KAR’s profit per vehicle sold grew 30% in Q4

KAR Auction Services Inc. said Wednesday net income ticked up in the fourth quarter of 2021 thanks to lower expenses and higher profit per vehicle sold.

The company posted a net profit of $5.1 million in the quarter, up from a net loss of $17.1 million in the year-earlier period. Gross profit per vehicle sold grew to $297 in the quarter, up 30 percent from $229 in the year-earlier period.

Revenue for the Carmel, Ind.-based automotive auction company rose 4 percent to $549.4 million in the quarter.

Supply constraints limited volumes for KAR and all others in the wholesale remarketing industry, KAR CFO Eric Loughmiller told investors and analysts during a Thursday earnings call.

KAR originally predicted wholesale marketplace volume would recover in the second half of 2021, but “what actually happened is the conditions in the wholesale marketplace worsened,” Loughmiller said.

Control over expenses did allow the company to generate improved gross profit in the quarter, Loughmiller said. That rose to $226.2 million, compared with $204.2 million in the year-earlier period.

The company’s ADESA auction giant sold 543,000 vehicles in the quarter, down 20 percent from 681,000 sold in the year-earlier period. It sold about 2.6 million vehicles in the full year, down 15 percent from about 3.1 million sold in 2020.

The company said 53 percent of its sales were transacted off-premise in the fourth quarter, compared with 52 percent in the year-earlier quarter.

The performance of KAR’s finance business, AFC, exceeded its expectations for the year, Loughmiller said. It benefited from strong retail used-car demand, strong used-car pricing and a low-risk credit environment.

KAR also completed its acquisition of Carwave, an online dealer-to-dealer marketplace, in an all-cash transaction in the fourth quarter.

Results from the company’s Wednesday earnings report include:

Q4 operating revenue: $549.4 million, up 4 percent from a year earlier

Q4 net income: $5.1 million, compared with a net loss of $17.1 million in the year-earlier period

Q4 adjusted EBITDA: $97.9 million, up 45 percent from a year earlier

2021 operating revenue: $2.25 billion, up from $2.18 billion in the year-earlier period

2021 net income: $66.5 million, compared with $500,000 in the year-earlier period

2021 adjusted EBITDA: $434.2 million, up nearly 16 percent from a year earlier

Vehicles sold: KAR sold 543,000 vehicles in the quarter, down 20 percent from 681,000 in the year-earlier period. For the full year, KAR sold 2.6 million vehicles, down 15 percent from about 3.1 million sold in 2020.