Openlane, Inc. · NYSE:OPLN
Openlane — KAR Auction Services — Q3 2017 Earnings Presentation
27 slides from Openlane's earnings presentation, Oct 31, 2017
Slide 1: Q3 2017 & Year-to-Date Earnings Slides
Q3 2017 & Year-to-Date Earnings Slides October 31, 2017
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: Q3 2017 Highlights
Q3 2017 Highlights 3 Revenues Highlights Fundamentals KAR • Revenue growth +7% • Adjusted EBITDA +13% • Operating Adjusted EPS +14% • Adjusted EBITDA margin grew to 25% from 23% in prior year • Diversified and complementary business services model • Controlling SG&A ADESA • Adjusted EBITDA +9% • Str
Slide 4: 2017 Outlook
2017 Outlook 4 KAR Auction Services' has updated its previous outlook to reflect the impact of recent acquisitions and a reduction of our effective tax rate. Previous Guidance Current Guidance 2017 Low 2017 High 2017 Low 2017 High Net income $218.4 $232.4 $231.4 $246.0 Add back: Income taxes $128.2
Slide 5: Key Operating Metrics
Key Operating Metrics 5 3Q17 3Q16 ADESA Total Vehicles Sold Growth Physical Vehicles Sold Growth1 8% -4% 17% 1% Online Only Vehicles Sold Growth 34% 23% Physical RPU Growth 3% 8% IAA Vehicles Sold Growth (includes HBC) 9% 5% Inventory Growth (excludes HBC) 12% 22% RPU Growth (includes HBC) 1% 1% AFC
Slide 6: Capital Allocation Framework
Capital Allocation Framework 6 Priorities Historically ~18% - 20% of Adjusted EBITDA, plus strategic investments Technology ~50% Physical ~50% 45% - 50% of FCF Highlights consistency & strength of free cash flow Acquisitions that leverage wholecar auction cyclical recovery (indep auction
Slide 7: TradeRev
TradeRev 7 TradeRev is an innovative digital mobile app that facilitates automotive exchanges between used car dealers • Headquartered in Toronto, Ontario and Carmel, Indiana • 200 employees across the U.S., Canada and United Kingdom • Thousands of registered dealers
Slide 8: KAR Q3 2017 Highlights
KAR Q3 2017 Highlights 8 ($ in millions, except per share amounts) KAR Q3 2017 Q3 2016 Highlights* Total operating revenues $843.0 $789.6 Gross profit** $363.8 $330.1 SG&A $155.7 $146.3 +$3.6M acquired SG&A EBITDA $207.4 $182.8 Adjusted EBITDA $209.3 $184.8 Net Income $62.8 $54.4 Net income per shar
Slide 9: ADESA Q3 2017 Highlights
ADESA Q3 2017 Highlights 9 ($ in millions, except RPU) ADESA Q3 2017 Q3 2016 Highlights* Revenue $477.1 $457.4 +$12.9M acquisitions Gross profit** $204.5 $187.9 % of revenue 42.9% 41.1% SG&A $87.6 $80.6 +$3.6M acquired SG&A EBITDA $113.6 $104.3 Adjusted EBITDA $122.0 $111.6 % of revenue 25.6% 24.4%
Slide 10: Used Vehicle Value Indices
Used Vehicle Value Indices 10 YoY Index Change Age 1Q17 2Q17 3Q17 YTD17 Industry All +4.1% +3.7% +1.9% +3.2% NADA 0-8 yrs -7.0% -7.3% -5.7% -6.7% Black Book 2-6 yrs -5.9% -5.1% -3.5% -4.8% RVI 2-5 yrs -6.1% -5.6% -2.7% -4.5% Increased industry (commercial) volumes are driving average industry tran
Slide 11: IAA Q3 2017 Highlights
IAA Q3 2017 Highlights 11 ($ in millions) IAA Q3 2017 Q3 2016 Highlights* Revenue $287.7 $261.0 +9% volume Gross profit** $102.9 $92.5 % of revenue 35.8% 35.4% SG&A $26.5 $26.7 EBITDA $76.5 $65.8 Adjusted EBITDA $77.8 $66.2 % of revenue 27.0% 25.4% Vehicles sold 562,000 516,000 Inventory growth (N.A
Slide 12: IAA Q3 2017 Gross Profit
IAA Q3 2017 Gross Profit 12 ($ in millions) IAA HBC Total IAA HBC Total Revenue $280.4 $7.3 $287.7 $248.7 $12.3 $261.0 Cost of Services** 178.5 6.3 184.8 157.7 10.8 168.5 Gross Profit** $101.9 $1.0 $102.9 $91.0 $1.5 $92.5 % of Revenue 36.3% 13.7% 35.8% 36.6% 12.2% 35.4% * For a more complete explana
Slide 13: AFC Q3 2017 Highlights
AFC Q3 2017 Highlights 13 ($ in millions, except for revenue per loan transaction) AFC Q3 2017 Q3 2016 Highlights* Interest and fee income $71.8 $68.4 Other revenue $3.0 $2.7 Provision for credit losses ($5.0) ($8.0) Other service revenue $8.4 $8.1 Total AFC revenue $78.2 $71.2 +18% revenue per LTU
Slide 14: AFC Provision for Credit Losses
AFC Provision for Credit Losses 14 3Q17 2Q17 1Q17 4Q16 3Q16 2Q16 1Q16 4Q15 3Q15 Ending Managed Receivables $1,809.2 $1,736.5 $1,760.7 $1,792.2 $1,785.4 $1,738.6 $1,705.5 $1,641.0 $1,529.6 Average Managed Receivables $1,772.9 $1,748.6 $1,776.5 $1,788.8 $1,762.0 $1,722.1 $1,673.3 $1,585.3 $1,503.3 Pro
Slide 15: Year-to-Date Slides
KAR Year-to-Date Slides AUCTION SERVICES.
