Openlane, Inc. · NYSE:OPLN

Openlane — KAR Auction Services — Corporate Update (November 2013)

34 slides from Openlane's corporate update, November 2013

  1. Slide 1: KAR Auction Services Corporate Update November 2013

    KAR Auction Services Corporate Update November 2013

  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: Leading Provider of Vehicle Auction Services in North America

    Leading Provider of Vehicle Auction Services in North America 2012 Revenue by Segment 2012 Adj. EBITDA by Segment(1) AFC 10% AFC 22% ADESA 3.3mm vehicles sold in 2012 41% ADESA IAAI 54% Revenue $1,963mm 36% Adj. EBITDA $500mm % margin 25.5% IAAI 37% Whole Car Auctions Salvage Vehicle Auctions Vehicl

  4. Slide 4: 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 272 Million Salvage Auctions units 3-4 Million units Used Vehicle Transactions in Removed from New Vehicle Sales North America Operation 16 Million units ~ 43 Million 13 Million units units Consumer-

  5. Slide 5: 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 Revenue: Revenue:  Wholesale Dealers  Financial Institutions ~$540 / vehicle* ~$450 / vehicle 

  6. Slide 6: Long-standing and Diverse Customer and Buyer Base

    Long-standing and Diverse Customer and Buyer Base  Largest customer ~2% of 2012 consolidated revenue  Over 150,000 registered whole car and salvage buyers from over 100 countries OEMs & Finance Banks Rental Car Companies Insurance Companies Companies OPENLANE Closed Programs 6

  7. 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)  2013 is inflection point in whole 12 20 car auction volumes U.S. Seasonally Adjusted Annual Rate (“SAAR”) (units in millions) 10.0 9.7 10 9.5

  8. Slide 8: OPENLANE & ADESA: Clear Leader in Private Label Sales for Manufacturers

    OPENLANE & ADESA: Clear Leader in Private Label Sales(1) for Manufacturers Current Private Label Sales (1) Private label sales held by manufacturers are limited to franchised dealers. 8

  9. Slide 9: Off-lease Auction Funnel

    Off-lease “Auction Funnel” Auction Inventory Gross Fees Margin % ~$100 “Online Only” – Private Label ~70% ~2-3 days “Online Only” – Open ~2-3 days ADESA In-lane buyer or Online buyer Competitors ~$450 ~60% 9

  10. Slide 10: Continued Positive Salvage Market Fundamentals

    Continued Positive Salvage Market Fundamentals Positive Demand Drivers Large Aging North American Car Parc  Increased use of alternative parts in 271 271 271 272 11.0 269 270 collision repair 264 10.5 258 251 10.0 244 9.5  Increasing vehicle complexity and 9.0 technology content 2003 2004 2005 200

  11. Slide 11: IAA Platform Continues to Expand Supporting Consistent Market Share Gains

    IAA Platform Continues to Expand Supporting Consistent Market Share Gains Organic Growth Drivers Demonstrated History of Tuck-in Acquisitions  Consistent volume growth  VDPC – November 2010 − Hybrid auction maximizes proceeds  Car Program – November 2010 − Smaller competitors lack the scale and t

  12. Slide 12: Attractive Floorplan Business Drivers

    Attractive Floorplan Business Drivers U.S. Independent Dealer Used Car Sales Positive Demand Drivers (Units in millions)  Large population of ~38,000(1) independent used vehicle 15.0 dealers in the U.S. 14.8 14.5 14.2 14.3 14.0 14.0 13.7 13.8 13.1 13.0  AFC has relationships with ~30% of the indep

  13. Slide 13: 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 underwriting and control environment $159 $156 $146 − Short-term (30-60 days) secured financing $117  Grow portfolio  Consistent credit standard

  14. Slide 14: Multiple Avenues for Continued Organic and Acquisition Expansion

    Multiple Avenues for Continued Organic and Acquisition Expansion  Continue market share gains across all businesses  Continue margin expansion during cyclical recovery of used car auction volumes Near-  Further leveraging of technology platform across business lines Term  Pursue disciplined grow

  15. Slide 15: Key Investment Highlights

    Key Investment Highlights  Poised to Benefit from Positive Cyclical Trends – Expected Increases in Forward Volumes  Established Market Leader Across Core Businesses  Proven and Resilient Growth through a Diversified Business Mix  Attractive Financial Model Generating Significant Free Cash Flow f

  16. Slide 16: Financial Overview

    Financial Overview

  17. Slide 17: Historical Financial Performance

    Historical Financial Performance Revenue Gross Profit ($ in millions) ($ in millions) $851 $876 $1,963 $815 $1,776 $1,823 $1,886 $720 $734 $1,736 $194 $136 $169 $102 $94 $550 $553 $610 $700 $716 $1,123 $1,089 $1,076 $1,017 $1,053 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 ADESA IAA AFC Visibl

  18. Slide 18: Third Quarter 2013 Performance

    Third Quarter 2013 Performance Revenue Gross Profit* $600 $475 $534 $300 $500 $250 $238 $400 $211 $200 $300 ($mm) ($mm) $150 $200 $100 $100 $50 $0 $0 Q3 2012 Q3 2013 Q3 2012 Q3 2013 Adjusted EBITDA Adjusted Net Income Per Share $0.50 $150 $131 $117 $0.29 ($mm) $100 $0.25 $0.23 $50 $0 $0.00 Q3 2012 Q

