CARMEL, Ind., Feb. 16, 2022 /PRNewswire/ -- KAR Auction
Services, Inc. (NYSE: KAR), today reported its fourth quarter
financial results for the period ended December 31, 2021.
"Though commercial seller volumes remained constrained in the
fourth quarter, I was pleased with our performance in the face of
this challenge," said Peter Kelly,
CEO of KAR Global. "We have maintained — and in some cases slightly
increased — our share with commercial sellers while achieving
strong double-digit growth in our digital dealer-to-dealer
businesses. We are focused on improving gross profit per unit sold
and Adjusted EBITDA as a percent of revenue, and continue to take
meaningful, deliberate steps to reduce our labor and selling,
general and administrative costs. We believe our digital
transformation strategy and leaner cost structure position us for
faster growth and higher profitability as volumes return."
Fourth Quarter 2021 Financial Highlights
- Total revenue for the fourth quarter of 2021 was $549.4 million, an increase of 4% compared with
$529.6 million for the fourth quarter
of 2020.
- Net income for the fourth quarter of 2021 of $5.1 million and a loss of $(0.04) per diluted share, compared with a net
loss of $17.1 million, or
$(0.21) per diluted share, in the
fourth quarter of 2020.
- Adjusted EBITDA for the quarter ended December 31, 2021 was $97.9 million, compared with $67.5 million for the quarter ended December 31, 2020, an increase of 45%.
- Operating adjusted net income per diluted share was
$0.11 for the quarter ended
December 31, 2021, compared with an
operating adjusted net loss per diluted share of $(0.01) for the quarter ended December 31, 2020.
- Year-over-year increase in ADESA's digital dealer-to-dealer
marketplaces of 72% or 20%, when including CARWAVE and BacklotCars
volumes in both years.
- ADESA gross profit per vehicle sold increased 30% to
$297 for the quarter ended
December 31, 2021, compared with
$229 for the quarter ended
December 31, 2020.
- AFC's strong fourth quarter performance was driven by increased
loan transactions (5%), increased revenue per loan transaction
(25%) and increased leverage of selling, general and administrative
costs of $9.1 million in both the
fourth quarter of 2021 and 2020.
2021 Financial Highlights
- Total revenue for the year ended December 31, 2021 was $2,251.6 million, an increase of 3% compared with
$2,187.7 million for the year ended
December 31, 2020.
- Net income for the year ended December
31, 2021 of $66.5 million, or
$0.16 per diluted share, compared
with net income of $0.5 million and a
loss of $(0.16) per diluted share,
for the year ended December 31,
2020.
- Adjusted EBITDA for the year ended December 31, 2021 was $434.2 million, compared with $375.3 million for the year ended December 31, 2020, an increase of 16%.
- Operating adjusted net income per diluted share was
$0.81 for the year ended December 31, 2021, compared with operating
adjusted net income per diluted share of $0.51 for the year ended December 31, 2020.
- Year-over-year increase in ADESA's digital dealer-to-dealer
marketplaces of 110% or 34%, when including CARWAVE and BacklotCars
volumes in both years.
- ADESA gross profit per vehicle sold increased 19% to
$277 for the year ended December 31, 2021, compared with $233 for the year ended December 31, 2020.
- Strong growth in AFC's revenue (8%), operating profit (36%) and
Adjusted EBITDA (46%) reflect strong used car pricing, low credit
risk and the efficiency of its inventory floorplanning business
model.
Investments in Early-Stage Automotive Companies
The
company invests in certain early-stage automotive companies and
funds that relate to the automotive industry. We believe these
investments have resulted in the expansion of relationships in the
vehicle remarketing industry. Realized gains on these investments
were $4.8 million and $32.0 million for the three and twelve months
ended December 31, 2021,
respectively. The company had a net reduction in unrealized gains
on investment securities of $9.3 million for the three months ended
December 31, 2021 and a net increase
in unrealized gains on investment securities of $1.4 million for the year ended December 31, 2021.
Earnings Conference Call Information
KAR will be
hosting an earnings conference call and webcast on Thursday, February 17, 2022 at 8:30 a.m. ET. The call will be hosted by KAR's
Chief Executive Officer, Peter Kelly
and Executive Vice President and Chief Financial Officer,
Eric Loughmiller. The conference
call may be accessed by calling 1-844-778-4145 and entering
participant passcode 8091348, while the live web cast will be
available at the investors section of www.karglobal.com.
