Openlane, Inc. · NYSE:OPLN

Openlane — KAR Auction Services — Q1 2017 Earnings Presentation

28 slides from Openlane's earnings presentation, Feb 22, 2017

  1. Slide 1: KAR Auction Services, Inc. Corporate Update First Quarter 2017

    KAR Auction Services, Inc. Corporate Update First Quarter 2017

  2. 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

  3. Slide 3: Key Investment Highlights

    Key Investment Highlights Adjusted EBITDA  Proven and Resilient Growth $800 Through Diversified Business Mix $700 $600 $500  Strong Free Cash Flow $400 Generation and High Margin $300 $200  Physical and Technological Assets $100 $0 Differentiate KAR 2008 2009 2010 2011 2012 2013 2014 2015 2016 

  4. Slide 4: Shareholder Value Creation Strategy

    Shareholder Value Creation Strategy  Extend and Integrate Our Distinct Portfolio of Assets Customer  Leverage Unique Data and Analytic Capabilities Focus  Expand Portfolio of Services and Geographic Presence  Provide Best in Class Remarketing Channels Operational  Standardize and Centralize Pro

  5. Slide 5: Vehicle Auction Services Leader

    Vehicle Auction Services Leader 2016 Revenue by Segment 2016 Adj. EBITDA by Segment(1) AFC AFC 9% 17% $287M $149M $420M $1,098M $1,765M ~5.1mm vehicles sold in 2016 ADESA IAA 49% 35% ADESA Revenue $3,150mm $289M 56% Adj. EBITDA $748mm IAA % margin 23.7% 34% Whole Car Auctions Salvage Vehicle Auction

  6. Slide 6: North American Car Parc

    North American Car Parc 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-Consumer Retail Used Vehicle Sales 12 Million Units 30

  7. Slide 7: Consignment Revenue Model

    Consignment Revenue Model Whole Car Consignors Whole Car Buyers  Dealers  Franchised Dealers  OEMs and their Captive Finance Arms Revenue:  Independent Dealers ~$600 / vehicle  Commercial Fleet Customers  Wholesale Dealers  Financial Institutions Revenue:  Rental Car Companies ~$150 / LTU(2)

  8. Slide 8: North American Whole Car Auction Industry

    North American Whole Car Auction Industry 14 20 17.5 17.6 17.0 17.0 17.0 16.8 16.6 16.9 16.9 16.5 16.5 16.1 15.6 14.4 13.2 15 12 11.6 12.7 11.2 11.4 10.4 10.6 10.8 10.0 9.9 10 9.5 9.7 9.5 9.5 9.5 10 9.4 9.2 Wholecar Industry Volumes (MM) 9.0 8.7 8.3 8.2 5 8.0 8 64% 60% 60% 60% 0 58% 50% 49% 56% 48%

  9. Slide 9: ADESA – Whole Car Market Fundamentals

    ADESA – Whole Car Market Fundamentals New Vehicle Lease Growth Auto Loans Outstanding 5.0 2.0% Loans Outstanding ($MM) $1,000 60 Day Delinquency 4.5 4.0 $800 1.5% 3.5 $600 1.0% 3.0 2.5 $400 2.0 0.5% $200 1.5 1.0 $0 0.0% 1Q07 3Q08 3Q09 1Q11 1Q12 3Q13 3Q14 1Q16 3Q07 1Q08 1Q09 1Q10 3Q10 3Q11 3Q12 1Q13

  10. Slide 10: IAA - Salvage Market Fundamentals

    IAA - Salvage Market Fundamentals Positive Industry Drivers Increasing Total Loss % of Total Claims 17.5%  Accident frequency benefits from rising 16.5% miles driven, an aging vehicle fleet, and 15.5% increasing driver distractions 14.5%  Accident severity increasing due to 13.5% vehicle complexit

  11. Slide 11: AFC Provides Complementary Service to Buyers

    AFC Provides Complementary Service to Buyers AFC Highlights Independent Dealer Used Vehicle Retail Sales 14.5  Short-term (~65 day) secured financing to 13.9 Industry Units Sold (MM) 14.0 13.3 independent used car dealers 13.5 12.8 12.7 12.9 13.0  Provides liquidity to auctions 12.5 12.2 12.0  Po

  12. Slide 12: Capital Allocation Framework

    Capital Allocation Framework $617M Returned to Shareholders 2015 – 2016 Strategic Share Capex Dividends Investments Repurchases  Historically ~18% - 20% of  45% - 50% of FCF  Acquisitions that leverage  Tool for managing cash Adjusted EBITDA, plus  Highlights consistency & wholecar auction cycl

