- KAR expects to close the transaction selling its ADESA U.S.
physical auction business to Carvana, with the proceeds expected to
reduce debt
- KAR reported consistent revenue from continuing
operations
- For the first quarter, gross profit per vehicle sold
increased year-over-year to $255
- Continued growth in digital dealer-to-dealer volumes were
driven by industry-leading platforms, BacklotCars and
TradeRev
CARMEL,
Ind., May 3, 2022 /PRNewswire/ -- KAR Auction
Services, Inc. (NYSE: KAR) today reported its first quarter
financial results for the period ended March
31, 2022.
"We expect to close the transaction selling our U.S. physical
auction business to Carvana within the next week," said
Peter Kelly, CEO of KAR Global.
"Going forward KAR will be the premier digital marketplace for
wholesale used vehicles, with a meaningful finance company enabling
our customer base. Our business will become asset-light with an
enhanced financial profile—including significantly
less debt. We expect the new simplified KAR to generate
$265 million of Adjusted EBITDA in
2022. And as I look beyond 2022, I see exciting opportunities for
growth across all of our businesses."
First Quarter 2022 Financial
Highlights
The company has classified the
ADESA U.S. physical auction business as held-for-sale (discontinued
operations) based on management's intention to sell the business.
As such, the results discussed herein refer to the continuing
operations of KAR and do not include the results of the ADESA U.S.
physical auction business.
- Total revenue for the first quarter of 2022 was $369.4 million, a decrease of less than 1%
compared with $369.8 million for the
first quarter of 2021.
- Net loss from continuing operations for the first quarter of
2022 of $8.4 million, or $(0.16) per diluted share, compared with net
income from continuing operations of $26.2
million, or $0.10 per diluted
share, for the first quarter of 2021.
- Adjusted EBITDA from continuing operations for the quarter
ended March 31, 2022 was $49.1 million, compared with $77.2 million for the quarter ended March 31, 2021.
- Operating adjusted net income (loss) from continuing operations
per diluted share was $(0.02) for the
quarter ended March 31, 2022,
compared with $0.26 for the quarter
ended March 31, 2021.
- Results for the quarter ended March 31,
2021 included $17.0 million in
realized gains related to previous investments in early-stage
automotive companies.
- Year-over-year increase in ADESA's digital dealer-to-dealer
marketplaces of 31%, or 6% when including CARWAVE volumes in both
years.
- ADESA gross profit per vehicle sold increased 3% to
$255 for the quarter ended
March 31, 2022, compared with
$248 for the quarter ended
March 31, 2021.
- AFC's strong first quarter performance was driven by increased
revenue per loan transaction of 28%.
Share Repurchase Authorization
The
board of directors authorized an increase in the size of the
company's $300 million share
repurchase program by an additional $200
million and an extension of the share repurchase program
through December 31, 2023. With the
increase, and giving effect to the company's previous repurchases,
approximately $309 million remains
available for repurchases under the share repurchase program.
Earnings Conference Call
Information
KAR will be hosting an
earnings conference call and webcast on Wednesday, May 4, 2022 at 8:30 a.m. EDT. 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 5886902, while the live web cast will be
available at the investors section of www.karglobal.com.
