Openlane, Inc. · NYSE:OPLN
Openlane — KAR Auction Services — J.P. Morgan Automotive Conference 2013
35 slides from Openlane's conference presentation, Aug 13, 2013
Slide 1: J.P. Morgan Automotive Conference
J.P. Morgan Automotive Conference August 13, 2013
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: Non-GAAP Financial Measures
Non-GAAP Financial Measures EBITDA, Adjusted EBITDA, free cash flow, adjusted net income and adjusted net income per share, and percentages or calculations using these measures, as presented herein, are supplemental measures of the company's performance that are not required by, or presented in acco
Slide 4: 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
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 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-
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 Revenue: Revenue: Wholesale Dealers Financial Institutions ~$560 / vehicle ~$450 / vehicle
Slide 7: Long-standing and Diverse Customer and Buyer Base
Long-standing and Diverse Customer and Buyer Base Average relationship of over ten years with top ten vehicle suppliers 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 Insur
Slide 8: 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 an expected inflection 12 20 point in whole car auction volumes N.A. Seasonally Adjusted Annual Rate (“SAAR”) (units in millions) 10.0
Slide 9: 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. 9
Slide 10: Continued Positive Salvage Market Fundamentals
Continued Positive Salvage Market Fundamentals Positive Demand Drivers Large Aging North American Car Parc Increased acceptance of alternative parts as 271 272 11.0 271 271 270 269 utilization has grown from ~25%+ levels in 2004 264 10.5 to over 30% currently 258 251 10.0 244 9.5 9.0 2003 2004 200
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 market share gains VDPC – November 2010 − Hybrid auction maximizes proceeds Car Program – November 2010 − Smaller competitors lack the scale
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
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 $117 Aim to selectively grow portfolio − Success
Slide 14: Multiple Avenues for Continued Organic and Acquisition Expansion
Multiple Avenues for Continued Organic and Acquisition Expansion Continue market share gains across all businesses Continue margin expansion during cyclical recovery of used car auction volumes Near- Further leveraging of technology platform across business lines Term Pursue disciplined grow
Slide 15: Key Investment Highlights
Key Investment Highlights Poised to Benefit from Positive Cyclical Trends – Expected Increases in Forward Volumes Established Market Leader Across Core Businesses Proven and Resilient Growth through a Diversified Business Mix Attractive Financial Model Generating Significant Free Cash Flow f
Slide 16: Financial Overview
Financial Overview
Slide 17: Historical Financial Performance
Historical Financial Performance Revenue Gross Profit ($ 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
Slide 18: Second Quarter 2013 Performance
Second Quarter 2013 Performance Revenue Gross Profit* $600 $488 $541 $300 $500 $250 $225 $243 $400 $200 $300 $150 ($mm) ($mm) $200 $100 $100 $50 $0 $0 Q2 2012 Q2 2013 Q2 2012 Q2 2013 Adjusted EBITDA Adjusted Net Income Per Share $0.50 $150 $128 $140 $0.34 $0.26 ($mm) $100 $0.25 $50 $0.00 $0 Q2 2012
Slide 19: IAA – Superstorm Sandy Impact
IAA – Superstorm Sandy Impact Superstorm Sandy Most catastrophic event in IAA history Sandy impacted one of the most densely populated areas in the U.S. The region’s infrastructure was very difficult to deal with Increased costs − Tow − Occupancy − Labor Over 50,000 vehicles assigned to IA
Slide 20: June 30, 2013 Capital Structure
June 30, 2013 Capital Structure (US$ in millions) 6/30/2013 Maturity Term Loan Facilities * $1,773.1 2017 Revolving Credit Facility $0.0 2016 Capital Leases 26.9 ** Total 1,800.0 Less: Available Cash*** (95.2) Net Debt $1,704.8 Net Debt /Adjusted EBITDA 3.32X * Includes unamortized debt discount **
Slide 21: Attractive Financial Model Generating Significant Free Cash Flow for Debt Repayment and Dividend Payments
Attractive Financial Model Generating Significant Free Cash Flow for Debt Repayment and Dividend Payments Adjusted EBITDA less Capital Expenditures Key Takeaways ($ in millions) Significant free cash flow available to reduce $396 $401 $398 $396 leverage and return cash to shareholders $360 High
Slide 22: Appendix
KAR AUCTION SERVICES. aS KAR AUCTION SERVICES.
