KAR Auction Services, Inc. Reports Second Quarter 2019 Financial Results

CARMEL, Ind., Aug. 6, 2019 /PRNewswire/ -- KAR Auction Services, Inc. (NYSE: KAR), today reported its second quarter financial results for the period ended June 30, 2019. For the second quarter of 2019, the company reported revenue from continuing operations of $719.1 million as compared with revenue from continuing operations of $623.4 million for the second quarter of 2018, an increase of 15%. Net income from continuing operations for the second quarter of 2019 decreased 27% to $27.4 million, or $0.20 per diluted share, as compared with net income from continuing operations of $37.4 million, or $0.28 per diluted share, in the second quarter of 2018. Adjusted EBITDA from continuing operations for the quarter ended June 30, 2019 decreased 2% to $135.9 million, as compared with Adjusted EBITDA from continuing operations of $139.0 million for the quarter ended June 30, 2018. Operating adjusted net income from continuing operations per diluted share decreased 17% to $0.30 for the quarter ended June 30, 2019, as compared with operating adjusted net income from continuing operations per diluted share of $0.36 for the quarter ended June 30, 2018. KAR incurred operating losses of $16.0 million and $11.3 million for the three months ended June 30, 2019 and 2018, respectively, which were attributable to the rollout of Trade Rev.

For the six months ended June 30, 2019, the company reported revenue from continuing operations of $1,408.7 million as compared with revenue from continuing operations of $1,236.6 million for the six months ended June 30, 2018, an increase of 14%. Net income from continuing operations for the six months ended June 30, 2019 decreased 40% to $42.7 million, or $0.32 per diluted share, as compared with net income from continuing operations of $71.6 million, or $0.53 per diluted share, in the first six months of 2018. Adjusted EBITDA from continuing operations for the six months ended June 30, 2019 decreased 4% to $258.8 million, as compared with Adjusted EBITDA from continuing operations of $268.3 million for the six months ended June 30, 2018. Operating adjusted net income from continuing operations per diluted share decreased 32% to $0.50 for the six months ended June 30, 2019, as compared with operating adjusted net income from continuing operations per diluted share of $0.74 for the six months ended June 30, 2018. KAR incurred operating losses of $32.8 million and $22.4 million for the six months ended June 30, 2019 and 2018, respectively, which were attributed to the rollout of Trade Rev.

"We successfully completed the spin of IAA and are pleased with the early results of the transaction," said Jim Hallett, chairman and CEO of KAR Auction Services, Inc. "We remain confident in our strategy and capital allocation plan, and are highly focused on leading the digital evolution of our industry, managing cost, and executing on the fundamentals of our business."

2019 Outlook

KAR Auction Services' previously stated outlook remains unchanged.

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.

Dividend Announcement
The company announced a cash dividend today of $0.19 per share on the company's common stock. The dividend is payable on October 3, 2019, to stockholders of record as of the close of business on September 20, 2019.

Potential Refinancing of Credit Facilities
We intend to amend and extend our credit facilities in early September, subject to acceptable market conditions. We are expecting to increase our Term Loan borrowings with the proceeds being used for general corporate purposes including future acquisitions. We expect any proceeds received from the refinancing to increase our cash balances upon closing. We expect to complete the refinancing of our debt prior to September 30, 2019.

Earnings Conference Call Information
KAR Auction Services, Inc. will be hosting an earnings conference call and webcast on Wednesday, August 7, 2019 at 11:00 a.m. EDT (10:00 a.m. CDT). The call will be hosted by KAR Auction Services, Inc.'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 2399573, while the live web cast will be available at the investor relations section of www.karauctionservices.com. Supplemental financial information for KAR Auction Services' second quarter 2019 results is available at the investor relations section of www.karauctionservices.com.

A replay of the call will be available for two weeks via telephone starting approximately 30 minutes after the completion of the call. The replay may be accessed by calling 1-855-859-2056 and entering passcode 2399573. The archive of the web cast will also be available following the call and will be available at the investor relations section of www.karauctionservices.com for a limited time.

About KAR Auction Services
KAR Auction Services (NYSE: KAR) provides sellers and buyers across the global wholesale used vehicle industry with innovative, technology-driven remarketing solutions. KAR's unique end-to-end platform supports whole car, salvage, financing, logistics and other ancillary and related services, including the sale of nearly 3.5 million units valued at over $40 billion through our auctions. Our integrated physical, online and mobile marketplaces reduce risk, improve transparency and streamline transactions for customers in more than 70 countries. Headquartered in Carmel, Ind., KAR has approximately 15,000 employees across the United States, Canada, Mexico and Europe. For more information go to www.karauctionservices.com. For the latest KAR news 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 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 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 from continuing operations and operating adjusted net income from continuing operations per share to net income and net income per share for the periods presented:

The following table reconciles EBITDA and Adjusted EBITDA to net income from continuing operations for the 2019 guidance presented:

The following table reconciles operating adjusted net income from continuing operations and operating adjusted net income from continuing operations per share to net income from continuing operations and net income from continuing operations per share for the 2019 guidance presented:

SOURCE KAR Auction Services, Inc.

Related Links

http://www.karauctionservices.com