Supplemental financial information for KAR's fourth quarter 2021
results is available at the investors section of
www.karglobal.com.
The archive of the webcast will also be available following the
call and will be available at the investors section of
www.karglobal.com for a limited time.
About KAR
KAR Auction Services, Inc. d/b/a KAR Global
(NYSE: KAR), provides sellers and buyers across the global
wholesale used vehicle industry with innovative, technology-driven
remarketing solutions. KAR Global's unique end-to-end platform
supports whole car, financing, logistics and other ancillary and
related services, including the sale of nearly 2.6 million units
valued at over $40 billion through
our auctions in 2021. Our integrated physical, online and mobile
marketplaces reduce risk, improve transparency and streamline
transactions for customers in about 75 countries. Headquartered in
Carmel, Indiana, KAR Global has
employees across the United
States, Canada,
Europe, Mexico, Uruguay and the
Philippines. For more information and the latest KAR Global
news, go to www.karglobal.com and follow us on Twitter
@KARSpeaks.
Forward-Looking Statements
Certain statements
contained in this release include "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995 and which are subject to certain risks, trends and
uncertainties. In particular, statements made that are not
historical facts may be forward-looking statements. Words such as
"should," "may," "will," "can," "of the opinion," "confident,"
"anticipates," "expects," "intends," "plans," "believes," "seeks,"
"estimates," "continues," "outlook," "initiatives," "goals,"
"opportunities," and similar expressions identify forward-looking
statements. Such statements are based on management's current
expectations, are not guarantees of future performance and are
subject to risks and uncertainties that could cause actual results
to differ materially from the results projected, expressed or
implied by these forward-looking statements. Factors that could
cause or contribute to such differences include those uncertainties
regarding the impact of the COVID-19 pandemic on our business and
the economy generally, and those other matters disclosed in the
Company's Securities and Exchange Commission filings. The Company
does not undertake any obligation to update any forward-looking
statements.
KAR Auction
Services, Inc.
Condensed
Consolidated Statements of Income
(In millions)
(Unaudited)
|
|
|
Three Months Ended
December 31,
|
|
Year
Ended
December
31,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Operating
revenues
|
|
|
|
|
|
|
|
Auction
fees
|
$
207.4
|
|
$
207.0
|
|
$
877.8
|
|
$
887.7
|
Service
revenue
|
168.2
|
|
173.5
|
|
707.2
|
|
737.4
|
Purchased vehicle
sales
|
94.6
|
|
83.7
|
|
377.4
|
|
295.0
|
Finance-related
revenue
|
79.2
|
|
65.4
|
|
289.2
|
|
267.6
|
Total operating
revenues
|
549.4
|
|
529.6
|
|
2,251.6
|
|
2,187.7
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Cost of services
(exclusive of depreciation and amortization)
|
323.2
|
|
325.4
|
|
1,299.9
|
|
1,284.8
|
Selling, general and
administrative
|
134.8
|
|
139.7
|
|
558.1
|
|
545.4
|
Depreciation and
amortization
|
45.9
|
|
50.6
|
|
183.0
|
|
191.3
|
Goodwill and other
intangibles impairment
|
—
|
|
—
|
|
—
|
|
29.8
|
Total operating
expenses
|
503.9
|
|
515.7
|
|
2,041.0
|
|
2,051.3
|
|
|
|
|
|
|
|
|
Operating
profit
|
45.5
|
|
13.9
|
|
210.6
|
|
136.4
|
|
|
|
|
|
|
|
|
Interest
expense
|
32.3
|
|
30.5
|
|
126.6
|
|
128.9
|
Other (income)
expense, net
|
4.6
|
|
3.9
|
|
(17.5)
|
|
2.1
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
8.6
|
|
(20.5)
|
|
101.5
|
|
5.4
|
|
|
|
|
|
|
|
|
Income
taxes
|
3.5
|
|
(3.4)
|
|
35.0
|
|
4.9
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
5.1
|
|
$
(17.1)
|
|
$
66.5
|
|
$
0.5
|
|
|
|
|
|
|
|
|
Net income (loss) per
share
|
|
|
|
|
|
|
|
Basic
|
$
(0.04)
|
|
$
(0.21)
|
|
$
0.16
|
|
$
(0.16)
|
Diluted
|
$
(0.04)
|
|
$
(0.21)
|
|
$
0.16
|
|
$
(0.16)
|
|
|
|
|
|
|
|
|
Dividends declared
per common share
|
$
—
|
|
$
—
|
|
$
—
|
|
$
0.19
|
KAR Auction
Services, Inc.
