KAR - Earnings call transcript Q4 2018 | KAR Auction Services, Inc.

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Operator

Good day, ladies and gentlemen and welcome to the KAR Auction Services Inc. Corporated Q4 2018 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer-session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call may be recorded. to host like Mr. today’s now would introduce for your conference I Eliason, Relations. Investor Vice Mike President, Treasurer, Sir, begin. you may

Mike Eliason

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

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

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

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

James Hallett

morning and Michael, good and call. ladies gentlemen to you, Thank welcome and our

believe of my the you our industry. know I views share I help the to extensive be wanted understand that started, the than little As our better that direction term you take trends of some time want today calls. comments get of I longer my more will I on a to most to will

on overview provide a trends discuss and I’ll an So let plan and want KAR’s cover in metrics fourth each me full quarter into our to you Insurance provide what update comment I you as a provide year, segments, completed forward. we’ve performance TradeRev trends key Auctions of of today the our after want and of that I to the get close, used my initiative, provide spin-off and you guidance then the two an our of I that of for business agenda for I comments. with on businesses overview as on of some go with update car year-end, the the you for performance Auto our review that, status XXXX, see with we acquisitions I of impacting to

quarter, a on results, quarter revenue increase saw the starting with consolidated a the we fourth for X%. So

the primarily per for increased interest and to EBITDA adjusted adjusted This income operating rates Our corporate quarter due decline X%. declined debt. was due expense to X%, interest was our increased up the on share net

an of from year. $X.X decrease X% year, Turning which generated to increase the This over share per the from prior to full year the was prior billion net operating of $X.XX income year. led share adjusted $X.XX, income of and the net a per up prior KAR XX% X% of

in the fourth Harvey lot Irma loss drove Auctions, into major quarter, a and recall fall sold volume will at than volumes create of fewer had and Looking total X% hurricane we last in that significant fourth the no I’m that all vehicles had a We you storms and Auto quarter. XXXX. starting ago with Auto and business Insurance units, sure Insurance the Auctions year

of from exclude the had XXXX, in rest the both cat we our vehicles sold increase actually XXXX an if So business. salvage of from X% and vehicles we

money. discussed typically As calls, not past we've events but add catastrophic do they volume in and revenue, make

its by increased quarter, Auto volume Auctions total XX% over lower Insurance the despite fourth So the XXXX. adjusted EBITDA in

increases by into salvage transaction. the in performance average some revenue the in volume, insights price also gives by selling average performance driven That quarter. in X% the the but per not vehicles, increase only the the our a you for drove of is business strong selling Our price

let X% on volume, American to increase per XX.X% X% now X% in key and profit a So up me gross nice revenue Auctions a give prior year. increased revenue performance. full Insurance Revenue you in average increase the our of metrics saw Auto transaction in some for North XX.X% at improvement year from

last fourth we begin in Moving loan of we This XXXX. transactions X% our X.X% to indicative of of losses year. losses revenue levels at a expect loan increase had deterioration in the in to and losses loan the our of higher the growth loan an in below of conditions, finance be we business. previous market XXXX, level fourth you the in in the X% compared that losses and higher that were told we experienced only prior Absent in a quarters fourth three unanticipated we quarter not The our X.X% X% portfolio. than AFC balances loan earnings average up on call, quarter, change is quarter to expect as segment the in to of loan

had transactions into XX% growth XX% in an AFC this increase on adjusted EBITDA, and year, revenue performance X% growth AFC. a translates full of the for overall, a For in strong loan

to Turning ADESA.

sold fourth volumes Let the an start X% me ADESA. with up quarter. update Total out in was on volumes

XX% X% prior for ARPU in volume year-over-year We includes and on venues was prior year. the saw physical every physical as increased the platform X% the open at same quarter online quarter, while this over volumes the per increased this this Adjusted auctions up XXXX. $XXX, steady negative auction fourth TradeRev TradeRev were was the year. quarter the fourth EBITDA the operations. online the increase in our fourth Revenue per flat lane only and quarter unit our increased transaction, XX%. we've that and EBITDA in and Our volumes to was $XXX segment and from our in increases experienced ADESA in volumes XX% continues the

adjusted fourth quarter. both TradeRev rest had XX% in of losses EBITDA impact increase segment the years, ADESA of Excluding in the the in a

For decrease to EBITDA revenue the of increased XXXX in grew with $XXX at and ADESA adjusted had losses the XX.X% one million. X% to EBITDA We down year, year adjusted from gross TradeRev margins of quarter X% in excluding XXXX, TradeRev slightly ADESA a a compared the year-over-year in XXXX. full prior year impact full only X% in

