Openlane, Inc. · NYSE:OPLN
Openlane — KAR Auction Services — Investor Day (March 2012)
47 slides from Openlane's investor day presentation, Mar 28, 2012
Slide 1: Analyst Day March 28, 2012
Analyst Day | <A: March 28, 2012 AUCTION SERVICES.
Slide 2: Analyst Day Agenda
Analyst Day Agenda Welcome & Opening Remarks Mike Russo, General Manager, ADESA Phoenix ADESA Phoenix Auction Tour OPENLANE Tour Corporate Overview Eric Loughmiller, EVP & Chief Financial Officer OPENLANE Overview Peter Kelly, CEO and President OPENLANE Q&A
Slide 3: Corporate Overview
Corporate Overview Eric Loughmiller EVP & Chief Financial Officer
Slide 4: 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 5: 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 6: Leading Provider of Vehicle Auction Services in North America
Leading Provider of Vehicle Auction Services in North America 2011 Revenue: $1,886mm 2011 Adj. EBITDA: $487mm1 ~3.1mm Vehicles Sold in 2011 2011 Revenue2: $1,186mm 2011 Revenue: $700mm 2011 Adj. EBITDA2: $334mm 2011 Adj. EBITDA: $212mm Top 2 whole car auction position Top 2 salvage vehicle aucti
Slide 7: Leader in Whole Car and Salvage Auction Markets
Leader in Whole Car and Salvage Auction Markets Whole Car Market Share Salvage Market Share Other Copart Other Manheim ADESA IAAI 4 Source: North American market share based on company estimates.
Slide 8: Vehicle Remarketing Life Cycle
Vehicle Remarketing Life Cycle Vehicles in Operation 270 Million units Used Vehicle New Vehicle Registrations Transactions in Removed from North America Operation 12 Million units 10- 15 Million units ~ 40 Million units Salvage Auctions 3 - 4 Million units NAAA Used Vehicle (Whole Car) Dealer Trades
Slide 9: 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 Independent Dealers Finance Arms Wholesale Dealers Commercial Fleet Customers Financial Institutions Rental Car Companies Seller Auction Fee Buyer Auct
Slide 10: North American Wholesale Volume Forecasts
North American Wholesale Volume Forecasts (1) Units Sold (Millions) 11.0 10.5 10.0 10.0 9.7 9.5 9.5 10.0 9.5 9.5 9.5 9.4 9.5 9.3 9.7 9.5 9.5 9.5 9.5 9.1 9.5 9.4 9.0 9.3 8.6 8.9 8.4 8.4 8.5 8.3 Peak to trough -22% 8.4 8.0 8.4 8.0 7.9 8.1 7.9 7.8 7.8 7.5 7.0 Manheim Kontos TME * Manheim - Manheim Cons
Slide 11: Comprehensive End-to-End Remarketing Solutions
Comprehensive End-to-End Remarketing Solutions Before Auction At Auction After Auction Recovery Secured storage Floorplan Financing administration (AFC) (PAR/RDN) Inspections Post-Sale Towing / Body Inspections Transportation Mechanical Reporting Vehicle Tracking Detailing (Auc
Slide 12: Established Relationships with Vehicle Providers & Buyers
Established Relationships with Vehicle Providers & Buyers The Company does business with major suppliers of whole car and salvage vehicles Average relationship of over ten years with top ten vehicle suppliers Largest customer less than 3% of 2011 consolidated revenue Registered whole car and
Slide 13: IAA – Providing the Advantage in Salvage Auto Auctions
IAA – Providing the Advantage in Salvage Auto Auctions • Leading seller of total loss vehicles • Largest facility footprint in N.A. Overview • Live and “live on-line” model • Revenue +15% 2011 • Adjusted EBITDA +14% Growth • Volume +9% • Approximately 50% of units sold on-line Technology • Integrate
Slide 14: AFC – Disciplined Growth
AFC – Disciplined Growth • Complements KAR’s offerings • Fee driven business Overview • Retain title as collateral • Revenue 2011 • Margins • Adjusted EBITDA Growth • Loan Transactions • $883M at 12/31/11 • 99% current Portfolio • $750M committed liquidity* • $610M drawn 11 * U.S. & Cdn facility com
Slide 15: Fourth Quarter Performance
Fourth Quarter Performance Revenue Gross Profit* $500 $443 $480 $400 $300 $300 $189 $211 ($mm) ($mm) $200 $200 $100 $100 42.7% 44.2% 43.9% $0 $0 Q4 2010 Q4 2011 Q4 2010 Q4 2011 Adjusted EBITDA Adjusted Net Income Per Share $0.60 $150 $103 $112 $0.40 $100 ($mm) $0.21 $50 23.2% 23.4% $0.20 $0.20 $0 $0
Slide 16: Consolidated Annual Financial Highlights
Consolidated Annual Financial Highlights Revenue Gross Profit* $2,000 $1,736 $1,823 $1,886 $1,500 $815 $851 $1,000 $900 $734 ($mm) ($mm) $600 $500 $300 $0 42.3% 44.7% 44.2% 45.1% $0 2009 2010 2011 2009 2010 2011 Adjusted EBITDA Adjusted Net Income Per Share $600 $475 $487 $1.50 $426 $1.16 $400 $1.05