Supplemental financial information for KAR's first quarter 2022
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," "is
set," "is on track," "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 risks and uncertainties regarding (i) the
impact of the COVID-19 pandemic on our business and the economy
generally; (ii) the impact of the conflict between Russia and Ukraine; (iii) the company's proposed sale of
the ADESA U.S. physical auction business to Carvana, including the
company may be unable to complete the proposed transaction in a
timely manner or at all, the ability of the company to execute on
its strategy and achieve its goals and other expectations after the
completion of the proposed transaction, the effect of the
transaction or the pendency of the proposed transaction on the
company's relationships with its customers and business, and the
outcome of any legal proceedings to the extent initiated against
the company or others related to the proposed transaction; and (iv)
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
March 31,
|
|
2022
|
|
2021
|
Operating
revenues
|
|
|
|
Auction fees
|
$
101.4
|
|
$
102.5
|
Service
revenue
|
137.5
|
|
146.3
|
Purchased vehicle
sales
|
46.3
|
|
55.2
|
Finance-related
revenue
|
84.2
|
|
65.8
|
Total operating
revenues
|
369.4
|
|
369.8
|
|
|
|
|
Operating
expenses
|
|
|
|
Cost of services
(exclusive of depreciation and amortization)
|
210.8
|
|
203.8
|
Selling, general and
administrative
|
118.9
|
|
107.3
|
Depreciation and
amortization
|
26.0
|
|
26.9
|
Total operating
expenses
|
355.7
|
|
338.0
|
|
|
|
|
Operating
profit
|
13.7
|
|
31.8
|
|
|
|
|
Interest
expense
|
25.6
|
|
30.8
|
Other (income) expense,
net
|
1.2
|
|
(49.7)
|
|
|
|
|
Income (loss) from
continuing operations before income taxes
|
(13.1)
|
|
50.7
|
|
|
|
|
Income taxes
|
(4.7)
|
|
24.5
|
|
|
|
|
Income (loss) from
continuing operations
|
(8.4)
|
|
26.2
|
Income from
discontinued operations, net of income taxes
|
8.1
|
|
24.7
|
Net income
(loss)
|
$
(0.3)
|
|
$
50.9
|
|
|
|
|
Net income (loss) per
share - basic
|
|
|
|
Income (loss) from
continuing operations
|
$
(0.16)
|
|
$
0.10
|
Income from
discontinued operations
|
0.07
|
|
0.15
|
Net income (loss) per
share - basic
|
$
(0.09)
|
|
$
0.25
|
|
|
|
|
Net income (loss) per
share - diluted
|
|
|
|
Income (loss) from
continuing operations
|
$
(0.16)
|
|
$
0.10
|
Income from
discontinued operations
|
0.07
|
|
0.15
|
Net income (loss) per
share - diluted
|
$
(0.09)
|
|
$
0.25
|
KAR Auction
Services, Inc.
|
Condensed
Consolidated Balance Sheets
|
(In millions)
(Unaudited)
|
|
|
March
31,
2022
|
|
December
31,
2021
|
Cash and cash
equivalents
|
$
134.2
|
|
$
177.6
|
Restricted
cash
|
26.3
|
|
25.8
|
Trade receivables, net
of allowances
|
433.3
|
|
381.3
|
Finance receivables,
net of allowances
|
2,734.8
|
|
2,506.0
|
Other current
assets
|
117.8
|
|
87.9
|
Current assets
held-for-sale
|
2,058.6
|
|
213.2
|
Total current
assets
|
5,505.0
|
|
3,391.8
|
|
|
|
|
Goodwill
|
1,595.4
|
|
1,598.0
|
Customer relationships,
net of accumulated amortization
|
153.4
|
|
159.1
|
Operating lease
right-of-use assets
|
93.2
|
|
94.7
|
Property and equipment,
net of accumulated depreciation
|
142.2
|
|
143.5
|
Intangible and other
assets
|
303.2
|
|
297.0
|
Non-current assets
held-for-sale
|
—
|
|
1,766.6
|
Total assets
|
$
7,792.4
|
|
$
7,450.7
|
|
|
|
|
Current liabilities,
excluding obligations collateralized by finance
receivables, current
maturities of debt and current liabilities