Given the impact our you let me TradeRev give on initiative performance; more important is KAR. having this on information for

even Clearly, the looking throughout automobile to the possible retail execute dealers in faster, value well. more wholesale winning dealers. the in or this Franchise highest During was the are automobile my is car marketplace within And can seeking digital I digital move that And of believe committed is convention the that this reinforced in are the the marketplace. it efficient time the transaction within TradeRev I'm transparent and hours NADA do happening TradeRev the absolutely and days entire is being independent transformation instead in more platform needs investing at to at transformation reduced. dealers ecosystem of to Consumers a that weeks are in platforms. the clearly make trade-ins the past. experience buying happening dealers and of this and time tools space. the technology January, serve to as the enables

initiative we years the past changed four TradeRev things have over the began since KARs. at Some

incentives have I expectations we TradeRev is the immediately headcount And able TradeRev direct subsidies But from in it to platform, cost that expectations. the launch to to is has team to been are the the the support are to greater these the can principles in platforms have been especially or while areas use launching on also grow and my corporate the transportation launch our finding and TradeRev First, that is Competitive and an attract This introduced certainly competition value TradeRev winning dealers venture of changed. capitals near initial involvement opportunity the term more adoption than and us this has. caused U.S. of would U.S. in partners. knew rate dealer not see has business. market requiring attract of lot leading companies like more products to the more

some share continue of key the model my positive that of business. components be and want I this TradeRev So, support expectations for to to

transaction profile in our on profit expect the in online The over and totaled of is per once can $XX transaction. XXXX. on has other been revenue on offerings TradeRev. XXXX. achieve consistently in approximately committed We million approximately the gross stay per neighborhood sold operating profit approximately XXXX TradeRev success and platform our expect $XXX $XX seeing we over cars the sale to cars we XXXX, in similar XXX,XXX believe business of remain we to vehicle in XX% are we TradeRev gross do And of me We XXX,XXX scale. XX vehicles sell XXXX of losses of the We and losses in reach Operating to strong. volume the excuse -- growth and million the XX,XXX we

achieving in We in by and XXX I XXXX, XXX in of in in over on two of set our depend breakeven number the end in losses in over the to have And I market and U.S. be are success will next scale Achieving breakeven currently scale XXXX, a as a entering in and goal be XXXX. reaching markets Canada, reach years we and of expect the markets sometime this new we of XXXX. to markets. goal reduced expect the sufficient

to operation. time. field achieve of in increase to sold stabilization objective. are scale in for our an of We achieve dynamics Canada in aligned employees they our the we as per goal. and that the also committed with TradeRev employee number an adequate launched need our Canada need cars was the I using local competitive achieve am and to in these also with some We to this pursue over other that the tool for in profitable dealer-to-dealer the segments to a need profitability, opportunities All this And operations compensation leader making customers routinely have space. will programs to and the in their of landscape reach I to demonstrated profitability, TradeRev in, market TradeRev have business initially efficiency market we'll opportunities markets for TradeRev are see in we see market.

We to this for are right can base. this initiative winning support our aligning by organization that the the we the shareholders create KAR within recognize resources tremendous value and

two we changing strategic gears, support So acquisitions other KAR. since priorities have for year-end completed that

expands and This expertise U.S. the in within Remarketing Dent-ology specific the Not we hail in wheel provide damaged And KAR position in KAR reconditioning large Remarketing positioning the in as ADESA our space. to are is fleet we nicely Dent-ology the January. reconditioning Services, us First, in mobility the only of the and mobility fit services the within of fleets. across area services are part repair Services capabilities to of ADESA adds acquired but and advance, segment. auction large vehicles serve operators fleets to that services operations, developing these of they do operation. also initiatives these vehicles

Europe. We completed is the company throughout acquisition also Belgium-based CarsOnTheWeb of a CarsOnTheWeb. operating

an As auction throughout implies, business is online Europe. and the it cars the this selling that used name focuses is on platform

market. it back the capabilities capabilities, businesses customers in handling gives asset-light One strong European business. expertise growth and and expertise. of buyers. from business Europe cross-border the European in European to between and transactions lead is our can key many in believe great for has that transaction its an It both Western Eastern platform other Europe It in team sellers differentiators a excellent KAR's CarsOnTheWeb with this transactions processing is is launch continued us we auction office an of including technology

our about for talk me let XXXX. Now guidance

provide We expect on per share I $X.XX. comments. $X.XX the XXXX. following million of to of net my result $X.XX. $X.XX will $XXX adjusted guidance to per in will Operating adjusted more income will income to in share be Eric This net million color let EBITDA $XXX

you let Now, of give the me of a the status update quick spin.

