Openlane, Inc. · NYSE:OPLN
Openlane — KAR Auction Services — Q3 2018 Earnings Presentation
39 slides from Openlane's earnings presentation, Nov 6, 2018
Slide 1: Third Quarter 2018 Earnings Slides
Third Quarter 2018 Earnings Slides November 6, 2018
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: Q3 2018 Highlights
Q3 2018 Highlights Revenues Highlights Fundamentals $933.5 $843.0 • Revenue growth +11% • Diversified and complementary 85.4 78.2 • Operating Adjusted EPS +23% business services model 321.1 287.7 KAR • Adjusted EBITDA +3% 527.0 477.1 2017 2018 • Revenue +10% • Off-lease supply driving volume growth
Slide 4: 2018 Outlook
2018 Outlook ANNUAL GUIDANCE 2018 Low 2018 High 2017 Net income $329.0 $349.7 $362.0 Add back: Income tax expense $115.6 $122.9 $36.0 Interest expense, net of interest income $191.0 $191.0 $162.6 Depreciation and amortization $268.0 $268.0 $264.6 EBITDA $903.6 $931.6 $825.2 Total addbacks, net ($8.6
Slide 5: Clear Shareholder Friendly Capital Allocation Framework
Clear Shareholder Friendly Capital Allocation Framework Strategic Share Capex Dividends Investments Repurchases • Historically ~18% - 20% of • 45% - 50% of FCF • Acquisitions that leverage • Tool for managing cash and Adjusted EBITDA, plus • Highlights consistency & wholecar auction cyclical leverag
Slide 6: September 30, 2018 Leverage
September 30, 2018 Leverage (US$ in millions) Balance Maturity Term Loan B-4 (Adjusted LIBOR + 2.25%) $708 2021 Term Loan B-5 (Adjusted LIBOR + 2.50%) 1,037 2023 Revolving Credit Facility (Adjusted LIBOR + 2.00%) - 2021 Senior Notes (Fixed 5.125%) 950 2025 Capital Leases 45 Total 2,740 Less: Availab
Slide 7: Third Quarter Results Appendix
T h i r d Q u a r t e r R e s u l t s APPENDIX 7
Slide 8: KAR Q3 2018 Highlights
KAR Q3 2018 Highlights ($ in millions, except per share amounts) Q3 Q3 KAR Highlights* 2018 2017 Total operating revenues $933.5 $843.0 $10.6M acquisitions Gross profit** $400.3 $363.8 % of revenue 42.9% 43.2% SG&A $186.0 $155.7 $17.9M acquired SG&A EBITDA $216.0 $207.4 Adjusted EBITDA $215.7 $209.3
Slide 9: ADESA Q3 2018 Highlights
ADESA Q3 2018 Highlights ($ in millions, except RPU) Q3 Q3 ADESA Highlights* 2018 2017 Revenue $527.0 $477.1 +$10.6M acquisitions Gross profit** $219.2 $204.5 % of revenue 41.6% 42.9% SG&A $111.8 $87.6 7% growth excluding $17.9M of acquired SG&A EBITDA $105.6 $113.6 Adjusted EBITDA $114.1 $122.0 6%
Slide 10: IAA Q3 2018 Highlights
IAA Q3 2018 Highlights ($ in millions) Q3 Q3 IAA Highlights* 2018 2017 Revenue $321.1 $287.7 Gross profit** $118.6 $102.9 % of revenue 36.9% 35.8% Excluding HBC 37.4% in Q3 2018 and 36.3% in Q3 2017 SG&A $28.8 $26.5 EBITDA $89.8 $76.5 Adjusted EBITDA $91.0 $77.8 % of revenue 28.3% 27.0% Vehicles sol
Slide 11: AFC Q3 2018 Highlights
AFC Q3 2018 Highlights ($ in millions, except for revenue per loan transaction) Q3 Q3 Highlights* AFC 2018 2017 Interest and fee income $80.7 $71.8 Other revenue $3.4 $3.0 Provision for credit losses ($7.3) ($5.0) Other service revenue $8.6 $8.4 PWI revenue Total AFC revenue $85.4 $78.2 +2% revenue
