Openlane, Inc. · NYSE:OPLN
Openlane — KAR Auction Services — Q2 2018 Earnings Presentation
41 slides from Openlane's earnings presentation, Aug 7, 2018
Slide 1: Second Quarter 2018 Earnings Slides
Second Quarter 2018 Earnings Slides August 7, 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: Q2 2018 Highlights
Q2 2018 Highlights Revenues Highlights Fundamentals $956.6 $858.0 • Revenue growth +11% • Diversified and complementary 85.1 70.1 business services model 333.2 • Operating Adjusted EPS +26% 298.7 KAR • Adjusted EBITDA +8% 538.3 489.2 2017 2018 • Revenue +10% • Off-lease supply driving volume growth
Slide 4: Clear Shareholder Friendly Capital Allocation Framework
Clear Shareholder Friendly Capital Allocation Framework Strategic Share Capex Dividends Investments Repurchases • Historically ~18% - 20% of • 45% - 50% of FCF • Acquisitions that leverage • Tool for managing cash and Adjusted EBITDA, plus • Highlights consistency & wholecar auction cyclical leverag
Slide 5: June 30, 2018 Leverage
June 30, 2018 Leverage (US$ in millions) Balance Maturity Term Loan B-4 (Adjusted LIBOR + 2.25%) $710 2021 Term Loan B-5 (Adjusted LIBOR + 2.50%) 1,040 2023 Revolving Credit Facility (Adjusted LIBOR + 2.00%) 0 2021 Senior Notes (Fixed 5.125%) 950 2025 Capital Leases 44 Total 2,744 Less: Available Ca
Slide 6: 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 ($8.6
Slide 7: Second Quarter Results Appendix
S e c o n d Q u a r t e r R e s u l t s APPENDIX 7
Slide 8: KAR Q2 2018 Highlights
KAR Q2 2018 Highlights ($ in millions, except per share amounts) Q2 Q2 KAR Highlights* 2018 2017 Total operating revenues $956.6 $858.0 $8.7M acquisitions Gross profit** $425.3 $376.3 % of revenue 44.5% 43.9% SG&A $182.8 $154.6 $16.5M acquired SG&A EBITDA $242.8 $195.5 Adjusted EBITDA $242.2 $223.5
Slide 9: ADESA Q2 2018 Highlights
ADESA Q2 2018 Highlights ($ in millions, except RPU) Q2 Q2 ADESA Highlights* 2018 2017 Revenue $538.3 $489.2 +$8.7M acquisitions Gross profit** $231.1 $210.5 % of revenue 42.9% 43.0% SG&A $108.3 $85.2 8% growth excluding $16.5M of acquired SG&A EBITDA $119.5 $123.3 Adjusted EBITDA $127.8 $130.6 2% d
Slide 10: IAA Q2 2018 Highlights
IAA Q2 2018 Highlights ($ in millions) Q2 Q2 IAA Highlights* 2018 2017 Revenue $333.2 $298.7 Gross profit** $132.1 $117.2 % of revenue 39.6% 39.2% Excluding HBC 40.2% in Q2 2017 and Q2 2018 SG&A $28.7 $27.5 EBITDA $104.2 $90.2 Adjusted EBITDA $105.1 $90.5 % of revenue 31.5% 30.3% Vehicles sold 623,0
Slide 11: AFC Q2 2018 Highlights
AFC Q2 2018 Highlights ($ in millions, except for revenue per loan transaction) Q2 Q2 Highlights* AFC 2018 2017 Interest and fee income $80.5 $70.0 Other revenue $3.3 $3.0 Provision for credit losses ($7.1) ($11.4) Other service revenue $8.4 $8.5 PWI revenue Total AFC revenue $85.1 $70.1 +20% revenu
Slide 12: Year-to-Date Results Appendix
Y e a r - to- D a t e R e s u l t s APPENDIX 12
Slide 13: KAR Six Months Ended June 30, 2018 Highlights
KAR Six Months Ended June 30, 2018 Highlights ($ in millions, except per share amounts) YTD YTD KAR Highlights* 2018 2017 Total operating revenues $1,907.1 $1,724.6 $15.7M acquisitions Gross profit** $840.8 $741.7 % of revenue 44.1% 43.0% SG&A $370.2 $312.0 $32.8M acquired SG&A EBITDA $470.8 $403.5
Slide 14: ADESA Six Months Ended June 30, 2018 Highlights
ADESA Six Months Ended June 30, 2018 Highlights ($ in millions, except RPU) YTD YTD ADESA Highlights* 2018 2017 Revenue $1,066.4 $987.2 +$15.7M acquisitions Gross profit** $453.2 $417.6 % of revenue 42.5% 42.3% SG&A $217.1 $172.5 7% growth excluding $32.8M of acquired SG&A EBITDA $228.5 $240.0 Adjus
Slide 15: IAA Six Months Ended June 30, 2018 Highlights