And the among execution is and including other Spinco between and on to markets private things, of available work wait markets. on subject for value. capital we This shareholder approvals, previously certain the KAR customary, regulatory as approval. we spin-off agreements spin-off evaluate Board the the will include maximizing also to and updating debt continue of rulings stated, we letter the KAR As to assessments and our options the

on or assurances spin that the in terms to We be track are are abandoned complete XXXX; however of the the there spin-off change. no not will

we the change. I see what are and with finish operating turn its with more automotive So will how of importantly, segments. is business KAR future my that this And the will some experiencing insights industry trends with share overview transforms. the comments up to as is no that, is absolutely for I impact doubt significant an that longer-term There prepared preparing on

a and segment playing is models mobility. Companies sharing are retailers dealers ownership technology is Carvana of SAAR are car a in many over we entering consolidation the This footprint. car the of have new without retail space, car typical that model. next the use. rethinking in brick-and-mortar creating market retail Tesla Ride like role the beginning the significant we new calling the a personal don't sharing increasingly see for and We and new transactions, are automobile And decline new industry few years. in are

we between retail retail the the However, in declines believe will while sales and resulting mix sales. shift see modest may increase a sales do decline, in in fleet fleet SAAR. We

that auction that the like others of are physical sales, decline. more in reduce me next dealer to the will number the years. And which car believe likely auction. All business. those several of physical to impact some which change retailing of these vehicles will to market see could let we trades car and wholesale also factors fewer over our retail consignment trade-ins. cause at a and number seeking many impact of vehicles TradeRev expect continue Dealers share supply trends the may We used alternatives new I are will the sold of

serve years. or still place will for buyers couple continue I more the there may to over physical expect of last I we this online the future. of of a as dealer believe the space, but has auctions segment vehicles XX% the be to declining However, market our selling in it be to

on to marketplace. serve offerings developing continue will to the and are focused We be digital

a evolve I expect as are digital industry. our across stronger already DNA to commercial with is the we will years. in opportunity I that volumes organization, digital the KAR next Our a have continue over and entire this few the to great workforce for believe do remain transformation leader will of strong KAR now

in maturities the are While off-lease lease few XXXX, years, will for next fairly their remain peak hitting expect we the flat. volumes

provides serve new the addition, opportunity an shift time to mix over In sales car to fleet marketplace. more vehicles this

the focused on for vehicles. fleets are opportunity growing real services space. of mobility directed serve is to at We a There us

revenue the my outlook While revenue well grow continue am to for that that career the vehicle with on at our up important focused I is as cars many it with become shifting is the mobility match industry the growth challenging, we our performance, industry. has ARPU services sold. sold key me spent or in driver entire and confident can volumes I've as of as auction to and that obvious per is vehicles

service to will continue We I to and the develop our over few grow offerings expect continue years. ARPU next to

be that will decision growth services evolution on we the reliance this a greater auction. on making sold to of data provide I believe see we will Some never from are vehicles an of analytics. and at

full making and will of vehicles. making tools suite to portfolio data analytics our decisions. in decision managing pricing assist and investing a assist support customers informed transactions. focused for wholesale we're customers in Today, management offering more capability future, are their tools in vehicle and on models, recommendations of We we that be commercial the services our In that other portfolio

Our point platform delivering Stratum and through the our team. starting DRIVIN science is data

tools continue suite evolve more will serve We it mobility can these a to comprehensive that space into offerings as the develops. of

we should the suggesting will businesses I are to between in the next and grow that believe need to to that including We not we increase years, North presence retail the several we contributor be and America that our that and interaction consumer market, meet I our I markets to wholesale competing of to enter with This the through of consumers the but acquired, to transacting to have needs meet focus consumers than that And are blur KAR markets serve, likely we talent CarsOnTheWeb, we they and with to the we have likely meaningful you and the facing demands do the changes more and the the our they over the offerings last, are believe positioning We on this occur. could a for are become are team of the can management to grow. contribution expect customers and retail, lines and results. This more as become evolution. need that digital businesses consolidated be KAR tell our valuing can is form I'm beginning that that today. other of outside KAR's vehicles progress we have expect and prepared in trade-ins. to global find from I

over Q&A. will turn So, back for Eric thanks I for it for additional today. some now your joining commentary, us we'll Eric? and to be

Eric Loughmiller

Thank you, Jim.

net cause and items in recorded the quarter financial XXXX. our a of today. analyzing to everyone want aspects of for adding by comments in remind this fourth basis. the in and want XXXX of of that couple of million of rate comparing the other in on of per net XXXX XXXX, and In highlighted a our corporate net consolidated share quarter When Cut you segments; reduction income in XXXX. the the income of I fourth few tax $XX.X laws tax Tax impact full United decreasing. tax in GAAP of net start income you performance income Act me our net on to Let States Jim the year and a the the performance, results passing of per highlight reduced performance changes The each is income we expense share comparisons distorts I of a and business income Jobs our XXXX in

is inventory title this vehicles and do First, levels. remind XXXX, up I generally on not we number Auctions We prior of value December not everyone, over take these balance sheet. Insurance call to was our the property want the At of our but on X% XX, I vehicles want Auto to comment inventory year. on the

we levels a going into the quarter we number throughout inventory increase AFC, fourth first as the quarter. of had losses level loan the this XXXX previous the experienced four elevated the very in is an At quarters. to Given strong in compared

