KAR Auction Services, Inc. Reports 2020 Financial Results

CARMEL, Ind., Feb. 16, 2021 /PRNewswire/ -- KAR Auction Services, Inc. (NYSE: KAR), today reported its fourth quarter financial results for the period ended December 31, 2020. For the fourth quarter of 2020, the company reported revenue of $529.6 million as compared with revenue of $671.3 million for the fourth quarter of 2019. Net income (loss) from continuing operations for the fourth quarter of 2020 decreased to a loss of $17.1 million, or $0.21 per diluted share, as compared with net income from continuing operations of $15.3 million, or $0.12 per diluted share, in the fourth quarter of 2019. Adjusted EBITDA for the quarter ended December 31, 2020 decreased to $67.5 million, as compared with Adjusted EBITDA of $122.0 million for the quarter ended December 31, 2019. Operating adjusted net income (loss) from continuing operations per diluted share decreased to a loss of $0.01 for the quarter ended December 31, 2020, as compared with operating adjusted net income from continuing operations per diluted share of $0.19 for the quarter ended December 31, 2019. 

For the year ended December 31, 2020, the company reported revenue of $2,187.7 million as compared with revenue from continuing operations of $2,781.9 million for the year ended December 31, 2019. For the year ended December 31, 2020, the company reported net income from continuing operations of $0.5 million and a loss of $0.16 per diluted share, as compared with net income from continuing operations of $92.4 million, or $0.70 per diluted share, for the year ended December 31, 2019. Adjusted EBITDA for the year ended December 31, 2020 decreased to $375.3 million, as compared with Adjusted EBITDA of $510.0 million for the year ended December 31, 2019. Operating adjusted net income from continuing operations per diluted share decreased to $0.51 for the year ended December 31, 2020, as compared with operating adjusted net income from continuing operations per diluted share of $1.04 for the year ended December 31, 2019. The company's operating results for the year ended December 31, 2020 were significantly impacted by the COVID-19 pandemic. In addition, the company recorded a $29.8 million charge for the impairment of goodwill and other intangible assets in the second quarter of 2020.

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. Given the evolving health, economic, social and governmental environments, the potential 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 timing, extent, trajectory and duration of the pandemic, the development and availability of effective treatments and vaccines, the imposition of protective public safety measures, and the timing to which normal economic and operating conditions resumes. Even after the COVID-19 outbreak has subsided, we may continue to experience materially adverse impacts to our business as a result of its impact.

2021 Guidance
The company expects net income from continuing operations of at least $90 million and Adjusted EBITDA of at least $475 million. The following table provides a reconciliation of net income from continuing operations to Adjusted EBITDA and additional assumptions used in the company's guidance.

* 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.

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), gains/losses associated with step acquisitions, contingent purchase price adjustments, significant expenses related to litigation and changes in applicable laws and regulations (including significant accounting and tax matters). 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. Forward-looking non-GAAP guidance excludes amortization expense associated with acquired intangible assets, as well as one-time charges, net of taxes. See reconciliations of the company's guidance on pages 8 and 9.

Earnings Conference Call Information
KAR will be hosting an earnings conference call and webcast on Wednesday, February 17, 2021 at 8:30 a.m. EST. The call will be hosted by KAR's Chief Executive Officer and Chairman of the Board, Jim Hallett, 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 7675889, while the live web cast will be available at the investors section of www.karglobal.com. Supplemental financial information for KAR's fourth quarter 2020 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 approximately $30 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 virus 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.
Reconciliation of Non-GAAP Financial Measures

EBITDA, Adjusted EBITDA, operating adjusted net income from continuing operations and operating adjusted net income 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 from continuing operations and operating adjusted net income 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 from continuing operations and operating adjusted net income from continuing operations per share may include adjustments for certain other charges.

EBITDA, Adjusted EBITDA, operating adjusted net income from continuing operations and operating adjusted net income 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 following table reconciles EBITDA and Adjusted EBITDA to net income for the periods presented:

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:

The following table reconciles EBITDA and Adjusted EBITDA to net income from continuing operations for the 2021 guidance presented:

The following table reconciles operating adjusted net income from continuing operations and operating adjusted net income from continuing operations per diluted share to net income from continuing operations for the 2021 guidance presented:

In the table above, operating adjusted net income from continuing operations per diluted share is computed using the weighted average diluted shares assuming conversion of the preferred shares to common shares.

SOURCE KAR Auction Services

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