Condensed
Consolidated Balance Sheets
(In millions)
(Unaudited)
|
|
|
December
31,
2021
|
|
December
31,
2020
|
Cash and cash
equivalents
|
$
190.0
|
|
$
752.1
|
Restricted
cash
|
25.8
|
|
60.2
|
Trade receivables,
net of allowances
|
527.0
|
|
367.2
|
Finance receivables,
net of allowances
|
2,506.0
|
|
1,889.0
|
Other current
assets
|
109.5
|
|
106.7
|
Total current
assets
|
3,358.3
|
|
3,175.2
|
|
|
|
|
Goodwill
|
2,578.4
|
|
2,140.2
|
Customer
relationships, net of accumulated amortization
|
243.3
|
|
211.3
|
Operating lease
right-of-use assets
|
325.7
|
|
350.6
|
Property and
equipment, net of accumulated depreciation
|
579.2
|
|
589.9
|
Intangible and other
assets
|
332.3
|
|
331.0
|
Total
assets
|
$
7,417.2
|
|
$
6,798.2
|
|
|
|
|
Current liabilities,
excluding obligations collateralized by
finance receivables and
current maturities of debt
|
$
1,267.2
|
|
$
965.1
|
Obligations
collateralized by finance receivables
|
1,692.3
|
|
1,261.2
|
Current maturities of
debt
|
16.3
|
|
24.3
|
Total current
liabilities
|
2,975.8
|
|
2,250.6
|
|
|
|
|
Long-term
debt
|
1,849.7
|
|
1,853.8
|
Operating lease
liabilities
|
317.1
|
|
344.2
|
Other non-current
liabilities
|
170.7
|
|
184.0
|
Temporary
equity
|
590.9
|
|
549.8
|
Stockholders'
equity
|
1,513.0
|
|
1,615.8
|
Total liabilities,
temporary equity and stockholders' equity
|
$
7,417.2
|
|
$
6,798.2
|
KAR Auction
Services, Inc.
Condensed
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
|
|
|
Year
Ended December
31,
|
|
2021
|
|
2020
|
Operating
activities
|
|
|
|
Net income
|
$
66.5
|
|
$
0.5
|
Adjustments to reconcile
net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
183.0
|
|
191.3
|
Provision for credit
losses
|
8.8
|
|
43.8
|
Deferred income
taxes
|
7.8
|
|
(7.2)
|
Amortization of debt
issuance costs
|
12.1
|
|
11.7
|
Stock-based
compensation
|
15.6
|
|
14.0
|
Contingent consideration
adjustment
|
24.3
|
|
4.7
|
Net decrease in unrealized
gain on investment securities
|
(1.4)
|
|
—
|
Goodwill and other
intangibles impairment
|
—
|
|
29.8
|
Other non-cash,
net
|
(1.9)
|
|
5.0
|
Changes in operating
assets and liabilities, net of acquisitions:
|
|
|
|
Trade receivables and other
assets
|
(94.1)
|
|
117.9
|
Accounts payable and accrued
expenses
|
192.5
|
|
(27.1)
|
Net cash provided
by operating activities
|
413.2
|
|
384.4
|
Investing
activities
|
|
|
|
Net (increase) decrease in
finance receivables held for investment
|
(618.6)
|
|
170.6
|
Acquisition of
businesses (net of cash acquired)
|
(521.8)
|
|
(421.0)
|
Purchases of property,
equipment and computer software
|
(108.5)
|
|
(101.4)
|
Investments in
securities
|
(22.5)
|
|
—
|
Proceeds from sale of
investments
|
38.5
|
|
—
|
Proceeds from the sale of
PWI
|
2.2
|
|
24.3
|
Proceeds from the sale of
property and equipment
|
12.1
|
|
0.9
|
Net cash used by
investing activities
|
(1,218.6)
|
|
(326.6)
|
Financing
activities
|
|
|
|
Net increase
(decrease) in book overdrafts
|
3.3
|
|
(6.9)
|
Net (decrease)
increase in borrowings from lines of credit
|
(8.0)
|
|
(14.0)
|
Net increase
(decrease) in obligations collateralized by finance
receivables
|
424.4
|
|
(191.1)
|
Proceeds from
issuance of Series A Preferred Stock
|
—
|
|
550.1
|
Payments for
issuance costs of Series A Preferred Stock
|
—
|
|
(21.9)
|
Payments for
debt issuance costs/amendments
|
(0.6)
|
|
(18.5)
|
Payments on long-term
debt
|
(9.5)
|
|
(9.5)
|