We ARPU X% positive In across the The to services profit a percent ADESA compared occur as expected and early the in to this gross revenue profit basis segment, ADESA at our We the sold of saw prior XX per XXXX. inspection segment, unit losses auction below TradeRev. year. in loan mix of had of of gross both gross the AutoVIN, in EBITDA expect company, revenue of revenue our all the and operating than and PAR the revenue from volumes lower in a make profit related XXXX, increase the decline but for businesses in in increase be the strong quarters year. ADESA drove up platforms, of adjusted the excluding company, repossession total that impact businesses We We in the ancillary increased trends and these our other of and saw relates as we X.X% to decline revenue had within revenue profit growth to ADESA that operate core number profiles grew segment. businesses. our points and

We also the ADESA were TradeRev incentives pressure reflected cost offered in that had and TradeRev. Program activity on at gross increased as of services profit the from platform Assurance

physical volumes, point the guidance. of and in of key the auction range factors provide high $XXX currency scenarios million, the ancillary potential the XXXX, to adjusted related our online assumptions contemplated me EBITDA some our of variations services, guidance Starting from with in Turning various influencing shifts of the low in mix guidance and the our mix to versus million our foreign additional to commentary in are $XXX guidance. components for let on used the

to $XX XXXX. guidance businesses included for $XX in Dent-ology have expected performance year. of and CarsOnTheWeb the million of contribute to our million EBITDA are We These adjusted the in

and We $X.XX, $X.XX. expect on per be basis GAAP a net to operating net per income adjusted share income to $X.XX of $X.XX to share

deducting XXXX. We in income tax were changes is thresholds will certain from tax the certain deduct for increase This XX.X% payments the compensation in to prior our certain compensation, new law, increase income all in years, of in rate effective exceeded of limit rate exceeding as compensation will for long-term rules driver that able rate The tax certain are is the the compensation. to income company In on expecting tax we and an be XXXX. the performance. XX% effective effective thresholds of including in as X% primary XXXX Under incentive the non-deductible. long employees. based compensation This annual deductibility defined and an was

exercise of XXXX outstanding the expire our We options are less as options also were number were remaining significant in and A than options prior expecting to stock the are in large scheduled less outstanding of in years. of XXXX. impact from stock XXXX and exercised number

to million million $XXX taxes on XXXX. be expense in $XXX reflects is expect interest in cash The XXXX. cash for Cash interest interest million for expectation expected rates We debt increase income our in in to corporate $XXX increased XXXX. compared

interest caps expire corporate our debt In on addition, XXXX. rate in August and March

expire We rate on expect until August. in caps caps XXXX been our in in and the have in the money the March to interest and in be XXXX money

our in capital And are XXXX we quarter million estimate property for expenditures million. to capital Auctions projects million. in $XX previously approximately our Florida more to be of year We original compares of This than because Auto Actual million acquired for the $XX exceeded service by the $XXX for placed Insurance the XXXX. compared fourth the guidance expecting totaled cost to XXXX $XXX estimated. in cash expenditures

million. $XXX update allocation in KAR in brings acquired capital in of the the of Our share headquarters that company's $XXX This costs XXXX and repurchases to capital total guidance includes stock relocation me market related with open XXXX the is summer our let an the XXXX. priorities. the our additional And technology on fourth quarter. for million of finish planned other We to

October call that Q&A. of That market purchase $XXX to any of will Krystal my in for open our the authorization remaining on have today. XXXX. not I return XXXX. expires the approximately We expect remarks do We for concludes quarter the million stock repurchase now in to share first in

Operator

John Instructions] question [Operator from of Lynch. Bank our And Murphy from Merrill first America comes you. Thank

open. Your is line

John Murphy

long got I've guys. here. morning, Good a list

I'll to it So or here. two try three keep to

lines were and from retail consumers more system. bit as buying cars you you to and maybe about Jim, might willing then it business the transformation be sort them of retail the like [Indiscernible] think just or little with of through the through first redistributing sounds pseudo between deal curious over you system Just time, the a the mentioning trade-ins auctions. I'm or

curious market Just move you potentially -- you vehicles to that less And maker, of more extreme maker, mean just from like some comments. what that? by understand wholesaler an big massive might market the just on a if maybe risk to from scale. a taking I obviously traditional principal kind should trying with say, of I'm

