CARMEL, Ind., Aug. 3, 2021 /PRNewswire/ -- KAR Auction
Services, Inc. (NYSE: KAR), today reported its second quarter
financial results for the period ended June
30, 2021.
"I am pleased with our second quarter performance, particularly
given the significant supply headwinds that our industry faced,"
said Peter Kelly, CEO of
KAR. "We achieved our strongest results to-date in the digital
dealer-to-dealer segment, with record numbers of sellers and buyers
participating and 65% volume growth versus the second quarter 2020.
We also saw improvement in the unit economics at ADESA and an
improved performance from our finance business, AFC. I believe
KAR is well positioned for growth as industry volumes begin to
recover."
Second Quarter 2021 Financial Highlights
- Total revenue for the second quarter of 2021 was $585.4 million, up 40% compared with $419.0 million for the second quarter of
2020.
- Net income for the second quarter of 2021 increased to
$11.5 million, or $0.01 per diluted share, compared with a net loss
of $32.3 million, or $0.27 net loss per diluted share, in the second
quarter of 2020.
- Adjusted EBITDA for the quarter ended June 30, 2021 increased 46% to $116.5 million, compared with $80.0 million for the quarter ended June 30, 2020.
- Operating adjusted net income per diluted share increased 88%
to $0.15 for the quarter ended
June 30, 2021, compared with
$0.08 for the quarter ended
June 30, 2020.
- Year-over-year growth in our digital dealer-to-dealer
marketplaces of 65%.
- ADESA gross profit per vehicle sold increased 24% to
$277 for the quarter ended
June 30, 2021, compared with
$224 for the quarter ended
June 30, 2020.
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 $0.2 million and $17.2 million for the three and six months ended
June 30, 2021, respectively. Although
the company had a reduction in unrealized gains on investment
securities of $11.9 million for the
three months ended June 30, 2021, net
unrealized gains on investment securities totaled $31.6 million for the six months ended
June 30, 2021.
2021 Guidance
The company's previously stated
guidance remains unchanged.
(in millions, except
per share amounts)
|
Annual Guidance
|
|
|
Net income from
continuing operations
|
$90
|
Income tax
expense
|
$38
|
Interest expense, net
of interest income
|
$125
|
Depreciation and
amortization
|
$205
|
EBITDA*
|
$458
|
Adjusted EBITDA
addbacks, net
|
$17
|
Adjusted
EBITDA*
|
$475
|
Effective tax
rate
|
30%
|
Net income from
continuing operations per share - diluted **
|
$0.30
|
Weighted average
diluted shares **
|
131
|
Operating adjusted net
income per share*
|
$0.87
|
Weighted average
diluted shares - including assumed conversion of preferred
shares
|
165
|
* EBITDA, Adjusted EBITDA, operating adjusted net income and
operating adjusted net income per share are non-GAAP financial
measures. See "Reconciliation of Non-GAAP Financial Measures."
** The company used the two-class method of calculating net
income from continuing operations per diluted share. Under the
two-class method, net income from continuing operations is reduced
by dividends and undistributed earnings to the holders of the
Series A Preferred Stock, and the weighted average diluted shares
do not assume conversion of the preferred shares to common
shares.
Impact of COVID-19 on Company Operations
The
company has been subject to numerous COVID-19-related orders and
directives that have caused us to modify our business practices.
All ADESA auction locations in the U.S. and Canada are offering vehicles for sale via
ADESA Simulcast, DealerBlock and Simulcast+. Auction locations have
resumed offering ancillary and related services, where possible and
as permitted by government directives. However, given the evolving
health, economic, social and governmental environments, the
continuing impact that COVID-19 could have on our business remains
uncertain. The broader implications for our business and results of
operations remain uncertain and will depend on many factors outside
our control, including, without limitation, the duration and
severity of the COVID-19 pandemic, the degree to which governmental
restrictions are relaxed or reimposed, the length of time it takes
for normal economic and operating conditions to resume, the number
and effectiveness of vaccines and numerous other uncertainties.
Even after the COVID-19 outbreak has subsided, we may continue to
experience materially adverse impacts to our business.
Earnings Conference Call Information
KAR will
be hosting an earnings conference call and webcast on Wednesday, August 4, 2021 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 5498273, while the live web cast will be
available at the investors section of www.karglobal.com.