held-for-sale
|
$
959.7
|
|
$
939.0
|
Obligations
collateralized by finance receivables
|
1,866.6
|
|
1,692.3
|
Current maturities of
debt
|
1,034.0
|
|
16.3
|
Current liabilities
held-for-sale
|
705.3
|
|
361.7
|
Total current
liabilities
|
4,565.6
|
|
3,009.3
|
|
|
|
|
Long-term
debt
|
939.8
|
|
1,849.7
|
Operating lease
liabilities
|
86.9
|
|
88.1
|
Other non-current
liabilities
|
82.6
|
|
85.9
|
Non-current liabilities
held-for-sale
|
—
|
|
313.8
|
Temporary
equity
|
601.6
|
|
590.9
|
Stockholders'
equity
|
1,515.9
|
|
1,513.0
|
Total liabilities,
temporary equity and stockholders' equity
|
$
7,792.4
|
|
$
7,450.7
|
KAR Auction
Services, Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(In millions)
(Unaudited)
|
|
|
Three Months Ended
March 31,
|
|
2022
|
|
2021
|
Operating
activities
|
|
|
|
Net income
(loss)
|
$
(0.3)
|
|
$
50.9
|
Net income from
discontinued operations
|
(8.1)
|
|
(24.7)
|
Adjustments to reconcile
net income to net (loss) cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
26.0
|
|
26.9
|
Provision for credit
losses
|
3.0
|
|
5.1
|
Deferred income
taxes
|
2.6
|
|
4.4
|
Amortization of debt
issuance costs
|
3.1
|
|
3.0
|
Stock-based
compensation
|
5.0
|
|
4.7
|
Contingent consideration
adjustment
|
—
|
|
11.2
|
Net change in unrealized
(gain) loss on investment securities
|
3.0
|
|
(43.5)
|
Other non-cash,
net
|
(8.7)
|
|
0.6
|
Changes in operating
assets and liabilities:
|
|
|
|
Trade receivables and other
assets
|
(80.1)
|
|
(222.4)
|
Accounts payable and accrued
expenses
|
45.0
|
|
334.0
|
Net cash (used by)
provided by operating activities - continuing
operations
|
(9.5)
|
|
150.2
|
Net cash used by
operating activities - discontinued operations
|
(50.5)
|
|
(1.6)
|
Investing
activities
|
|
|
|
Net
increase in finance receivables held for investment
|
(229.4)
|
|
(73.3)
|
Purchases of property, equipment and computer software
|
(13.5)
|
|
(11.9)
|
Investments in securities
|
(4.1)
|
|
(15.3)
|
Proceeds from sale of investments
|
0.3
|
|
21.1
|
Proceeds from the sale of PWI
|
—
|
|
0.9
|
Net cash used by
investing activities - continuing operations
|
(246.7)
|
|
(78.5)
|
Net cash used by
investing activities - discontinued operations
|
(11.8)
|
|
(0.7)
|
Financing
activities
|
|
|
|
Net
increase in book overdrafts
|
6.5
|
|
5.1
|
Net
increase in borrowings from lines of credit
|
108.8
|
|
6.1
|
Net
increase (decrease) in obligations collateralized by finance
receivables
|
170.5
|
|
(25.1)
|
Payments on long-term
debt
|
(2.4)
|
|
(2.4)
|
Payments on finance
leases
|
(1.3)
|
|
(1.5)
|
Payments of contingent
consideration and deferred acquisition costs
|
(29.6)
|
|
(21.3)
|
Issuance of common stock
under stock plans
|
0.6
|
|
0.3
|
Tax withholding payments for
vested RSUs
|
(2.5)
|
|
(2.2)
|
Repurchase and retirement of
common stock
|
—
|
|
(80.8)
|
Net cash provided by
(used by) financing activities - continuing
operations
|
250.6
|
|
(121.8)
|
Net cash provided by
financing activities - discontinued operations
|
22.0
|
|
33.1
|
Effect of exchange rate
changes on cash
|
3.0
|
|
2.6
|
Net decrease in
cash, cash equivalents and restricted cash
|
(42.9)
|
|
(16.7)
|
Cash, cash equivalents
and restricted cash at beginning of period
|
203.4
|
|
784.3
|
Cash, cash equivalents
and restricted cash at end of period
|
$
160.5
|
|
$
767.6
|
Cash paid for interest,
net of proceeds from interest rate derivatives
|
$
18.5
|
|
$
15.3
|
Cash paid for taxes,
net of refunds
|
$
12.6
|
|
$
11.7
|
KAR Auction Services,
Inc.
