Openlane, Inc. · NYSE:OPLN
Openlane — KAR Auction Services — Bank of America Merrill Lynch Auto Summit 2016
32 slides from Openlane's conference presentation, Mar 23, 2016
Slide 1: Bank of America Merrill Lynch Auto Summit 2016
Bank of America Merrill Lynch Auto Summit 2016 March 23, 2016
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: Key Investment Highlights
Key Investment Highlights Experienced Management Team with Proven Track Record Attractive Financial Model Generating Significant Free Cash Poised to Benefit from Positive Cyclical Trends – Expected Increases in Forward Volumes Established Market Leader Across Core Businesses Multiple Avenu
Slide 4: Leading Provider of Vehicle Auction Services in North America
Leading Provider of Vehicle Auction Services in North America 2015 Revenue by Segment 2015 Adj. EBITDA by Segment(1) AFC 10% AFC 20% ADESA ADESA 4.4mm vehicles sold in 2015 44% IAA 52% 38% Revenue $2,640mm Adj. EBITDA $650mm % margin 24.6% IAA 36% Whole Car Auctions Salvage Vehicle Auctions Vehicle
Slide 5: 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 Salvage Auctions 283 Million 4+ Million Units units Used Vehicle Removed from Transactions in New Vehicle Sales Operation North America 20 Million Units 13 Million Units ~42 Million units Consumer-to
Slide 6: 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 Wholesale Dealers Financial Institutions Revenue: Revenue: ~$560 / vehicle* ~$445 / vehicle**
Slide 7: 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) 12 20 2013 was inflection point for whole 1 11.2 car auction volumes 10.7 10.2 U.S. Seasonally Adjusted Annual Rate (“SAAR”) (units in million
Slide 8: Off-lease Auction Funnel
Off-lease “Auction Funnel” Revenue Inventory Gross Per Unit Margin % ~$100 Higher “Online Only” – Private Label ~2-3 days “Online Only” – Open ~2-3 days ADESA In-lane buyer or Online buyer Competitors ~$700 Lower 8
Slide 9: Continued Positive Salvage Market Fundamentals
Continued Positive Salvage Market Fundamentals Positive Demand Drivers Increased use of alternative parts in collision repair Increasing vehicle complexity and technology content Increase in non-insurance supply, including charity, direct-to-consumer and dealer sales International demand Lar
Slide 10: 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 $159 $156 $157 $155 $150 underwriting and control environment − Short-term secured financing Grow portfolio Consistent credit standards 2011 2
Slide 11: Long-term Outlook
Long-term Outlook Opportunities Challenges 11
Slide 12: Financial Overview
KAR Financial Overview AUCTION SERVICES
Slide 13: Historical Financial Performance
Historical Financial Performance Revenue Gross Profit ($ in millions) ($ in millions) $1,142 $2,640 $941 $1,046 $2,173 $2,365 $851 $876 $1,886 $1,963 $250 $268 $225 $169 $194 $830 $896 $995 $700 $716 $1,017 $1,053 $1,118 $1,219 $1,377 2011 2012 2013 2014 2015 ADESA IAA AFC 2011 2012 2013 2014 2015 V
Slide 14: Fourth Quarter 2015 Performance
Fourth Quarter 2015 Performance Revenue Gross Profit* $750 $682 $600 $606 ($mm) $450 $300 $262 $281 ($mm) $300 $200 $150 $100 44.3% 43.2% 43.3% 41.2% 44.2% $0 $0 Q4 2014 Q4 2015 Q4 2014 Q4 2015 Adjusted EBITDA Adjusted Net Income Per Share $0.60 $200 $155 $0.40 $0.40 $150 $149 $0.40 ($mm) $100 $0.20
Slide 15: December 31, 2015 Leverage
December 31, 2015 Leverage (US$ in millions) 12/31/2015 Maturity Term Loan B-1 $637.2 2017 Term Loan B-2* 1,096.0 2021 Revolving Credit Facility 1 140.0 2019 Capital Leases 47.2 ** Total 1,920.4 Less: Available Cash (113.2) Net Debt $1,807.2 Net Debt /Adjusted EBITDA 2.78X * Includes unamortized deb
Slide 16: Capital Allocation Framework
Capital Allocation Framework Strategic Share Repurchase Dividends Investments Program Qtrly dividend of $0.27 per Priority for free cash flow $300M share Acquisitions that leverage the Two year authorization 45% - 50% of free cash flow cyclical recovery Tool for managing cash / Highl
Slide 17: 2016 Capital Allocation Actions
2016 Capital Allocation Actions Completed ASR; Retired an Additional 800K Shares in January 2016 Increased Annual Dividend 7% to $1.16 Per Share Announced Agreement to Acquire Brasher’s Auto Auctions Increased Revolving Credit Facility $300M to $550M Announced Intent to Refinance Credit Ag
Slide 18: Brasher's Acquisition