Slide 12: Year-to-Date Results Appendix
Y e a r - to- D a t e R e s u l t s APPENDIX 12
Slide 13: KAR Nine Months Ended September 30, 2018 Highlights
KAR Nine Months Ended September 30, 2018 Highlights ($ in millions, except per share amounts) YTD YTD KAR Highlights* 2018 2017 Total operating revenues $2,840.6 $2,567.6 $26.3M acquisitions Gross profit** $1,241.1 $1,105.5 % of revenue 43.7% 43.1% SG&A $556.2 $467.7 $50.7M acquired SG&A EBITDA $686
Slide 14: ADESA Nine Months Ended September 30, 2018 Highlights
ADESA Nine Months Ended September 30, 2018 Highlights ($ in millions, except RPU) YTD YTD ADESA Highlights* 2018 2017 Revenue $1,593.4 $1,464.3 +$26.3M acquisitions Gross profit** $672.4 $622.1 % of revenue 42.2% 42.5% SG&A $328.9 $260.1 7% growth excluding $50.7M of acquired SG&A EBITDA $334.1 $353
Slide 15: IAA Nine Months Ended September 30, 2018 Highlights
IAA Nine Months Ended September 30, 2018 Highlights ($ in millions) YTD YTD IAA Highlights* 2018 2017 Revenue $991.6 $883.8 Gross profit** $381.3 $328.4 % of revenue 38.5% 37.2% Excluding HBC 39.0% vs 38.0% prior year SG&A $88.0 $79.9 EBITDA $294.1 $249.5 Adjusted EBITDA $297.8 $252.1 % of revenue 3
Slide 16: AFC Nine Months Ended September 30, 2018 Highlights
AFC Nine Months Ended September 30, 2018 Highlights ($ in millions, except for revenue per loan transaction) YTD YTD Highlights* AFC 2018 2017 Interest and fee income $243.1 $213.1 Other revenue $9.6 $8.9 Provision for credit losses ($22.1) ($27.5) Other service revenue $25.0 $25.0 PWI revenue Total
Slide 17: Historical Data
AUCTION SERVICES. HISTORICAL DATA
Slide 18: ADESA Metrics - Annual
ADESA Metrics - Annual 2017 2016 2015 2014 2013 Revenue2 $1,937.5 $1,765.3 $1,427.8 $1,271.0 $1,165.5 Total Volume 3,180 2,885 2,465 2,198 2,055 Online Only Volume 938 743 592 495 407 Total Online Volume % 46% 42% 40% 38% 35% Physical Conversion % (N.A.) 60.4% 58.0% 58.3% 58.2% 56.9% Dealer Consignm
Slide 19: ADESA Metrics - Quarter
ADESA Metrics - Quarter 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 4Q16 3Q16 Revenue2 $527.0 $538.3 $528.1 $473.2 $477.1 $489.2 $498.0 $442.3 $457.4 Total Volume 876 907 878 744 788 830 818 700 732 Online Only Volume 343 346 309 237 241 245 215 177 180 Total Online Volume % 54% 54% 52% 49% 46% 46% 44% 43% 4
Slide 20: Used Vehicle Value Indices - Quarterly
Used Vehicle Value Indices - Quarterly YoY Index Change Age 3Q17 4Q17 1Q18 2Q18 3Q18 Industry All +1.9% +2.3% +0.0% -0.6% +0.4% JCP/NADA 0-8 yrs -2.6% -0.1% +0.8% +3.3% +4.8% Black Book 2-6 yrs -3.5% -0.8% -0.9% -0.1% +1.7% RVI 2-5 yrs -2.7% +0.1% +0.1% +2.4% +4.7% • Increased industry (commercial)
Slide 21: IAA Metrics - Annual
IAA Metrics - Annual 2017 2016 2015 2014 2013 Revenue $1,219.2 $1,098.0 $994.4 $895.9 $830.0 Total Volume 2,369 2,184 1,970 1,732 1,616 Inventory Growth (North America) 3% 25% 14% 20% -3% Purchased Vehicle Mix % 5% 7% 7% 6% 7% Gross Profit $441.1 $390.0 $360.8 $340.2 $284.1 Gross Margin (IAA) 36.2%