Reconciliation of Non-GAAP Financial
Measures
EBITDA, Adjusted EBITDA, operating adjusted net income (loss)
from continuing operations and operating adjusted net income (loss)
from continuing operations 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 (loss) from continuing
operations and operating adjusted net income (loss) from continuing
operations 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 (loss) from continuing operations and operating adjusted net
income (loss) from continuing operations per share may include
adjustments for certain other charges.
EBITDA, Adjusted EBITDA, operating adjusted net income (loss)
from continuing operations and operating adjusted net income (loss)
from continuing operations 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 2022 expectation for Adjusted EBITDA is a forward-looking
non-GAAP financial measure. We have not reconciled this non-GAAP
financial measure to its most directly comparable GAAP measure of
net income (loss) due to the inherent difficulty and
impracticability of predicting certain amounts required by GAAP
with a reasonable degree of accuracy. Accordingly, a reconciliation
is not available without unreasonable effort.
The following table reconciles EBITDA and Adjusted EBITDA to net
income (loss) from continuing operations for the periods
presented:
|
Three Months
Ended
March
31,
|
(in
millions), (unaudited)
|
2022
|
|
2021
|
Net income (loss)
from continuing operations
|
$
(8.4)
|
|
$
26.2
|
Add back:
|
|
|
|
Income taxes
|
(4.7)
|
|
24.5
|
Interest expense, net
of interest income
|
25.5
|
|
30.6
|
Depreciation and
amortization
|
26.0
|
|
26.9
|
Intercompany
interest
|
—
|
|
—
|
EBITDA
|
38.4
|
|
108.2
|
Non-cash stock-based
compensation
|
5.2
|
|
5.1
|
Acquisition related
costs
|
0.3
|
|
1.3
|
Securitization
interest
|
(10.4)
|
|
(6.8)
|
(Gain)/Loss on asset
sales
|
(0.1)
|
|
(0.8)
|
Severance
|
3.4
|
|
0.4
|
Foreign currency
(gains)/losses
|
1.2
|
|
2.2
|
Contingent
consideration adjustment
|
—
|
|
11.2
|
Net change in
unrealized (gains) losses on investment securities
|
3.0
|
|
(43.5)
|
Professional fees
related to business improvement efforts
|
8.1
|
|
—
|
Other
|
—
|
|
(0.1)
|
Total
addbacks/(deductions)
|
10.7
|
|
(31.0)
|
Adjusted
EBITDA
|
$
49.1
|
|
$
77.2
|
The following table reconciles operating adjusted net income
(loss) from continuing operations and operating adjusted net income
(loss) from continuing operations per diluted share to net income
(loss) for the periods presented:
|
Three Months Ended
March 31,
|
(in millions,
except per share amounts), (unaudited)
|
2022
|
|
2021
|
Net income
(loss)
|
$
(0.3)
|
|
$ 50.9
|
Less: income from
discontinued operations
|
(8.1)
|
|
(24.7)
|
Net income (loss) from
continuing operations (1)
|
(8.4)
|
|
26.2
|
|
|
|
|
Acquired
amortization expense
|
8.6
|
|
8.5
|
Contingent
consideration adjustment
|
—
|
|
11.2
|
Income
taxes (2)
|
(3.1)
|
|
(4.1)
|
Operating adjusted net
income (loss) from continuing operations
|
$
(2.9)
|
|
$ 41.8
|
|
|
|
|
Operating adjusted net
income (loss) from continuing operations per share -
diluted
|
$ (0.02)
|
|
$ 0.26
|
|
|
|
|
Weighted average
diluted shares
|
156.5
|
|
162.4
|
(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) from continuing operations
and operating adjusted net income (loss) from continuing operations
per diluted share.
|
|
|
(2)
|
The effective tax rate
at the end of each period presented was used to determine the
amount of income tax benefit on the acquired amortization expense.
There was no income tax benefit related to the contingent
consideration adjustment because this item is 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