- Revenue, gross profit per vehicle sold, income from
continuing operations and Adjusted EBITDA increased for the quarter
despite a decrease in volumes
- Repurchased $600 million
principal amount of senior notes
- Repurchased $50 million of
common stock in the third quarter and an additional $50 million of common stock in October 2022
CARMEL,
Ind., Nov. 1, 2022 /PRNewswire/ -- KAR Auction
Services, Inc. (NYSE: KAR) today reported its third quarter
financial results for the period ended September 30, 2022.
"I am pleased with the results that we produced across the
organization, especially given what continues to be a very
challenging industry and economic environment," said Peter Kelly, CEO of KAR Global. "During the
quarter, we increased revenue, total gross profit and Adjusted
EBITDA. We are achieving our cost reduction targets ahead of our
original timeline, and are re-investing in the platforms and
technology that will accelerate KAR and our customers into the
future. I am energized by the many opportunities ahead and believe
our digital strategy and differentiated offerings position us well
for the future."
Third Quarter 2022 Financial Highlights
- Total revenue was $393.0 million,
an increase of 13% for the third quarter of 2022, compared with
$347.1 million for the third quarter
of 2021.
- Income from continuing operations of $0.5 million, or $(0.09) per diluted share, for the third quarter
of 2022, compared with a loss from continuing operations of
$26.9 million, or $(0.31) per diluted share, for the third quarter
of 2021.
- Operating adjusted net income from continuing operations of
$13.7 million, or $0.09 per diluted share, for the quarter ended
September 30, 2022, compared with an
operating adjusted net loss from continuing operations of
$16.5 million, or $(0.11) per diluted share, for the quarter ended
September 30, 2021.
- Adjusted EBITDA from continuing operations was $69.5 million for the quarter ended September 30, 2022, compared with $66.6 million, including a $10 million gain from sale of investments, for
the quarter ended September 30,
2021.
- Marketplace revenue, excluding purchased vehicle sales, was
$248.1 million, an increase of 14%
for the third quarter of 2022, compared with $217.8 million for the third quarter of
2021.
- Marketplace gross profit per vehicle sold increased 14% to
$320 for the quarter ended
September 30, 2022, compared with
$280 for the quarter ended
September 30, 2021.
- Finance segment's strong third quarter performance was driven
by increased revenue per loan transaction of 16% and increased loan
transactions of 13%.
- In the third quarter of 2022, KAR repurchased and retired
3,309,527 shares of common stock in the open market at a weighted
average price of $15.11 per share,
aggregating $50 million.
The company has classified the ADESA U.S. physical auction
business as discontinued operations. 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.
Recent Share Repurchases
In October 2022, KAR repurchased and retired
3,909,406 shares of common stock in the open market at a weighted
average price of $12.79 per share,
aggregating $50 million. At
October 31, 2022, approximately
$126.9 million of the company's
outstanding common stock remained available for repurchase under
the 2019 share repurchase program.
Earnings Conference Call Information
KAR will be
hosting an earnings conference call and webcast on Wednesday, November 2, 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 1-833-634-2155 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 third 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. 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, Europe 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 macroeconomic conditions and