Slide 22: IAA Nine Months Ended September 30, 2018 Gross Profit
IAA Nine Months Ended September 30, 2018 Gross Profit ($ in millions) Nine Months Ended Nine Months Ended September 30, 2018 September 30, 2017 IAA HBC Total IAA HBC Total Revenue $966.5 $25.1 $991.6 $853.5 $30.3 $883.8 Cost of Services** $589.9 $20.4 $610.3 $529.3 $26.1 $555.4 Gross Profit** $376.6
Slide 23: IAA Metrics - Quarter
IAA Metrics - Quarter 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 4Q16 3Q16 Revenue $321.1 $333.2 $337.3 $335.4 $287.7 $298.7 $297.4 $302.6 $261.0 Total Volume 597 623 643 635 562 580 592 610 516 Inventory Growth (North -9% 2% 4% 3% 12% 9% 17% 25% 22% America) Purchased Vehicle Mix % 4% 4% 4% 4% 5% 5% 5% 6%
Slide 24: IAA Q3 2018 Gross Profit
IAA Q3 2018 Gross Profit ($ in millions) Three Months Ended Three Months Ended September 30, 2018 September 30, 2017 IAA HBC Total IAA HBC Total Revenue $314.0 $7.1 $321.1 $280.4 $7.3 $287.7 Cost of Services** $196.5 $6.0 $202.5 $178.5 $6.3 $184.8 Gross Profit** $117.5 $1.1 $118.6 $101.9 $1.0 $102.9
Slide 25: AFC Metrics - Annual
AFC Metrics - Annual 2017 2016 2015 2014 2013 Revenue $301.3 $286.8 $268.4 $250.1 $224.7 Loan Transaction Units (LTU) 1,688 1,718 1,607 1,445 1,355 Revenue per Loan Transaction, $159 $148 $150 $155 $157 Excluding “Other Service Revenue” Ending Managed Finance Receivables $1,912.6 $1,792.2 $1,641.0 $
Slide 26: AFC Metrics - Quarter
AFC Metrics - Quarter 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 4Q16 3Q16 Revenue $85.4 $85.1 $85.1 $81.8 $78.2 $70.1 $71.2 $68.8 $71.2 Loan Transaction Units 433 435 464 414 402 416 456 417 426 (LTU) Revenue per Loan Transaction, Excluding $177 $177 $166 $178 $174 $148 $138 $145 $148 “Other Service Revenu
Slide 27: AFC Provision for Credit Losses - Annual
AFC Provision for Credit Losses - Annual 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Ending Managed $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 $1,802.2 $1,732.5 $1,474.9 $1,208.4 $1,051.4 $925.8 $798.8 $688.6 $516.4
Slide 28: AFC Provision for Credit Losses - Quarterly
AFC Provision for Credit Losses - Quarterly 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 4Q16 3Q16 Ending Managed $1,979.7 $1,958.6 $1,933.2 $1,912.6 $1,809.2 $1,736.5 $1,760.7 $1,792.2 $1,785.4 Receivables Average Managed $1,969.2 $1,945.9 $1,922.9 $1,860.9 $1,772.9 $1,748.6 $1,776.5 $1,788.8 $1,762.0 Receiv
Slide 29: Appendix
AUCTION SERVICES. APPENDIX
Slide 30: Non-GAAP Financial Measures
Non-GAAP Financial Measures EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings as
Slide 31: Q3 2018 Adjusted EBITDA Reconciliation
Q3 2018 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended September 30, 2018 ADESA IAA AFC Corporate Consolidated Net income (loss) $51.0 $41.8 $29.1 ($44.4) $77.5 Add back: Income taxes 19.0 14.3 9.0 (17.2) 25.1 Interest expense, net of interest income 0.1 - 14.9 32.8 47.8 Depreciat