  19. Slide 19: September 30, 2013 Leverage

    September 30, 2013 Leverage (US$ in millions) 9/30/2013 Maturity Term Loan Facilities * $1,770.3 2017 Revolving Credit Facility 0.0 2016 Total 1,770.3 Less: Available Cash (124.8) Net Debt $1,645.5 Net Debt /Adjusted EBITDA 3.12X * Includes unamortized debt discount 19

  20. Slide 20: Attractive Financial Model Generating Significant Free Cash Flow for Debt Repayment and Dividend Payments

    Attractive Financial Model Generating Significant Free Cash Flow for Debt Repayment and Dividend Payments Adjusted EBITDA less Capital Expenditures Key Takeaways ($ in millions) $401 $398 $410 $396  Significant free cash flow available to reduce $360 leverage and return cash to shareholders $264 

  21. Slide 21: Appendix

    KAR AUCTION SERVICES. aS KAR AUCTION SERVICES.

  22. Slide 22: 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

  23. Slide 23: 2008 Adjusted EBITDA Reconciliation

    2008 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2008 ADESA IAA AFC Corporate Consolidated Net income (loss) $52.5 $9.2 ($151.3) ($126.6) ($216.2) Add back: Income taxes 33.7 6.3 10.2 (81.6) (31.4) Interest expense, net of interest income – 0.2 – 213.2 213.4 Depreciation a

  24. Slide 24: 2009 Adjusted EBITDA Reconciliation

    2009 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2009 ADESA IAA AFC Corporate Consolidated Net income (loss) $94.4 $25.8 $19.1 ($116.1) $23.2 Add back: Income taxes 56.0 16.2 8.4 (69.5) 11.1 Interest expense, net of interest income 0.5 1.4 – 170.3 172.2 Depreciation and am

  25. Slide 25: 2010 Adjusted EBITDA Reconciliation

    2010 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2010 ADESA IAA AFC Corporate Consolidated Net income (loss) $80.1 $44.7 $38.4 ($93.6) $69.6 Add back: Income taxes 43.6 26.7 21.1 (64.2) 27.2 Interest expense, net of interest income 0.9 2.3 7.2 130.9 141.3 Depreciation and

  26. Slide 26: 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

  27. Slide 27: 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

  28. Slide 28: Q3 2012 Adjusted EBITDA Reconciliation

    Q3 2012 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended September 30, 2012 ADESA IAA AFC Corporate Consolidated Net income (loss) $5.6 $12.2 $18.8 ($17.4) $19.2 Add back: Income taxes 4.6 7.7 10.9 (9.4) 13.8 Interest expense, net of interest income 0.1 0.3 3.8 25.6 29.8 Depreciatio

  29. Slide 29: Q3 2013 Adjusted EBITDA Reconciliation

    Q3 2013 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended September 30, 2013 ADESA IAA AFC Corporate Consolidated Net income (loss) $14.5 $13.8 $18.8 ($24.3) $22.8 Add back: Income taxes 9.1 8.4 12.0 (9.9) 19.6 Interest expense, net of interest income – 0.2 4.6 21.0 25.8 Depreciation

  30. Slide 30: 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, 2012 2013 2013 2013 2013 Net income (loss) $22.9 $29.1 $33.4 $22.8 $108.2 Add back: Income taxes 7.2 17.0 22.9 19.6 66.7 Interest expense,

  31. Slide 31: Adjusted Net Income Per Share Reconciliation (2012 & 2011)

    Adjusted Net Income Per Share Reconciliation (2012 & 2011) ($ in millions, except per share amounts) Year ended December 31, 2012 2011 Net income $92.0 $72.2 (1) Loss on extinguishment of debt, net of tax – 33.2 (2) Swap termination, net of tax – 9.0 (3) Stepped up depreciation and amortization expe

  32. Slide 32: Adjusted Net Income Per Share Reconciliation (Q3 2013 & Q3 2012)

    Adjusted Net Income Per Share Reconciliation (Q3 2013 & Q3 2012) ($ in millions, except per share amounts) Three Months ended September 30, 2013 2012 Net income $22.8 $19.2 (1) Loss on modification/extinguishment of debt, net of tax – – (3) Stepped up depreciation and amortization expense, net of ta

  33. Slide 33: Adjusted Net Income – Explanatory Footnotes

    Adjusted Net Income – Explanatory Footnotes (1) In the second quarter of 2011, there were losses on extinguishments of debt totaling $53.5 million ($33.2 million net of tax). (2) In connection with our debt refinancing, in the second quarter of 2011 we de-designated our interest rate swap and entere

  34. Slide 34: Free Cash Flow Calculation – Explanatory Footnotes

    Free Cash Flow Calculation – Explanatory Footnotes (1) Free cash flow represents Adjusted EBITDA less capital expenditures, adjusted cash interest paid and cash taxes paid. (2) Cash paid for interest excludes interest paid for standby letters of credit and securitization interest paid on obligations

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