- Total revenue increased 14% year-over-year
- Significant increases in operating profit and income from
continuing operations
- Adjusted EBITDA increased 20% year-over-year
CARMEL,
Ind., May 2, 2023 /PRNewswire/ --KAR Auction
Services, Inc. (NYSE: KAR), today reported its first quarter
financial results for the period ended March
31, 2023.
"I am very pleased with our solid performance in the first
quarter and the improvement we achieved over the prior
year—including double-digit growth in revenue, gross profit,
adjusted EBITDA and operating adjusted earnings per share," said
Peter Kelly, CEO. "Our Marketplace
segment grew revenue and profitability by increasing service attach
rates, buyer participation and overall conversion during the
quarter. We are beginning to see the positive impact of our ongoing
cost control efforts across our business, and remain well
positioned for growth."
First Quarter 2023 Financial Highlights
- Total revenue was $420.6 million,
an increase of 14% for the first quarter of 2023, compared with
$369.4 million for the first quarter
of 2022.
- Income from continuing operations of $12.7 million, or $0.01 per diluted share, for the first quarter of
2023, compared with a loss from continuing operations of
$8.4 million, or $(0.16) per diluted share, for the first quarter
of 2022.
- Operating adjusted net income from continuing operations of
$17.4 million, or $0.12 per diluted share, for the quarter ended
March 31, 2023, compared with an
operating adjusted net loss from continuing operations of
$2.9 million, or $(0.02) per diluted share, for the quarter ended
March 31, 2022.
- Adjusted EBITDA from continuing operations was $58.9 million, an increase of 20% for the quarter
ended March 31, 2023, which included
an $11 million charge related to an
investment in an early-stage automotive company, compared with
$49.1 million for the quarter ended
March 31, 2022.
- Marketplace revenue, excluding purchased vehicle sales, was
$265.5 million, an increase of 11%
for the first quarter of 2023, compared with $238.9 million for the first quarter of
2022.
- Finance segment's first quarter performance was driven by
increased loan transactions of 13% and increased revenue per loan
transaction of 5%.
2023 Guidance
The company's previously stated annual
guidance for Adjusted EBITDA of $250
to $270 million and operating
adjusted net income from continuing operations per diluted share of
$0.37 to $0.47 remains unchanged.
The company has not provided a reconciliation because it is
unable, without unreasonable efforts, to quantify the
forward-looking income from continuing operations, the most
directly comparable GAAP measure. In connection with the rebranding
of the existing branded marketplaces to OPENLANE, the company
expects to evaluate the carrying amount of its indefinite-lived
ADESA tradename and other definite-lived tradenames for potential
impairment, as well as reassess the useful life of the ADESA
tradename, in the second quarter of 2023. Any such non-cash
impairment would affect income from continuing operations, but not
the non-GAAP financial measures Adjusted EBITDA and operating
adjusted net income from continuing operations per diluted
share.
Earnings guidance does not contemplate future items such as
business development activities, strategic developments (such as
restructurings, spin-offs or dispositions of assets or
investments), contingent purchase price adjustments, significant
expenses related to litigation and changes in applicable laws and
regulations (including significant accounting and tax matters) and
intangible impairments. The timing and amounts of these items are
highly variable, difficult to predict, and of a potential size that
could have a substantial impact on the company's reported results
for any given period. Prospective quantification of these items is
generally not practicable. Operating adjusted net income from
continuing operations per share excludes amortization expense
associated with acquired intangible assets, as well as one-time
charges, net of taxes.
Earnings Conference Call Information
KAR will be
hosting an earnings conference call and webcast on Wednesday, May 3, 2023 at 8:30 a.m. EDT. The call will be hosted by KAR's
Chief Executive Officer, Peter
Kelly, Executive Vice President and Chief Financial Officer,
Brad Lakhia and Chief Accounting
Officer, Scott Anderson. The
conference call may be accessed by calling 1-833-634-2155 and
entering participant passcode "KAR", while the live web cast will
be available at the investors section of www.karglobal.com.
