Openlane, Inc. · NYSE:OPLN

Openlane — KAR Auction Services — Investor Presentation (November 2016)

28 slides from Openlane's investor presentation, Nov 9, 2016

  1. Slide 1: KAR Auction Services, Inc. Corporate Update Fourth Quarter 2016

    KAR Auction Services, Inc. Corporate Update Fourth Quarter 2016

  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  Attractive Financial Model Generating Growing and Consistent Free Cash Flow  Physical and Technological Assets Differentiate KAR  Established Market Leader Across Core Businesses  Multiple Avenues for Continued Organic and Acquisition Expansion  Proven and Resilient G

  4. Slide 4: Vehicle Auction Services Leader

    Vehicle Auction Services Leader 2015 Revenue by Segment 2015 Adj. EBITDA by Segment(1) AFC 10% AFC 20% $268M $147M ADESA $329M $995M $1,377M ADESA 4.4mm vehicles sold in 2015 44% IAA 52% $265M 38% Revenue $2,640mm Adj. EBITDA $650mm % margin 24.6% IAA 36% Whole Car Auctions Salvage Vehicle Auctions

  5. Slide 5: 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

  6. Slide 6: Consignment Revenue Model

    Consignment Revenue Model Whole Car Consignors Whole Car Buyers  Dealers  Franchised Dealers  OEMs and their Captive Finance Arms Revenue:  Independent Dealers ~$560 / vehicle(1)  Commercial Fleet Customers  Wholesale Dealers  Financial Institutions Revenue:  Rental Car Companies ~$150 / LTU

  7. Slide 7: North American Whole Car Auction Industry

    North American Whole Car Auction Industry 14 20 16.9 17.5 17.0 17.0 17.0 16.8 16.6 16.9 16.5 16.5 16.1 15.6 14.4 13.2 15 12 12.7 11.6 11.2 10.4 10.8 10.3 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% 45% 40% 40

  8. Slide 8: ADESA – Whole Car Market Fundamentals

    ADESA – Whole Car Market Fundamentals Positive Supply Drivers ADESA Physical Revenue Per Unit $780  Increasing new vehicle leases $760 $740 $720  Increasing supply of consumer credit $700 $680 leads to growing repossessions $660 $640 $620 $600  Dealer consignment displaced by growing 1Q14 2Q14 3Q

  9. Slide 9: IAA - Salvage Market Fundamentals

    IAA - Salvage Market Fundamentals Positive Industry Drivers Increasing Total Loss % of Total Claims 17.5%  Increasing vehicle complexity and 16.5% technology content 15.5%  Increase in non-insurance supply 14.5% 13.5%  International demand 12.5% 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1

  10. Slide 10: AFC Provides Complementary Service to Buyers

    AFC Provides Complementary Service to Buyers AFC Highlights Revenue Per Loan Transaction(2)  Short-term (~60 day) secured financing to $159 $156 $157 $155 $150 independent used car dealers  Portfolio managed through disciplined underwriting and consistent credit standards  Utilizes risk based pri

  11. Slide 11: Long-term Outlook

    Long-term Outlook Opportunities Challenges  Whole car recovery through 2019  Industry  Institutional volumes grow from off-  Retail vehicle sales lease and repossession  Availability of consumer credit  Increasing physical auction RPU  Competition and new entrants  Salvage market growth  Re

  12. Slide 12: Financial Overview

    KAR Financial Overview AUCTION SERVICES

  13. Slide 13: Third Quarter 2016 Performance

    Third Quarter 2016 Performance Revenue Gross Profit* $800 $667 $774 $400 $330 $289 $600 $300 $ MM $ MM $400 $200 43.3% 42.7% $200 $100 $0 $0 Q3 2015 Q3 2016 Q3 2015 Q3 2016 Adjusted EBITDA Operating Adjusted Net Income Per Share $250 $200 $163 $185 $0.60 $0.50 $0.47 $150 $ MM $ MM $0.40 $100 24.5% 2

  14. Slide 14: 2016 YTD Performance

    2016 YTD Performance Revenue Gross Profit* $2,500 $1,957 $2,291 $1,200 $997 $2,000 $1,000 $861 $800 $1,500 $ MM $ MM $600 $1,000 44.0% 43.5% $400 $500 $200 $0 $0 YTD 2015 YTD 2016 YTD 2015 YTD 2016 Adjusted EBITDA Operating Adjusted Net Income Per Share $571 $2.00 $1.45 $1.61 $600 $495 $1.50 $ MM $4