Payments on finance
leases
|
(10.5)
|
|
(16.1)
|
Payments of contingent
consideration and deferred acquisition costs
|
(37.1)
|
|
(31.2)
|
Issuance of common stock
under stock plans
|
1.5
|
|
2.1
|
Issuance of common stock -
private placement
|
30.0
|
|
15.0
|
Tax withholding payments for
vested RSUs
|
(2.2)
|
|
(4.0)
|
Repurchase and retirement of
common stock
|
(180.9)
|
|
(10.2)
|
Dividends paid to
stockholders
|
—
|
|
(49.0)
|
Net cash provided
by financing activities
|
210.4
|
|
194.8
|
Effect of exchange
rate changes on cash
|
(1.5)
|
|
(1.2)
|
Net (decrease)
increase in cash, cash equivalents and restricted
cash
|
(596.5)
|
|
251.4
|
Cash, cash
equivalents and restricted cash at beginning of period
|
812.3
|
|
560.9
|
Cash, cash
equivalents and restricted cash at end of period
|
$
215.8
|
|
$
812.3
|
Cash paid for
interest, net of proceeds from interest rate derivatives
|
$
112.7
|
|
$
116.6
|
Cash paid for taxes,
net of refunds
|
$
26.0
|
|
$
16.6
|
KAR Auction Services, Inc.
Reconciliation of
Non-GAAP Financial Measures
EBITDA, Adjusted EBITDA, operating adjusted net income and
operating adjusted net income per share as presented herein are
supplemental measures of our performance that are not required by,
or presented in accordance with, generally accepted accounting
principles in the United States
("GAAP"). They are not measurements of our financial performance
under GAAP and should not be considered as substitutes for net
income (loss) or any other performance measures derived in
accordance with GAAP. Management believes that these measures
provide investors additional meaningful methods to evaluate certain
aspects of the company's results period over period and for the
other reasons set forth below.
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 our senior secured credit
agreement covenant calculations. Management believes that the
inclusion of supplementary adjustments to EBITDA applied in
presenting Adjusted EBITDA is appropriate to provide additional
information to investors about one of the principal measures of
performance used by our creditors. In addition, management uses
EBITDA and Adjusted EBITDA to evaluate our performance.
Depreciation expense for property and equipment and amortization
expense of capitalized internally developed software costs relate
to ongoing capital expenditures; however, amortization expense
associated with acquired intangible assets, such as customer
relationships, software, tradenames and noncompete agreements are
not representative of ongoing capital expenditures, but have a
continuing effect on our reported results. Non-GAAP financial
measures of operating adjusted net income and operating adjusted
net income per share, in the opinion of the company, provide
comparability of the company's performance to other companies that
may not have incurred these types of non-cash expenses or that
report a similar measure. In addition, operating adjusted net
income and operating adjusted net income per share may include
adjustments for certain other charges.
EBITDA, Adjusted EBITDA, operating adjusted net income and
operating adjusted net income per share have limitations as
analytical tools, and should not be considered in isolation or as a
substitute for analysis of the results as reported under GAAP.
These measures may not be comparable to similarly titled measures
reported by other companies.
