KAR - Earnings call transcript Q4 2017 | KAR Auction Services, Inc.

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Operator

Good day, ladies and gentlemen and welcome to the KAR Auction Services Fourth Quarter Fiscal Year 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host for today, Mike Eliason, Vice President, Investor Relations and Treasurer. begin. Please

Mike Eliason

financial morning Auction for earnings ended Services Today, discuss Good for us conference December thank Auction take we'll KAR KAR questions concluding the fourth the we XX, and XXXX. Latoya. the our joining you today call. Services After Thanks, for of commentary, quarter will performance quarter participants. XXXX from

Safe conference I'd forward-looking Harbor call statements Securities Act results off the any kicks such remind disclaims that to of to uncertainties may company Jim fully meaning Private like update risks such of of our the obligation provision discussion, the and forward-looking the these Litigation and contains of providing prospects that are risks are business Before statements SEC statements, forward-looking operations, XXXX. within our this involve detailed expressly affect cautioned and you Reform Investors statements. in KAR's In filings. that

mention throughout our financial will let site. also measures Lastly, non-GAAP press is measure call applicable non-GAAP both to the the issued GAAP in can Relations we referencing Investor the be we in morning, GAAP this that measures. of release the of found and available which financial me financial Reconciliations be section this that conference Web

over like Jim call I'd Now to Services' turn to CEO, Auction KAR this Hallett. Jim?

Jim Hallett

review And businesses. of want taking finish of ADESA up comments initiatives overview are key capital to performance, guidance or, ongoing to Great. to plan Thank at place our to you, on for with the At our with review provide review with agenda call. our welcome in outset you cover. we you provide our and KAR. good number the I to me, afternoon, and Michael XXXX, see excuse trends -- allocation. want that things want then my at strategic a and an today gentlemen I here, just I our XXXX for ladies I and that

a performance. income tax XXXX adjusted XX% which had operating I year. revenue, adjusted reform. and of our very to good significant increase on highlights represents comment did a me increase The a were benefit generated KAR a million believe of net let First, XX% $XXX that tax in performance consolidated in over due per XXXX. a record the EBITDA share, We XX% our we

per and Our impact there reform net on operating XXXX. of cash in adjusted tax income taxes the excludes is share no the our impact

years revaluation However, we tax will liabilities. future save our the of $XXX over as in deferred in million reflected

growth saw to same our drove in in As finish well. volume increases the by you up down strong same year ADESA Online AFC of grow in the but X% in and this second X% had year. the performed all the sales saw volumes quarter was XXXX the unit. fourth XX% our improvement for morning, X.X% businesses Revenue losses performance press with release the store contributed X% volumes Auto a continued strong net that year. Auctions average the quarter. in in to the fourth its a is in the expected X.X% of half year. loan in the This in fourth the were we Insurance losses XXXX year. volume, was physical very this physical store and in of balances offset per the quarter credit revenue for receivable increase increased revenue for

XX%. like was foreseeable volume looks it market XX% up going future. was strong For adjusted salvage the will continue year revenue The up and is was EBITDA for up X%, this the and

XXXX. for guidance Turning to our

per operating This XX% XX% $X.XX net XXXX. over to will EBITDA result adjusted of to We of $XXX over income expecting share represents This XXXX. million adjusted X% $XXX to XX% million in a to of growth in of are growth $X.XX XXXX.

low or cause in XXXX. could factors the Auctions in is high guidance. The Auto of what Insurance end will We are what ADESA be important asked net volumes often to at our us item most at be

the to influence of STRATIM our add of individual technology we enhanced of platform to contemplates the to to acquisition net generate markets platform. the rollout use is outcomes range. mobility services U.S. that of as that possible platform various Another the within factor where TradeRev speed and loss XXXX pace our is we in our Also, a fall and level will the on range incentives expected the the guidance our based introduce and of we

XXX,XXX they expected trends to key the starting that XXXX. business taking used be greater XXXX are with supply. in to in place than were Some in our are car vehicles XXX,XXX returns Lease

We also expect reduction a volumes Offsetting repo vehicles saw will We dealer in the commercial same consignment decline auction. on in physical consignment in increases these activity dealer X% a levels. to increase volumes at over basis a in XXXX. XXXX store be

supply On remain vehicles to the salvage of to expect front, we strong.

We X% expect years. volumes over increase to X% several the annually next to

events catastrophic AFC the impact level growth At on XXXX of continue pursue in growth. volume Of without to our in portfolio underwriting we course number risk. will of taking the increased

identifying expanding great Our our job doing plans with is AFC team new and customers customers. floor of a existing

at the may number impact volumes dealer vehicles of in physical decline the auctions floored. However, consignment

throughout XXXX. remains year, what we second credit the outlook in and Our of losses half loan we to XXXX consistent for be X% experienced expect the positive below with

three within strategic would on moments going discussing a we initiatives I KAR. have that like Now few to spend

me are continued a we leader resources that Let that in by start the ensure this I investments to our in dedicating evolved making believe evolution. the are to we stating that has and industry

digital to facilitating leader digital transition transformation. First off, intend to markets this a are at marketplace. businesses all of in of more our a in our stages various be a We

XXXX We of projects, of tools. on internal technology our will suite our expanding expenditures half spend capital in

changes and We on those have acquired our few. the for including And to future to customers are position priorities. are our strategic the three better of an past would name extensive inevitable. of OPENLANE, that working the digital assets Today, STRATIM, over we I to years, TradeRev like portfolio Autoniq, DRIVIN, and focus businesses understand several a with