IAA Six Months Ended June 30, 2018 Highlights ($ in millions) YTD IAA YTD 2018 Highlights* 2017 Revenue $670.5 $596.1 Gross profit** $262.7 $225.5 % of revenue 39.2% 37.8% Excluding HBC 39.7% vs 38.8% prior year SG&A $59.2 $53.4 EBITDA $204.3 $173.0 Adjusted EBITDA $206.8 $174.3 % of revenue 30.8% 2
Slide 16: AFC Six Months Ended June 30, 2018 Highlights
AFC Six Months Ended June 30, 2018 Highlights ($ in millions, except for revenue per loan transaction) YTD YTD Highlights* AFC 2018 2017 Interest and fee income $162.4 $141.3 Other revenue $6.2 $5.9 Provision for credit losses ($14.8) ($22.5) Other service revenue $16.4 $16.6 PWI revenue Total AFC r
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 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 4Q16 3Q16 2Q16 Revenue2 $538.3 $528.1 $473.2 $477.1 $489.2 $498.0 $442.3 $457.4 $450.8 Total Volume 907 878 744 788 830 818 700 732 750 Online Only Volume 346 309 237 241 245 215 177 180 198 Total Online Volume % 54% 52% 49% 46% 46% 44% 43% 41% 4
Slide 20: Used Vehicle Value Indices - Quarterly
Used Vehicle Value Indices - Quarterly YoY Index Change Age 2Q17 3Q17 4Q17 1Q18 2Q18 Industry All +3.7% +1.9% +2.3% +0.0% -0.6% JCP/NADA 0-8 yrs -4.5% -2.6% -0.1% +0.8% +3.3% Black Book 2-6 yrs -5.1% -3.5% -0.8% -0.9% -0.1% RVI 2-5 yrs -5.6% -2.7% +0.1% +0.1% +2.4% • 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 $284.1 Gross Margin (IAA) 36.2%
Slide 22: IAA Six Months Ended June 30, 2018 Gross Profit
IAA Six Months Ended June 30, 2018 Gross Profit ($ in millions) Six Months Ended Six Months Ended June 30, 2018 June 30, 2017 IAA HBC Total IAA HBC Total Revenue $652.5 $18.0 $670.5 $573.1 $23.0 $596.1 Cost of Services** $393.4 $14.4 $407.8 350.8 19.8 370.6 Gross Profit** $259.1 $3.6 $262.7 $222.3 $
Slide 23: IAA Metrics - Quarter
IAA Metrics - Quarter 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 4Q16 3Q16 2Q16 Revenue $333.2 $337.3 $335.4 $287.7 $298.7 $297.4 $302.6 $261.0 $264.8 Total Volume 623 643 635 562 580 592 610 516 523 Inventory Growth (North 2% 4% 3% 12% 9% 17% 25% 22% 11% America) Purchased Vehicle Mix % 4% 4% 4% 5% 5% 5% 6% 7%
Slide 24: IAA Q2 2018 Gross Profit
IAA Q2 2018 Gross Profit ($ in millions) Three Months Ended Three Months Ended June 30, 2018 June 30, 2017 IAA HBC Total IAA HBC Total Revenue $324.9 $8.3 $333.2 $288.5 $10.2 $298.7 Cost of Services** $194.3 $6.8 $201.1 172.6 8.9 181.5 Gross Profit** $130.6 $1.5 $132.1 $115.9 $1.3 $117.2 % of Revenu
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 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 4Q16 3Q16 2Q16 Revenue $85.1 $85.1 $81.8 $78.2 $70.1 $71.2 $68.8 $71.2 $72.9 Loan Transaction Units 435 464 414 402 416 456 417 426 422 (LTU) Revenue per Loan Transaction, Excluding $177 $166 $178 $174 $148 $138 $145 $148 $154 “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 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 4Q16 3Q16 2Q16 Ending Managed $1,958.6 $1,933.2 $1,912.6 $1,809.2 $1,736.5 $1,760.7 $1,792.2 $1,785.4 $1,738.6 Receivables Average Managed $1,945.9 $1,922.9 $1,860.9 $1,772.9 $1,748.6 $1,776.5 $1,788.8 $1,762.0 $1,722.1 Receiv
Slide 29: Appendix
AUCTION SERVICES. APPENDIX
Slide 30: Non-GAAP Financial Measures
Non-GAAP Financial Measures EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings as
Slide 31: Q2 2018 Adjusted EBITDA Reconciliation
Q2 2018 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended June 30, 2018 ADESA IAA AFC Corporate Consolidated Net income (loss) $60.0 $52.4 $27.7 ($46.9) $93.2 Add back: Income taxes 23.5 17.6 9.3 (15.2) 32.5 Interest expense, net of interest income 0.4 - 14.7 32.4 47.5 Depreciation a