James Hallett

thank your you Yes. all John, first of morning. question. Good for

for think and and could confidence download TradeRev business, they fair provide the the consumer trade-in transaction that it our that we -- it's easily also a download through in cut Everybody the price consumer's actually the appraised network it. the things. think of that's provide the would to a the the and they could that creates they guaranteed a their it do take what secondly, They could vehicle that a was And obvious dealers dealer ways. they and work And with. getting And in pain would an consumer get that they could that to an value that dealers check price more immediate for on thing would immediately And business their or think that car our biggest I do helps one a two on wins. oftentimes app, dealer car, offer point for trade-in cash submit we for is vehicles inspect the could we sell there's would believe trade-in. transparency good for. do to take TradeRev that instant more them one car of that both is market to that possibility they

John Murphy

dealers this Okay. follow-up Has TradeRev in of sort tested more understand there stands where And potential that. plan going after is developing trying or you're maybe as future, with like the in a a just been that you're on and this process? this anything to

James Hallett

are without as speak. identifying piloting market we John, Yes. this the we

John Murphy

we Okay. grow time, about the in more say it a ancillary really them -- I auctions these shouldn't able acceptance channel the in high levels or to as is the or I'm but most services. future jam, bang Well, we you you question is the auction, that used appear curious increasing the company available if of in physical versus can still you normal, that customer for the a does but may your buck where services you're think to these just I a different really to they're guess in future. way the it we're and ARPUs different push to physical at about the touching at looking what mean that if talk for of sort that high sky as an to the move you're long use your to in of hearing relative And be be of there kind look covering getting we in continuing into to second could I ancillary services. still these forward a values ancillary jam channel revenue. because to capture into you ancillary service these and will not the about car

James Hallett

that's KAR think Remarketing and segment. these within So there why we ancillary Services, we continued with services, what quite the operating is opportunity call a frankly John, division separate ADESA as that we created

will in opportunity comes area then We there's they examples. much North they the think that sellers once some And haven't case put to starting very do consumers of of And the rather say you sellers to them on the couple mobility our to online mobility. an would focus may in it give do the to online some behind that back a or reconditioning another the me reconditioned. world we're would We America online. physical let than mainly auction, -- feel First that this of is -- them world say, I vehicles will decide to of cases. before vehicle reconditioning sold is rest after sending is I go would The when sell they whole also space.

it's lot Now matter a America, there's and out. North investment before here a these been only in in of mobility fleets of roll time

And that be As going these need to are a the cars car us is to arrives there to is car to traditional wherever do the the the there fleet fleet these need we we be these we we is parked. is bring and believe at the do the lot be now And to opportunity out, going for an auction the -- manage roll fleets of and deliver fleets auction, the maintained. where services the at services there can the to to vehicle. that serviced, services, are services

we expand continue, want to we as those services. So

with do customers. and we These today, in. can are us be keys, the of to our daily whatever to to have be going business to You a tires, need on a these another whether just that that business going to we where inspections, dents, be it's the now them seen basis, need are repositioned you've wheel replacement a and -- refueled point we look us believe basis. now service play repair in that's going to on to can do or even of are to vehicles going people The be, daily These windshield that the we are with or down seen repair environment. fleets many space

John Murphy

seems lastly, sticking changing potential curious as the there to the be have what and Auctions. And Insurance there? timing Then more and this a markets changing? just which understand capital for little just trepidation both Okay, seems to with debt? that's think there of It recapitalizing Auto to bit maybe is I'm something you there, like with just really more bit to trepidation. point, trying Does I'm the is kind Is a helpful. is companies really what new the of do or little there's

Eric Loughmiller

And spend mentioned as value. of at the completion we evaluation. this or any spin-off reason to for options change maximize and I or the Though, as depending for we John, or stated, of our change the to other terms commentary, in -- well on may in as at remains we results modify time modify XXXX. on evaluate abandon spend continue the shareholder my the as time, any track

that. So, by to stand I continue

John Murphy

might Would it in a be might the there be wings emerged that may changed that fair bidder to have this? say have

Eric Loughmiller

comment making any that at mean, all. John. we're I No, not like

John Murphy

thank right, you. All Okay.

thank Okay, guys. very much you

James Hallett

Thank you.

Eric Loughmiller

you, Thank John.

Operator

you. Thank

question from next JPMorgan. Ryan Brinkman from Our comes

Your line open. is

James Hallett

Hi, Ryan.

Ryan Brinkman

have is Hi, that in good higher. margin for operating to then? the What line afternoon. trade line business on you EBITDA the making you the operating like -- discretionary look that look would What of halt the then like thanks the were over the gross margin gross what target top profit TradeRev that What TradeRev. profile like? And SG&A operating does margin the or operating look investments TradeRev you've of loss for the drive the to top And been or line -- margin sort is time? detail

Eric Loughmiller

of So business. Ryan, currently we revenue are against expensing the incentives transportation that

investment margin our look, XX%. well if we of you it in maturity So past at when a are get operating they same talk operating we go would -- the than like so developing business. can margins At other a Once Relative have over not this profit want would stages Right we heavy within early I its attributes in a going I'm out don't the the that which number is very XX% now that about it reaches markets developing now, it with to think it's time, strong OPENLANE the be on are in be has right look a below to transportation we than the to margins margins. EBITDA to and scale high number are its that. to margins this incentives. think markets businesses But the we the business talk early development. gross markets, I we online and -- has business, over add leverage and can gross Actually very more about after mature of margins we you put would that operating SG&A. probably tell

Ryan Brinkman

it maintaining become accretive Is XXXX, say? will margin, that to after sometime fair operating characteristics. while to growth also But

Eric Loughmiller

mentioned Jim them. given That's he the goal that has that

believe and that achieve I Let's execute, yes, can we goal.