geopolitical events, including the conflict between Russia and Ukraine; (iii) the company's sale of the ADESA
U.S. physical auction business to Carvana, including the ability of
the company to execute on its strategy and achieve its goals and
other expectations after the sale and the impact on the company's
business and relationships with its customers; 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
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Operating
revenues
|
|
|
|
|
|
|
|
Auction fees
|
$
88.9
|
|
$
89.6
|
|
$
289.5
|
|
$ 298.4
|
Service
revenue
|
159.2
|
|
128.2
|
|
444.0
|
|
415.5
|
Purchased vehicle
sales
|
45.8
|
|
53.7
|
|
137.9
|
|
169.0
|
Finance-related
revenue
|
99.1
|
|
75.6
|
|
275.2
|
|
210.0
|
Total operating
revenues
|
393.0
|
|
347.1
|
|
1,146.6
|
|
1,092.9
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Cost of services
(exclusive of depreciation and
amortization)
|
209.6
|
|
185.7
|
|
632.3
|
|
598.3
|
Selling, general and
administrative
|
109.1
|
|
104.8
|
|
352.1
|
|
318.5
|
Depreciation and
amortization
|
24.3
|
|
27.4
|
|
76.2
|
|
81.7
|
Total operating
expenses
|
343.0
|
|
317.9
|
|
1,060.6
|
|
998.5
|
|
|
|
|
|
|
|
|
Operating
profit
|
50.0
|
|
29.2
|
|
86.0
|
|
94.4
|
|
|
|
|
|
|
|
|
Interest
expense
|
32.3
|
|
31.9
|
|
83.8
|
|
93.7
|
Other (income) expense,
net
|
1.2
|
|
13.9
|
|
6.4
|
|
(20.5)
|
Loss on extinguishment
of debt
|
9.3
|
|
—
|
|
17.0
|
|
—
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations before income
taxes
|
7.2
|
|
(16.6)
|
|
(21.2)
|
|
21.2
|
|
|
|
|
|
|
|
|
Income taxes
|
6.7
|
|
10.3
|
|
(7.9)
|
|
37.2
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations
|
0.5
|
|
(26.9)
|
|
(13.3)
|
|
(16.0)
|
Income (loss) from
discontinued operations, net of income
taxes
|
(6.3)
|
|
25.9
|
|
217.4
|
|
77.4
|
Net income
(loss)
|
$
(5.8)
|
|
$
(1.0)
|
|
$
204.1
|
|
$
61.4
|
|
|
|
|
|
|
|
|
Net income (loss) per
share - basic
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations
|
$
(0.09)
|
|
$ (0.31)
|
|
$
(0.30)
|
|
$ (0.30)
|
Income (loss) from
discontinued operations
|
(0.06)
|
|
0.21
|
|
1.41
|
|
0.50
|
Net income (loss) per
share - basic
|
$
(0.15)
|
|
$ (0.10)
|
|
$
1.11
|
|
$
0.20
|
|
|
|
|
|
|
|
|
Net income (loss) per
share - diluted
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations
|
$
(0.09)
|
|
$ (0.31)
|
|
$
(0.30)
|
|
$ (0.30)
|
Income (loss) from
discontinued operations
|
(0.06)
|
|
0.21
|
|
1.41
|
|
0.50
|
Net income (loss) per
share - diluted
|
$
(0.15)
|
|
$ (0.10)
|
|
$
1.11
|
|
$
0.20
|
KAR Auction
Services, Inc. Condensed Consolidated Balance
Sheets (In millions) (Unaudited)
|
|
|
September
30, 2022
|
|
December
31, 2021
|
Cash and cash
equivalents
|
$
148.7
|
|
$
177.6
|
Restricted
cash
|
28.9
|
|
25.8
|
Trade receivables, net
of allowances
|
419.9
|
|
381.3
|
Finance receivables,
net of allowances
|
2,533.6
|
|
2,506.0
|
Other current
assets
|
71.8
|
|
87.9
|
Current assets of
discontinued operations
|
—
|
|
213.2
|
Total current
assets
|
3,202.9
|
|
3,391.8
|
|
|
|
|
Goodwill
|
1,452.3
|
|
1,598.0
|
Customer relationships,
net of accumulated amortization
|
141.1
|
|
159.1
|
Operating lease
right-of-use assets
|
85.9
|
|
94.7
|
Property and equipment,
net of accumulated depreciation
|
131.3
|
|
143.5
|
Intangible and other
assets
|
287.8
|
|
297.0
|
Non-current assets of
discontinued operations
|
—
|
|
1,766.6
|
Total assets
|
$
5,301.3
|
|
$
7,450.7
|
|
|
|