First, about analytics me and talk let capabilities. data

Over collected to and in This customers annually. of customers. results transactions to have improve am the In utilizing clear in data it’s us excited data developed wholesale value net months improve vehicles. now a of and the about and and a their market differentiator few with the marketing the In company we for commercial have teams. transaction I of have short in DRIVIN, for works demonstrated stuff our XXXX, integrated utilizing process years past several returns our data performance the acquired the really a we scientists and the of two commercial these customers. utilizing analytics data millions focused analytics we our understanding we team and data on to that these

but decision driven for We in the are of KAR very space. this opportunity I of lot a evolution see early in data making

part developing Another North is our outside of America. on strategy XXXX business our that plan to international of I focus

a have presence pilot we a U.K. To know, opportunity the date this you knowledge learn used and As base new small new the in develop markets, we have an offerings new in market. to as geographic

of focused We are outside growing on North America. our businesses

efforts advanced I markets serve the We continuously technology global The designed strategic new our want markets. priority discuss and to to to mobility. is platform enter are are around to today the opportunities prepared we last release assessing the

in platform to this manage, date believe their help is services locations capabilities to maintain is our developing fleet North the uses current at to that As extension auction you natural We We that we analytics of early opportunity the with development the the acquisition the market. customers. America. provide fleets. owner earlier of many of the saw the us platform servicing data recognize completed here physical companies our of This stages service is will to and mobility take we month, in to mobility STRATIM. a a offer STRATIM STRATIM

become we provider we it's to market the feel a mobility However, critical that service now.

on allocation me remarks let with update capital an my finally, So, our conclude priorities.

million in cash corporate income addition free over will generate reduction First, taxes $XX XXXX. in flow the in

We flow in are to free XXXX. million $XXX expecting of cash million $XXX

Our not changed. businesses in our has priorities capital allocating for generated

return paying will is approximately rates of best total down our adjusted capital so at to to the EBITDA debt a low Interest not the at three of our times we shareholders our We and time in remain leverage believe quarterly dividend. year-end. this continue capital form use was

capital continue for strategic using our growth. to prioritize We

today. no have M&A to We transactions discuss

and opportunities to our potential consistent Our our is of to review with growth. capital strategic acquisitions continue will be we priorities for we strategic pipeline deploy disciplined as and patient

quarter. buy we quarter We also typically back will our that support the do to us quarter capital continue to working quarter. this of buy purchased KAR in revisit stock utilizes stock expect KAR do stock. a We as and We use repurchase I the back our not of not our the $XX situation in fourth second operations. is will to the the first open in first period in XXXX stock market capital to in million

well our to capital Our to forward. approach balanced shareholders similar cash free and and has I the deploying expect going utilize in served fashion a flows our businesses

So joining our over thank more will turn now Eric around our I financials. today. call commentary to you it for for

Eric Loughmiller

Thank you, Jim.

walk me details through let about First, a few guidance. our

adjusted our XXXX for is mentioned, million to $XXX be EBITDA Jim As to million. expected $XXX

and purchase purchase in payments capital close property use $XX and $XXX on discussed of taxes in expecting including events. cash to is expenditures in this XXX cash the acre for the potential Florida $XXX debt anticipate XXXX expect approximately million purchase are during be million million. The of of development property XXXX. to of $XXX this catastrophic interest of We approximately We corporate transaction million. and expected We

significant guidance per the free will earnings evaluated share for tax XXXX. taxes benefit KAR's $XXX million of In Jobs the expect and determining our to Tax The our impact net income net of we We provide a adjusted $XXX income to cash Act reduce of operating beginning in the and million rate in corporate from have income XXXX. XX% U.S. cash the flow to year. and reduction XX% for Reform

XX%. programs future estimate as compensation this meet effective limitation not is anticipate Our for executive is expense existing be non-deductible term grandfathered long will impact grants tax may are We expected in future result compensation requirements income our increase us compensation rate we XXXX of and and years code may to the will future our provision incentive of rate in tax rate tax in years. deductions. our One that deductions. in the effective tax XXXX XX%. new XX% to the be This on significantly effective In tax limitation awards

For income share share operating of to $X.XX. XXXX, per $X.XX to income of $X.XX $X.XX adjusted and we expect net per net

that results Our items favorably I impacted were would two XXXX to review. like by

in excluded accounting had First, remaining October net XX% included August we million operating XXXX. upon but interest was of in in a is computing of $XX.X acquired the resulting arises in Software the This in that XX% of interest gain Nth income XXXX. from purchase is the net revaluation income. treatment adjusted pretax gain Gen of This

a this expense in reflected Another of to income reduction the liabilities XXXX. $XX.X rate in equal the value XXXX be related unremitted revaluation installments will of liabilities income reduction our XXXX. income an by net is deferred U.S. is U.S. item net as This taxes Canada. statement in annual in due XX% tax reduced December our and from the reflects corporate XX% foreign XX, is tax recorded in was beginning tax of expense of year. item in X tax in the of $XXX deferred beginning XXXX. recording The on as million the earnings, to primarily This Offsetting for income due million

were previous margins experience lower lower reflect impact As the XXXX. at in ADESA sold the were of the businesses related in operating quarter. we adjusted EBITDA volumes acquired by quarter, $XXX services lower in quarters impacted The than auction other Consolidated fourth revenue. physical margins typically our and at per unit seasonal combined sold was three fourth higher ancillary in margins with and incremental XXXX. Revenue

the Excluding the EBITDA Insurance Auctions for year. were December incremental prior to margins and would I Auto in XX% end. X% like acquired exceeded results for comment of on the XX. businesses, year above full at the quarter KAR at adjusted inventories levels fourth Inventory

total IAA initiatives highest level focused lowest quarter an IAA XXXX, possible. cost increase have is the inventory compared to as in X% A claims quickly in to as insurance our been year-over-year is recover reducing of help effort number history. cycle of this the it first the on since times plans loss While in of