Ryan Brinkman

it you last including without much and And how are Anymore purchase Thanks. guide you do And to acquisition how there the EBITDA trigger into this revenue to XXXX over targets? the are the can does acquisition? outs additional press from profitability take results expect What Okay. price, then incorporating grow on its for the you CarsOnTheWeb. question business but What disclosed that your background provide earn example, time? just in release?

Eric Loughmiller

a CarsOnTheWeb. So have after smaller That's that more of It QX. most Ryan, give is we CarsOnTheWeb. purchase line the at give are we giving that disclosure revenue today. is guidance Relative might business, top that haven't has on the we're most that's accounting is grow, We'll of not disclosure there guiding sum but some great think revenue, access to we and focus business the that $XX to I information corporation, is $XX Dent-ology to million, introduce to to. a we million don't we of that to may Jim will to guide customers want as had add for about some on. what but them we this they opportunity on comments

James Hallett

Yes.

an great this I opportunity countries but that think not base help believe are we mentioned, we relationships different buyer bidding a have is there we grow buyer opportunity that to I there And these vehicles. a buying that and believe, we that throughout our have grow business. on but of only Europe XX that increase will in to them can base, business. is actually may introduce we many can

that that in add to resources operating we over going think there. support there's can I well place team, As that's be to

opportunities growth see in So Europe. good here we do

Ryan Brinkman

Okay, that's helpful. you. Thank

James Hallett

you. Thank

Operator

Thank you.

Our next Chris Research. Bottiglieri Wolfe question comes from from

Your is line open.

Chris Bottiglieri

the for Thanks taking guys. Hey question.

James Hallett

Chris. Hi,

Chris Bottiglieri

you or don't this on a internally or -- I to, effect the to consumer element. up is that Cars.com partner want there? consumer something platform would know or Do being to driven there a to acquire like foresee Wanted you follow scale completely get

Eric Loughmiller

that's Chris, question. good a

on our Jim? the the especially price set, TradeRev. mentioned that cash will the dealer In cases, Our always That for is many Jim take does we focus instant not And existing for capital transaction. using use offer. Right, our mean product the trade.

James Hallett

Right.

Eric Loughmiller

the And this marketplace inventory of have transaction used of think they that tools we in we our don't So of be we capital. can where this and network options as, and best we data in we a do all out days. that it pricing if using to within feel analytics have move put the results

having see exposure So valuation. that is big on don't we the

Chris Bottiglieri

was I in I traffic within acquiring guess; to you. deliver without how well market speaking would but Got the guess loud who that I needed out imagine here, I reputation known compete can't business I are. is to the know you many maybe or but guess I something? extremely consumers mean your circles, partnering

Eric Loughmiller

there brand bringing It's the product network place, we it's in a market, to consumers in through course be that now. of we pilot advancing And in Well, develop that's just I whereabouts, and it's at think to market there as brought is and to an takes will really any again from market getting it market. and the that awareness dealer well. process as are one that time, over And will time. the new it like continue awareness

Chris Bottiglieri

Got you.

business slightly apologies core the last about been prefer to a I the so look When question. worse. ADESA -- TradeRev the for little think ADESA on Okay. seems final gross metric, I to And if than discussed basis unit at, growth the a ex-TradeRev? the have core takeaway this just less What's in was bit quarter but per profit profit then gross one year-over-year we profit

Eric Loughmiller

very Chris. in I and big ancillary fourth issue following prior you of the work to well and us, followed it's outside ultimate that having in slightly high prior years sale revenue, in margin of it which TradeRev for strong transaction doing because more the typically end to the a the ex-TradeRev, done quarter. a be years the those tends by mentioned Well of lower is is quarter, I've then lead a that first services always very in margin mix up as again, again some think quarter, all fourth

again, that that, I strong again ADESA the XX% we gross haul. margin a So when the long look business you that that the being And ex-TradeRev, ex-TradeRev. over sustain above ADESA, performer can look at at such

You the deceleration did in mention growth.

well. happens a just me think in the that I used car the we and transactions. near just felt that. it We The they holidays weren't else. sector that. dealers There to quarter us of, bit There anybody say, is was retail as a fourth has little softness Let to seasonality shall a speak bit actually losing of risk bothers share fewer in were buy and what the and nothing had around

strong growth. However, we grew XX% very year-over-year. That's still

Chris Bottiglieri

That's it.