Supplemental financial information for KAR's second 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 3.1 million units
valued at over $40 billion through
our auctions in 2020. 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,
Mexico, Uruguay, U.K. and Europe. 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," "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates," 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
June
30,
|
|
Six Months
Ended
June
30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Operating
revenues
|
|
|
|
|
|
|
|
Auction
fees
|
$
|
236.7
|
|
|
$
|
177.8
|
|
|
$
|
472.2
|
|
|
$
|
433.1
|
|
Service
revenue
|
182.2
|
|
|
134.8
|
|
|
369.8
|
|
|
371.0
|
|
Purchased vehicle
sales
|
97.9
|
|
|
49.6
|
|
|
190.6
|
|
|
125.1
|
|
Finance-related
revenue
|
68.6
|
|
|
56.8
|
|
|
134.4
|
|
|
135.3
|
|
Total operating
revenues
|
585.4
|
|
|
419.0
|
|
|
1,167.0
|
|
|
1,064.5
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Cost of services
(exclusive of depreciation and amortization)
|
333.2
|
|
|
235.1
|
|
|
663.6
|
|
|
629.7
|
|
Selling, general and
administrative
|
140.2
|
|
|
112.3
|
|
|
289.2
|
|
|
274.7
|
|
Depreciation and
amortization
|
45.4
|
|
|
46.5
|
|
|
92.4
|
|
|
94.2
|
|
Goodwill and other
intangibles impairment
|
—
|
|
|
29.8
|
|
|
—
|
|
|
29.8
|
|
Total operating
expenses
|
518.8
|
|
|
423.7
|
|
|
1,045.2
|
|
|
1,028.4
|
|
|
|
|
|
|
|
|
|
Operating profit
(loss)
|
66.6
|
|
|
(4.7)
|
|
|
121.8
|
|
|
36.1
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
31.2
|
|
|
30.9
|
|
|
62.1
|
|
|
68.9
|
|
Other (income)
expense, net
|
14.8
|
|
|
1.3
|
|
|
(35.4)
|
|
|
(0.7)
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
20.6
|
|
|
(36.9)
|
|
|
95.1
|
|
|
(32.1)
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
9.1
|
|
|
(4.6)
|
|
|
32.7
|
|
|
(2.6)
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
11.5
|
|
|
$
|
(32.3)
|
|
|
$
|
62.4
|
|
|
$
|
(29.5)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share
|
|
|
|
|
|
|
|
Basic
|
$
|
0.01
|
|
|
$
|
(0.27)
|
|
|
$
|
0.27
|
|
|
$
|
(0.24)
|
|
Diluted
|
$
|
0.01
|
|
|
$
|
(0.27)
|
|
|
$
|
0.26
|
|
|
$
|
(0.24)
|
|
|
|
|
|
|
|
|
|
Dividends declared
per common share
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.19
|
|
KAR Auction
Services, Inc.
Condensed
Consolidated Balance Sheets
(In millions)
(Unaudited)
|
|
|
June
30,
2021
|
|
December
31,
2020
|
Cash and cash
equivalents
|
$
|
621.6
|
|
|
$
|
752.1
|
|
Restricted
cash
|
53.8
|
|
|
60.2
|
|
Trade receivables,
net of allowances
|
549.2
|
|
|
367.2
|
|
Finance receivables,
net of allowances
|
2,084.9
|
|
|
1,889.0
|
|
Other current
assets
|
105.1
|
|
|
106.7
|
|
Total current
assets
|
3,414.6
|
|
|
3,175.2
|
|
|
|
|
|
Goodwill
|
2,212.5
|
|
|
2,140.2
|
|
Customer
relationships, net of accumulated amortization
|
199.8
|
|
|
211.3
|
|
Operating lease
right-of-use assets
|
339.0
|
|
|
350.6
|
|
Property and
equipment, net of accumulated depreciation
|
579.6
|
|
|
589.9
|
|
Intangible and other
assets
|
372.8
|
|
|
331.0
|
|
Total
assets
|
$
|
7,118.3
|
|
|
$
|
6,798.2
|
|
|
|
|
|
Current liabilities,
excluding obligations collateralized by
finance receivables and
current maturities of debt
|
$
|
1,336.4
|
|
|
$
|
965.1
|
|
Obligations
collateralized by finance receivables
|
1,324.2
|
|
|
1,261.2
|
|
Current maturities of
debt
|
22.7
|
|
|
24.3
|
|
Total current
liabilities
|
2,683.3
|
|
|
2,250.6
|
|
|
|
|
|
Long-term
debt
|
1,851.8
|
|
|
1,853.8
|
|
Operating lease
liabilities
|
332.0
|
|
|
344.2
|
|
Other non-current
liabilities
|
179.9
|
|
|
184.0
|
|
Temporary
equity
|
570.0
|
|
|
549.8
|
|
Stockholders'
equity
|
1,501.3
|
|
|
1,615.8
|
|
Total liabilities,
temporary equity and stockholders' equity
|
$
|
7,118.3
|
|
|
$
|
6,798.2
|
|
KAR Auction
Services, Inc.
