Openlane, Inc. · NYSE:OPLN

Openlane — KAR Auction Services — Baird Global Consumer Technology and Services Conference 2016

30 slides from Openlane's conference presentation, Jun 8, 2016

  1. Slide 1: KAR Auction Services, Inc. Corporate Update

    KAR Auction Services, Inc. Corporate Update June 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  Experienced Management Team with Proven Track Record  Attractive Financial Model Generating Significant Free Cash  Poised to Benefit from Positive Cyclical Trends – Expected Increases in Forward Volumes  Established Market Leader Across Core Businesses  Multiple Avenu

  4. Slide 4: Leading Provider of Vehicle Auction Services in North America

    Leading Provider of Vehicle Auction Services in North America 2015 Revenue by Segment 2015 Adj. EBITDA by Segment(1) AFC 10% AFC 20% ADESA ADESA 4.4mm vehicles sold in 2015 44% IAA 52% 38% Revenue $2,640mm Adj. EBITDA $650mm % margin 24.6% IAA 36% Whole Car Auctions Salvage Vehicle Auctions Vehicle

  5. 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 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

  6. Slide 6: Benefiting from Volume Recovery in Whole Car

    Benefiting from Volume Recovery in Whole Car North American Whole Car Auction Volume & New Vehicle Sales 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 10.7 10.0 10.2 9.8 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

  7. Slide 7: 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 Revenue:  Independent Dealers ~$560 / vehicle*  Commercial Fleet Customers  Wholesale Dealers  Financial Institutions Revenue:  Rental Car Comp

  8. Slide 8: Off-lease Auction Funnel

    Off-lease “Auction Funnel” Revenue Inventory Gross Per Unit Margin % ~$100 Higher “Online Only” – Private Label ~2-3 days “Online Only” – Open ~2-3 days ADESA In-lane buyer or Online buyer Competitors ~$700 Lower 8

  9. Slide 9: Continued Positive Salvage Market Fundamentals

    Continued Positive Salvage Market Fundamentals Positive Demand Drivers  Increased use of alternative parts in collision repair  Increasing vehicle complexity and technology content  Increase in non-insurance supply, including charity, direct-to-consumer and dealer sales  International demand Lar

  10. Slide 10: 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 $159 $156 $157 $155 $150 underwriting and control environment − Short-term secured financing  Growing portfolio  Consistent credit standards 201

  11. Slide 11: Long-term Outlook

    Long-term Outlook Opportunities Challenges  Volume increases  Scrap values  Cyclical recovery at ADESA  Foreign currency trends  Salvage volumes  Competition  LTU growth  Capital deployment  Acquisition integration  Increase RPU at physical auctions  Used vehicle prices  Used vehicle pri

  12. Slide 12: Financial Overview

    KAR Financial Overview AUCTION SERVICES

  13. Slide 13: Historical Financial Performance

    Historical Financial Performance Revenue Gross Profit ($ in millions) ($ in millions) $1,142 $2,640 $941 $1,046 $2,173 $2,365 $851 $876 $1,886 $1,963 $250 $268 $225 $169 $194 $830 $896 $995 $700 $716 $1,017 $1,053 $1,118 $1,219 $1,377 2011 2012 2013 2014 2015 ADESA IAA AFC 2011 2012 2013 2014 2015 V

  14. Slide 14: First Quarter 2016 Performance

    First Quarter 2016 Performance Revenue Gross Profit* $800 $745 $400 $326 $632 $280 $600 $300 $ MM $ MM $400 $200 44.3% 43.8% $200 $100 $0 $0 Q1 2015 Q1 2016 Q1 2015 Q1 2016 Adjusted EBITDA Operating Adjusted Net Income Per Share $250 $190 $0.55 $200 $162 $0.60 $0.47 $150 $ MM $ MM $0.40 $100 25.6% 2

  15. Slide 15: March 31, 2016 Leverage

    March 31, 2016 Leverage (US$ in millions) 3/31/2016 Maturity Term Loan B-2 $1,098 2021 Term Loan B-3 1,350 2023 Revolving Credit Facility 0 2021 Capital Leases 41 Total 2,489 Less: Available Cash (612) Net Debt $1,877 Net Debt /Adjusted EBITDA 2.77 15

