Slide 1: Q4 2018 & Annual Earnings Slides
Q4 2018 & Annual Earnings Slides February 19, 2019
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: 2018 Highlights
2018 Highlights Revenues Highlights Fundamentals $3,458.0 $3,769.6 • Revenue growth +9% • Diversified and complementary 340.9 301.3 • Operating Adjusted EPS +18% business services model 1,219.2 1,326.8 KAR • Adjusted EBITDA +7% 2,101.9 1,937.5 2017 2018 • Revenue +8% • Off-lease supply driving volum
Slide 4: 2019 Outlook
2019 Outlook ANNUAL GUIDANCE 2019 Low 2019 High 2018 Net income $330.0 $355.5 $328.0 Add back: Income tax expense $122.0 $131.5 $107.7 Interest expense, net of interest income $220.0 $220.0 $188.1 Depreciation and amortization $281.0 $281.0 $269.9 EBITDA $953.0 $988.0 $893.7 Total Adjusted EBITDA ad
Slide 5: Capital Allocation Framework
Clear Shareholder Friendly Capital Allocation Framework Strategic Share PRIORITIES Capex Dividends Investments Repurchases • Historically ~18% - 20% of • 45% - 50% of FCF • Targeted acquisitions • Tool for managing cash and Adjusted EBITDA, plus • Highlights consistency & • Complementary technology
Slide 6: December 31, 2018 Leverage
December 31, 2018 Leverage (US$ in millions) Balance Maturity Term Loan B-4 (Adjusted LIBOR + 2.25%) $704 2021 Term Loan B-5 (Adjusted LIBOR + 2.50%) 1,032 2023 Revolving Credit Facility (Adjusted LIBOR + 2.00%) - 2021 Senior Notes (Fixed 5.125%) 950 2025 Capital Leases 56 Total 2,742 Less: Availabl
Slide 7: TradeRev North America
TradeRev North America 300 Million Vehicles in 5M vehicle dealer-to- Operation dealer market 2018 vehicles sold 42 doubled 13M 19M New Vehicle Sales Million Removed Used Retail Vehicle From Operation ~$250 RPU Transactions Strong gross profit and improving with scale 2018A 2019E 12 Million U
Slide 8: KAR Extends International Footprint
KAR Extends International Footprint 97% cross border sales 19 languages 170 employees 40K+ registered dealers* Pan-European logistics VAT Compliant COTW Offices Buyer distribution Partnerships processes *Figures represent 12 month period. 8
Slide 9: Fourth Quarter Results
Fourth Quarter Results APPENDIX 9
Slide 10: KAR Q4 2018 Highlights
KAR Q4 2018 Highlights ($ in millions, except per share amounts) Q4 Q4 KAR Highlights* 2018 2017 Total operating revenues $929.0 $890.4 Gross profit** $385.8 $365.3 % of revenue 41.5% 41.0% SG&A $176.6 $172.5 $1.5M acquired SG&A EBITDA $206.9 $214.3 Adjusted EBITDA $206.6 $194.6 Net Income $67.3 $17
Slide 11: ADESA Q4 2018 Highlights
ADESA Q4 2018 Highlights ($ in millions, except RPU) Q4 Q4 ADESA Highlights* 2018 2017 Revenue $508.5 $473.2 Gross profit** $198.7 $191.5 % of revenue 39.1% 40.5% SG&A $106.9 $99.9 $1.5M of acquired SG&A EBITDA $86.6 $109.1 Adjusted EBITDA $98.8 $95.7 3% increase % of revenue 19.4% 20.2% Vehicles so
Slide 12: IAA Q4 2018 Highlights
IAA Q4 2018 Highlights ($ in millions) Q4 Q4 IAA Highlights* 2018 2017 Revenue $335.2 $335.4 Gross profit** $124.3 $112.7 % of revenue 37.1% 33.6% Excluding HBC 37.5% in Q4 2018 and 33.9% in Q4 2017 SG&A $26.3 $27.2 3% decrease EBITDA $97.7 $85.4 Adjusted EBITDA $97.7 $87.4 % of revenue 29.1% 26.1%
Slide 13: AFC Q4 2018 Highlights
AFC Q4 2018 Highlights ($ in millions, except for revenue per loan transaction) Q4 Q4 AFC 2018 2017 Highlights* Interest and fee income $84.2 $77.2 Other revenue $3.5 $2.9 Provision for credit losses ($10.8) ($6.4) Other service revenue $8.4 $8.1 PWI revenue Total AFC revenue $85.3 $81.8 +1% revenue
Slide 14: Year-to-Date Results
Ye a r - t o - D a t e R e s u l t s APPENDIX 14
Slide 15: KAR Year Ended December 31, 2018 Highlights
KAR Year Ended December 31, 2018 Highlights ($ in millions, except per share amounts) YTD YTD KAR Highlights* 2018 2017 Total operating revenues $3,769.6 $3,458.0 $26.4M acquisitions Gross profit** $1,626.9 $1,470.8 % of revenue 43.2% 42.5% SG&A $732.8 $640.2 $52.2M acquired SG&A EBITDA $893.7 $825.