Slide 32: Q3 2017 Adjusted EBITDA Reconciliation
Q3 2017 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended September 30, 2017 ADESA IAA AFC Corporate Consolidated Net income (loss) $47.0 $28.0 $20.4 ($32.6) $62.8 Add back: Income taxes 29.6 15.9 11.6 (19.4) 37.7 Interest expense, net of interest income (0.4) - 11.0 30.1 40.7 Deprec
Slide 33: YTD 2018 Adjusted EBITDA Reconciliation
YTD 2018 Adjusted EBITDA Reconciliation ($ in millions) Nine Months ended September 30, 2018 ADESA IAA AFC Corporate Consolidated Net income (loss) $165.2 $144.5 $82.5 ($131.5) $260.7 Add back: Income taxes 58.0 48.2 26.7 (46.2) 86.7 Interest expense, net of interest income 0.9 - 43.0 92.7 136.6 Dep
Slide 34: YTD 2017 Adjusted EBITDA Reconciliation
YTD 2017 Adjusted EBITDA Reconciliation ($ in millions) Nine Months ended September 30, 2017 ADESA IAA AFC Corporate Consolidated Net income (loss) $152.0 $97.5 $61.6 ($121.9) $189.2 Add back: Income taxes 92.4 54.5 35.9 (77.1) 105.7 Interest expense, net of interest income (0.4) - 31.8 89.4 120.8 D
Slide 35: Operating Adjusted Net Income per Share Reconciliation
Operating Adjusted Net Income per Share Reconciliation ($ in millions, except per share amounts), (unaudited) Three Months ended Nine Months ended September 30, September 30, 2018 2017 2018 2017 Net income $77.5 $62.8 $260.7 $189.2 Acquired amortization expense 20.5 25.8 69.4 76.7 IAA separation cos
Slide 36: Q3 2018 ADESA Incremental Operating Profit Margin Analysis
Q3 2018 ADESA Incremental Operating Profit Margin Analysis Incremental Operating Profit % ($ in millions) ADESA IMPACT OF REPORTED EXCLUDING ACQUISITIONS ACQUISITIONS Q3 2018 Revenue $527.0 $10.6 $516.4 Operating Profit $75.5 ($18.4) $93.9 Operating Profit % 14.3% (173.6%) 18.2% Q3 2017 Revenue $477
Slide 37: YTD 2018 ADESA Incremental Operating Profit Margin Analysis
YTD 2018 ADESA Incremental Operating Profit Margin Analysis Incremental Operating Profit % ($ in millions) ADESA IMPACT OF REPORTED EXCLUDING ACQUISITIONS ACQUISITIONS YTD 2018 Revenue $1,593.4 $26.3 $1,567.1 Operating Profit $249.1 ($49.2) $298.3 Operating Profit % 15.6% (187.1%) 19.0% YTD 2017 Rev
Slide 38: Q3 2018 IAA Incremental Operating Profit Margin Analysis
Q3 2018 IAA Incremental Operating Profit Margin Analysis Incremental Operating Profit % ($ in millions) REPORTED Q3 2018 Revenue $321.1 Operating Profit $65.5 Operating Profit % 20.4% Q3 2017 Revenue $287.7 Operating Profit $53.3 Operating Profit % 18.5% Q3 2018 Reported Growth Reported Revenue Grow
Slide 39: YTD 2018 IAA Incremental Operating Profit Margin Analysis
YTD 2018 IAA Incremental Operating Profit Margin Analysis Incremental Operating Profit % ($ in millions) REPORTED YTD 2018 Revenue $991.6 Operating Profit $220.2 Operating Profit % 22.2% YTD 2017 Revenue $883.8 Operating Profit $179.3 Operating Profit % 20.3% YTD 2018 Reported Growth Reported Revenu