  16. Slide 16: Capital Allocation Framework

    Capital Allocation Framework Strategic Share Repurchase Dividends Investments Program  Qtrly dividend of $0.29 per  Priority for free cash flow  $300M share  Acquisitions that leverage the  Two year authorization  45% - 50% of free cash flow cyclical recovery  Tool for managing cash /  Highl

  17. Slide 17: 2016 Capital Allocation Actions

    2016 Capital Allocation Actions  Completed ASR; Retired an Additional 800K Shares in January 2016  Increased Annual Dividend 7% to $1.16 Per Share  Completed the Acquisition of Brasher’s Auto Auctions  Refinanced and Extended Credit Agreement  Increased U.S. Securitization Facility $100M to $1.

  18. Slide 18: Brasher's Acquisition

    Brasher’s Acquisition  8 locations in Western U.S. – Sacramento, Salt Lake City, Portland, Boise, Eugene, Fresno, San Jose, Reno  Purchase price; ~$275M  ~190,000 vehicles sold  2015 Revenue ~$140M; Adjusted EBITDA ~$34M  Closed April 1st 18

  19. Slide 19: Key Investment Highlights

    Key Investment Highlights  Experienced Management Team with Proven Track Record  Attractive Financial Model Generating Significant Free Cash  Poised to Benefit from Positive Cyclical Trends – Expected Increases in Forward Volumes  Established Market Leader Across Core Businesses  Multiple Avenu

  20. Slide 20: Appendix

    KAR Appendix AUCTION SERVICES

  21. Slide 21: 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

  22. Slide 22: 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

  23. Slide 23: 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

  24. Slide 24: 2013 Adjusted EBITDA Reconciliation

    2013 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2013 ADESA IAA AFC Corporate Consolidated Net income (loss) $50.2 $56.6 $76.1 ($115.2) $67.7 Add back: Income taxes 40.1 32.8 40.2 (31.6) 81.5 Interest expense, net of interest income 0.6 0.8 16.7 86.2 104.3 Depreciation and

  25. Slide 25: 2014 Adjusted EBITDA Reconciliation

    2014 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2014 ADESA IAA AFC Corporate Consolidated Net income (loss) $86.4 $79.7 $76.6 ($73.4) $169.3 Add back: Income taxes 43.2 48.4 48.6 (44.5) 95.7 Interest expense, net of interest income 0.6 0.2 18.7 66.4 85.9 Depreciation and

  26. Slide 26: 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

  27. Slide 27: Q1 2015 Adjusted EBITDA Reconciliation

    Q1 2015 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended March 31, 2015 ADESA IAA AFC Corporate Consolidated Net income (loss) $22.5 $25.0 $21.0 ($14.0) $54.5 Add back: Income taxes 14.9 15.3 12.8 (8.4) 34.6 Interest expense, net of interest income 0.1 – 5.1 15.7 20.9 Depreciation a

  28. Slide 28: Q1 2016 Adjusted EBITDA Reconciliation

    Q1 2016 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended March 31, 2016 ADESA IAA AFC Corporate Consolidated Net income (loss) $39.3 $24.9 $24.0 ($27.5) $60.7 Add back: Income taxes 23.3 14.9 14.6 (16.1) 36.7 Interest expense, net of interest income 0.1 – 7.8 20.8 28.7 Depreciation

  29. Slide 29: LTM Adjusted EBITDA Reconciliation

    LTM Adjusted EBITDA Reconciliation ($ in millions) (unaudited) Twelve months Three months ended ended June 30, September 30, December 31, March 31, March 31, 2015 2015 2015 2016 2016 Net income (loss) $59.5 $52.3 $48.3 $60.7 $220.8 Add back: Income taxes 34.8 29.6 26.9 36.7 128.0 Interest expense, n

  30. Slide 30: Operating Adjusted Net Income Per Share Reconciliation (Q1 2016 & Q1 2015)

    Operating Adjusted Net Income Per Share Reconciliation (Q1 2016 & Q1 2015) ($ in millions, except per share amounts) Three Months ended March 31, 2016 2015 Net income $60.7 $54.5 Acquired amortization expense, net of tax(1) 13.7 12.9 Loss on extinguishment of debt, net of tax(2) 2.5 – Operating adju

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