Openlane, Inc. · NYSE:OPLN
Openlane — KAR Auction Services — Investor Presentation (June 2019)
40 slides from Openlane's investor presentation, Jun 5, 2019
Slide 1: Investor Presentation June 2019
Investor Presentation June 2019
Slide 2: Disclaimer
Disclaimer This presentation is for informational purposes only. Neither the company nor any of its affiliates or representatives makes any representation or warranty, expressed or implied, as to the accuracy or completeness of this presentation or any of the information contained herein. The compan
Slide 3: Today's Speakers
Today’s Speakers John KettChief Executive Officer and President, IAA CEO and President of IAA since 2014Previously served as CFO and Senior Vice President of Planning and Business DevelopmentPrior to IAA, served in a variety of senior financial and operational roles for Central Steel and Wire Co., S
Slide 4: Spin-Off Update
Spin-Off Update Progress Update Private letter rulings received in the U.S. and Canada Required agreements progressing or in placeReadiness plans in place Team Board of Directors confirmedExecutive Leadership in place Capital Structure IAA capital structure consisting of $800mm Term Loan B, $500mm S
Slide 5: Key Investment Highlights
Key Investment Highlights Leading omnichannel marketplace for total loss, damaged and low-value vehicles with industry-leading technology and data analytics capabilities Strong and consistent revenue growth, profitability and cash flow generation with supportive market fundamentals Asset-light busin
Slide 6: Company and Industry Overview
Company and Industry Overview
Slide 7: Highly Experienced Leadership Team
Highly Experienced Leadership Team Executive Officers Highly experienced leadership team with extensive industry expertise John KettCEO and President34+ years of experience17 years with IAA Vance JohnstonCFO27+ years of experienceJoined in 2019 Tim O’DayPresident of U.S. Operations30+ years of exper
Slide 8: Key Operations Management
Key Operations Management Key Operations Management Deep bench of key operators Jeanene O’Brien Global Marketing Steve Muscarello Chief Commercial Officer, U.S. Justin Mahlik Digital Products and Data John Krupnik Technology Bill Davidson Human Resources Terry Daniels International Operations Eldon
Slide 9: Board of Directors
Board of Directors Board of Directors Accomplished Board of Directors with diverse backgrounds and areas of expertise Lynn JolliffeCEO, Jolliffe SolutionsIndependent Director Olaf KastnerRetired (Previously President & CEO, BMW Group China)Independent Director Peter KaminFounder and Managing Partner
Slide 10: History and Key Events
History and Key Events 2017 2015 –2016 2009 –2010 2005 – 2007 1982 –1991 announces spin-off of 2018 2019 2011 –2014 Acquired by Founded and enters the vehicle salvage business LaunchesIAA TotalLoss Solutions Expands into UK with acquisition of Launches industry-first mobile app to accelerate catastr
Slide 11: Large North American Addressable Market
Large North American Addressable Market 5mm+ UnitsSalvage Auctions $22bn ~300mmVehicles in Operation ~42mmUsed Retail Sales ~13mm UnitsRemoved from Operation ~8mm UnitsRemaining Vehicles Vehicles out of serviceVehicles not processed by insuranceUninsured vehicles ~19mm UnitsNew Vehicle Sales 11
Slide 12: Comprehensive, End-to-End Solutions Creates Deeply Embedded Customer Relationships
Comprehensive, End-to-End SolutionsCreates Deeply Embedded Customer Relationships Insurance Auto Auctions (“IAA”) Overview Leading omnichannel marketplace for total loss, damaged and low-value vehicles $1.3bnLTM (1Q19) Revenue ~3,600Employees $396mmLTM (1Q19) Adjusted EBITDA(1) 193Locations 2.5mmVeh
Slide 13: Overview of the Auction Process
Buyer Transportation Via IAA Overview of the Auction Process ~40 days (varies by state) Assignment to Storage~2-3 days TransportationVia Buyer Insurance Title Procurement |InspectionImaging | Storage Sold Vehicle Arrives at IAA Location OmnichannelBidding $ $ Seller Entire process takes 45-90 days 1