Slide 32: Q2 2017 Adjusted EBITDA Reconciliation
Q2 2017 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended June 30, 2017 ADESA IAA AFC Corporate Consolidated Net income (loss) $53.7 $37.3 $20.3 ($54.1) $57.2 Add back: Income taxes 33.8 20.6 12.5 (33.0) 33.9 Interest expense, net of interest income (0.1) – 10.5 29.5 39.9 Depreciatio
Slide 33: YTD 2018 Adjusted EBITDA Reconciliation
YTD 2018 Adjusted EBITDA Reconciliation ($ in millions) Six Months ended June 30, 2018 ADESA IAA AFC Corporate Consolidated Net income (loss) $114.2 $102.7 $53.4 ($87.1) $183.2 Add back: Income taxes 39.0 33.9 17.7 (29.0) 61.6 Interest expense, net of interest income 0.8 - 28.1 59.9 88.8 Depreciatio
Slide 34: YTD 2017 Adjusted EBITDA Reconciliation
YTD 2017 Adjusted EBITDA Reconciliation ($ in millions) Six Months ended June 30, 2017 ADESA IAA AFC Corporate Consolidated Net income (loss) $105.0 $69.5 $41.2 ($89.3) $126.4 Add back: Income taxes 62.8 38.6 24.3 (57.7) 68.0 Interest expense, net of interest income – – 20.8 59.3 80.1 Depreciation a
Slide 35: Operating Adjusted Net Income per Share Reconciliation
Operating Adjusted Net Income per Share Reconciliation ($ in millions, except per share amounts), (unaudited) Three Months ended Six Months ended June 30, June 30, 2018 2017 2018 2017 Net income $93.2 $57.2 $183.2 $126.4 Acquired amortization expense 22.0 25.7 48.9 50.9 IAA separation costs 3.6 – 4.
Slide 36: Q2 2018 ADESA Incremental Operating Profit Margin Analysis
Q2 2018 ADESA Incremental Operating Profit Margin Analysis Incremental Operating Profit % ($ in millions) ADESA IMPACT OF REPORTED EXCLUDING ACQUISITIONS ACQUISITIONS Q2 2018 Revenue $538.3 $8.7 $529.6 Operating Profit $91.5 ($14.8) $106.3 Operating Profit % 17.0% (170.1%) 20.1% Q2 2017 Revenue $489
Slide 37: YTD 2018 ADESA Incremental Operating Profit Margin Analysis
YTD 2018 ADESA Incremental Operating Profit Margin Analysis Incremental Operating Profit % ($ in millions) ADESA IMPACT OF REPORTED EXCLUDING ACQUISITIONS ACQUISITIONS YTD 2018 Revenue $1,066.4 $15.7 $1,050.7 Operating Profit $173.6 ($30.8) $204.4 Operating Profit % 16.3% (196.2%) 19.5% YTD 2017 Rev
Slide 38: Q2 2018 IAA Incremental Operating Profit Margin Analysis
Q2 2018 IAA Incremental Operating Profit Margin Analysis Incremental Operating Profit % ($ in millions) REPORTED Q2 2018 Revenue $333.2 Operating Profit $78.7 Operating Profit % 23.6% Q2 2017 Revenue $298.7 Operating Profit $66.8 Operating Profit % 22.4% Q2 2018 Reported Growth Reported Revenue Grow
Slide 39: YTD 2018 IAA Incremental Operating Profit Margin Analysis
YTD 2018 IAA Incremental Operating Profit Margin Analysis Incremental Operating Profit % ($ in millions) REPORTED YTD 2018 Revenue $670.5 Operating Profit $154.7 Operating Profit % 23.1% YTD 2017 Revenue $596.1 Operating Profit $126.0 Operating Profit % 21.1% YTD 2018 Reported Growth Reported Revenu
Slide 40: Q2 2018 AFC Incremental Operating Profit Margin Analysis
Q2 2018 AFC Incremental Operating Profit Margin Analysis Incremental Operating Profit % ($ in millions) REPORTED Q2 2018 Revenue $85.1 Operating Profit $51.1 Operating Profit % 60.0% Q2 2017 Revenue $70.1 Operating Profit $33.5 Operating Profit % 47.8% Q2 2018 Reported Growth Reported Revenue Growth
Slide 41: YTD 2018 AFC Incremental Operating Profit Margin Analysis
YTD 2018 AFC Incremental Operating Profit Margin Analysis Incremental Operating Profit % ($ in millions) REPORTED YTD 2018 Revenue $170.2 Operating Profit $98.1 Operating Profit % 57.6% YTD 2017 Revenue $141.3 Operating Profit $67.8 Operating Profit % 48.0% YTD 2018 Reported Growth Reported Revenue