Slide 17: Attractive 2011 Adjusted EBITDA Margins
Attractive 2011 Adjusted EBITDA Margins (US$ in millions) $500 $487.2 $400 $300 $232.2 $211.7 $200 $101.9 $100 60.4% 30.2% 22.8% 25.8% $0 AFC IAAI ADESA KAR* * KAR adjusted EBITDA includes holding company 14
Slide 18: Significant Free Cash Flow Generation
Significant Free Cash Flow Generation (1) (US$ in millions) $300 (4) $238 (3) $253 (2) $200 $184 $100 $0 2009 2010 2011 Annual Free Cash Flow as a % of revenues 10.6 % 13.1% 13.4% (1) Free cash flow represents Adjusted EBITDA less capital expenditures, adjusted cash interest paid and cash taxes paid
Slide 19: December 31, 2011 Capital Structure
December 31, 2011 Capital Structure (US$ in millions) 12/31/2011 Maturity Term Loan Facilities $1,683.9 2017 Revolving Credit Facility $68.9 2016 Floating Rate Notes 150.0 2014 Capital Leases 27.3 * Total 1,930.1 Less: Available Cash (52.7) Net Debt $1,877.4 Net Debt /Adjusted EBITDA 3.85X * Various
Slide 20: KAR’s Diverse Business Model – Adjusted EBITDA Contribution by Segment
KAR’s Diverse Business Model – Adjusted EBITDA Contribution by Segment* $396M** $394M $426M $475M $487M 100% 11% 10% 15% 19% 22% 80% 30% 30% 25% 35% 39% 60% 40% 60% 53% 59% 50% 20% 42% 0% 2007 2008 2009 2010 2011 ADESA IAA AFC *Percentage calculations exclude holding company. 17 ** Represents pro fo
Slide 21: 2011 Accomplishments
2011 Accomplishments • Revenue Growth • Gross Margins • Adjusted EBITDA • Reduced net debt prior to OPENLANE(1) Capital • Benefits from new Term Loan B Structure • U.S. & Canadian Securitizations • Dealer consignment Strategic • IAA non-insurance vehicles Initiatives • OPENLANE integration (1) Follo
Slide 22: OPENLANE Overview
OPENLANE Overview Peter Kelly CEO and President, OPENLANE
Slide 23: OPENLANE – A Leader in Online Remarketing
OPENLANE – A Leader in Online Remarketing North America’s largest independent online auto auction company Since 1999, operating in the United States and Canada Technology-driven innovator, focused on automotive remarketing Pioneered the ‘upstream’ segment, numerous other technology innovatio
Slide 24: History and Locations
History and Locations 1999 2002 2006 2007 2010 Acquired by ADESA Oct . 3, 2011 Mesa, AZ Redwood City, CA Toronto, ON US Sales and Operations; Corp HQ and Technology Technology; CarsArrive Network; RDN; Canada Sales and Finance Operations 20
Slide 25: OPENLANE Business Verticals
OPENLANE Business Verticals Online auction business OPENLANE’s “core” business and business model Transport business (CarsArrive) Developed alongside OPENLANE’s auction business and enhanced through acquisition of CarsArrive RDN (Recovery Database Network) Strategic acquisition completed
Slide 26: Online Auction Business – Closed Sales and Open Sales
Online Auction Business – Closed Sales and Open Sales Closed Sale Historically, closed sales were the (Private Label) “market entry” segment for OPENLANE Private branded marketplace with seller’s brand, restricted to certain dealers ~75% of 2011 sales Vehicles can move between Closed and Open Sales
Slide 27: Online Auction Business – Technology a Strong Differentiator
Online Auction Business – Technology a Strong Differentiator Proprietary, end-to-end technology solution for online channel Flexible and customizable Fully integrated into financial reporting and CRM systems 23
Slide 28: Together with ADESA – The Market Leader with Online Closed Sale Programs
Together with ADESA – The Market Leader with Online Closed Sale Programs OPENLANE Closed Programs ADESA Closed Sale Programs (being migrated to OPENLANE technology platform) On a combined basis, ADESA / OPENLANE is the clear leader in online closed sales programs (“upstream remarketing”) 24
Slide 29: CarsArrive: A Unique Vehicle Logistics Platform
CarsArrive: A Unique Vehicle Logistics Platform “Asset-light” vehicle logistics platform Does not own or operate trucks; interfaces with a nationwide network of automotive carriers Founded in 2000, acquired by OPENLANE in 2007 Serving OPENLANE’s dealer customers (“Attached Moves”) and commer
Slide 30: Recovery Database Network (RDN) – Serving Recovery Agents and Automotive Lenders
Recovery Database Network (RDN) – Serving Recovery Agents and Automotive Lenders Originated as a subscription-based workflow tool for recovery service providers Proprietary, in house technology, designed to enhance customer operations SAAS business model Evolution of business model to provid
