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KAR Auction Services (KAR) Q4 2018 Results – Earnings Call Transcript

KAR Auction Services (NYSE:KAR) Q4 2018 Results Earnings Conference Call February 20, 2019 11:00 AM ET

Company Participants

Mike Eliason – Treasurer and VP, IR

James Hallett – CEO

Eric Loughmiller – EVP and CFO

Conference Call Participants

John Murphy – Bank of America Merrill Lynch

Ryan Brinkman – JPMorgan

Chris Bottiglieri – Wolfe Research

Derek Glynn – Consumer Edge Research

Daniel Imbro – Stephens

Bret Jordan – Jefferies


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.

I would now like to introduce your host for today’s conference Mr. Mike Eliason, Treasurer, Vice President, Investor Relations. Sir, you may begin.

Mike Eliason

Thanks, Krystal. Good morning and thank you for joining us today for the KAR Auction Services fourth quarter 2018 earnings conference call. Today, we’ll discuss the financial performance of KAR Auction Services for the quarter ended December 31, 2018. After concluding our commentary, we will take questions from participants.

Before Jim kicks off our discussion, I would like to remind you that this conference call contains forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties that may affect KAR’s business, prospects and results of operations, and such risks are fully detailed in our SEC filings. In providing forward-looking statements, the company expressly disclaims any obligation to update these statements.

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

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

James Hallett

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

So with that, let me provide a agenda for you of what I plan to cover today and then I’ll get into my comments.

I want to provide an overview of KAR’s performance for the fourth quarter and the full year, discuss key trends and performance metrics in each of our business segments, update you on our TradeRev initiative, provide you with a overview of two acquisitions that we’ve completed after year-end, review our guidance for 2019, provide you with an update on the status of the spin-off of Insurance Auto Auctions and as I close, I want to comment on some of the trends that I see impacting our used car businesses as we go forward.

So starting with the fourth quarter, on a consolidated results, we saw a revenue for the quarter increase 4%. Our adjusted EBITDA for the quarter was up 6%, and operating adjusted net income per share declined 2%. This decline was primarily due to increased interest expense due to the increased interest rates on our corporate debt.

Turning to the full year, KAR generated $3.8 billion an increase of 9% over the prior year. This led to net income per share of $2.42, a decrease of 9% from the prior year and operating adjusted net income per share of $2.96 which was up 18% from the prior year.

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