I it. help. appreciate for Thanks Okay.

Operator

you. Thank

Derek comes Consumer question Glynn next Our from Research. from Edge

is open. line Your

Derek Glynn

XXXX should think my thinking investment consolidated in How on you taking for continued leverage do drive about question. in you or Thanks basis? SG&A the despite in morning. could expense trajectory we elevated good a Yes, SG&A be TradeRev? And

Eric Loughmiller

Yes, Derek.

in initiatives in business the some core we focusing are businesses on that driving we and on spending the place are much growth. aren't have on very We today, that parts that time our of SG&A focused the spend really

year in one four quarters significant in again, of big a in SG&A. when to from So their TradeRev, portion TradeRev is going structure a the quarter cost jump prior

I yes, that, off I So, think look as can that. at we drive of some leverage

our the anything to rest SG&A Jim, the you we'll have get of add? invest but into more will in TradeRev launch, leverage businesses. We still do

James Hallett

attention just focused I'll It's think day. we're we're technology would forward, I And focus. Derek, single add base as going to not focus on a our and quarterly to to SG&A to stronger invest draw daily a background. every of is that employees going things much where think the that have Yes. that. one is we digital in I about employee have SG&A

North or around this move products we're talking about whether transforms business As think to the about again, and set the need we're we're be keeping in that laser there, world, skill we're going about, we we and that as focused people hire, America the to on and to and platforms it the digital the talking technology a we that. need SG&A different very

Eric Loughmiller

services process you've automation that processing, we're need we robotic office And Jim things remind digital out of some more at. and back shared get -- our including operations, to me looking power

company process to. more focus that than more expanding we mean have do very future transactions I not trying the people. a shared any footprint fewer with services on or we So without to we people more have grow in the

Derek Glynn

follow-up. quick a just And color. the appreciate I Okay.

to a XXX,XXX the by for believe, I company prior sold acquisition, CarsOnTheWeb, target XXXX. units XXXX, had So,

with perhaps synergies the exceed anything possibly wondering average? target? online should there, think for to that how about the can or could respect Just there figures ADESA trajectory we investment, the secondly compares to expect is how you you ARPU And share it we some CarsOnTheWeb

Eric Loughmiller

do growth first I a I'm mean, company that here ARPU can deal just and accelerate and more agree, their of quarter they results a generic announced put We we that than own. it well targets their say. the And on to after it's at their expecting to Yes, we'll I won't marketplace, give interesting, other goals private be going balance marketplace. our sheet, is an things actually what capabilities with and their January, were not end the their where very It's we comparable. but we because on details beyond and some again very closed were of that in online second, our combination believe label previous like marketplace, comment strong

because in value is that businesses, transaction. So seen proposition just lot our it's sale not vehicle. such the Their pressure comparable the in get and a physical high we value to of of auction haven't we a on the it's businesses, evidence of what auction

can the leverage of in we think across the really Jim the strong They model into handling VAT, borders, business the that marketplace. transportation. processing As we growth have mentioned a superb that

Derek Glynn

you. Thank Okay.

Operator

Thank you.

Imbro Stephens. from next comes Daniel Our from question

line is Your open.

Daniel Imbro

morning Yes, Thanks questions. my for taking guys. hey, good

James Hallett

morning. Good

Daniel Imbro

start channel. I wanted in dealer-to-dealer the to

term as that and goals has landscape delayed TradeRev? space get the know original been timeline to that landscape way, XXXX, losses the your in for has these opportunity players cut business we in you or the said with have the competitive competition to talked has long-term pieces If competitive think you more we think has Jim; longer where beyond into near You about shifting increased recent you quarters. is in changed, another Or profitability ramp the got forward more the think pie term? seen

Michael Eliason

Yes.

Daniel, So, you. thank

there's what that I and it to here. see I for me, there are First think others think question, confirms are that confirms wanting And this players space. opportunity that enter truly foremost, no is more

getting getting bit is this in the will found end as get not considerable launch, the get investment boots space. my the winner. won't The of the taken only but other more. in the lot then confirms it's little dealer were here, think is and at our at time. the seeing and I that commentary that mentioned mentioned, help have area taken believe market which out; of of for the been himself, of value we whereas lion's to said, and images be that I point being doing ground hired timelines time, this And rolled to couple one asking market. I planned we there service it's that I manage have a taking some more expectations. that providing With them. the process I vehicle I longer the that up just that in the in day, are get in is That level to on the people that leader. little in be see would on space there the others a dealership say from that the dealer And kind us believe I a line at get of that are people may with the we've now share and that need And got all the pictures lot least It get dealer really think a get the I our we much getting that and at pretty to a bit photos, support