Slide 23: Non-GAAP Financial Measures
Non-GAAP Financial Measures EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings as
Slide 24: 2008 Adjusted EBITDA Reconciliation
2008 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2008 ADESA IAA AFC Corporate Consolidated Net income (loss) $52.5 $9.2 ($151.3) ($126.6) ($216.2) Add back: Income taxes 33.7 6.3 10.2 (81.6) (31.4) Interest expense, net of interest income – 0.2 – 213.2 213.4 Depreciation a
Slide 25: 2009 Adjusted EBITDA Reconciliation
2009 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2009 ADESA IAA AFC Corporate Consolidated Net income (loss) $94.4 $25.8 $19.1 ($116.1) $23.2 Add back: Income taxes 56.0 16.2 8.4 (69.5) 11.1 Interest expense, net of interest income 0.5 1.4 – 170.3 172.2 Depreciation and am
Slide 26: 2010 Adjusted EBITDA Reconciliation
2010 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2010 ADESA IAA AFC Corporate Consolidated Net income (loss) $80.1 $44.7 $38.4 ($93.6) $69.6 Add back: Income taxes 43.6 26.7 21.1 (64.2) 27.2 Interest expense, net of interest income 0.9 2.3 7.2 130.9 141.3 Depreciation and
Slide 27: 2011 Adjusted EBITDA Reconciliation
2011 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2011 ADESA IAA AFC Corporate Consolidated Net income (loss) $55.8 $65.5 $57.2 ($106.3) $72.2 Add back: Income taxes 17.9 36.1 29.6 (65.8) 17.8 Interest expense, net of interest income 0.7 2.1 12.0 128.0 142.8 Depreciation an
Slide 28: 2012 Adjusted EBITDA Reconciliation
2012 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2012 ADESA IAA AFC Corporate Consolidated Net income (loss) $38.4 $56.5 $64.1 ($67.0) $92.0 Add back: Income taxes 14.5 33.7 46.0 (34.6) 59.6 Interest expense, net of interest income 0.8 1.4 15.0 101.9 119.1 Depreciation and
Slide 29: Q2 2012 Adjusted EBITDA Reconciliation
Q2 2012 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended June 30, 2012 ADESA IAA AFC Corporate Consolidated Net income (loss) $7.3 $16.2 $16.2 ($15.8) $23.9 Add back: Income taxes 7.7 11.0 9.3 (7.8) 20.2 Interest expense, net of interest income 0.3 0.4 3.7 25.2 29.6 Depreciation and
Slide 30: Q2 2013 Adjusted EBITDA Reconciliation
Q2 2013 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended June 30, 2013 ADESA IAA AFC Corporate Consolidated Net income (loss) $17.3 $15.7 $16.9 ($16.5) $33.4 Add back: Income taxes 11.2 9.3 10.7 (8.3) 22.9 Interest expense, net of interest income 0.2 0.2 3.9 20.2 24.5 Depreciation a
Slide 31: LTM Adjusted EBITDA Reconciliation
LTM Adjusted EBITDA Reconciliation ($ in millions) (unaudited) Twelve months Three months ended ended September 30, December 31, March 31, June 30, June 30, 2012 2012 2013 2013 2013 Net income (loss) $19.2 $22.9 $29.1 $33.4 $104.6 Add back: Income taxes 13.8 7.2 17.0 22.9 60.9 Interest expense, net
Slide 32: Adjusted Net Income Per Share Reconciliation (2012 & 2011)
Adjusted Net Income Per Share Reconciliation (2012 & 2011) ($ in millions, except per share amounts) Year ended December 31, 2012 2011 Net income $92.0 $72.2 (1) Loss on extinguishment of debt, net of tax – 33.2 (2) Swap termination, net of tax – 9.0 (3) Stepped up depreciation and amortization expe
Slide 33: Adjusted Net Income Per Share Reconciliation (Q2 2013 & Q2 2012)
Adjusted Net Income Per Share Reconciliation (Q2 2013 & Q2 2012) ($ in millions, except per share amounts) Three Months ended June 30, 2013 2012 Net income $33.4 $23.9 (1) Loss on modification/extinguishment of debt, net of tax 1.0 – (3) Stepped up depreciation and amortization expense, net of tax 7
Slide 34: 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). In the second quarter of 2013, we incurred a loss on the modification/extinguishment of debt totaling $1.6 million ($1.0 mill
Slide 35: 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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