|
Current liabilities,
excluding obligations collateralized by finance
receivables, current
maturities of debt and current liabilities
of discontinued
operations
|
$
829.0
|
|
$
939.0
|
Obligations
collateralized by finance receivables
|
1,707.8
|
|
1,692.3
|
Current maturities of
debt
|
283.6
|
|
16.3
|
Current liabilities of
discontinued operations
|
—
|
|
361.7
|
Total current
liabilities
|
2,820.4
|
|
3,009.3
|
|
|
|
|
Long-term
debt
|
194.7
|
|
1,849.7
|
Operating lease
liabilities
|
80.7
|
|
88.1
|
Other non-current
liabilities
|
58.6
|
|
85.9
|
Non-current liabilities
of discontinued operations
|
—
|
|
313.8
|
Temporary
equity
|
612.5
|
|
590.9
|
Stockholders'
equity
|
1,534.4
|
|
1,513.0
|
Total liabilities,
temporary equity and stockholders' equity
|
$
5,301.3
|
|
$
7,450.7
|
KAR Auction
Services, Inc. Condensed Consolidated Statements of Cash
Flows (In millions) (Unaudited)
|
|
|
Nine Months
Ended
September 30,
|
|
2022
|
|
2021
|
Operating
activities
|
|
|
|
Net income
|
$
204.1
|
|
$
61.4
|
Net income from
discontinued operations
|
(217.4)
|
|
(77.4)
|
Adjustments to reconcile
net income (loss) to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
76.2
|
|
81.7
|
Provision for credit
losses
|
9.7
|
|
6.5
|
Deferred income
taxes
|
(4.3)
|
|
5.3
|
Amortization of debt
issuance costs
|
8.5
|
|
9.1
|
Stock-based
compensation
|
22.6
|
|
12.1
|
Contingent consideration
adjustment
|
—
|
|
20.1
|
Net change in unrealized
(gain) loss on investment securities
|
6.5
|
|
(10.7)
|
Loss on extinguishment of
debt
|
17.0
|
|
—
|
Other non-cash,
net
|
0.3
|
|
1.7
|
Changes in operating
assets and liabilities, net of acquisitions:
|
|
|
|
Trade receivables and other
assets
|
(23.2)
|
|
(180.5)
|
Accounts payable and accrued
expenses
|
(86.5)
|
|
283.8
|
Net cash provided by
operating activities - continuing operations
|
13.5
|
|
213.1
|
Net cash (used by)
provided by operating activities - discontinued
operations
|
(435.6)
|
|
142.4
|
Investing
activities
|
|
|
|
Net
increase in finance receivables held for investment
|
(34.9)
|
|
(281.4)
|
Acquisition of businesses (net of cash acquired)
|
(0.4)
|
|
(79.8)
|
Purchases of property, equipment and computer software
|
(45.8)
|
|
(47.6)
|
Investments in securities
|
(6.6)
|
|
(22.0)
|
Proceeds from sale of investments
|
0.3
|
|
32.7
|
Proceeds from the sale of business
|
—
|
|
2.1
|
Net cash used by
investing activities - continuing operations
|
(87.4)
|
|
(396.0)
|
Net cash provided by
(used by) investing activities - discontinued
operations
|
2,066.4
|
|
(19.0)
|
Financing
activities
|
|
|
|
Net decrease in
book overdrafts
|
(5.8)
|
|
(2.7)
|
Net increase
(decrease) in borrowings from lines of credit
|
126.8
|
|
(5.2)
|
Net increase in
obligations collateralized by finance receivables
|
36.6
|
|
119.6
|
Payments for debt issuance
costs/amendments
|
(11.6)
|
|
—
|
Payments on long-term
debt
|
(928.6)
|
|
(7.1)
|
Payment for early
extinguishment of debt
|
(606.1)
|
|
—
|
Payments on finance
leases
|
(3.1)
|
|
(4.4)
|
Payments of contingent
consideration and deferred acquisition costs
|
(29.6)
|
|
(21.3)
|
Issuance of common stock
under stock plans
|
1.1
|
|
1.2
|
Tax withholding payments for
vested RSUs
|
(2.5)
|
|
(2.2)
|
Repurchase and retirement of
common stock
|
(132.2)
|
|
(180.9)
|
Dividends paid on Series A
Preferred Stock
|
(11.1)
|
|
—
|
Net cash used by
financing activities - continuing operations
|
(1,566.1)
|
|
(103.0)
|
Net cash provided by
financing activities - discontinued operations
|
10.8
|
|
40.2
|
Effect of exchange rate
changes on cash
|
(27.4)
|
|
(3.0)
|
Net decrease in