Slide 16: KAR Nine Months Ended September 30, 2017 Highlights
KAR Nine Months Ended September 30, 2017 Highlights 16 ($ in millions, except per share amounts) KAR YTD 2017 YTD 2016 Highlights* Total operating revenues $2,567.6 $2,336.4 Gross profit** $1,105.5 $997.3 SG&A $467.7 $434.3 +$16.8M acquired SG&A EBITDA $610.9 $559.5 Adjusted EBITDA $643.4 $571.4 Net
Slide 17: ADESA Nine Months Ended September 30, 2017 Highlights
ADESA Nine Months Ended September 30, 2017 Highlights 17 ($ in millions, except RPU) ADESA YTD 2017 YTD 2016 Highlights* Revenue $1,464.3 $1,323.0 +$79.6M acquisitions Gross profit** $622.1 $555.9 % of revenue 42.5% 42.0% SG&A $260.1 $237.8 +$16.8M acquired SG&A EBITDA $353.6 $310.6 Adjusted EBITDA
Slide 18: IAA Nine Months Ended September 30, 2017 Highlights
IAA Nine Months Ended September 30, 2017 Highlights 18 ($ in millions) IAA YTD 2017 YTD 2016 Highlights* Revenue $883.8 $795.4 +10% volume Gross profit** $328.4 $286.1 % of revenue 37.2% 36.0% SG&A $79.9 $78.9 EBITDA $249.5 $207.3 Adjusted EBITDA $252.1 $208.7 % of revenue 28.5% 26.2% Vehicles sold
Slide 19: IAA Nine Months Ended September 30, 2017 Gross Profit
IAA Nine Months Ended September 30, 2017 Gross Profit 19 ($ in millions) IAA HBC Total IAA HBC Total Revenue $853.5 $30.3 $883.8 $755.8 $39.6 $795.4 Cost of Services** 529.3 26.1 555.4 473.6 35.7 509.3 Gross Profit** $324.2 $4.2 $328.4 $282.2 $3.9 $286.1 % of Revenue 38.0% 13.9% 37.2% 37.3% 9.8% 36.
Slide 20: AFC Nine Months Ended September 30, 2017 Highlights
AFC Nine Months Ended September 30, 2017 Highlights 20 ($ in millions, except for revenue per loan transaction) AFC YTD 2017 YTD 2016 Highlights* Interest and fee income $213.1 $205.5 Other revenue $8.9 $7.7 Provision for credit losses ($27.5) ($19.0) Other service revenue $25.0 $23.8 Total AFC reve
Slide 21: Appendix
KAR ; AUCTION Appendix SERVICES.
Slide 22: Non-GAAP Financial Measures
Non-GAAP Financial Measures 22 EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings
Slide 23: Q3 2017 Adjusted EBITDA Reconciliation
Q3 2017 Adjusted EBITDA Reconciliation 23 ($ in millions) Three Months ended September 30, 2017 ADESA IAA AFC Corporate Consolidated Net income (loss) $47.0 $28.0 $20.4 ($32.6) $62.8 Add back: Income taxes 29.6 15.9 11.6 (19.4) 37.7 Interest expense, net of interest income (0.4) – 11.0 30.1 40.7 Dep
Slide 24: Q3 2016 Adjusted EBITDA Reconciliation
Q3 2016 Adjusted EBITDA Reconciliation 24 ($ in millions) Three Months ended September 30, 2016 ADESA IAA AFC Corporate Consolidated Net income (loss) $43.5 $22.0 $21.6 ($32.7) $54.4 Add back: Income taxes 26.3 12.5 13.2 (20.2) 31.8 Interest expense, net of interest income (0.2) – 8.7 27.6 36.1 Depr
Slide 25: YTD 2017 Adjusted EBITDA Reconciliation
YTD 2017 Adjusted EBITDA Reconciliation 25 ($ in millions) Nine Months ended September 30, 2017 ADESA IAA AFC Corporate Consolidated Net income (loss) $152.0 $97.5 $61.6 ($121.9) $189.2 Add back: Income taxes 92.4 54.5 35.9 (77.1) 105.7 Interest expense, net of interest income (0.4) – 31.8 89.4 120.
Slide 26: YTD 2016 Adjusted EBITDA Reconciliation
YTD 2016 Adjusted EBITDA Reconciliation 26 ($ in millions) Nine Months ended September 30, 2016 ADESA IAA AFC Corporate Consolidated Net income (loss) $129.0 $72.1 $68.6 ($92.8) $176.9 Add back: Income taxes 76.7 42.5 41.8 (54.8) 106.2 Interest expense, net of interest income (0.1) – 24.7 75.9 100.5
Slide 27: Operating Adjusted Net Income per Share Reconciliation
Operating Adjusted Net Income per Share Reconciliation 27 ($ in millions, except per share amounts), (unaudited) 2017 2016 2017 2016 Net income $62.8 $54.4 $189.2 $176.9 Acquired amortization expense (1) 25.8 24.7 76.7 71.3 Loss on extinguishment of debt (2) – – 27.5 4.0 Income taxes (3) (9.7) (9.1)