Supplemental financial information for KAR's first quarter 2023
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. Our integrated marketplaces reduce risk, improve
transparency and streamline transactions for customers around the
globe. Headquartered in Carmel,
Indiana, KAR Global has employees across the United States, Canada, Europe, 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 but are not limited to risks and uncertainties
regarding the impact of adverse market, economic and geopolitical
conditions and those other matters disclosed in the company's
Securities and Exchange Commission filings, including those
discussed under the heading "Risk Factors" in the company's annual
and quarterly periodic reports. 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,
|
|
2023
|
|
2022
|
Operating
revenues
|
|
|
|
Auction fees
|
$
99.9
|
|
$
101.4
|
Service
revenue
|
165.6
|
|
137.5
|
Purchased vehicle
sales
|
55.5
|
|
46.3
|
Finance-related
revenue
|
99.6
|
|
84.2
|
Total operating
revenues
|
420.6
|
|
369.4
|
|
|
|
|
Operating
expenses
|
|
|
|
Cost of services
(exclusive of depreciation and amortization)
|
224.2
|
|
210.8
|
Selling, general and
administrative
|
108.0
|
|
118.9
|
Depreciation and
amortization
|
23.0
|
|
26.0
|
Total operating
expenses
|
355.2
|
|
355.7
|
|
|
|
|
Operating
profit
|
65.4
|
|
13.7
|
|
|
|
|
Interest
expense
|
38.3
|
|
25.6
|
Other (income) expense,
net
|
7.1
|
|
1.2
|
|
|
|
|
Income (loss) from
continuing operations before income taxes
|
20.0
|
|
(13.1)
|
|
|
|
|
Income taxes
|
7.3
|
|
(4.7)
|
|
|
|
|
Income (loss) from
continuing operations
|
12.7
|
|
(8.4)
|
Income from
discontinued operations, net of income taxes
|
—
|
|
8.1
|
Net income
(loss)
|
$
12.7
|
|
$
(0.3)
|
|
|
|
|
Net income (loss) per
share - basic
|
|
|
|
Income (loss) from
continuing operations
|
$
0.01
|
|
$
(0.16)
|
Income from
discontinued operations
|
—
|
|
0.07
|
Net income (loss) per
share - basic
|
$
0.01
|
|
$
(0.09)
|
|
|
|
|
Net income (loss) per
share - diluted
|
|
|
|
Income (loss) from
continuing operations
|
$
0.01
|
|
$
(0.16)
|
Income from
discontinued operations
|
—
|
|
0.07
|
Net income (loss) per
share - diluted
|
$
0.01
|
|
$
(0.09)
|
KAR Auction
Services, Inc. Condensed Consolidated Balance
Sheets (In millions) (Unaudited)
|
|
|
March
31, 2023
|
|
December
31, 2022
|
Cash and cash
equivalents
|
$
219.6
|
|
$
225.7
|
Restricted
cash
|
32.2
|
|
52.0
|
Trade receivables, net
of allowances
|
340.3
|
|
270.7
|
Finance receivables,
net of allowances
|
2,385.4
|
|
2,395.1
|
Other current
assets
|
97.5
|
|
78.9
|
Total current
assets
|
3,075.0
|
|
3,022.4
|
|
|
|
|
Goodwill
|
1,466.3
|
|
1,464.5
|
Customer relationships,
net of accumulated amortization
|
130.9
|
|
135.9
|
Operating lease
right-of-use assets
|
82.6
|
|
84.8
|
Property and equipment,
net of accumulated depreciation
|
120.4
|
|
123.6
|
Intangible and other
assets
|
272.7
|
|
288.6
|
Total assets
|
$
5,147.9
|
|
$
5,119.8
|
|
|
|
|
Current liabilities,
excluding obligations collateralized by
finance receivables and
current maturities of debt
|
$
802.4
|
|
$
676.9
|
Obligations
collateralized by finance receivables
|
1,638.2
|
|
1,677.6
|
Current maturities of
debt
|
225.8
|
|
288.7
|
Total current
liabilities
|
2,666.4
|
|
2,643.2
|
|
|
|
|
Long-term
debt
|
206.0
|
|
205.3
|
Operating lease
liabilities
|
77.5
|
|
79.7
|
Other non-current
liabilities