Slide 31: ADESA and OPENLANE – Strategic Rationale for the Combination
ADESA and OPENLANE – Strategic Rationale for the Combination Significantly Increased Customer Significantly Enhanced Marketplace Benefits Capabilities 27
Slide 32: OPENLANE Integration Update
OPENLANE Integration Update Integrated ADESA/OPENLANE sales teams One voice to the customer (commercial sellers and dealers) Technology migration underway Single sign-on for ADESA DealerBlock and OPENLANE DealerBlock migration to OPENLANE ADESA closed sales being migrated to OPENLANE C
Slide 33: Closed Sale Migration to OPENLANE Technology
Closed Sale Migration to OPENLANE Technology Migration of first two closed sale venues (Hyundai and Kia) from ADESA to OPENLANE technology on track for early Q2 deployment. 29
Slide 34: ADESA.com Migration to OPENLANE Technology
ADESA.com Migration to OPENLANE Technology Sample screenshot (will be subject to change) ADESA.com migrating to OPENLANE technology. Consolidating inventory on an enhanced technology platform to benefit sellers and buyers 30
Slide 35: CarsArrive Implementation
CarsArrive Implementation Deployment of CarsArrive across ADESA auction network will lead to increased efficiency, vehicle visibility and control 31
Slide 36: Looking Ahead
Looking Ahead Unique end-to-end remarketing solution Market leader in upstream closed programs Integration will deliver a significantly enhanced open sale offering for commercial sellers and dealers Well positioned for market shifts (online or physical) Recovery in industry volumes (partic
Slide 37: Appendix
Appendix 33
Slide 38: 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 39: 2007 Adjusted EBITDA Reconciliation
2007 Adjusted EBITDA Reconciliation Year Ended December 31, 2007 (Dollars in millions) ADESA IAAI AFC Corporate Consolidated Net Income (Loss) $37.0 $2.2 $25.9 $(103.4) $(38.3) Add Back: ADESA 2007 Net Income 39.4 – 16.2 (28.7) 26.9 Add Back: ADESA 2007 Discontinued Ops 0.1 – – – 0.1 Add back: IAAI
Slide 40: 2008 Adjusted EBITDA Reconciliation
2008 Adjusted EBITDA Reconciliation Year Ended December 31, 2008 (Dollars in millions) ADESA IAAI 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 Depreci
Slide 41: 2009 Adjusted EBITDA Reconciliation
2009 Adjusted EBITDA Reconciliation Year Ended December 31, 2009 (Dollars in millions) ADESA IAAI 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
Slide 42: 2010 Adjusted EBITDA Reconciliation
2010 Adjusted EBITDA Reconciliation Year Ended December 31, 2010 (Dollars in millions) ADESA IAAI 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 Depreciati
Slide 43: 2011 Adjusted EBITDA Reconciliation
2011 Adjusted EBITDA Reconciliation Year Ended December 31, 2011 (Dollars in millions) 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 Depreciat
Slide 44: LTM Adjusted EBITDA Reconciliation
LTM Adjusted EBITDA Reconciliation Twelve Months Three Months Ended Ended March 31, June 30, September 30, December 31, December 31, 2011 2011 2011 2011 2011 (Dollars in millions) (Unaudited) Net income (loss) $39.8 ($14.3) $32.2 $14.5 $72.2 Add back: Income taxes 1.0 (6.9) 14.7 9.0 17.8 Interest ex
Slide 45: Q4 2010 Adjusted EBITDA Reconciliation
Q4 2010 Adjusted EBITDA Reconciliation Three Months Ended December 31, 2010 (Dollars in millions) ADESA IAA AFC Corporate Consolidated Net Income (Loss) $8.1 $11.4 $11.2 $(23.4) $7.3 Add back: Income Taxes 4.9 5.2 3.7 (16.3) (2.5) Interest Expense, Net of Interest Income 0.1 0.6 2.1 32.2 35.0 Deprec
Slide 46: Q4 2011 Adjusted EBITDA Reconciliation
Q4 2011 Adjusted EBITDA Reconciliation Three Months Ended December 31, 2011 (Dollars in millions) ADESA IAA AFC Corporate Consolidated Net Income (Loss) $(2.0) $15.9 $15.0 $(14.4) $14.5 Add back: Income Taxes 3.0 7.2 7.3 (8.5) 9.0 Interest Expense, Net of Interest Income 0.2 0.5 3.5 26.5 30.7 Deprec
Slide 47: Adjusted Net Income Per Share Reconciliation
Adjusted Net Income Per Share Reconciliation Three Months Ended Year Ended December 31, December 31, (In millions, except per share amounts ) 2011 2010 2011 2010 Net income $ 14.5 $ 7.3 $ 72.2 $ 69.6 Loss on extinguishment of debt, net of tax (1) - 4.6 33.2 20.3 (2) Swap termination, net of tax - -