Condensed
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
|
|
|
Six Months
Ended June
30,
|
|
2021
|
|
2020
|
Operating
activities
|
|
|
|
Net income
(loss)
|
$
|
62.4
|
|
|
$
|
(29.5)
|
|
Adjustments to reconcile
net income (loss) to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
92.4
|
|
|
94.2
|
|
Provision for credit
losses
|
7.6
|
|
|
41.6
|
|
Deferred income
taxes
|
6.8
|
|
|
(13.1)
|
|
Amortization of debt
issuance costs
|
6.0
|
|
|
5.6
|
|
Stock-based
compensation
|
9.9
|
|
|
7.6
|
|
Contingent consideration
adjustment
|
15.7
|
|
|
—
|
|
Unrealized gain on
investment securities
|
(31.6)
|
|
|
—
|
|
Goodwill and other
intangibles impairment
|
—
|
|
|
29.8
|
|
Other non-cash,
net
|
2.1
|
|
|
4.9
|
|
Changes in operating
assets and liabilities, net of acquisitions:
|
|
|
|
Trade receivables and other
assets
|
(198.5)
|
|
|
(137.5)
|
|
Accounts payable and accrued
expenses
|
322.9
|
|
|
265.3
|
|
Net cash provided
by operating activities
|
295.7
|
|
|
268.9
|
|
Investing
activities
|
|
|
|
Net (increase) decrease in
finance receivables held for investment
|
(200.0)
|
|
|
532.6
|
|
Acquisition of
businesses (net of cash acquired)
|
(79.8)
|
|
|
—
|
|
Purchases of property,
equipment and computer software
|
(50.7)
|
|
|
(46.7)
|
|
Investments in
securities
|
(20.6)
|
|
|
—
|
|
Proceeds from sale of
investments
|
21.4
|
|
|
—
|
|
Proceeds from the sale of
PWI
|
2.1
|
|
|
—
|
|
Proceeds from the sale of
property and equipment
|
1.9
|
|
|
—
|
|
Net cash (used by)
provided by investing activities
|
(325.7)
|
|
|
485.9
|
|
Financing
activities
|
|
|
|
Net increase in
book overdrafts
|
45.4
|
|
|
5.0
|
|
Net decrease in
borrowings from lines of credit
|
(1.6)
|
|
|
(1.9)
|
|
Net increase
(decrease) in obligations collateralized by finance
receivables
|
57.0
|
|
|
(720.5)
|
|
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
|
—
|
|
|
(3.9)
|
|
Payments on long-term
debt
|
(4.7)
|
|
|
(4.7)
|
|
Payments on finance
leases
|
(6.0)
|
|
|
(7.8)
|
|
Payments of contingent
consideration and deferred acquisition costs
|
(21.3)
|
|
|
(22.3)
|
|
Issuance of common stock
under stock plans
|
1.0
|
|
|
0.7
|
|
Tax withholding payments for
vested RSUs
|
(2.2)
|
|
|
(3.7)
|
|
Repurchase and retirement of
common stock
|
(180.9)
|
|
|
—
|
|
Dividends paid to
stockholders
|
—
|
|
|
(49.0)
|
|
Net cash used by
financing activities
|
(113.3)
|
|
|
(279.9)
|
|
Effect of exchange
rate changes on cash
|
6.4
|
|
|
(17.3)
|
|
Net (decrease)
increase in cash, cash equivalents and restricted
cash
|
(136.9)
|
|
|
457.6
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
812.3
|
|
|
560.9
|
|
Cash, cash
equivalents and restricted cash at end of period
|
$
|
675.4
|
|
|
$
|
1,018.5
|
|
Cash paid for
interest, net of proceeds from interest rate derivatives
|
$
|
55.4
|
|
|
$
|
63.9
|
|
Cash paid for taxes,
net of refunds
|
$
|
16.6
|
|
|
$
|
3.6
|
|