|
59.6
|
|
60.8
|
Temporary
equity
|
612.5
|
|
612.5
|
Stockholders'
equity
|
1,525.9
|
|
1,518.3
|
Total liabilities,
temporary equity and stockholders' equity
|
$
5,147.9
|
|
$
5,119.8
|
KAR Auction
Services, Inc. Condensed Consolidated Statements of Cash
Flows (In millions) (Unaudited)
|
|
|
Three Months
Ended March
31,
|
|
2023
|
|
2022
|
Operating
activities
|
|
|
|
Net income
(loss)
|
$
12.7
|
|
$
(0.3)
|
Net income from
discontinued operations
|
—
|
|
(8.1)
|
Adjustments to reconcile
net income (loss) to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
23.0
|
|
26.0
|
Provision for credit
losses
|
14.3
|
|
3.0
|
Deferred income
taxes
|
0.2
|
|
2.6
|
Amortization of debt
issuance costs
|
2.2
|
|
3.1
|
Stock-based
compensation
|
3.6
|
|
5.0
|
Net change in unrealized
(gain) loss on investment securities
|
0.1
|
|
3.0
|
Investment and note
receivable impairment
|
11.0
|
|
—
|
Other non-cash,
net
|
0.7
|
|
(8.7)
|
Changes in operating
assets and liabilities, net of acquisitions:
|
|
|
|
Trade receivables and other
assets
|
(96.4)
|
|
(67.1)
|
Accounts payable and accrued
expenses
|
124.7
|
|
45.0
|
Payments of contingent
consideration in excess of acquisition-date fair value
|
—
|
|
(26.1)
|
Net cash provided by
(used by) operating activities - continuing
operations
|
96.1
|
|
(22.6)
|
Net cash provided by
(used by) operating activities - discontinued
operations
|
—
|
|
(39.2)
|
Investing
activities
|
|
|
|
Net increase in finance
receivables held for investment
|
(1.7)
|
|
(229.4)
|
Purchases of property,
equipment and computer software
|
(12.0)
|
|
(13.5)
|
Investments in
securities
|
(0.2)
|
|
(4.1)
|
Proceeds from sale of
investments
|
0.3
|
|
0.3
|
Net cash used by
investing activities - continuing operations
|
(13.6)
|
|
(246.7)
|
Net cash provided by
(used by) investing activities - discontinued
operations
|
7.0
|
|
(11.8)
|
Financing
activities
|
|
|
|
Net (decrease)
increase in book overdrafts
|
(0.5)
|
|
6.5
|
Net (decrease)
increase in borrowings from lines of credit
|
(62.9)
|
|
108.8
|
Net (decrease)
increase in obligations collateralized by finance
receivables
|
(41.0)
|
|
170.5
|
Payments for
debt issuance costs/amendments
|
(0.5)
|
|
—
|
Payments on long-term
debt
|
—
|
|
(2.4)
|
Payments on finance
leases
|
(0.5)
|
|
(1.3)
|
Payments of contingent
consideration and deferred acquisition costs
|
—
|
|
(3.5)
|
Issuance of common stock
under stock plans
|
1.3
|
|
0.6
|
Tax withholding payments for
vested RSUs
|
(1.3)
|
|
(2.5)
|
Dividends paid on Series A
Preferred Stock
|
(11.1)
|
|
—
|
Net cash (used by)
provided by financing activities - continuing
operations
|
(116.5)
|
|
276.7
|
Net cash provided by
financing activities - discontinued operations
|
—
|
|
22.0
|
Net change in cash
balances of discontinued operations
|
—
|
|
(24.3)
|
Effect of exchange rate
changes on cash
|
1.1
|
|
3.0
|
Net decrease in
cash, cash equivalents and restricted cash
|
(25.9)
|
|
(42.9)
|
Cash, cash equivalents
and restricted cash at beginning of period
|
277.7
|
|
203.4
|
Cash, cash equivalents
and restricted cash at end of period
|
$
251.8
|
|
$
160.5
|
Cash paid for interest,
net of proceeds from interest rate derivatives
|
$
31.1
|
|
$
18.5
|
Cash paid for taxes,
net of refunds - continuing operations
|
$
12.0
|
|
$
12.6
|
Cash paid for taxes,
net of refunds - discontinued operations
|
$
—
|
|
$
—
|
KAR Auction Services, Inc.