Daniel Imbro

front? just your that you Or about what better investing -- is do there then of you go you dealers improve in over and you bring make that are that peers of side versus choose Can helpful. on flip space. of your some some you some advantages that over the them? really you TradeRev competitive from talked peers on thinking And learn something the about That's your offering your that than could

James Hallett

question. good So,

organization. do TradeRev pretty do today. with are dealers dealers just the say every these part approved business These one We of business us. KAR would much I of to First, with being registered and

that care know handle going of. an only know they a who business there and they're solved, get we They wherewithal to payment. not if going to to it's So there and financial get know issue, it's with. is taken that is if title the capability They doing that the have problem

very reputation We in have the a market. strong

the with think, of are to I our with speaks they lot So itself a doing KAR in strength dealers, and business familiar us.

that products transportation that the is into app collection is unmatched analytics in when and we have pricing think can vehicles, our use inspection arrive, may these be we're the for but market, the services products of and provide services, we help thing think the financing a with we believe building to believe into about that you the more in think we about products and TradeRev. entrants the accessible you we most data have to I other you When to with market of these other other The about transactions KARs own these I products I with mean -- facilitate terms these valuation. AFC these when that and help part assets on

Daniel Imbro

lower gears to is so, events, shifting X% and still And of down what than a that's little bit? we've the up driving quickly IAA, kind in the units bit, Can do maybe recent that market? in but years. structural due a salvage be to Or a driving about think you obviously the the if slowdown bit salvage in last do think think saw you is industry could then what some slowing, market one, you slowdown you of CAT over the seen excluding we whether little talk

James Hallett

push feel X% changing. Yes is We And it more believe cases look accidents. to as numbers to are still XX%. There a a become basis, XX%. growth as somewhere back, do increased more X% total as neighborhood If starting don't four, those is seen I -- we've is total now, think that we in that we've losses always said write-offs years, percent continued on probably business accident I volume opportunities. annual we've vehicles an this -- was that that accidents seen that see these some And in in complex. of and we an there percent five we and believe see of increase we of

think, averaged the the of I in neighborhood over last somewhere XX.X%. quarter, we

sharing room there to think X% X% business still we grow. comfortable with feel this I with you. But for So very is to

Eric Loughmiller

more is events early add, in are there's you remembering fourth that typically go weather weather been affect And back as XXXX can to the I weather that in We summer has I expect fall year, an more to be to had would weather mean, we in activity States quarter. again last the those going all events the particular. been impact. that severe United fewer

-- I before, of just is think market, So there timing. had no this in is kind there change it's we've the

Daniel Imbro

it. the for color, Thanks much so Got guys. all

James Hallett

You're welcome.

Michael Eliason

more We're running have probably should for out of time one time, Krystal. We question.

Operator

Bret our Jordan Jefferies. Thank question final from from you. come And will

Your open. line is

Bret Jordan

Good Hey. morning, guys.

James Hallett

Good morning.

Bret Jordan

systems might dealer and Question there chasing. a obviously, is use on desks, as out number there the any TradeRev where both is dealer look it you is at incidents market and a certain ACV usually or of Are exclusive?

James Hallett

No, situations dealers there both could where are use platforms.

Bret Jordan

Okay.

defendable? look would I So that that is that over something as guess transaction think your $XXX time, expect you at down is average, you you you comes can or

Eric Loughmiller

know think is I You it defendable.

the think to you're just a it's value, you. in a and and anytime terms product creating the expense, is value it of I talking creates tremendous dealer of time in interested dealer the value in the truly think seeing and terms the question of that I

Bret Jordan

the were CAT quarter at inventory growth ex-CAT about end? is And then on, including Okay. that X% Eric inventory or that a IAA. talking question you the

Eric Loughmiller

of inclusive all That's everything.

Bret Jordan

Okay. All right. Thank you.

Operator

session. today's I to any back Thank Hallett to like conclude conference you. And now question-and-answer that would over does the closing remarks. Jim turn for

James Hallett

Krystal. you, on company. appreciate your continued interest and call Okay. all We Thank investment being for in you our thank today. And the

that that our we sources, the that it's we're your and confident that I in we value. and change that bets It the staying ahead extremely of the curve day you and we this the making we and is we placing is come a I want clear to we are have expectations. make may up deliver at transformation think grow sure the are the keep to end place, can to here. to right changing are right industry taking environment the believe But meet transforming. different of business that investments, confident We're opportunity share to also with truly with the from the to continues continue but I'm

in appreciate and on another So with say that, you, thank we'll you talk and I'll quarter, to today. I being you

Operator

thank gentlemen, conference. Ladies program. conclude today's participating in and for you does This the

may You wonderful a disconnect. Everyone have all day.

KAR Auction Services (KAR) 20 Feb 192018 Q4 Earnings call transcript