cash, cash equivalents and restricted cash
|
(25.8)
|
|
(125.3)
|
Cash, cash equivalents
and restricted cash at beginning of period
|
203.4
|
|
784.3
|
Cash, cash equivalents
and restricted cash at end of period
|
$
177.6
|
|
$
659.0
|
Cash paid for interest,
net of proceeds from interest rate derivatives
|
$
71.0
|
|
$
71.6
|
Cash paid for taxes,
net of refunds
|
$
352.2
|
|
$
22.1
|
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 September
30,
|
|
Nine Months
Ended September
30,
|
(in
millions), (unaudited)
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Income (loss) from
continuing operations
|
$
0.5
|
|
$ (26.9)
|
|
$ (13.3)
|
|
$ (16.0)
|
Add back:
|
|
|
|
|
|
|
|
Income taxes
|
6.7
|
|
10.3
|
|
(7.9)
|
|
37.2
|
Interest expense, net
of interest income
|
30.9
|
|
31.7
|
|
81.6
|
|
93.1
|
Depreciation and
amortization
|
24.3
|
|
27.4
|
|
76.2
|
|
81.7
|
EBITDA
|
62.4
|
|
42.5
|
|
136.6
|
|
196.0
|
Non-cash stock-based
compensation
|
3.5
|
|
3.6
|
|
23.2
|
|
13.0
|
Loss on extinguishment
of debt
|
9.3
|
|
—
|
|
17.0
|
|
—
|
Acquisition related
costs
|
0.3
|
|
2.1
|
|
0.9
|
|
5.0
|
Securitization
interest
|
(20.2)
|
|
(7.9)
|
|
(44.9)
|
|
(21.5)
|
(Gain)/Loss on asset
sales
|
—
|
|
—
|
|
(0.1)
|
|
(0.8)
|
Severance
|
1.5
|
|
0.8
|
|
8.2
|
|
1.8
|
Foreign currency
(gains)/losses
|
4.1
|
|
0.1
|
|
8.6
|
|
2.7
|
Contingent
consideration adjustment
|
—
|
|
4.4
|
|
—
|
|
20.1
|
Net change in
unrealized (gains) losses on investment securities
|
0.3
|
|
20.9
|
|
6.5
|
|
(10.7)
|
Professional fees
related to business improvement efforts
|
3.2
|
|
—
|
|
12.1
|
|
—
|
Other
|
5.1
|
|
0.1
|
|
6.6
|
|
0.3
|
Total
addbacks/(deductions)
|
7.1
|
|
24.1
|
|
38.1
|
|
9.9
|
Adjusted
EBITDA
|
$
69.5
|
|
$ 66.6
|
|
$ 174.7
|
|
$ 205.9
|
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 September
30,
|
|
Nine Months
Ended September
30,
|
(in millions,
except per share amounts), (unaudited)
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Net income (loss) from
continuing operations (1)
|
$
0.5
|
|
$ (26.9)
|
|
$ (13.3)
|
|
$ (16.0)
|
Acquired
amortization expense
|
8.2
|
|
8.0
|
|
25.0
|
|
24.8
|
Loss on
extinguishment of debt
|
9.3
|
|
—
|
|
17.0
|
|
—
|
Contingent
consideration adjustment
|
—
|
|
4.4
|
|
—
|
|
20.1
|
Income
taxes (2)
|
(4.3)
|
|
(2.0)
|
|
(10.3)
|
|
(6.1)
|
Operating adjusted net
income (loss) from continuing operations
|
$
13.7
|
|
$ (16.5)
|
|
$
18.4
|
|
$ 22.8
|
|
|
|
|
|
|
|
|
Net income (loss) from
discontinued operations
|
$
(6.3)
|
|
$ 25.9
|
|
$ 217.4
|
|
$ 77.4
|
Acquired
amortization expense
|
—
|
|
4.4
|
|
8.8
|
|
16.8
|
Income
taxes (2)
|
—
|
|
(1.1)
|
|
(2.2)
|
|
(4.1)
|
Operating adjusted net
income (loss) from discontinued
operations
|
$
(6.3)
|
|
$ 29.2
|
|
$ 224.0
|
|
$ 90.1
|
|
|
|
|
|
|
|
|
Operating adjusted net
income
|
$
7.4
|
|
$ 12.7
|
|
$ 242.4
|
|
$ 112.9
|
|
|
|
|
|
|
|
|
Operating adjusted net
income (loss) from continuing operations
per share - diluted
|
$
0.09
|
|
$ (0.11)
|
|
$
0.12
|
|
$ 0.15
|
Operating adjusted net
income (loss) from discontinued
operations per share - diluted
|
(0.04)
|
|
0.19
|
|
1.45
|
|
0.57
|
Operating adjusted net
income per share - diluted
|
$
0.05
|
|
$ 0.08
|
|
$
1.57
|
|
$ 0.72
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares
|
150.3
|
|
153.2
|
|
154.0
|
|
157.0
|
|
|
(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)
|
An effective tax rate
of 24.5% was used to determine the amount of income tax benefit on
the acquired amortization expense and the loss on extinguishment of
debt. 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