Slide 14: Diversified Customer Base With Longstanding Relationships
Diversified Customer Base With Longstanding Relationships Sellers Buyers Significant large insurance seller base with a diverse set of non-insurance sellers, including charitable organizations, dealer groups and rental car companies Long-term business partnerships with 80 of the top 100 major U.S. i
Slide 15: IAA's Omnichannel Marketplace
Enhances auctions through the use of technology and a democratized marketplace network modelRevenue: ~$500-$550 / vehicle IAA’s Omnichannel Marketplace Omnichannel Marketplace Buyers Sellers DismantlersRebuildersScrap Dealers Services Large, diverse and global buyer network with limited buyer concen
Slide 16: Comprehensive Suite of Solutions for Sellers and Buyers
Comprehensive Suite of Solutions for Sellers and Buyers Seller Solutions Buyer Solutions IAA Loan Payoff™Online portal between banks and insurance companies that expedites the total loss process IAA Title Services™Full-service tools designed to expedite the laborious and time-consuming title-procure
Slide 17: Comprehensive Coverage
Comprehensive Coverage Strong Presence and Scale Near Major Metro Areas U.S. Locations Canada Locations UK Locations UK North America Presence in Every U.S. State #1 Coverage in Canada Growing Footprint in the UK Estimated 40% Market Share and Co-Leader in North America 17
Slide 18: Strategic Plan
Strategic Plan
Slide 19: IAA Growth Strategy
IAA Growth Strategy Employ Disciplined Capital Allocation StrategyDrive long-term growth and deliver sustainable shareholder value Broaden Service Offering to Deepen Strategic RelationshipsAdd additional innovative services and capabilities to our leading end-to-end solutions Expand Internationally
Slide 20: Enhance Existing Relationships and Expand Market Share
1 Enhance Existing Relationships and Expand Market Share Small Insurance Sellers Large Insurance Sellers Non-Insurance Sellers Grow volume in low value cars (e.g. repossessions and high mileage vehicles) “Many-to-Many” Network Effects Omnichannel Auctions Comprehensive, End-to-End Solutions Advanced
Slide 21: Broaden Service Offering to Deepen Strategic Relationships
2 Broaden Service Offering to Deepen Strategic Relationships Comprehensive Platform to Process Auto Insurance Claims Efficiently, from the Loss Event to Asset Liquidation First Notice of Loss LossDetermination Vehicle Inspectionand Appraisal TitleManagement Inventory Management Sale andSettlement Lo
Slide 22: Enhance International Buyer Network
3 Enhance International Buyer Network International Buyer Network Expansion Approach On-site, in-personrecruiting State-of-the-art digital platform ~30% of our 2018 U.S. volume is exported Buyer Portal Call Center Supports 12Languages ~50% growth in the number of international buyers in our U.S. mar
Slide 23: Reduce Costs to Expand Margins
4 Reduce Costs to Expand Margins Optimize stand-alone public company costsOrganizational alignmentDiscipline on discretionary spend Back Office G&A Strategic Sourcing Source key categoriesReduce costs and obtain volume discountsImprove terms Branch Costs Auction and related costsVehicle storage conf
Slide 24: Drive Operating Efficiencies to Expand Margins
4 Drive Operating Efficiencies to Expand Margins Margin Expansion Processes and Technology Vehicle Check-in Vehicle Sale Title and Inventory Reduced Cycle Time Improved Real Estate Utilization $ Higher Buyer Fees Increased Customer Satisfaction Reduced Depreciation of Vehicle Value 24
Slide 25: Grow Ancillary Services to Expand Margins
4 Grow Ancillary Services to Expand Margins Opportunity to monetize data in the future Seller Services / Solutions Buyer Services / Solutions IAA InspectionServices® Data Services IAA Transport TitleProcurement IAA 360˚ View™ IAA LoanPayoff™ 25
Slide 26: Continue to Innovate and Enhance Data Analytics Capabilities