Reconciliation of
Non-GAAP Financial Measures
EBITDA, Adjusted EBITDA, operating adjusted net income (loss)
and operating adjusted net income (loss) 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) and operating
adjusted net income (loss) 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) and operating adjusted net income (loss)
per share may include adjustments for certain other charges.
EBITDA, Adjusted EBITDA, operating adjusted net income (loss)
and operating adjusted net income (loss) 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
income (loss) from continuing operations for the periods
presented:
|
Three Months
Ended March
31,
|
(in
millions), (unaudited)
|
2023
|
|
2022
|
Income (loss) from
continuing operations
|
$
12.7
|
|
$
(8.4)
|
Add back:
|
|
|
|
Income taxes
|
7.3
|
|
(4.7)
|
Interest expense, net
of interest income
|
37.4
|
|
25.5
|
Depreciation and
amortization
|
23.0
|
|
26.0
|
EBITDA
|
80.4
|
|
38.4
|
Non-cash stock-based
compensation
|
3.8
|
|
5.2
|
Acquisition related
costs
|
0.3
|
|
0.3
|
Securitization
interest
|
(27.8)
|
|
(10.4)
|
(Gain)/Loss on asset
sales
|
—
|
|
(0.1)
|
Severance
|
0.5
|
|
3.4
|
Foreign currency
(gains)/losses
|
0.1
|
|
1.2
|
Net change in
unrealized (gains) losses on investment securities
|
0.1
|
|
3.0
|
Professional fees
related to business improvement efforts
|
0.7
|
|
8.1
|
Other
|
0.8
|
|
—
|
Total
addbacks/(deductions)
|
(21.5)
|
|
10.7
|
Adjusted
EBITDA
|
$
58.9
|
|
$
49.1
|
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 March 31,
|
(in millions,
except per share amounts), (unaudited)
|
2023
|
|
2022
|
Net income (loss) from
continuing operations (1)
|
$
12.7
|
|
$
(8.4)
|
Acquired
amortization expense
|
7.4
|
|
8.6
|
Income
taxes (2)
|
(2.7)
|
|
(3.1)
|
Operating adjusted net
income (loss) from continuing operations
|
$
17.4
|
|
$
(2.9)
|
|
|
|
|
Net income from
discontinued operations
|
$
—
|
|
$
8.1
|
Acquired
amortization expense
|
—
|
|
4.4
|
Income
taxes (2)
|
—
|
|
(1.1)
|
Operating adjusted net
income from discontinued operations
|
$
—
|
|
$ 11.4
|
|
|
|
|
Operating adjusted net
income
|
$
17.4
|
|
$
8.5
|
|
|
|
|
Operating adjusted net
income (loss) from continuing operations per share -
diluted
|
$
0.12
|
|
$ (0.02)
|
Operating adjusted net
income from discontinued operations per share - diluted
|
—
|
|
0.07
|
Operating adjusted net
income per share - diluted
|
$
0.12
|
|
$ 0.05
|
|
|
|
|
Weighted average
diluted shares - including assumed conversion of preferred
shares
|
145.6
|
|
156.5
|
|
|
(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)
|
The effective tax rate
at the end of each period was used to determine the amount of
income tax on the adjustments to net income. An effective tax rate
of 24.5% was used to determine the amount of income tax benefit on
the acquired amortization for discontinued operations for the three
months ended March 31, 2022.
|
Analyst
Inquiries:
|
Media
Inquiries:
|
Mike Eliason
|
Laurie
Dippold
|
(317)
249-4559
|
(317)
468-3900
|
mike.eliason@karglobal.com
|
laurie.dippold@karglobal.com
|
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SOURCE KAR Auction Services