  15. Slide 15: September 30, 2016 Leverage

    September 30, 2016 Leverage (US$ in millions) 9/30/2016 Maturity Term Loan B-2 (Adjusted LIBOR(1) + 3.1875%) $1,088 2021 Term Loan B-3 (Adjusted LIBOR(1) + 3.50%) 1,343 2023 Revolving Credit Facility (Adj LIBOR(1) + 2.50%) 0 2021 Capital Leases 49 Total 2,480 Less: Available Cash (228) Net Debt $2,2

  16. Slide 16: Capital Allocation Framework

    Capital Allocation Framework Strategic Share Repurchase Dividends Investments Program  Dividends have been 45% - 50%  Acquisitions that leverage cyclical  Tool for managing cash & leverage of FCF recovery (e.g., independent auctions)  Highlights consistency &  Complementary technologies strengt

  17. Slide 17: Key Investment Highlights

    Key Investment Highlights  Attractive Financial Model Generating Growing and Consistent Free Cash Flow  Physical and Technological Assets Differentiate KAR  Established Market Leader Across Core Businesses  Multiple Avenues for Continued Organic and Acquisition Expansion  Proven and Resilient G

  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: 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

  21. Slide 21: Q3 2016 Adjusted EBITDA Reconciliation

    Q3 2016 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended September 30, 2016 ADESA IAA AFC Corporate Consolidated Net income (loss) $43.5 $22.0 $21.6 ($32.7) $54.4 Add back: Income taxes 26.3 12.5 13.2 (20.2) 31.8 Interest expense, net of interest income (0.2) – 8.7 27.6 36.1 Depreci

  22. Slide 22: Q3 2015 Adjusted EBITDA Reconciliation

    Q3 2015 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended September 30, 2015 ADESA IAA AFC Corporate Consolidated Net income (loss) $29.6 $19.9 $22.1 ($19.3) $52.3 Add back: Income taxes 16.0 11.4 13.6 (11.4) 29.6 Interest expense, net of interest income 0.1 – 6.6 17.6 24.3 Depreciat

  23. Slide 23: Q3 YTD 2016 Adjusted EBITDA Reconciliation

    Q3 YTD 2016 Adjusted EBITDA Reconciliation ($ in millions) Nine Months ended September 30, 2016 ADESA IAA AFC Corporate Consolidated Net income (loss) $129.0 $72.1 $68.6 ($92.8) $176.9 Add back: Income taxes 76.7 42.5 41.8 (54.8) 106.2 Interest expense, net of interest income (0.1) – 24.7 75.9 100.5

  24. Slide 24: Q3 YTD 2015 Adjusted EBITDA Reconciliation

    Q3 YTD 2015 Adjusted EBITDA Reconciliation ($ in millions) Nine Months ended September 30, 2015 ADESA IAA AFC Corporate Consolidated Net income (loss) $84.1 $69.5 $61.8 ($49.1) $166.3 Add back: Income taxes 48.4 41.3 37.9 (28.6) 99.0 Interest expense, net of interest income 0.4 – 17.2 49.4 67.0 Depr

  25. Slide 25: LTM Adjusted EBITDA Reconciliation

    LTM Adjusted EBITDA Reconciliation ($ in millions) (unaudited) Twelve months Three months ended ended December 31, March 31, June 30, September 30, September 30, 2015 2016 2016 2016 2016 Net income (loss) $48.3 $60.7 $61.8 $54.4 $225.2 Add back: Income taxes 26.9 36.7 37.7 31.8 133.1 Interest expens

  26. Slide 26: Operating Adjusted Net Income Per Share Reconciliation (Q3 2016 & Q3 2015)

    Operating Adjusted Net Income Per Share Reconciliation (Q3 2016 & Q3 2015) ($ in millions, except per share amounts) Three Months ended September 30, 2016 2015 Net income $54.4 $52.3 Acquired amortization expense (1) 24.7 22.4 Income taxes (2) (9.1) (8.1) Operating adjusted net income $70.0 $66.6 Ne

  27. Slide 27: Operating Adjusted Net Income Per Share Reconciliation (Q3 YTD 2016 & 2015)

    Operating Adjusted Net Income Per Share Reconciliation (Q3 YTD 2016 & Q3 YTD 2015) ($ in millions, except per share amounts) Nine Months ended September 30, 2016 2015 Net income $176.9 $166.3 Acquired amortization expense (1) 71.3 65.3 Loss on extinguishment of debt (2) 4.0 – Income taxes (3) (28.2)

  28. Slide 28: AFC Provision for Credit Losses

    AFC Provision for Credit Losses 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 YTD Ending Managed $1,785.4 $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 $1,717.6 $1,474.9 $1,208.4 $1,051.4 $925.8 $798.8 $688.6 $516.4 $744.4 $835.3 Receivables P

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