Now on and hurricanes let Harvey me update Irma. you

for recover X,XXX net are sell as we the hurricane XXXX. Most in XX, sold vehicles. this our sold vehicles remaining performance remaining XXXX. concludes on our financial we all titles my $XXX,XXX and hurricane of to awaiting XX. but about Through activity December we vehicles will of about early We and loss of That and was December expect comments the as statements be expect have

in report expect XX-K next We to our or file day Form two. the annual on

quarter earnings and in XXXX an provided Thanks time earnings performance. for will and a results now our we discussion our of questions. your your have take you fourth and supplement financial slides with understanding assist to We today

Operator

The Instructions] from first [Operator of come Brinkman JPMorgan. Ryan question will

Your line is open.

Ryan Brinkman

when to it etcetera do always management comes vehicles you in of digital dispose fleet Could In time particular, providing strategic itself kind little perhaps services about bit kind for knock second of the to might of And interested footprints. over are that, time like business there core storage your attracted over then whether given whether and STRATIM to be rationale think time, you you of you your for more that nature benefit fleets vehicles. a the please on talk some imagine to of acquisition? in the some maybe are or of business kind or

Jim Hallett

Right.

It's So, me Ryan, take let that. Jim.

we the and are are about sharing car go people on very cars on are when at I the here international the think America sold use often mobility on you focused First, to North mobility they different autonomous stage this we of sharing. much many way is is focused ride going mobility a are And cars. markets. believe to that times I see that really future here people And you focused behind think in very how is respects vehicles. and of and I going are to What is am in see many I right thing think what

the back millennials are here, car move a when centers, to people they come people and ownership. as car need to urban want as a play total think into I have going not

to need to the hour, very this as and going vehicles. to the these leave tell to large are by we the need. would to world, are be these business do their week, not day, envision by going fleets into put and are of very place. very customers I the the And have the you going today own to have they fleets is So I by we service going manage, month, it's in whatever resell they to fleets place, as what are that And renting year, the of car all go Lyfts the is Ubers very that minute, vehicles, it a they the which by the that such, by that by going they well. maintain, owning They

And fee. a look at STRATIM refer take you what was takes startup fleet the a connects take platform a to it registration and that platform, that platform STRATIM services the I with early also If a fee an owners. well could it's a platform it's would as these as

extension we In cut have tires. site dents, natural mobile or going So that won't have come auction keys these today. do replace or to windshield car, as with to do customers our there replace you a we of STRATIM an cases We for. for these services will what all a to seen a be with can cases some it's that to or services In be we this many outlet. the to will taking whether pop to

take XXXX, at it's and I here prepares happen a invest look put but where up STRATIM I not we that very confident perhaps for we obviously we see can to and ahead company sand that tell is in to believe made for that opportunity and you in as going the what's and am us that our away. saw we mobility And far is not, somebody the look to else it in us it this we invested So space. and truly in space and the don’t position sense make going, we this sure wake head at leadership

I business was with today. to So second any about that’s talked your is and right, think transforms, a say look world part that the is think understood going see the business question take I you a digital Ryan. products other transformation I digital. this the do, it as of And some within well of know a more mean as taking look platforms, place watch I would if take I how you business at there you and I we I

business we and impact transforming how As that’s and it's look analytics and at data having. the

how the As space. really and is we to TradeRev at revolutionizing that dealer look dealer

So more do going I forward. technology, digital, see more

I I have answered So hope Ryan. your question,

Ryan Brinkman

the year, ago. Yes. And inventory quarter thanks That XX% in a or was the at something super IAA The Thanks. year helpful. lastly me, then the XX% of top from growth context. last what, of, just higher for top on on fourth X% volume like

relative think you related if share track to though, curious can hurricane sort of your you how volumes expectations. Just

was an And competitors how confirm your Can of had was volume expectations? over-estimated I sort there relative it looking that say just tracked you back, to think of come. one also maybe much then to belief how earlier maybe going that.

should stage. this there think be I left at very few vehicles

Jim Hallett

probably Yes. we cars but we Ryan, that cars Not margin definitely fewer great I we than a what would anticipated. by anticipated. than say fewer got have

think approximately cars. We that got remaining. mentioned I Eric it XX,XXX was X,XXX

a all catastrophic come the possibly events equipment, We we of in word I got team amount be Auto we a look quite breakeven a team we focusing together a I we it place absolutely that coming, above hurricane Sandy, thing to putting when want going think the really the what lessons And would that I provide. and the This best proud that Insurance land a our Auctions this at that hurricane storm, and the to these putting cat called needed. storm of point amount be you or are important from that that place. consider team it to team. am So start we take that sides going that I took the totally you storms. position minute the took to went resources with But bit services we that believe a is is can four and us during that And pleased the in that Whether to that Sandy that was or or we we team deploy out we to huge practices dedicated people, that within think of would at cost loss up less. be to more investment with of after be when the learnt really the the little head of I the we gets team. can that could place on are

So really money with lost back cat, and you look if history, have on only was that, one in Sandy. we that

one We this normally are we we can breaking little we get forward may even anticipate here from on but even these or going events. smidge that profit

Operator

next And you. Goldman question of Sachs. the Fassler from Thank Matt will come

is line Your open.

