Openlane, Inc. · NYSE:OPLN
Openlane — KAR Auction Services — Q4 2017 Earnings Presentation
38 slides from Openlane's earnings presentation, Feb 20, 2018
Slide 1: Q4 2017 & Annual Earnings Slides
Q4 2017 & Annual Earnings Slides February 20, 2018
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: 2017 Highlights
2017 Highlights 3 Revenues Highlights Fundamentals KAR • Revenue growth +10% • Operating Adjusted EPS +21% • Adjusted EBITDA +12% • Adjusted EBITDA margin grew to 24.2% from 23.7% in prior year • Diversified and complementary business services model • Controlling SG&A ADESA • Revenue +10% • Strong v
Slide 4: 2018 Outlook
2018 Outlook 4 Annual Guidance 2018 Low 2018 High 2017 Net income $329.0 $349.7 $362.0 Add back: Income tax expense $115.6 $122.9 $36.0 Interest expense, net of interest income $191.0 $191.0 $162.6 Depreciation and amortization $268.0 $268.0 $264.6 EBITDA $903.6 $931.6 $825.2 Total addbacks, net ($8
Slide 5: Key Operating Metrics
Key Operating Metrics 5 4Q17 4Q16 2017 2016 ADESA Total Vehicles Sold Growth 6% 16% 10% 17% Physical Vehicles Sold Growth1 -4% 0% -2% 4% Online Only Vehicles Sold Growth 34% 16% 26% 26% Physical RPU Growth 6% 4% 3% 7% IAA Vehicles Sold Growth (includes HBC) 4% 18% 8% 11% Inventory Growth (excludes H
Slide 6: Share Repurchases
Share Repurchases Clear Shareholder Friendly Capital Allocation Framework 6 Priorities Priorities Historically ~18% - 20% of Adjusted EBITDA, plus strategic investments 45% - 50% of FCF Highlights consistency & strength of free cash flow Acquisitions that leverage wholecar auction cyclical r
Slide 7: Tax Reform Impact
Tax Reform Impact 7 2018 Estimate 26% - 28% Effective Rate Note: ~13%-15% KAR Revenues Generated Outside U.S. 2017 Annualized Proforma Impact ~$0.30 EPS Increase Over $40M Cash Tax Reduction 4Q17 Impact 1. Deferred tax liability revaluation $102.7M benefit $0.75 EPS impact 2. Repatriation tax 4Q17 (
Slide 8: Catastrophic Events (Hurricanes Harvey & Irma)
Catastrophic Events (Hurricanes Harvey & Irma) 8 Real Estate Enough acreage to store 100K+ units to meet initial estimates from providers Trucks 900 trucks within 4 days; 1,100 trucks & 3,000+ daily pickups at peak Personnel 350 IAA Volunteers Deployed ~100 Non-IAA KAR employees Fina
Slide 9: KAR Q4 2017 Highlights
KAR Q4 2017 Highlights 9 ($ in millions, except per share amounts) KAR Q4 2017 Q4 2016 Highlights* Total operating revenues $890.4 $813.7 $10.0M acquisitions and $44.6M hurricanes Harvey & Irma Gross profit** $365.3 $325.4 % of revenue 41.0% 40.0% SG&A $172.5 $148.8 $10.8M acquired SG&A EBITDA $214.
