OPENLANE(KAR) - 2021 Q4 - Annual Report

Financial Performance - Total revenues for the year ended December 31, 2021, were $2,251.6 million, an increase of 3% from $2,187.7 million in 2020[179] - The company recorded a net income of $66.5 million for 2021, compared to a net income of $0.5 million in 2020[179] - Gross profit of the company was $951.7 million in 2021, compared to $902.9 million in 2020[179] - Operating profit increased to $210.6 million in 2021 from $136.4 million in 2020, reflecting improved operational efficiency[320] - The company reported a comprehensive income of $74.5 million for 2021, recovering from a loss of $1.2 million in 2020[323] - Net income for 2021 was $66.5 million, a significant increase from $0.5 million in 2020 and a decrease from $188.5 million in 2019[336] Revenue Breakdown - Auction fees decreased to $877.8 million in 2021 from $887.7 million in 2020, while service revenue declined to $707.2 million from $737.4 million[179] - Purchased vehicle sales increased significantly to $377.4 million in 2021, up from $295.0 million in 2020[179] - For the year ended December 31, 2021, total revenue from ADESA increased by $42.3 million, or 2%, to $1,962.4 million compared to $1,920.1 million in 2020, driven by an increase in average revenue per vehicle sold[191] - AFC revenue increased by $21.6 million, or 8%, to $289.2 million for the year ended December 31, 2021, primarily due to a 31% increase in revenue per loan transaction[199] Expenses and Costs - Interest expense decreased by 2% to $126.6 million in 2021, primarily due to a reduction in the average outstanding balance of corporate debt[183] - Selling, general and administrative expenses for ADESA increased by $14.1 million, or 3%, to $522.9 million, primarily due to acquisition-related expenses[195] - The effective tax rate for the year ended December 31, 2021, was 34.5%, significantly lower than 90.7% in 2020, impacted by contingent consideration adjustments[186] - The provision for credit losses decreased to 0.2% of average managed receivables for 2021, down from 2.1% in 2020[200] Cash Flow and Liquidity - Cash and cash equivalents decreased to $190.0 million in 2021 from $752.1 million in 2020[228] - Working capital declined to $382.5 million in 2021 compared to $924.6 million in 2020[228] - Cash flow from operations increased to $413.2 million in 2021 from $384.4 million in 2020[228] - The company believes its liquidity sources are sufficient to meet operating needs for the foreseeable future[242] Acquisitions and Investments - The company utilized approximately $522 million in cash for business acquisitions, including CARWAVE and Auction Frontier[228] - The acquisition of CARWAVE Holdings LLC was completed for approximately $442.0 million, resulting in $373.4 million of goodwill recorded[268] - The acquisition of Auction Frontier, LLC was completed for approximately $92.2 million, resulting in $73.8 million of goodwill recorded[270] Market Conditions and Outlook - The company expects continued volatility in the automotive market due to supply chain disruptions and the impact of the COVID-19 pandemic[167] - The digital marketplace segment, including ADESA, is strategically positioned with over 70 vehicle logistics center locations across North America[172] - The company anticipates that the mobile applications market could expand the total addressable market for dealer-to-dealer transactions to as much as 15 million units[172] Financial Ratios and Metrics - The Consolidated Senior Secured Net Leverage Ratio was 1.8 as of December 31, 2021[240] - Adjusted EBITDA for the year ended December 31, 2021, was $434.2 million, an increase from $375.3 million in 2020, reflecting a growth of approximately 15.6%[254][255] - EBITDA for the year ended December 31, 2021, was $410.2 million, compared to $324.0 million in 2020, representing a year-over-year increase of approximately 26.6%[255][256] Foreign Currency and Interest Rate Impact - Fluctuations in the Canadian exchange rate increased revenue by $20.0 million and operating profit by $6.7 million for the year ended December 31, 2021[187] - Foreign currency losses on intercompany loans were approximately $3.8 million and $4.9 million for the years ended December 31, 2021 and 2020, respectively[286] - A hypothetical 100 basis point increase in short-term rates (LIBOR) for the year ended December 31, 2021 would have resulted in an increase in interest expense of approximately $4.3 million[289] Operational Highlights - The AFC segment served approximately 14,500 dealers in 2021, with loan transactions totaling approximately 1.4 million[173] - ADESA is the second largest used vehicle auction network in North America, facilitating the sale of used vehicles through both on-premise and off-premise marketplaces[342] - As of December 31, 2021, AFC provided floorplan financing through approximately 100 locations across the United States and Canada[343]