Matthew Fassler

question business. on ADESA first is My the

bit could reflective sluggish about that you about pieces and are quite channels more the If Can I the resilient. work channel remain some drivers anything else. than and guess the that making which talk of margins, the though moving you are shift drivers a profit ASP underlying The gross of gross talk volume different is of you, profitability please. for

Jim Hallett

as off-lease look it's commentary to going at by I vehicles. the ADESA, Well, heavily driven mentioned that in my we be

upstream a about over also car, car. a $XX,XXX in many be vehicles XXX,XXX to Last of got a sell close higher year coming. a $XX,XXX think this going are XXX,XXX these moment, we have for off-lease our averaged programs. car. you a are additional to we We private little pushing if label year They dollar vehicles may off-lease that just And to

very and more sales high share label, analytics of now on just And a a data over only to Matt, we is cars. And going we of on In private put haven't actually in can come year price take reason are So obviously get moment. a close off-lease get closed third here the high our condition. of they because some are because closed doesn’t the hurt. sale share also these Not going focus open we to the of this a we you, TradeRev. but they sell a a to that for lick then have the those sales, lollypop sold back a get in we have want past when because and of vehicles of to I

it when to sale, now changing open an So prices. got weren't they

TradeRev cut, are sale. to sell it physical And Now that they when a to able if goes what doesn’t price before then we if adjustment comes to it to open. will, data able you show should is it when are through there, our perhaps do it we to customers another take price comes

just being So be in that’s amount huge driver. consignment. that we repos increase, dealer know, a there decline expect written. could expect we And credit of the a on that’s will We slight the

XX% year, we If you and we dealer. were XX% were about think commercial last it

We will have past the this the XX% mentioned have and at in business times, that our we told you commercial I several XX% I past expect and in dealer. settle over year think

like with on or -- the revenue that’s Now job doing really well. I the on other were part getting to an as dealers exceptional that are that auctions, ancillary physical services the vehicles driving and

at look today. we and volumes we good we outlined with achieve as for are assets we think I a the have are very that well positioned overall, in are here what to that the position coming I we have you So knowing think

Matthew Fassler

meaningful way? showing up the in any So financials this in is TradeRev

Jim Hallett

let will on I you that. you Eric, comment

Eric Loughmiller

meaningful an on impact in in Not Matt. a Sure, quarter way our the had fourth performance.

the first in a the in incurred represented loss our we It that’s from shown volumes Matt. of fact up volume about quarter our quarter. only of that’s In Again, online the numbers, X% activity. course

$XXX net of So add part loss and incentives was incurred that’s financials. EBITDA the of in million quarters a that in And the and in quarter and adjusted not an then it that. the previous the getting encompassed in going in loss rollouts was zero three back, our our that’s again, resulted

Operator

America. of question The Murphy next you. Bank Thank is John from of

is open. line Your

John Murphy

very stay to second here. for on a was wanted Just It TradeRev helpful.

thought mean and margins sort up I you incremental of X% only volume weren't quarter. do normally I about if do sort of it sort mean cost kind you cost You Is you of over what basis. can think ramp the of net online TradeRev said operating just booked significantly and of a an time. the it and higher? running in loss on here

Eric Loughmiller

margins, of think very get that’s you are only you introducing asking. more new any And much are on markets, this label our margins per very significantly sales. Again, to this beyond is rollout TradeRev what the importantly, in the The car business high I average is once higher than like business. online John, revenue closed sold in private cost

that’s at attractive So that what comparable we open from incremental. I would margins the historically to and very consider lane we really particular, In us have what comparable in terms very of activity. call to

John Murphy

go with wouldn’t in greater. network physical and might if And you other this focus becomes have before of I virtual or where and less that helpful. is not of TradeRev. international kind a That’s point this a you footprint business, at sale in that point Okay. growth, you of you a build and in as are asset then that strategy you mean to go to able second international sort your about does just the markets international of growth we intensive mean of year, it think product. and to looking I this to doors in up TradeRev open have does what might as you lot be markets much open TradeRev sort opportunity online

Jim Hallett

Sure, John.

international the the is truly We are world. open to markets. that an well TradeRev very transports to asset very

tell have right on have going we that deployed, a now. pilot In can fact we I you

go right TradeRev observation. now but And this U.K. is customers in world. that good on in the the a anywhere have We can technology

John Murphy

what or Thank But Okay. it's to new Then kind and vehicles think land your vehicle will know and it their question dealers, think this impact think the well, the for market? mean to vehicle business and because just in you down? what you the so ability in on tax consumers that have up that about Jim, also, And think been much do you leg one it you direct if of do will for demand What buy going very there customers and from of has do be sort here. the pay your the color you used consumers middlemen dealers more those then reform. are another or that benefit them on on the I dealers. directly. mean coming buy will a lot your for tax being, that reform from where we customers then you

Jim Hallett

of I can Eric and the first Let maybe Eric? add take part question on. that

Eric Loughmiller

Yes. where were concerned provision in plan their on ended the loans is being for added there a about in very of I and XXth mean hours deductibility that dealers floor protected legislation. we interest our up

the use is no letting now consumer change. keep for good operated. good has then market is that to both floor the I such very borrowings big how it which continue operate right we to see our car. inventory think to is Jim similar it. were the new Jim, it will So Very there to I used for And dealers able And let and plan industry basically talk us. side -- on more I car of economy our mean, again, as

Jim Hallett

there asking, which lift nothing benefit think there for will little a negative some say Certainly what consumer I is anything is our business is well would tax Any which going you maybe I are bit upside. of may If about there be forward. a time the serve there this.