Slide 10: ADESA Q4 2017 Highlights
ADESA Q4 2017 Highlights 10 ($ in millions, except RPU) ADESA Q4 2017 Q4 2016 Highlights* Revenue $473.2 $442.3 +$10.0M acquisitions Gross profit** $191.5 $172.9 % of revenue 40.5% 39.1% SG&A $99.9 $89.2 0% growth excluding $10.8M of acquired SG&A EBITDA $109.1 $80.4 Adjusted EBITDA $95.7 $88.0 9% g
Slide 11: IAA Q4 2017 Highlights
IAA Q4 2017 Highlights 11 ($ in millions) IAA Q4 2017 Q4 2016 Highlights* Revenue $335.4 $302.6 $44.6M from hurricanes Harvey & Irma Gross profit** $112.7 $103.9 $4.0M gross profit from hurricanes Harvey & Irma % of revenue 33.6% 34.3% Excluding HBC and Harvey & Irma 37.9% vs 35.1% PY SG&A $27.2 $25
Slide 12: AFC Q4 2017 Highlights
AFC Q4 2017 Highlights 12 ($ in millions, except for revenue per loan transaction) AFC Q4 2017 Q4 2016 Highlights* Interest and fee income $77.2 $69.6 Other revenue $2.9 $2.6 Provision for credit losses ($6.4) ($11.7) Other service revenue $8.1 $8.3 Largely PWI Total AFC revenue $81.8 $68.8 +23% rev
Slide 13: Year-to-Date Slides
KAR Year-to-Date Slides AUCTION SERVICES.
Slide 14: KAR Year Ended December 31, 2017 Highlights
KAR Year Ended December 31, 2017 Highlights 14 ($ in millions, except per share amounts) KAR YTD 2017 YTD 2016 Highlights* Total operating revenues $3,458.0 $3,150.1 $89.6M acquired businesses & $45.1M hurricanes Gross profit** $1,470.8 $1,322.7 SG&A $640.2 $583.1 $27.7M acquired SG&A EBITDA $825.2
Slide 15: ADESA Year Ended December 31, 2017 Highlights
ADESA Year Ended December 31, 2017 Highlights 15 ($ in millions, except RPU) ADESA YTD 2017 YTD 2016 Highlights* Revenue $1,937.5 $1,765.3 $89.6M from acquisitions Gross profit** $813.6 $728.8 % of revenue 42.0% 41.3% Increased mix of online only volumes SG&A $360.0 $327.0 $27.7M acquired SG&A EBITD
Slide 16: IAA Year Ended December 31, 2017 Highlights
IAA Year Ended December 31, 2017 Highlights 16 ($ in millions) IAA YTD 2017 YTD 2016 Highlights* Revenue $1,219.2 $1,098.0 $45.1M hurricanes Harvey & Irma Gross profit** $441.1 $390.0 ($0.3M) loss from hurricanes Harvey & Irma % of revenue 36.2% 35.5% 38.3% excluding hurricanes Harvey & Irma and HBC
Slide 17: AFC Year Ended December 31, 2017 Highlights
AFC Year Ended December 31, 2017 Highlights 17 ($ in millions, except for revenue per loan transaction) AFC YTD 2017 YTD 2016 Highlights* Interest and fee income $290.3 $275.1 Other revenue $11.8 $10.3 Provision for credit losses ($33.9) ($30.7) Other service revenue $33.1 $32.1 Largely PWI Total AF
Slide 18: Historical Data
KAR Historical Data AUCTION SERVICES.
