Openlane, Inc. · NYSE:OPLN
Openlane — KAR Auction Services — Debt Investor Presentation (May 2013)
36 slides from Openlane's debt investor presentation, May 22, 2013
Slide 1: Barclays 2013 High Yield Bond and Syndicated Loan Conference
Barclays 2013 High Yield Bond and Syndicated Loan Conference May 22, 2013
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: Non-GAAP Financial Measures
Non-GAAP Financial Measures EBITDA, Adjusted EBITDA, free cash flow, adjusted net income and adjusted net income per share, and percentages or calculations using these measures, as presented herein, are supplemental measures of the company's performance that are not required by, or presented in acco
Slide 4: Key Investment Highlights
Key Investment Highlights Poised to Benefit from Positive Cyclical Trends – Expected Increases in Forward Volumes Established Market Leader Across Core Businesses Proven and Resilient Growth through a Diversified Business Mix Attractive Financial Model Generating Significant Free Cash Flow f
Slide 5: Leading Provider of Vehicle Auction Services in North America
Leading Provider of Vehicle Auction Services in North America 2012 Revenue by Segment 2012 Adj. EBITDA by Segment(1) AFC 10% AFC 22% ADESA 3.3mm vehicles sold in 2012 41% ADESA IAAI 54% Revenue $1,963mm 36% Adj. EBITDA $500mm % margin 25.5% IAAI 37% Whole Car Auctions Salvage Vehicle Auctions Vehicl
Slide 6: 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 272 Million Salvage Auctions units 3-4 Million units Used Vehicle Transactions in Removed from New Vehicle Sales North America Operation 16 Million units ~ 43 Million 13 Million units units Consumer-
Slide 7: 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 ~$550 / vehicle ~$470 / vehicle
Slide 8: Long-standing and Diverse Customer and Buyer Base
Long-standing and Diverse Customer and Buyer Base Average relationship of over ten years with top ten vehicle suppliers Largest customer ~2% of 2012 consolidated revenue Over 150,000 registered whole car and salvage buyers from over 100 countries OEMs & Finance Banks Rental Car Companies Insur
Slide 9: 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 is an expected inflection 12 20 point in whole car auction volumes N.A. Seasonally Adjusted Annual Rate (“SAAR”) (units in millions) 10.0
Slide 10: OPENLANE & ADESA: Clear Leader in Private Label Sales for Manufacturers
OPENLANE & ADESA: Clear Leader in Private Label Sales(1) for Manufacturers OPENLANE ADESA (migrating to OPENLANE technology platform) New Customer Wins Since OPENLANE Acquisition (1) Private label sales held by manufacturers are limited to franchised dealers. 10
Slide 11: Continued Positive Salvage Market Fundamentals
Continued Positive Salvage Market Fundamentals Positive Demand Drivers Large Aging North American Car Parc Increased acceptance of alternative parts as 271 272 11.0 271 271 270 269 utilization has grown from ~25%+ levels in 2004 264 10.5 to over 30% currently 258 251 10.0 244 9.5 9.0 2003 2004 200
Slide 12: IAA Platform Continues to Expand Supporting Consistent Market Share Gains
