Openlane, Inc. · NYSE:OPLN
Openlane — KAR Auction Services — Q1 2017 Earnings Presentation
19 slides from Openlane's earnings presentation, May 9, 2017
Slide 1: First Quarter 2017 Earnings Slides
First Quarter 2017 Earnings Slides May 9, 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: Key Messages
Key Messages 3 Our Priorities Favorable Market Conditions Performance End of lease returns continue Increased accident frequency and total losses Independent used dealer retail sales “choppy” Net Income $69.2M (+14%); Adjusted EBITDA $210.6M (+11%); Operating Adjusted EPS $0.62 (+13%) ADES
Slide 4: 2017 Outlook
2017 Outlook 4 2017 Low 2017 High Net income $235.7 $249.7 Add back: Income taxes $138.4 $146.6 Interest expense, net of interest income $170.0 $170.0 Depreciation and amortization $278.0 $278.0 EBITDA $822.1 $844.3 Total addbacks $2.9 $5.7 Adjusted EBITDA $825.0 $850.0 Capital expenditures $145.0 $
Slide 5: Q1 2017 Highlights
Q1 2017 Highlights 5 Revenues Highlights Fundamentals ADESA • Adjusted EBITDA +20% • Total volumes +16% (SS +4%) • Physical volumes +17% (SS 0%) • RPU +3% (Physical +2%) • Incremental operating profit 17% • Used retail sales +4% (NADA) • Lease change -2% (Edmunds) IAA • Revenue +10% • North American
Slide 6: Key Operating Metrics
Key Operating Metrics 6 1Q17 1Q16 ADESA Physical Vehicles Sold Growth1 0% 12% Online Only Vehicles Sold Growth 14% 33% Physical RPU Growth 2% 8% IAA Vehicles Sold Growth (includes HBC) 11% 14% Inventory Growth (excludes HBC) 17% 4% RPU Growth (includes HBC) 0% 0% AFC LTU Growth 0% 10% Provision for
Slide 7: Capital Allocation Priorities
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 auctions) Complementary technologies
Slide 8: KAR Q1 2017 Highlights
KAR Q1 2017 Highlights 8 ($ in millions, except per share amounts) KAR Q1 2017 Q1 2016 Highlights* Total operating revenues $866.6 $758.3 Gross profit** $365.4 $326.3 SG&A $157.4 $141.1 +$8.8M acquired SG&A EBITDA $208.0 $182.5 Adjusted EBITDA $210.6 $189.5 Net income $69.2 $60.7 Net income per shar
Slide 9: ADESA Q1 2017 Highlights
ADESA Q1 2017 Highlights 9 ($ in millions, except RPU) ADESA Q1 2017 Q1 2016 Highlights* Revenue $498.0 $414.8 +16% volume, +2% Physical RPU, +$48.4M acquisitions Gross profit** $207.1 $176.4 % of revenue 41.6% 42.5% SG&A $87.3 $76.6 +$8.8M acquired SG&A EBITDA $116.7 $97.1 Adjusted EBITDA $125.0 $1
Slide 10: Used Vehicle Value Indices
Increased commercial volumes are driving wholesale prices lower (ADESA) Revenue per unit sold has increased as used vehicle prices decline as a result of increased commercial mix (ADESA) Declining used car values increase likelihood of total losses (IAA) YoY Index Change Age Jan Feb Mar Indust
Slide 11: IAA Q1 2017 Highlights
IAA Q1 2017 Highlights 11 ($ in millions) IAA Q1 2017 Q1 2016 Highlights* Revenue $297.4 $269.6 +11% volume, -$1.1M HBC, -$2.0M GBP currency Gross profit** $108.3 $96.1 +$0.6M HBC % of revenue 36.4% 35.6% SG&A $25.9 $25.7 EBITDA $82.8 $70.5 Adjusted EBITDA $83.8 $71.1 % of revenue 28.2% 26.4% Vehicl
Slide 12: IAA Q1 2017 Gross Profit
IAA Q1 2017 Gross Profit 12 ($ in millions) IAA HBC Total IAA HBC Total Revenue $284.6 $12.8 $297.4 $255.7 $13.9 $269.6 Cost of Services** 178.2 10.9 189.1 160.9 12.6 173.5 Gross Profit $106.4 $1.9 $108.3 $94.8 $1.3 $96.1 % of Revenue 37.4% 14.8% 36.4% 37.1% 9.4% 35.6% * For a more complete explanat
Slide 13: AFC Q1 2017 Highlights
($ in millions, except for revenue per loan transaction) AFC Q1 2017 Q1 2016 Highlights* Interest and fee income $71.3 $69.4 Other revenue $2.9 $2.4 Provision for credit losses ($11.1) ($5.5) Other service revenue $8.1 $7.6 Total AFC revenue $71.2 $73.9 -5% revenue per LTU Gross profit** $50.0 $53.8
Slide 14: AFC Provision for Credit Losses
AFC Provision for Credit Losses 14 1Q17 4Q16 3Q16 2Q16 1Q16 4Q15 3Q15 2Q15 1Q15 Ending Managed Receivables $1,760.7 $1,792.2 $1,785.4 $1,738.6 $1,705.5 $1,641.0 $1,529.6 $1,476.9 $1,355.8 Average Managed Receivables $1,776.5 $1,788.8 $1,762.0 $1,722.1 $1,673.3 $1,585.3 $1,503.3 $1,416.4 $1,363.5 Pro
Slide 15: Appendix
KAR ; AUCTION Appendix SERVICES.
Slide 16: EBITDA, Adjusted EBITDA and Free Cash Flow Definitions
EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings as described in the company's
Slide 17: Q1 2017 Adjusted EBITDA Reconciliation
17 Q1 2017 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended March 31, 2017 ADESA IAA AFC Corporate Consolidated Net income (loss) $51.3 $32.2 $20.9 ($35.2) $69.2 Add back: Income taxes 29.0 18.0 11.8 (24.7) 34.1 Interest expense, net of interest income 0.1 – 10.3 29.8 40.2 Depreciat
Slide 18: Q1 2016 Adjusted EBITDA Reconciliation
18 Q1 2016 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended March 31, 2016 ADESA IAA AFC Corporate Consolidated Net income (loss) $39.3 $24.9 $24.0 ($27.5) $60.7 Add back: Income taxes 23.3 14.9 14.6 (16.1) 36.7 Interest expense, net of interest income 0.1 – 7.8 20.8 28.7 Depreciati
Slide 19: Operating Adjusted Net Income per Share Reconciliation
19 Operating Adjusted Net Income per Share Reconciliation ($ in millions, except per share amounts) 2017 2016 Net income $69.2 $60.7 Acquired amortization expense (1) 25.2 22.0 Loss on extinguishment of debt (2) – 4.0 Income taxes (3) (8.3) (9.8) Operating adjusted net income $86.1 $76.9 Net income