  13. Slide 13: Financial Overview

    KAR Financial Overview AUCTION SERVICES

  14. Slide 14: Fourth Quarter 2016 Performance

    Fourth Quarter 2016 Performance Revenue Gross Profit* $814 $400 $325 $800 $696 $281 $300 $600 $ MM $ MM $200 $400 40.4% 40.0% $100 $200 $0 $0 4Q15 4Q16 4Q15 4Q16 Adjusted EBITDA Operating Adjusted Net Income Per Share $250 $200 $155 $177 $0.60 $0.45 $0.45 $150 $ MM $ MM $0.40 $100 22.2% 21.7% $0.20

  15. Slide 15: 2016 Performance

    2016 Performance Revenue Gross Profit* $3,200 $3,150 $1,500 $1,323 $1,142 $3,000 $1,000 $ MM $ MM $2,800 $2,691 42.4% 42.0% $500 $2,600 $2,400 $0 2015 2016 2015 2016 Adjusted EBITDA Operating Adjusted Net Income Per Share $800 $748 $2.10 $2.06 $650 $600 $ MM $2.00 $ MM $400 24.2% 23.7% $1.90 $1.90 $

  16. Slide 16: December 31, 2016 Leverage

    December 31, 2016 Leverage (US$ in millions) 12/31/2016 Maturity Term Loan B-2 (Adjusted LIBOR(1) + 3.1875%) $1,081 2021 Term Loan B-3 (Adjusted LIBOR(1) + 3.50%) 1,328 2023 Revolving Credit Facility (Adj LIBOR(1) + 2.50%) 81 2021 Capital Leases 52 Total 2,541 Less: Available Cash (108) Net Debt $2,

  17. Slide 17: Three Year Trends and Outlook

    Three Year Trends and Outlook Expected Environmental Trends Strategic Priorities Growth in off-lease and repo vehicle volumes Capital Extend and integrate 5%-7% annual growth in salvage deployment our platforms Leverage unique Improve auction industry volumes data and analytic operating capabilities

  18. Slide 18: Appendix

    KAR Appendix AUCTION SERVICES

  19. Slide 19: 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

  20. Slide 20: 2007–2014 Adjusted EBITDA Reconciliations

    2007–2014 Adjusted EBITDA Reconciliations ($ in millions) 2008 2009 2010 2011 2012 2013 2014 Net income (loss) ($216.2) $23.2 $69.6 $72.2 $92.0 $67.7 $169.3 Add back: Income taxes (31.4) 11.1 27.2 17.8 59.6 81.5 95.7 Interest expense, net of interest 213.4 172.2 141.3 142.8 119.1 104.3 85.9 income D

  21. Slide 21: 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

  22. Slide 22: Q4 2016 Adjusted EBITDA Reconciliation

    Q4 2016 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended December 31, 2016 ADESA IAA AFC Corporate Consolidated Net income (loss) $27.9 $29.0 $19.8 ($31.2) $45.5 Add back: Income taxes 16.0 16.8 12.2 (18.3) 26.7 Interest expense, net of interest income (0.2) – 9.4 28.7 37.9 Deprecia

  23. Slide 23: YTD 2015 Adjusted EBITDA Reconciliation

    YTD 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

  24. Slide 24: YTD 2016 Adjusted EBITDA Reconciliation

    YTD 2016 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2016 ADESA IAA AFC Corporate Consolidated Net income (loss) $156.9 $101.1 $88.4 ($124.0) $222.4 Add back: Income taxes 92.7 59.3 54.0 (73.1) 132.9 Interest expense, net of interest income (0.3) – 34.1 104.6 138.4 Depreci

  25. Slide 25: 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, 2016 2016 2016 2016 2016 Net income (loss) $60.7 $61.8 $54.4 $45.5 $222.4 Add back: Income taxes 36.7 37.7 31.8 26.7 132.9 Interest expense

  26. Slide 26: Operating Adjusted Net Income Per Share Reconciliation (Q4 2016 & Q4 2015)

    Operating Adjusted Net Income Per Share Reconciliation (Q4 2016 & Q4 2015) ($ in millions, except per share amounts) Three Months ended December 31, 2016 2015 Net income $45.5 $48.3 Acquired amortization expense (1) 25.8 22.3 Loss on extinguishment of debt (2) 1.4 – Income taxes (3) (10.0) (8.0) Ope

  27. Slide 27: Operating Adjusted Net Income Per Share Reconciliation (YTD 2016 & YTD 2015)

    Operating Adjusted Net Income Per Share Reconciliation (YTD 2016 & YTD 2015) ($ in millions, except per share amounts) Year ended December 31, 2016 2015 Net income $222.4 $214.6 Acquired amortization expense (1) 97.1 87.5 Loss on extinguishment of debt (2) 5.4 – Income taxes (3) (38.3) (32.4) Operat

  28. Slide 28: AFC Provision for Credit Losses

    AFC Provision for Credit Losses 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Ending Managed $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 $1,732.5 $1,474.9 $1,208.4 $1,051.4 $925.8 $798.8 $688.6 $516.4 $744.4 $835.3 Receivables Provi

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