Slide 16: ADESA Year Ended December 31, 2018 Highlights
ADESA Year Ended December 31, 2018 Highlights ($ in millions, except RPU) YTD YTD ADESA Highlights* 2018 2017 Revenue $2,101.9 $1,937.5 +$26.4M acquisitions Gross profit** $871.1 $813.6 % of revenue 41.4% 42.0% SG&A $435.8 $360.0 7% growth excluding $52.2M of acquired SG&A EBITDA $420.7 $462.7 Adjus
Slide 17: IAA Year Ended December 31, 2018 Highlights
IAA Year Ended December 31, 2018 Highlights ($ in millions) YTD YTD IAA Highlights* 2018 2017 Revenue $1,326.8 $1,219.2 Gross profit** $505.6 $441.1 % of revenue 38.1% 36.2% Excluding HBC 38.6% vs 36.9% prior year SG&A $114.3 $107.1 EBITDA $391.8 $334.9 Adjusted EBITDA $395.5 $339.5 % of revenue 29.
Slide 18: AFC Year Ended December 31, 2018 Highlights
AFC Year Ended December 31, 2018 Highlights ($ in millions, except for revenue per loan transaction) YTD YTD AFC 2018 2017 Highlights* Interest and fee income $327.3 $290.3 Other revenue $13.1 $11.8 Provision for credit losses ($32.9) ($33.9) Other service revenue $33.4 $33.1 PWI revenue Total AFC r
Slide 19: Historical Data
AUCTION SERVICES. HISTORICAL DATA
Slide 20: ADESA Metrics - Annual
ADESA Metrics - Annual 2018 2017 2016 2015 2014 Revenue2 2,101.9 $1,937.5 $1,765.3 $1,427.8 $1,271.0 Total Volume 3,472 3,180 2,885 2,465 2,198 Online Only Volume 1,304 938 743 592 495 Total Online Volume %3 54% 46% 42% 40% 38% Physical Conversion % (N.A.) 61.6% 60.4% 58.0% 58.3% 58.2% Dealer Consig
Slide 21: ADESA Metrics - Quarter
ADESA Metrics - Quarter 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 Revenue2 508.5 $527.0 $538.3 $528.1 $473.2 $477.1 $489.2 $498.0 Total Volume 811 876 907 878 744 788 830 818 Online Only Volume 306 343 346 309 237 241 245 215 Total Online Volume %3 54% 54% 54% 52% 49% 46% 46% 44% Physical Conversion %
Slide 22: IAA Metrics - Annual
IAA Metrics - Annual 2018 2017 2016 2015 2014 Revenue $1,326.8 $1,219.2 $1,098.0 $994.4 $895.9 Total Volume 2,480 2,369 2,184 1,970 1,732 Inventory Growth (North America) 1% 3% 25% 14% 20% Purchased Vehicle Mix % 4% 5% 7% 7% 6% Gross Profit $505.6 $441.1 $390.0 $360.8 $340.2 Gross Margin (IAA) 38.1%
Slide 23: IAA Year Ended December 31, 2018 Gross Profit
IAA Year Ended December 31, 2018 Gross Profit ($ in millions) Year Ended Year Ended December 31, 2018 December 31, 2017 IAA HBC Total IAA HBC Total Revenue $1,294.1 $32.7 $1,326.8 $1,181.3 $37.9 $1,219.2 Cost of Services** $794.6 $26.6 $821.2 $745.9 $32.2 $778.1 Gross Profit** $499.5 $6.1 $505.6 $43
Slide 24: IAA Metrics - Quarter
IAA Metrics - Quarter 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 Revenue $335.2 $321.1 $333.2 $337.3 $335.4 $287.7 $298.7 $297.4 Total Volume 617 597 623 643 635 562 580 592 Inventory Growth (North 1% -9% 2% 4% 3% 12% 9% 17% America) Purchased Vehicle Mix % 4% 4% 4% 4% 4% 5% 5% 5% Gross Profit $124.3 $
Slide 25: IAA Q4 2018 Gross Profit
IAA Q4 2018 Gross Profit ($ in millions) Three Months Ended Three Months Ended December 31, 2018 December 31, 2017 IAA HBC Total IAA HBC Total Revenue $327.6 $7.6 $335.2 $327.8 $7.6 $335.4 Cost of Services** $204.7 $6.2 $210.9 $216.6 $6.1 $222.7 Gross Profit** $122.9 $1.4 $124.3 $111.2 $1.5 $112.7 %
Slide 26: AFC Metrics - Annual
AFC Metrics - Annual 2018 2017 2016 2015 2014 Revenue $340.9 $301.3 $286.8 $268.4 $250.1 Loan Transaction Units (LTU) 1,760 1,688 1,718 1,607 1,445 Revenue per Loan Transaction, $175 $159 $148 $150 $155 Excluding “Other Service Revenue” Ending Managed Finance Receivables $2,014.8 $1,912.6 $1,792.2 $
Slide 27: AFC Metrics - Quarter