John Murphy

the Okay. And place might for in the STRATIM third owning your that your could as -- owning then there. put just future as fleet these to on got to these that lastly, customers opposed might the be you [ph] like have base. there Is be where AFC you cars where [ahead] grow selling fleets year help on initiative a adjusting customer

Jim Hallett

AFC TradeRev. the been I has will with really for you tell opportunity

providers look captives, of more many really we you the dealer are take own. financing dealers When by are financing. a on capable on managed TradeRev. the their independent fact AFC being on In getting OEMs, are they our buyers are Whereas pretty these which the with biggest of at mobility focused the

don’t So see base. our I with with independent STRATIM it dealer so much more much TradeRev but it so see and I

Eric Loughmiller

within network. life there will fleet AFC to thing that John, ownership will the car private we that is the be one of end when see and moves reaches

that We expect attractive theory used player In a car to dealers inventory be lower access the get independent a will to dealer. the it to helping that’s really be big inventory. value

John Murphy

is AFC buttoning automatically. TradeRev, right there to vehicle, use you When of sort an almost finance there just the

Eric Loughmiller

Yes.

two There there one transport finance is matter an there. a there AFC As another to on of and cars when is it to is one fact arrive. buttons

Operator

next Ben Inc. The question of Stephens, Bienvenu Thank you. is from

Your is line open.

Benjamin Bienvenu

ask in to as guidance Is i.e., contribution for in fourth similar TradeRev. one what's next but quarter, a the magnitude year want to relates about very to a I grows that reflected we of term. it long saw that the it smaller contribution

If for from sense path in us here give could that your mind. business in the you glide a

Jim Hallett

Yes.

you you about of but the to in here it U.S. TradeRev, U.S. It's when startup a context to in the new bit little if Canada we roll it more longer of because think out the there So been it's continuing it's here mature in markets think a are in still

fact am very Southern you week. we I in California In pleased tell last rolled to just out

the have primarily We on been Coast. East

both have it on coasts. now So we

to of think But TradeRev it I term this will is to Now I to close you how a come total in, here thing bit a to addressable would the don’t focus country. of as play it the with I that but contribute on we middle ask market. just have little we the year. that a more And refer longer is expect

dealer number now. am of I think cars -- of the vehicles that you If talking

that the of the much transaction. auctions middle come, that or and the in number trading don’t cars transaction TradeRev middle either dealers wholesaling like that It's in to additional is we XX some we do a is today. get cars physical are of fashion going we to are vehicles there are of online do auction on And If dealer themselves get much going you bringing an to where in that’s the an are not of coming then that’s They chasing. to that in really and what million that like think auction, among auction. today

auctions of We that are not although total million it XX looking we looking really cannibalize get a grow slice to we to but cannibalize cars. of make that market addressable existing are some and our

Eric Loughmiller

into impact of a on we expect The quarter question. your quarterly the to performance XXXX specifically on is would just fourth in consistent clarify quarter. looking basis me let pretty Ben each expected with And terms what

Benjamin Bienvenu

declined for IAA. the Volume to gears XX,XXX Thanks Great. hurricane meaningful year-over-year. units Okay. excluding that. somewhat Shifting

huge around play? of sustaining. Now you the function traditional against of of a do the in 'XX. sort commentary other Matthew displacing units. the is volumes non-cat But decline I what were factors the extent at in positive realize hurricane industry light see vehicles a Particularly of portion the XQ broader salvage you what provided of compare To

Eric Loughmiller

XX-weeks at point Ben, business. We the operate long. just fiscal XXXX week XXXX I year. salvage XX-XX this out, one only a long. technical is thing on and was should XX-weeks was

there the was actual week So in of salvage business. one of actual less activity

then there a let have Jim did in comp Harvey difficult we will forgotten what stuck answer lot not was fourth the I probably last was bit and a but also the Matthew. little and experienced more but from only we That system the Louisiana cars a hurricane you a year I probably people Second, real more backlog have Irma. will remind quarter of with that of in floods hurricane

Jim Hallett

comparison and times was has little in the of, turned difficult fact has as I have we I No, is reducing to thing that’s and will real very faster. IAA that bit on have taken said, think I you cycle inventory as as we a remind did add had well the down over is a the focus XXXX And Eric wise over mentioned XXXX. everything going a is very said comp that Eric what we

Benjamin Bienvenu

salvage Okay. the look services the units question The are higher? providing the less in are you just or difference companies units traditional that higher Great. hurricane meaningfully one a insurance the the additional of there than than Is that And that sustain then the the that unit quarter. to vehicles skewing non-hurricane hurricane might IAA. all of for those on last ARPU be damage for just be ARPU units

Jim Hallett

Yes.

that I it not think would companies. where were you is these some flooded be vehicles with by get non-insurance necessarily of that insurance the with vehicles,

that cars get obviously those think we they were at all were the fees get you the cat much If for cars different then insurance flooded all businesses what of where volumes other about vehicles flooded dealerships companies. have of from in the in the a we of that and selling vehicles,