Slide 19: ADESA Metrics - Annual
ADESA Metrics - Annual 2017 2016 2015 2014 2013 Revenue2 $1,937.5 $1,765.3 $1,427.8 $1,271.0 $1,165.5 Total Volume 3,180 2,885 2,465 2,198 2,055 Online Only Volume 938 743 592 495 407 Total Online Volume % 45% 42% 40% 38% 35% Physical Conversion % (N.A.) 60.4% 58.0% 58.3% 58.2% 56.9% Dealer Consignm
Slide 20: ADESA Metrics - Quarter
ADESA Metrics - Quarter 4Q17 3Q17 2Q17 1Q17 4Q16 3Q16 2Q16 1Q16 Revenue2 $473.2 $477.1 $489.2 $498.0 $442.3 $457.4 $450.8 $414.8 Total Volume 744 788 830 818 700 732 750 703 Online Only Volume 237 241 245 215 177 180 198 188 Total Online Volume % 48% 45% 45% 42% 41% 40% 41% 43% Physical Conversion %
Slide 21: Used Vehicle Value Indices – Quarterly 2017
Increased industry (commercial) volumes drive average industry transaction wholesale prices higher (ADESA) Revenue per unit sold increased as a result of increased commercial mix (ADESA) Declining used car values increase likelihood of total losses (IAA) YoY Index Change Age 1Q17 2Q17 3Q17 4Q1
Slide 22: IAA Metrics - Annual
IAA Metrics - Annual 2017 2016 2015 2014 2013 Revenue $1,219.2 $1,098.0 $994.4 $895.9 $830.0 Total Volume 2,369 2,184 1,970 1,732 1,616 Inventory Growth (North America) 3% 25% 14% 20% -3% Purchased Vehicle Mix % 5% 7% 7% 6% 7% Gross Profit $441.1 $390.0 $360.8 $340.2 $284.1 Gross Margin (IAA) 36.2%
Slide 23: IAA Metrics - Quarter
IAA Metrics - Quarter 4Q17 3Q17 2Q17 1Q17 4Q16 3Q16 2Q16 1Q16 Revenue $335.4 $287.7 $298.7 $297.4 $302.6 $261.0 $264.8 $269.6 Total Volume 635 562 580 592 610 516 523 534 Inventory Growth (North America) 3% 12% 9% 17% 25% 22% 11% 4% Purchased Vehicle Mix % 4% 5% 5% 5% 6% 7% 6% 7% Gross Profit $112.7
Slide 24: IAA Year Ended December 31, 2017 Gross Profit
IAA Year Ended December 31, 2017 Gross Profit 24 ($ in millions) IAA HBC Total IAA HBC Total Revenue $1,181.3 $37.9 $1,219.2 $1,046.4 $51.6 $1,098.0 Cost of Services** 745.9 32.2 778.1 662.2 45.8 708.0 Gross Profit** $435.4 $5.7 $441.1 $384.2 $5.8 $390.0 % of Revenue 36.9% 15.0% 36.2% 36.7% 11.2% 35
Slide 25: IAA Q4 2017 Gross Profit
IAA Q4 2017 Gross Profit 25 ($ in millions) IAA HBC Total IAA HBC Total Revenue $327.8 $7.6 $335.4 $290.6 $12.0 $302.6 Cost of Services** 216.6 6.1 222.7 188.6 10.1 198.7 Gross Profit** $111.2 $1.5 $112.7 $102.0 $1.9 $103.9 % of Revenue 33.9% 19.7% 33.6% 35.1% 15.8% 34.3% * For a more complete expla
Slide 26: AFC Metrics - Annual
AFC Metrics - Annual 2017 2016 2015 2014 2013 Revenue $301.3 $286.8 $268.4 $250.1 $224.7 Loan Transaction Units (LTU) 1,688 1,718 1,607 1,445 1,355 Revenue per Loan Transaction, Excluding “Other Service Revenue” $159 $148 $150 $155 $157 Ending Managed Finance Receivables $1,912.6 $1,792.2 $1,641.0 $
Slide 27: AFC Metrics - Quarter
AFC Metrics - Quarter 4Q17 3Q17 2Q17 1Q17 4Q16 3Q16 2Q16 1Q16 Revenue $81.8 $78.2 $70.1 $71.2 $68.8 $71.2 $72.9 $73.9 Loan Transaction Units (LTU) 414 402 416 456 417 426 422 454 Revenue per Loan Transaction, Excluding “Other Service Revenue” $178 $174 $148 $138 $145 $148 $154 $146 Ending Managed Fi
Slide 28: AFC Provision for Credit Losses - Annual
AFC Provision for Credit Losses - Annual 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Ending Managed Receivables $1,912.6 $1,792.2 $1,641.0 $1,371.1 $1,107.6 $1,004.2 $883.2 $771.6 $613.0 $506.6 $847.9 Average Managed Receivables $1,802.2 $1,732.5 $1,474.9 $1,208.4 $1,051.4 $925.8 $798.8 $
Slide 29: AFC Provision for Credit Losses - Quarterly
AFC Provision for Credit Losses - Quarterly 4Q17 3Q17 2Q17 1Q17 4Q16 3Q16 2Q16 1Q16 Ending Managed Receivables $1,912.6 $1,809.2 $1,736.5 $1,760.7 $1,792.2 $1,785.4 $1,738.6 $1,705.5 Average Managed Receivables $1,860.9 $1,772.9 $1,748.6 $1,776.5 $1,788.8 $1,762.0 $1,722.1 $1,673.3 Provision for Cre
Slide 30: Appendix
KAR ; AUCTION Appendix SERVICES.