Brasher’s Acquisition 8 locations in Western U.S. – Sacramento, Salt Lake City, Portland, Boise, Eugene, Fresno, San Jose, Reno Purchase price; ~$283M ~190,000 vehicles sold Revenue ~$140M; Adjusted EBITDA ~$34M Subject to regulatory approvals and other customary closing conditions 18
Slide 19: Key Investment Highlights
Key Investment Highlights Experienced Management Team with Proven Track Record Attractive Financial Model Generating Significant Free Cash Poised to Benefit from Positive Cyclical Trends – Expected Increases in Forward Volumes Established Market Leader Across Core Businesses Multiple Avenu
Slide 20: Appendix
KAR Appendix AUCTION SERVICES
Slide 21: Non-GAAP Financial Measures
Non-GAAP Financial Measures EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings as
Slide 22: 2011 Adjusted EBITDA Reconciliation
2011 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2011 ADESA IAA AFC Corporate Consolidated Net income (loss) $55.8 $65.5 $57.2 ($106.3) $72.2 Add back: Income taxes 17.9 36.1 29.6 (65.8) 17.8 Interest expense, net of interest income 0.7 2.1 12.0 128.0 142.8 Depreciation an
Slide 23: 2012 Adjusted EBITDA Reconciliation
2012 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2012 ADESA IAA AFC Corporate Consolidated Net income (loss) $38.4 $56.5 $64.1 ($67.0) $92.0 Add back: Income taxes 14.5 33.7 46.0 (34.6) 59.6 Interest expense, net of interest income 0.8 1.4 15.0 101.9 119.1 Depreciation and
Slide 24: 2013 Adjusted EBITDA Reconciliation
2013 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2013 ADESA IAA AFC Corporate Consolidated Net income (loss) $50.2 $56.6 $76.1 ($115.2) $67.7 Add back: Income taxes 40.1 32.8 40.2 (31.6) 81.5 Interest expense, net of interest income 0.6 0.8 16.7 86.2 104.3 Depreciation and
Slide 25: 2014 Adjusted EBITDA Reconciliation
2014 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2014 ADESA IAA AFC Corporate Consolidated Net income (loss) $86.4 $79.7 $76.6 ($73.4) $169.3 Add back: Income taxes 43.2 48.4 48.6 (44.5) 95.7 Interest expense, net of interest income 0.6 0.2 18.7 66.4 85.9 Depreciation and
Slide 26: 2015 Adjusted EBITDA Reconciliation
2015 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2015 ADESA IAA AFC Corporate Consolidated Net income (loss) $109.2 $92.8 $83.2 ($70.6) $214.6 Add back: Income taxes 62.3 52.4 51.3 (40.1) 125.9 Interest expense, net of interest income 0.1 – 24.1 66.6 90.8 Depreciation and
Slide 27: Q4 2014 Adjusted EBITDA Reconciliation
Q4 2014 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended December 31, 2014 ADESA IAA AFC Corporate Consolidated Net income (loss) $23.9 $18.5 $19.9 ($12.0) $50.3 Add back: Income taxes 7.5 12.4 13.9 (6.4) 27.4 Interest expense, net of interest income 0.1 – 4.9 15.8 20.8 Depreciation
Slide 28: Q4 2015 Adjusted EBITDA Reconciliation
Q4 2015 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended December 31, 2015 ADESA IAA AFC Corporate Consolidated Net income (loss) $25.1 $23.3 $21.4 ($21.5) $48.3 Add back: Income taxes 13.9 11.1 13.4 (11.5) 26.9 Interest expense, net of interest income (0.3) – 6.9 17.2 23.8 Deprecia
Slide 29: LTM Adjusted EBITDA Reconciliation
LTM Adjusted EBITDA Reconciliation ($ in millions) (unaudited) Twelve months Three months ended ended March 31, June 30, September 30, December 31, December 31, 2015 2015 2015 2015 2015 Net income (loss) $54.5 $59.5 $52.3 $48.3 $214.6 Add back: Income taxes 34.6 34.8 29.6 26.9 125.9 Interest expense
Slide 30: Adjusted Net Income Per Share Reconciliation
Adjusted Net Income Per Share Reconciliation ($ in millions, except per share amounts) Year ended December 31, 2015 2014 2013 2012 2011 Net income $214.6 $169.3 $67.7 $92.0 $72.2 (1) Loss on modification/extinguishment of debt, net of tax – 19.3 3.2 – 33.2 Swap termination, net of tax (2) – – – – 9.
Slide 31: Adjusted Net Income Per Share Reconciliation (Q4 2015 & Q4 2014)
Adjusted Net Income Per Share Reconciliation (Q4 2015 & Q4 2014) ($ in millions, except per share amounts) Three Months ended December 31, 2015 2014 Net income $48.3 $50.3 (3) Stepped up depreciation and amortization expense, net of tax 7.0 7.2 Stock-based compensation, net of tax(4) – (0.3) Adjuste
Slide 32: Adjusted Net Income – Explanatory Footnotes
Adjusted Net Income – Explanatory Footnotes (1) In 2011 there were losses on extinguishments of debt totaling $53.5 million ($33.2 million net of tax). We incurred a loss on the extinguishment/modification of debt totaling $30.3 million ($19.3 million net of tax) and $5.4 million ($3.2 million net o
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