AFC Metrics - Quarter 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 Revenue $85.3 $85.4 $85.1 $85.1 $81.8 $78.2 $70.1 $71.2 Loan Transaction Units (LTU) 428 433 435 464 414 402 416 456 Revenue per Loan Transaction, Excluding $180 $177 $177 $166 $178 $174 $148 $138 “Other Service Revenue” Ending Managed Fi
Slide 28: AFC Provision for Credit Losses - Annual
AFC Provision for Credit Losses - Annual 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Ending Managed $2,014.8 $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 Receivables Average Managed $1,959.8 $1,802.2 $1,732.5 $1,474.9 $1,208.4 $1,051.4 $925
Slide 29: AFC Provision for Credit Losses - Quarterly
AFC Provision for Credit Losses - Quarterly 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 Ending Managed $2,014.8 $1,979.7 $1,958.6 $1,933.2 $1,912.6 $1,809.2 $1,736.5 $1,760.7 Receivables Average Managed $1,997.3 $1,969.2 $1,945.9 $1,922.9 $1,860.9 $1,772.9 $1,748.6 $1,776.5 Receivables Provision for $10
Slide 30: Appendix
AUCTION SERVICES. APPENDIX
Slide 31: Non-GAAP Financial Measures
Non-GAAP Financial Measures EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings as
Slide 32: Q4 2018 Adjusted EBITDA Reconciliation
Q4 2018 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended December 31, 2018 ADESA IAA AFC Corporate Consolidated Net income (loss) $38.1 $47.8 $29.5 ($48.1) $67.3 Add back: Income taxes 11.1 16.0 8.7 (14.8) 21.0 Interest expense, net of interest income 0.1 - 16.3 35.1 51.5 Depreciati
Slide 33: Q4 2017 Adjusted EBITDA Reconciliation
Q4 2017 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended December 31, 2017 ADESA IAA AFC Corporate Consolidated Net income (loss) $108.9 $68.5 $42.3 ($46.9) $172.8 Add back: Income taxes (39.5) (16.5) (9.3) (4.4) (69.7) Interest expense, net of interest income 0.4 - 11.8 29.6 41.8 D
Slide 34: YTD 2018 Adjusted EBITDA Reconciliation
YTD 2018 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2018 ADESA IAA AFC Corporate Consolidated Net income (loss) $203.3 $192.3 $112.0 ($179.6) $328.0 Add back: Income taxes 69.1 64.2 35.4 (61.0) 107.7 Interest expense, net of interest income 1.0 - 59.3 127.8 188.1 Deprecia
Slide 35: YTD 2017 Adjusted EBITDA Reconciliation
YTD 2017 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2017 ADESA IAA AFC Corporate Consolidated Net income (loss) $260.9 $166.0 $103.9 ($168.8) $362.0 Add back: Income taxes 52.9 38.0 26.6 (81.5) 36.0 Interest expense, net of interest income - - 43.6 119.0 162.6 Depreciatio
Slide 36: Operating Adjusted Net Income per Share Reconciliation
Operating Adjusted Net Income per Share Reconciliation ($ in millions, except per share amounts), (unaudited) Three Months ended Year ended December 31, December 30, 2018 2017 2018 2017 Net income $67.3 $172.8 $328.0 $362.0 Acquired amortization expense 20.1 27.0 89.5 103.7 IAA separation costs 1.3
Slide 37: YTD 2018 ADESA Incremental Operating Profit Margin Analysis
YTD 2018 ADESA Incremental Operating Profit Margin Analysis Incremental Operating Profit % ($ in millions) ADESA IMPACT OF REPORTED EXCLUDING ACQUISITIONS ACQUISITIONS YTD 2018 Revenue $2,101.9 $26.4 $2,075.5 Operating Profit $307.8 ($51.1) $358.9 Operating Profit % 14.6% (193.6%) 17.3% YTD 2017 Rev
Slide 38: YTD 2018 IAA Incremental Operating Profit Margin Analysis
YTD 2018 IAA Incremental Operating Profit Margin Analysis Incremental Operating Profit % ($ in millions) REPORTED YTD 2018 Revenue $1,326.8 Operating Profit $293.9 Operating Profit % 22.2% YTD 2017 Revenue $1,219.2 Operating Profit $240.9 Operating Profit % 19.8% YTD 2018 Reported Growth Reported Re