Slide 31: Non-GAAP Financial Measures
Non-GAAP Financial Measures 31 EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings
Slide 32: Q4 2017 Adjusted EBITDA Reconciliation
Q4 2017 Adjusted EBITDA Reconciliation 32 ($ in millions) Three Months ended December 31, 2017 ADESA IAA AFC Corporate Consolidated Net income (loss) $108.9 $68.5 $42.3 ($46.9) $172.8 Add back: Income taxes (39.5) (16.5) (9.3) (4.4) (69.7) Interest expense, net of interest income 0.4 – 11.8 29.6 41.
Slide 33: Q4 2016 Adjusted EBITDA Reconciliation
Q4 2016 Adjusted EBITDA Reconciliation 33 ($ in millions) Three Months ended December 31, 2016 ADESA IAA AFC Corporate Consolidated Net income (loss) $27.9 $29.0 $19.8 ($31.2) $45.5 Add back: Income taxes 16.0 16.8 12.2 (18.3) 26.7 Interest expense, net of interest income (0.2) – 9.4 28.7 37.9 Depre
Slide 34: YTD 2017 Adjusted EBITDA Reconciliation
YTD 2017 Adjusted EBITDA Reconciliation 34 ($ in millions) Year ended December 31, 2017 ADESA IAA AFC Corporate Consolidated Net income (loss) $260.9 $166.0 $103.9 ($168.8) $362.0 Add back: Income taxes 52.9 38.0 26.6 (81.5) 36.0 Interest expense, net of interest income – – 43.6 119.0 162.6 Deprecia
Slide 35: YTD 2016 Adjusted EBITDA Reconciliation
YTD 2016 Adjusted EBITDA Reconciliation 35 ($ in millions) Year ended December 31, 2016 ADESA IAA AFC Corporate Consolidated Net income (loss) $156.9 $101.1 $88.4 ($124.0) $222.4 Add back: Income taxes 92.7 59.3 54.0 (73.1) 132.9 Interest expense, net of interest income (0.3) – 34.1 104.6 138.4 Depr
Slide 36: Operating Adjusted Net Income per Share Reconciliation
Operating Adjusted Net Income per Share Reconciliation 36 ($ in millions, except per share amounts), (unaudited) 2017 2016 2017 2016 Net income $172.8 $45.5 $362.0 $222.4 Acquired amortization expense 27.0 25.8 103.7 97.1 Loss on extinguishment of debt – 1.4 27.5 5.4 Gain on previously held equity i
Slide 37: Q4 2017 KAR Incremental Operating Profit Margin Analysis
Q4 2017 KAR Incremental Operating Profit Margin Analysis 37 Reported Impact of Acquisitions KAR Excluding Acquisitions Q4 2017 Revenue 890.4$ 10.0$ 880.4$ Operating Profit 123.4$ (8.8)$ 132.2$ Operating Profit % 13.9% -88.0% 15.0% Q4 2016 Revenue 813.7$ Operating Profit 111.9$ Operating Profit % 13.
Slide 38: YTD 2017 KAR Incremental Operating Profit Margin Analysis
YTD 2017 KAR Incremental Operating Profit Margin Analysis 38 Reported Impact of Acquisitions KAR Excluding Acquisitions Q4 YTD 2017 Revenue 3,458.0$ 89.6$ 3,368.4$ Operating Profit 566.0$ 2.5$ 563.5$ Operating Profit % 16.4% 2.8% 16.7% Q4 YTD 2016 Revenue 3,150.1$ Operating Profit 499.0$ Operating P