IAA Platform Continues to Expand Supporting Consistent Market Share Gains Organic Growth Drivers Demonstrated History of Tuck-in Acquisitions Consistent market share gains VDPC – November 2010 − Hybrid auction maximizes proceeds Car Program – November 2010 − Smaller competitors lack the scale
Slide 13: IAA – Superstorm Sandy Impact
IAA – Superstorm Sandy Impact Superstorm Sandy Most catastrophic event in IAA history Sandy impacted one of the most densely populated areas in the U.S. The region’s infrastructure was very difficult to deal with Increased costs − Tow − Occupancy − Labor Over 50,000 vehicles assigned to IA
Slide 14: Attractive Floorplan Business Drivers
Attractive Floorplan Business Drivers U.S. Independent Dealer Used Car Sales Positive Demand Drivers (Units in millions) Large population of ~38,000(1) independent used vehicle 15.0 dealers in the U.S. 14.8 14.5 14.2 14.3 14.0 14.0 13.7 13.8 13.1 13.0 AFC has relationships with ~30% of the indep
Slide 15: 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 $146 − Short-term (30-60 days) secured financing $117 Aim to selectively grow portfolio − Success
Slide 16: Multiple Avenues for Continued Organic and Acquisition Expansion
Multiple Avenues for Continued Organic and Acquisition Expansion Continue market share gains across all businesses Continue margin expansion during cyclical recovery of used car auction volumes Near- Further leveraging of technology platform across business lines Term Pursue disciplined grow
Slide 17: Financial Overview
Financial Overview
Slide 18: Historical Financial Performance
Historical Financial Performance Revenue Gross Profit ($ in millions) ($ in millions) $851 $876 $1,963 $815 $1,776 $1,823 $1,886 $720 $734 $1,736 $194 $136 $169 $102 $94 $550 $553 $610 $700 $716 $1,123 $1,089 $1,076 $1,017 $1,053 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 ADESA IAA AFC Visibl
Slide 19: YTD December 31, 2012 Performance
YTD December 31, 2012 Performance Revenue Gross Profit* $2,400 $1,886 $1,963 $1,000 $2,000 $851 $876 $1,600 $800 $1,200 $600 ($mm) ($mm) $800 $400 $400 44.9% 45.1% 44.4% 44.6% $200 $0 $0 2011 2012 2011 2012 Adjusted EBITDA** Adjusted Net Income Per Share** $600 $1.50 $487 $500 $1.16 $1.07 $400 $1.00
Slide 20: First Quarter 2013 Performance
First Quarter 2013 Performance Revenue Gross Profit* $600 $507 $558 $500 $400 $300 ($mm) ($mm) $200 $250 $237 $226 $100 $125 46.9% 44.2% 40.6% $0 $0 Q1 2012 Q1 2013 Q1 2012 Q1 2013 Adjusted EBITDA Adjusted Net Income Per Share $0.60 $150 $136 $135 $0.40 $100 $0.31 $0.31 ($mm) $50 26.6% 24.4% $0.20 $
Slide 21: March 31, 2013 Pro forma Capital Structure
March 31, 2013 Pro forma* Capital Structure (US$ in millions) 3/31/2013 - 4/3/2013 FRN 3/31/2013 - Reported Redemption Pro Forma Term Loan Facility - 2017 $1,819.9 $1,819.9 Revolving Credit Facility - 2016 0.0 0.0 Floating Rate Notes 150.0 (150.0) 0.0 Capital Leases ** 29.1 29.1 Total 1,999.0 1,849.
Slide 22: Investment Summary: Diverse Business Model / Strong Free Cash Flow
Investment Summary: Diverse Business Model / Strong Free Cash Flow Adjusted EBITDA Contribution Free Cash Flow** By Segment* $475M $487M $500M $238 $253 $238 100% 15% 19% 22% 35% 39% 37% 50% 50% 42% 41% 2010 2011 2012 0% 2010 2011 2012 13.1% 13.4% 12.1% ADESA IAA AFC Annual Free Cash Flow as a % of
Slide 23: Appendix
sa KA AUCTION SERVICES.
