KAR Auction Services, Inc. Reports First Quarter 2022 Financial Results

• KAR expects to close the transaction selling its ADESA U.S. physical auction business to Carvana, with the proceeds expected to reduce debt
• KAR reported consistent revenue from continuing operations
• For the first quarter, gross profit per vehicle sold increased year-over-year to $255
• Continued growth in digital dealer-to-dealer volumes were driven by industry-leading platforms, BacklotCars and TradeRev

CARMEL, Ind., May 3, 2022 /PRNewswire/ -- KAR Auction Services, Inc. (NYSE: KAR) today reported its first quarter financial results for the period ended March 31, 2022.

"We expect to close the transaction selling our U.S. physical auction business to Carvana within the next week," said Peter Kelly, CEO of KAR Global. "Going forward KAR will be the premier digital marketplace for wholesale used vehicles, with a meaningful finance company enabling our customer base. Our business will become asset-light with an enhanced financial profile—including significantly less debt. We expect the new simplified KAR to generate $265 million of Adjusted EBITDA in 2022. And as I look beyond 2022, I see exciting opportunities for growth across all of our businesses."

First Quarter 2022 Financial Highlights   
The company has classified the ADESA U.S. physical auction business as held-for-sale (discontinued operations) based on management's intention to sell the business. 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.

• Total revenue for the first quarter of 2022 was $369.4 million, a decrease of less than 1% compared with $369.8 million for the first quarter of 2021.
• Net loss from continuing operations for the first quarter of 2022 of $8.4 million, or $(0.16) per diluted share, compared with net income from continuing operations of $26.2 million, or $0.10 per diluted share, for the first quarter of 2021.
• Adjusted EBITDA from continuing operations for the quarter ended March 31, 2022 was $49.1 million, compared with $77.2 million for the quarter ended March 31, 2021.
• Operating adjusted net income (loss) from continuing operations per diluted share was $(0.02) for the quarter ended March 31, 2022, compared with $0.26 for the quarter ended March 31, 2021.
• Results for the quarter ended March 31, 2021 included $17.0 million in realized gains related to previous investments in early-stage automotive companies.
• Year-over-year increase in ADESA's digital dealer-to-dealer marketplaces of 31%, or 6% when including CARWAVE volumes in both years.
• ADESA gross profit per vehicle sold increased 3% to $255 for the quarter ended March 31, 2022, compared with $248 for the quarter ended March 31, 2021.
• AFC's strong first quarter performance was driven by increased revenue per loan transaction of 28%.

Share Repurchase Authorization   
The board of directors authorized an increase in the size of the company's $300 million share repurchase program by an additional $200 million and an extension of the share repurchase program through December 31, 2023. With the increase, and giving effect to the company's previous repurchases, approximately $309 million remains available for repurchases under the share repurchase program.

Earnings Conference Call Information   
KAR will be hosting an earnings conference call and webcast on Wednesday, May 4, 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 1-844-778-4145 and entering participant passcode 5886902, while the live web cast will be available at the investors section of www.karglobal.com. Supplemental financial information for KAR's first 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, including the sale of nearly 2.6 million units valued at over $40 billion through our auctions in 2021. 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, Europe, Mexico, 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 those risks and uncertainties regarding (i) the impact of the COVID-19 pandemic on our business and the economy generally; (ii) the impact of the conflict between Russia and Ukraine; (iii) the company's proposed sale of the ADESA U.S. physical auction business to Carvana, including the company may be unable to complete the proposed transaction in a timely manner or at all, the ability of the company to execute on its strategy and achieve its goals and other expectations after the completion of the proposed transaction, the effect of the transaction or the pendency of the proposed transaction on the company's relationships with its customers and business, and the outcome of any legal proceedings to the extent initiated against the company or others related to the proposed transaction; 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.  
Reconciliation of Non-GAAP Financial Measures

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

EBITDA, Adjusted EBITDA, operating adjusted net income (loss) from continuing operations and operating adjusted net income (loss) 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 2022 expectation for Adjusted EBITDA is a forward-looking non-GAAP financial measure. We have not reconciled this non-GAAP financial measure to its most directly comparable GAAP measure of net income (loss) due to the inherent difficulty and impracticability of predicting certain amounts required by GAAP with a reasonable degree of accuracy. Accordingly, a reconciliation is not available without unreasonable effort.

The following table reconciles EBITDA and Adjusted EBITDA to net income (loss) from continuing operations 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:

SOURCE KAR Auction Services