607 1,445 Revenue per Loan Transaction, $175 $159 $148 $150 $155 Excluding “Other Service Revenue” Ending Managed Finance Receivables $2,014.8 $1,912.6 $1,792.2 $
Slide 17: AFC Metrics - Quarter
AFC Metrics - Quarter 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 Revenue $89.9 $85.3 $85.4 $85.1 $85.1 $81.8 $78.2 $70.1 $71.2 Loan Transaction Units 461 428 433 435 464 414 402 416 456 (LTU) Revenue per Loan Transaction, Excluding $177 $180 $177 $177 $166 $178 $174 $148 $138 “Other Service Revenu
Slide 18: AFC Provision for Credit Losses - Annual
AFC Provision for Credit Losses - Annual 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Ending Managed $2,014.8 $1,912.6 $1,792.2 $1,641.0 $1,371.1 $1,107.6 $1,004.2 $883.2 $771.6 $613.0 $506.6 $847.9 Receivables Average Managed $1,959.8 $1,802.2 $1,732.5 $1,474.9 $1,208.4 $1,051.4 $925
Slide 19: AFC Provision for Credit Losses - Quarterly
AFC Provision for Credit Losses - Quarterly 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 Ending Managed $1,989.1 $2,014.8 $1,979.7 $1,958.6 $1,933.2 $1,912.6 $1,809.2 $1,736.5 $1,760.7 Receivables Average Managed $2,002.0 $1,997.3 $1,969.2 $1,945.9 $1,922.9 $1,860.9 $1,772.9 $1,748.6 $1,776.5 Receiv
Slide 20: Appendix
AUCTION SERVICES. APPENDIX
Slide 21: Non-GAAP Financial Measures
Non-GAAP Financial Measures EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings as
Slide 22: Q1 2019 Adjusted EBITDA Reconciliation
Q1 2019 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended March 31, 2019 ADESA IAA AFC Corporate Consolidated Net income (loss) $42.4 $56.4 $30.5 ($51.5) $77.8 Add back: Income taxes 15.9 19.2 10.8 (17.8) 28.1 Interest expense, net of interest income 0.4 - 16.9 39.0 56.3 Depreciation
Slide 23: Q1 2018 Adjusted EBITDA Reconciliation
Q1 2018 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended March 31, 2018 ADESA IAA AFC Corporate Consolidated Net income (loss) $54.2 $50.3 $25.7 ($40.2) $90.0 Add back: Income taxes 15.5 16.3 8.4 (13.8) 26.4 Interest expense, net of interest income 0.4 - 13.4 27.5 41.3 Depreciation
Slide 24: Operating Adjusted Net Income per Share Reconciliation
Operating Adjusted Net Income per Share Reconciliation ($ in millions, except per share amounts), (unaudited) Three Months ended March 31, 2019 2018 Net income $77.8 $90.0 Acquired amortization expense 21.2 26.9 IAA separation costs 0.8 1.1 Income taxes (1) (5.8) (6.3) Operating adjusted net income
Slide 25: Q1 2019 ADESA Incremental Operating Profit Margin Analysis
Q1 2019 ADESA Incremental Operating Profit Margin Analysis Incremental Operating Profit % ($ in millions) ADESA IMPACT OF REPORTED EXCLUDING ACQUISITIONS ACQUISITIONS Q1 2019 Revenue $599.7 $31.8 $567.9 Operating Profit $67.4 ($0.9) $68.3 Operating Profit % 11.2% (-2.8%) 12.0% Q1 2018 Revenue $528.1
Slide 26: Q1 2019 IAA Incremental Operating Profit Margin Analysis
Q1 2019 IAA Incremental Operating Profit Margin Analysis Incremental Operating Profit % ($ in millions) REPORTED Q1 2019 Revenue $357.2 Operating Profit $85.7 Operating Profit % 24.0% Q1 2018 Revenue $337.3 Operating Profit $76.0 Operating Profit % 22.5% Q1 2019 Reported Growth Reported Revenue Grow