So those that certainly the cars. revenues on impacted

Eric Loughmiller

is there add, value also a totaled have hurricane collisions. would I you Ben, typically in car then And higher a in

price the in average average selling higher industry. of total up end the losses the event be we to the so in catastrophic any related tends than collision And

Operator

Thank you. The next Jefferies. of question is from Bret Jordan

line open. is Your

Bret Jordan

On versus the would dealer consignment expect physical being decline down X% and we 'XX. be physical I XXXX in in guess expectations cars, of down continued

Jim Hallett

three we we another if that an our commercial Brett. would on the have are additional that enhanced expect. you down repeating, off-lease that me, vehicle commercial Why? am always I repossessed cars dealer again resale. in We 'XX story in mentioned, be going cars. been at about or or the points to similar Especially last it a vehicle were it yes, will dealer vehicles for as a to but seen consider XX%. think have impact you has Could points consignment often today at was expectations car Because XX%, now. the could I or couple drop car XX% here or what I you X% services forgive had year, a of dealer that displace And have all -- whatever, think Normally, as these car. settled it, times

these body dents the cosmetically to effort work, needed outcome an to economic a the or off be to So any best the most car. get paintwork taken or done been that care get or for and commercial to on sellers in car anything attraction has

is year. you there likelihood bit follow that a could say would that see this continue I dealer So consignment to

Bret Jordan

off less standpoint, I in physical the from against you become doesn’t a can guess that fixed Or, year. down auctions it it's cost flex guess, productive? I offset overhead of units the down the decline a so And

Eric Loughmiller

have actually own leased have think that’s let leases our it's And of to properties we adjacent Bret, I it. job done those property locations something including if even own can many that controlling go. we No, we a good our really

have volume, using under are number decline despite will the the almost sure strong of very running we it are through around at labor we all labor the this slight we control. cars running, of right in running are our We And high processes at to amount options. levels really for that Keeping make of capacity processes. of

Bret Jordan

digital then I And there live any all question. digital. services. you about the and one thought taking the transformation of auction last about Great. Okay. Is car portion mean going auctions talked out of IAA

Jim Hallett

the well cars Well, as being you know, physical. showing we all digital of that where we like time over think methodology I demonstrated the as are hybrid course have

I this You never but we this at it's is point time. that that time say know this never in would at something in contemplating are something not point

Operator

The you. question is Thank from next Barrington of Gary Prestopino Research.

open. is line Your

Gary Prestopino

Jim. Hey,

data for some the You XXXX. market the the what us returns saying gave lease is for year, on

also the Can the a you repos of to coming any what think to data various said be amount be You think were share would of with or the back total growth. source pundits going year-over-year. repos you -- market what

Jim Hallett

go I Yes. peak at don’t X.X the last know very know We at X.X vehicles back we pre-recession. if and in million a to little have we history, was Gary, that repos up very a number. year were over the it million peak,

they markets write results the to additional strong paper. an exact tell obviously to want credit be back continue a So you volume I it than do comes can number other add Eric, you And to and as I that? written, to in result, don’t continue more have repossessions. more that to

Eric Loughmiller

Yes.

loans we at default from same in rate industry historically, have another Gary. would really been about experiencing that that the outstanding, just the NAAA that received Our have of looks we we And data result if number through year XXX,XXX of will of those. the repos as years, XXX,XXX an the share And several our marketplace industry. then wholesale year. for projecting units next per And increase it's about per an get coming we that

Gary Prestopino

you will rolled TradeRev, do North rolling it platform? in out mean have just of entire out. then Okay. think you you it the When I still across are And terms American

Jim Hallett

like Well, I in to certainly to year, across the that the course think the starting of over be can we would next markets country. most be major

I my XX are account, but being to apologize, probably know now. I I that in up know markets over we not You am on date

we know move we going do truly capable marketplace over good don’t and that. I can be into more the year, think the those as We of if are ourselves we doing articulate gone a next I the But a than job is have are can is the at message longer trained a bit little to east the now we that to Southern just deploy pace that towards quickly guess but as California. I over maybe back additional of in to get and to the able of course trip not marketplace the markets starting TradeRev in and product. represent putting people, the to people

there fast. is is there know fear sometimes, too trying of to You go that always

So Gary. there is there, a balance

Gary Prestopino

dealers Your to And would in the be as Canada. signed the applicable as also the this goal to of up right. country dealers well well, get is this majority franchise then in independent

Jim Hallett

from on standpoint on Well, the that. to franchise say selling sellers the franchise. a dealers. There were focused that exceptions some I focused Were are the would

we wholesalers, selling which be where well. as there are buyers, for but buyers the that strong some standpoint, the an could typically franchises is a the it's may as and the oftentimes the not be typically, -- exceptions as franchises buyers think -- well buyers are I from allow it's sell independent to are independents but independents could

Gary Prestopino

And is a say older of now. through being to like Is right terms -- are a of of in that system going Okay. franchise any by Buick bucket? guess car non-brand dealers. to is franchise dealers. like -- there it's kind am is more that offered of a trying can GMC what at get a I I an anything the what the there it kind Is cars that vehicle, you

Jim Hallett

Yes.

