KAR records net profit, saw reduced conversion rates in Q2

KAR Global said Tuesday it brought in more profit per each vehicle it sold in the second quarter, but it also noted its performance was affected by reductions in conversion rates across its digital and hybrid marketplaces.

The Carmel, Ind.-based wholesale auction and digital services company reported a $5.4 million net loss from continuing operations in the second quarter. That’s slimmer than the $15.3 million loss it recorded in the year-earlier period. Its total revenue was $384.2 million, up 2 percent.

KAR, which held its earnings call Wednesday, plans to monitor conversion rate pressures through the rest of the year. Its marketplaces had a 36 percent conversion rate of vehicles offered in the second quarter, down from a 48 percent conversion rate a year ago.

If those pressures stick around, KAR’s 2022 adjusted earnings before interest, taxes, depreciation and amortization might be “as low as $245 million as sellers and buyers look for price equilibrium across our marketplaces,” KAR CEO Peter Kelly said in a statement.

That’s revised from earlier this year, when Kelly said the company was expecting an adjusted EBITDA of $265 million.

Additional earnings
KAR sold 343,000 vehicles in the quarter, down 22.4 percent from the 442,000 it sold in the year-earlier period. The company attributed that downturn to a 35 percent decline in commercial volumes and a 1 percent decline in dealer consignment volumes.

However, gross profit per each vehicle sold ticked up to $282 from $254 a year ago.

Stock purchase offering

KAR said Tuesday it is offering to purchase up to $600 million of its senior notes due in 2025, which carry a 5.125 percent interest rate.

The company said it repurchased $82 million of common stock in the second quarter.

KAR shares were down 3.02 percent to $16.03 in early trading Wednesday.

ADESA U.S.

Because KAR finalized its sale of ADESA U.S. to used-retail giant Carvana Co. in May, it designated that unit as “discontinued operations” on its second-quarter earnings sheet. The preceding paragraphs don’t reflect results from the ADESA U.S. side.

KAR again noted it is using the proceeds from that transaction to pay down its debt.

The company reported $800 million in available cash as of June 30.

Results from the company’s Tuesday earnings report include:

Second-quarter revenue: $384.2 million, up 2 percent from the year-earlier period.

Second-quarter net income from continuing operations: Net loss of $5.4 million, compared with a net loss of $15.3 million in the year-earlier period.

Second-quarter adjusted EBITDA from continuing operations: $56.1 million, down about 9.7 percent from the year-earlier period.

Second-quarter vehicle sales: 343,000 total vehicles sold, down 22.4 percent from 442,000 in the year-earlier period.