The following table reconciles EBITDA and Adjusted EBITDA to net
income (loss) for the periods presented:
|
Three Months
Ended
December
31,
|
|
Year
Ended
December
31,
|
(in
millions), (unaudited)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net income
(loss)
|
$
5.1
|
|
$
(17.1)
|
|
$
66.5
|
|
$
0.5
|
Add back:
|
|
|
|
|
|
|
|
Income
taxes
|
3.5
|
|
(3.4)
|
|
35.0
|
|
4.9
|
Interest expense, net
of interest income
|
32.0
|
|
30.3
|
|
125.7
|
|
127.3
|
Depreciation and
amortization
|
45.9
|
|
50.6
|
|
183.0
|
|
191.3
|
EBITDA
|
86.5
|
|
60.4
|
|
410.2
|
|
324.0
|
Non-cash stock-based
compensation
|
1.9
|
|
3.0
|
|
16.7
|
|
15.1
|
Acquisition related
costs
|
2.4
|
|
4.1
|
|
8.1
|
|
8.8
|
Securitization
interest
|
(8.3)
|
|
(6.2)
|
|
(29.8)
|
|
(27.3)
|
(Gain)/Loss on asset
sales
|
(0.8)
|
|
0.2
|
|
(4.4)
|
|
1.3
|
Severance
|
1.6
|
|
0.9
|
|
5.2
|
|
11.5
|
Foreign currency
(gains)/losses
|
1.1
|
|
1.7
|
|
3.8
|
|
4.9
|
Goodwill and other
intangibles impairment
|
—
|
|
—
|
|
—
|
|
29.8
|
Contingent
consideration adjustment
|
4.2
|
|
4.7
|
|
24.3
|
|
4.7
|
Net change in
unrealized gains on investment securities
|
9.3
|
|
—
|
|
(1.4)
|
|
—
|
Other
|
—
|
|
(1.3)
|
|
1.5
|
|
2.5
|
Total
addbacks/(deductions)
|
11.4
|
|
7.1
|
|
24.0
|
|
51.3
|
Adjusted
EBITDA
|
$
97.9
|
|
$
67.5
|
|
$
434.2
|
|
$
375.3
|
The following table reconciles operating adjusted net income
(loss) and operating adjusted net income (loss) per diluted share
to net income (loss) for the periods presented:
|
Three Months
Ended
December
31,
|
|
Year
Ended
December
31,
|
(in millions,
except per share amounts), (unaudited)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net income (loss)
(1)
|
$
5.1
|
|
$
(17.1)
|
|
$
66.5
|
|
$
0.5
|
Acquired
amortization expense
|
13.0
|
|
15.3
|
|
54.6
|
|
57.7
|
Contingent consideration adjustment
|
4.2
|
|
4.7
|
|
24.3
|
|
4.7
|
Goodwill
and other intangibles impairment
|
—
|
|
—
|
|
—
|
|
29.8
|
Income
taxes (2)
|
(4.5)
|
|
(4.6)
|
|
(18.8)
|
|
(17.3)
|
Operating adjusted
net income (loss)
|
$
17.8
|
|
$
(1.7)
|
|
$
126.6
|
|
$
75.4
|
|
|
|
|
|
|
|
|
Operating adjusted
net income (loss) per share - diluted
|
$
0.11
|
|
$
(0.01)
|
|
$
0.81
|
|
$
0.51
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares
|
156.1
|
|
161.8
|
|
157.2
|
|
147.0
|
|
|
(1)
|
The Series A
Preferred Stock dividends and undistributed earnings allocated to
participating securities have not been included in the calculation
of operating adjusted net income (loss) and operating adjusted net
income (loss) per diluted share.
|
(2)
|
For the three and
twelve months ended December 31, 2021, an effective tax rate of
34.5% was applied to the acquired amortization expense and for the
three and twelve months ended December 31, 2020, an effective tax
rate of 30% was applied to the acquired amortization expense. There
was no income tax benefit related to the contingent consideration
adjustment or the goodwill and other intangibles impairment because
these items were not deductible for income tax purposes.
|
Analyst
Inquiries:
|
Media
Inquiries:
|
Mike
Eliason
|
Jill
Trudeau
|
(317)
249-4559
|
(317)
796-0945
|
mike.eliason@karglobal.com
|
jill.trudeau@karglobal.com
|
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SOURCE KAR Auction Services