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
June
30,
|
|
Six Months
Ended
June
30,
|
(in
millions), (unaudited)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net income
(loss)
|
$
|
11.5
|
|
|
$
|
(32.3)
|
|
|
$
|
62.4
|
|
|
$
|
(29.5)
|
|
Add back:
|
|
|
|
|
|
|
|
Income
taxes
|
9.1
|
|
|
(4.6)
|
|
|
32.7
|
|
|
(2.6)
|
|
Interest expense, net
of interest income
|
31.0
|
|
|
30.6
|
|
|
61.7
|
|
|
67.8
|
|
Depreciation and
amortization
|
45.4
|
|
|
46.5
|
|
|
92.4
|
|
|
94.2
|
|
EBITDA
|
97.0
|
|
|
40.2
|
|
|
249.2
|
|
|
129.9
|
|
Non-cash stock-based
compensation
|
4.9
|
|
|
2.9
|
|
|
10.5
|
|
|
8.2
|
|
Acquisition related
costs
|
1.8
|
|
|
0.9
|
|
|
3.3
|
|
|
2.3
|
|
Securitization
interest
|
(6.8)
|
|
|
(6.0)
|
|
|
(13.6)
|
|
|
(17.4)
|
|
(Gain)/Loss on asset
sales
|
—
|
|
|
0.5
|
|
|
0.2
|
|
|
1.0
|
|
Severance
|
1.2
|
|
|
6.5
|
|
|
1.9
|
|
|
8.3
|
|
Foreign currency
(gains)/losses
|
0.4
|
|
|
2.7
|
|
|
2.6
|
|
|
3.1
|
|
Goodwill and other
intangibles impairment
|
—
|
|
|
29.8
|
|
|
—
|
|
|
29.8
|
|
Contingent
consideration adjustment
|
4.5
|
|
|
—
|
|
|
15.7
|
|
|
—
|
|
Change in unrealized
gains on investment securities
|
11.9
|
|
|
—
|
|
|
(31.6)
|
|
|
—
|
|
Other
|
1.6
|
|
|
2.5
|
|
|
1.5
|
|
|
3.4
|
|
Total
addbacks/(deductions)
|
19.5
|
|
|
39.8
|
|
|
(9.5)
|
|
|
38.7
|
|
Adjusted
EBITDA
|
$
|
116.5
|
|
|
$
|
80.0
|
|
|
$
|
239.7
|
|
|
$
|
168.6
|
|
The following table reconciles operating adjusted net income and
operating adjusted net income per diluted share to net income
(loss) for the periods presented:
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
(in millions,
except per share amounts), (unaudited)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net income (loss)
(1)
|
$
|
11.5
|
|
|
$
|
(32.3)
|
|
|
$
|
62.4
|
|
|
$
|
(29.5)
|
|
Acquired
amortization expense
|
13.6
|
|
|
14.1
|
|
|
29.2
|
|
|
28.4
|
|
Contingent consideration adjustment
|
4.5
|
|
|
—
|
|
|
15.7
|
|
|
—
|
|
Goodwill
and other intangibles impairment
|
—
|
|
|
29.8
|
|
|
—
|
|
|
29.8
|
|
Income
taxes (2)
|
(6.0)
|
|
|
(1.8)
|
|
|
(10.0)
|
|
|
(2.3)
|
|
Operating adjusted
net income
|
$
|
23.6
|
|
|
$
|
9.8
|
|
|
$
|
97.3
|
|
|
$
|
26.4
|
|
|
|
|
|
|
|
|
|
Operating adjusted
net income per share - diluted
|
$
|
0.15
|
|
|
$
|
0.08
|
|
|
$
|
0.61
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares
|
156.6
|
|
|
129.3
|
|
|
159.5
|
|
|
129.2
|
|
|
|
(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 and operating adjusted net income
per diluted share.
|
(2)
|
The effective tax
rate at the end of each period presented was used to determine the
amount of income tax on the adjustments to net income. 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
|
Tobin
Richer
|
(317)
249-4559
|
(317)
249-4521
|
mike.eliason@karglobal.com
|
tobin.richer@karglobal.com
|
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SOURCE KAR Auction Services