the of Gary, So, really it's above. all

We have mix. a

We have end cars. high dollar sold very some very

cars. luxury Some

or sell even XX is are fit This opportunity car typically just We brand, XX have then I cars. opportunity just sold that’s doesn’t inventory end what that in they they of the wouldn’t and of sell. to it's for because you cars that condition for of. days, aged product selling they an the want an of would that also of say, profile for what that fit been around some the And some bottom nature. get to kind miles mentioning. are dispose to their them is their dealers And sell things opportunity keep that cases, and we doesn’t

after. a and and it's buyer bag just cars. to biggest basically lot really we So want those can. the we We we are what the can sell create base mixed Bring biggest kind of of that’s a seller

Operator

question from Thank is of next you. The Securities. CJS Bob Labick

open. line Your is

Robert Labick

back that the in IAA Thanks driver the Could so just and the HPC the has you if bit far. I see over talk were been what XXXX. shift and again. to for very a strong The continuing call the and the into margins of strong to little in half margins QX you details ex particular. on wanted about in cat

Eric Loughmiller

I Eric. will start focus by is on our about this Bob, times. Yes. cycle just talking

not good process, It's As can them our been a that we our we like. cars good are go back trying good very hurricanes are the when network. our pretty having Very They disruptions withstanding it's be processing and we also and been ground efficient the XXXX. vehicles. in sit constantly can the to through are it's move year for for because of will all and on having across we throughput the margins. a for less, operations. marketplace salvage quicker vehicles those any of the to big Not steady be But that,

of thing, titles companies. One And difficulty. can process. is in other that out, see titles on seems move our go processing prices. and the at cars when the can build states that up We I is impact would also, we point have have efficient a efficient pace, up. you the of are one And margins we inventory the admitted in location. more titles average in helps seen right steady move we Bob, there They for thing And a it causes when state more in kind now when selling strong through the that are volumes processing and have is difficulty Midwest the that having steadily insurance northern processing

what in proceeds a cars or improvement Some call paid really bit as just for little up average price is well. we the

Jim Hallett

on to to and is, year could if or know the that would throughout very I add if we that year and Bob, very said SG&A forward. to the going I Yes. don’t of are last Eric inaugurations it And We continue acquisitions year talked add place. cost. do has the I course not lot about we last and our to we going focused that that. that continue And, do on but taking a to get you are focused told we the that

if the the and create think are those And have For all new then and part completed been those are providing, inaugurations talking that to services and products finally, these most you some we KAR so margins. continue grow add, of revenue we I would for acquisitions about about well. opportunities can we think additional as all we that

I that think with we a So are in good spot.

Robert Labick

of at what there that ASPs behind underlying rising Okay. a factor Super. kind driver to mix proceeds, and is would And likely the ASPs then with or the Is the IAA. be continue? just on the

Jim Hallett

such You know industry, but I would There it's of Not a closed of to a extent shortage to and a argue relative a aftermarket utilization high what, end some there. repair shortage. parts is it's in when the as the mismatch the strength market.

to come the distribution market into buyers it's function in and they So a strong with repair. a for aftermarket have been strong the collision support very for

that’s there So prices of what's the off a were and we period where declines really And some are it. driving coming to commodity like. due

little bit it's coming that right natural now, probably it's Bob. So up a

Operator

Wolfe Thank Research. you. next Bottiglieri of Chris is The question from

line Your open. is

Chris Bottiglieri

one the some that of kind there one of in uptick OEMs Were two, Just wholesaled quick diverted, have then by And to ADESA. been services hurricane. directed related seeing might Are you effects in vehicles seen you couple being ancillary a lateral hurricane? a any dealers? have the or questions, on like any quick on,

Jim Hallett

is the reaching I being Houston want it uncommon in this benefit really vehicles our were of biggest a there were a cars transporting see where flooded. dealers was to XXX and that played big Houston XXX would dealers that were say vehicles platform those is cars replace role into online the for to number shipped to market And miles.

cars. of supply sell vehicles opportunity to out a the CarsArrive us dealers basically was was services So of inventory it was and for their a fresh in ship opportunity not until the for related good into to get market and But floods. a good ancillary it terms TradeRev those opportunity business our platform more to good for It to so these that place. directly really got were market the vehicles into much they on

Chris Bottiglieri

you. Got

TradeRev. early. Okay. know then extremely on question And I it's

units be core TradeRev you ARPU. online tailwind of times said could fees that much previously At of fees. massive should as had think I been X% the have kind the to as really three that

see get are takeaway how then So these we initial the about just go in, are up transacting you the and some you I should over on ARPU putting that of guess incentives is think or to time the platform lower ARPU you accepting that. that to should people start a

Eric Loughmiller

Well, reduction through in these as incentives not revenue, running Chris. are

So it is impacting bottom line performance.