Continue to Innovate and Enhance Data Analytics Capabilities 5 Our culture of innovation and leading data analytics capabilities continues to enhance economic benefits for both sellers and buyers Fleet Management$13B TAM HCV Picture Advanced Data Analytics Improve Decision MakingIncrease Transparenc
Slide 27: Expand Internationally in Attractive Markets
6 Expand Internationally in Attractive Markets Identify opportunities to expand throughout the world Focus on geographies with a mature used car marketplace, relatively stable economy and business friendly regulations Leverage extensive international buyer base to facilitate global expansion Adapt b
Slide 28: Financial Overview
Financial Overview
Slide 29: Organic Growth Driven by Supporting Fundamentals
Organic Growth Driven by Supporting Fundamentals ___________________________Source: CCC Information Services, Hedges and Company, U.S. Department of Transportation, Autocare Association. Increasing Total Loss U.S. Light Vehicle Car Parc U.S. LTM Miles Driven (Vehicles in Operation in millions) (Mile
Slide 30: Strong and Consistent Execution History
Revenue Adjusted EBITDA less Capex(1) Adjusted EBITDA(1) Adjusted EBITDA Margin: 26% 27% 29% 29% 2016-2018 CAGR: 10% ($ in millions) ($ in millions) ($ in millions) ___________________________Please reference page 32 for a notice regarding Non-GAAP financial measures.Unaffected for estimated public
Slide 31: Limited Exposure to Economic Cycles
Limited Exposure to Economic Cycles Historical Sales ($ in millions) ___________________________Source: Company management. 31
Slide 32: Objectives Going Forward
Expect to provide further details on margin expansion plan andimpact on long-term targets at investor day in early 2020 Short-Term Stand up new public companyOptimize transition services and new public company costsExecute strategy and continue to deliver results for sellers and buyersConduct margin
Slide 33: Long-Term Financial Outlook
Long-Term Financial Outlook – Next 5 Years Revenue Growth ~5%-7% OrganicUpside from M&A and Ancillary Services Adjusted EBITDA Growth ~6%-8% OrganicUpside from Margin Expansion Plan and M&A Current expectations for 2019 in alignment with long-termfinancial outlook for revenue growth and adjusted EBI
Slide 34: Capital Allocation Priorities
Capital Allocation Priorities Initial use of excess cash generated by the business for debt reduction, with target net leverage of ~2.0x-3.0x A Patient and disciplined investment in strategic growth B Evaluate initiatives to return capital to shareholders C 34
Slide 35: Key Investment Highlights
Key Investment Highlights Leading omnichannel marketplace for total loss, damaged and low-value vehicles with industry-leading technology and data analytics capabilities Strong and consistent revenue growth, profitability and cash flow generation with supportive market fundamentals Asset-light busin
Slide 36: Appendices
Appendices
Slide 37: 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 in
Slide 38: Adjusted EBITDA Reconciliation – Annual
Adjusted EBITDA Reconciliation – Annual Fiscal years ended ($ in millions) Dec 29, 2013 (unaudited) Dec 28, 2014 (unaudited) Dec 27, 2015 Jan 1, 2017 Dec 31, 2017 Dec 30, 2018 LTM Mar 31, 2019 Statement of income data Net income $55.4 $78.2 $89.9 $94.9 $161.4 $183.7 $189.9 Add back: Income taxes 32.
Slide 39: Adjusted EBITDA Reconciliation – Quarter
Adjusted EBITDA Reconciliation – Quarter Fiscal quarters ($ in millions) 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 Statement of income data Net income $30.5 $35.6 $26.2 $69.1 $48.3 $49.8 $39.0 $46.6 $54.5 Add back: Income taxes 18.0 20.6 15.9 (18.9) 16.0 17.4 14.0 15.1 19.1 Interest expense, net
Slide 40: Summary Unaudited Pro Forma Balance Sheet
Summary Unaudited Pro Forma Balance Sheet Assets Liabilities & Equity ($ in millions, as of March 31, 2019) 40
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