Slide 24: Non-GAAP Financial Measures
Non-GAAP Financial Measures EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings as
Slide 25: 2008 Adjusted EBITDA Reconciliation
2008 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2008 ADESA IAA AFC Corporate Consolidated Net income (loss) $52.5 $9.2 ($151.3) ($126.6) ($216.2) Add back: Income taxes 33.7 6.3 10.2 (81.6) (31.4) Interest expense, net of interest income – 0.2 – 213.2 213.4 Depreciation a
Slide 26: 2009 Adjusted EBITDA Reconciliation
2009 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2009 ADESA IAA AFC Corporate Consolidated Net income (loss) $94.4 $25.8 $19.1 ($116.1) $23.2 Add back: Income taxes 56.0 16.2 8.4 (69.5) 11.1 Interest expense, net of interest income 0.5 1.4 – 170.3 172.2 Depreciation and am
Slide 27: 2010 Adjusted EBITDA Reconciliation
2010 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2010 ADESA IAA AFC Corporate Consolidated Net income (loss) $80.1 $44.7 $38.4 ($93.6) $69.6 Add back: Income taxes 43.6 26.7 21.1 (64.2) 27.2 Interest expense, net of interest income 0.9 2.3 7.2 130.9 141.3 Depreciation and
Slide 28: 2011 Adjusted EBITDA Reconciliation
2011 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2011 ADESA IAA AFC Corporate Consolidated Net income (loss) $55.8 $65.5 $57.2 ($106.3) $72.2 Add back: Income taxes 17.9 36.1 29.6 (65.8) 17.8 Interest expense, net of interest income 0.7 2.1 12.0 128.0 142.8 Depreciation an
Slide 29: 2012 Adjusted EBITDA Reconciliation
2012 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2012 ADESA IAA AFC Corporate Consolidated Net income (loss) $38.4 $56.5 $64.1 ($67.0) $92.0 Add back: Income taxes 14.5 33.7 46.0 (34.6) 59.6 Interest expense, net of interest income 0.8 1.4 15.0 101.9 119.1 Depreciation and
Slide 30: Q1 2012 Adjusted EBITDA Reconciliation
Q1 2012 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended March 31, 2012 ADESA IAA AFC Corporate Consolidated Net income (loss) $9.0 $18.3 $16.3 ($17.6) $26.0 Add back: Income taxes 7.2 12.1 9.6 (10.5) 18.4 Interest expense, net of interest income 0.3 0.4 3.7 25.9 30.3 Depreciation a
Slide 31: Q1 2013 Adjusted EBITDA Reconciliation
Q1 2013 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended March 31, 2013 ADESA IAA AFC Corporate Consolidated Net income (loss) $15.7 $9.8 $18.7 ($15.1) $29.1 Add back: Income taxes 7.9 5.9 11.5 (8.3) 17.0 Interest expense, net of interest income 0.2 0.3 3.8 24.4 28.7 Depreciation an
Slide 32: LTM Adjusted EBITDA Reconciliation
LTM Adjusted EBITDA Reconciliation ($ in millions) (unaudited) Twelve months Three months ended ended June 30, September 30, December 31, March 31, March 31, 2012 2012 2012 2013 2013 Net income (loss) $23.9 $19.2 $22.9 $29.1 $95.1 Add back: Income taxes 20.2 13.8 7.2 17.0 58.2 Interest expense, net
Slide 33: Adjusted Net Income Per Share Reconciliation (2012 & 2011)
Adjusted Net Income Per Share Reconciliation (2012 & 2011) ($ in millions, except per share amounts) Year ended December 31, 2012 2011 Net income $92.0 $72.2 (1) Loss on extinguishment of debt, net of tax – 33.2 (2) Swap termination, net of tax – 9.0 (3) Stepped up depreciation and amortization expe
Slide 34: Adjusted Net Income Per Share Reconciliation (Q1 2013 & Q1 2012)
Adjusted Net Income Per Share Reconciliation (Q1 2013 & Q1 2012) ($ in millions, except per share amounts) Three Months ended March 31, 2013 2012 Net income $29.1 $26.0 (1) Loss on modification/extinguishment of debt, net of tax 2.2 – (3) Stepped up depreciation and amortization expense, net of tax
Slide 35: Adjusted Net Income – Explanatory Footnotes
Adjusted Net Income – Explanatory Footnotes (1) In the second quarter of 2011, there were losses on extinguishments of debt totaling $53.5 million ($33.2 million net of tax). In the first quarter of 2013, we incurred a loss on the modification/extinguishment of debt totaling $3.8 million ($2.2 milli
Slide 36: Free Cash Flow Calculation – Explanatory Footnotes
Free Cash Flow Calculation – Explanatory Footnotes (1) Free cash flow represents Adjusted EBITDA less capital expenditures, adjusted cash interest paid and cash taxes paid. (2) Cash paid for interest excludes interest paid for standby letters of credit and securitization interest paid on obligations
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