ARPU X% look when And only On cars were sold ADESA the volumes. online to being acquisitions TradeRev it online good the on program. you Assurance [indiscernible]. look in only that only pretty top only the online at, saw was -- of line year-over-year, those at we the the increase vehicles our excluding being were that’s X%, total And at the were a attributable volumes up when $X you

Chris Bottiglieri

Got you.

actually much regular, as shall that is or So the that as core mean up something interpolate fees, different? three is I as, TradeRev it that does times

Jim Hallett

is quarter it's that but number close it specific to being substantially the specific. for and not that guidance was number. be for that not fourth without quite up Let's in How you that but

Operator

from next Edge. is of The you. Thank James Consumer Albertine question

is Your open. line

James Albertine

I if to specific fourth guidance, Congratulations Look a first could. I couple we two-thirds quarter. can on through are almost should ask the us year-over-year giving perspective. modeling wanted terms quarter. follow-ups Without helpful you understand the way we of trends of of anything help or that considering Whether kind be you might have in that noticed any for year-over-year compares? be the

Jim Hallett

those to they platforms. know will lollipop label are only a the what you of lease XXX,XXX volumes going know I there. licks Eric? to private is is I in We because the cars kind Well, of our have XXX,XXX stop think terms We of are thing I We get would additional that, coming. of cars at percentage mention three before high very will the going get know we to know always go physical of spoken we Other auction. there to ADESA. a than to I

Eric Loughmiller

good I but Yes. Jamie. you will We I quarter going look am last year. this on mean, I a back to had first forward again, for not look very

those growth not but integrated volumes but acquisitions, were ADESA -- of we acquisitions, so was first the Our which will get of are any the the in up level year same without double because of i.e. last quarter. strong digits acquisitions a mid-teens of up number, it probably be will power that, again

last are don’t So performing first is good but those again the about and front. compares as feel negative strong that we how a but was tough really I on the particularly see business year's quarter volume

Jim Hallett

that to you see we being just to retell sustainable X% the about IAA Yes. we for take And back I future. said foreseeable a would to you X% minute for what here the

and few years over know, talking That don’t a being only have continues climb. of to You this that XX% I was written a that but mentioned it my off. vehicles Last commentary percentage just in XX% and in as we think number total that was I were being about ago year range. write-offs number

has this some as forward. And and I vehicles. these are the continue to of these vehicles, complexity has to and do the will with to that number more more vehicles that think rise of of some with it written So you of being age see off do we go

about those scrap think today. you those all of international the prices, think little currency, really All cost business, think a lot, IAA, X% X%, bit push, a driven, to about us when I drivers that little to and part of if about business to up think good you the southeast about say, you a for and you pretty providing then the And you about adds what bit you drivers, think think So you tailwind use miles are of that’s think supply. as a factors that the and that confidence really. other gives sustainability about

James Albertine

there. final and Understood. And More one I I appreciate a follow the color question. may, up just a If strategic here. additional

route, using about acquisitions Just are then beginning back very higher call, this to XXXX That are comments potentially to by go same alluding having of talking up you there. in your are open the the at point. through as the you those to. And international opportunities about trade sort of exciting around you doors off and to the cycling comments of spend, token integrated acquisition nosing

look Just if you marry I the help relative could us incremental understand cost undertaken international America, in that to North helpful. could two. growth like or an trying And some think to what from perspective be SG&A growth you the of might have

Jim Hallett

with just of a for talk financial that The the opportunity, about. of that there many Yes. I markets talk bit bit a will mentioned, impact little we about can we a is might technologies. think our Eric maybe real as and international then TradeRev demand the

We are focused asset-lite. on being

technologies about a We and makes patience have And proud that TradeRev. very out are money these chase other. it and taking I sense, in discipline. profile. are are strategic service are the it talked to not where speak have number from we will point we we have each will get a at are we invest. time, will global we geographies are Eric one should best we with going number are where look I to we we it many thing with. a we unless aside our from unless buck that current proud the markets had different rolling And relationships standpoint our of that technologies I for at you remind in anything that how of platform that the to over And and very bang we is we turn good a a fits or the targets prioritizing There before

will turn it So Eric, with you. that I

Eric Loughmiller

we to into last as in Yes. on been region, to have and particular, markets infrastructure be over would time. SG&A I Europe to market thing The able the in even U.K. building particular prepared step the front, other grow that in the we say in

not up really it's creating So near But the term. direct step with you I have in there this, function be will SG&A creating step will -- opportunity to don’t big now to see it. a big my the cost and business do in view in come know a order the

Operator

question Gabelli. of will Paige come The last from Matthew

is open. line Your

Matthew Paige

perspective. Tax an follow one reform, Just quick up dealers worthiness of AFC from it the your independent here. credit of has impacted view the

Jim Hallett

not. say No, Matthew, would I

where dealers credit and through look worthiness about by all these reform. independent a You tax standalone and it's very know at his the focused on not dealer we stability impacted lens a his basis

Eric Loughmiller

in add, that Many is look tax will of through, one I Matt, income the probably are rate of could customers. for avoiding credit, in have when of files something at pass-through passing And reduction terms their that Again, certain entities. we the amount giving been these on of profitability. a negative them provisions

that Now it pass-through looks again neutral, their on XX% deduction giving them their income personal returns.

Operator

back for call Jim to you. the Thank turn remarks. I will over closing now Hallett

Jim Hallett

more being truly extremely interested I so business call gentlemen. our that chair, you the can how we I I going with today am our is my pleased ladies pleased appreciate vision performing you from and I have and you am and you, you Thank on appreciate Latoya, business. thank the being and in tell forward. with

a value customers much some KAR you adding also but for the creating our as again think defined investments dealers very we a today. that offer focus we I through of heard very you things strategy shareholders. real for to that And made to we that support to today I the our that improve on heard more that value services some we real our continue significant as to a have have. truly can through look opportunity

a participation near future. your forward Have you the and thank in you talking look with for So that to great I day. to

Operator

today's gentlemen. Ladies This you. conference. and Thank concludes

disconnect. now day, everyone. may You Good

KAR Auction Services (KAR) 21 Feb 182017 Q4 Earnings call transcript