kar-20220216
0001395942false00013959422022-02-162022-02-16

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 16, 2022
kar-20220216_g1.jpg
KAR Auction Services, Inc.
(Exact name of Registrant as specified in its charter)

Delaware
001-34568
20-8744739
(State or other jurisdiction
of incorporation)
(Commission File
Number)
(IRS Employer
Identification No.)


11299 N. Illinois Street
Carmel, Indiana 46032
(Address of principal executive offices)
(Zip Code)

(800) 923-3725
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of each exchange on which registered
Common Stock, par value $0.01 per shareKARNew York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐




Item 2.02    Results of Operations and Financial Condition.

On February 16, 2022, KAR Auction Services, Inc. (“KAR” or the "Company") issued a press release announcing its financial results for the three and twelve months ended December 31, 2021. KAR will host an earnings conference call and webcast, Thursday, February 17, 2022 at 8:30 a.m., Eastern Time. The conference call may be accessed by calling 1-844-778-4145 and entering participant code 8091348 and the live webcast may be accessed at the investors section of www.karglobal.com. The call will be hosted by KAR's Chief Executive Officer, Peter Kelly and Executive Vice President and Chief Financial Officer, Eric Loughmiller. The call will feature a review of operating highlights and financial results for the three and twelve months ended December 31, 2021. The press release dated February 16, 2022 is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference in its entirety.

On February 16, 2022, KAR also posted supplemental financial information for the three and twelve months ended December 31, 2021, and Earnings Slides for the three and twelve months ended December 31, 2021. The supplemental financial information and Earnings Slides can be located at the investors section of www.karglobal.com. The supplemental financial information and Earnings Slides posted on February 16, 2022 are attached to this Current Report on Form 8-K as Exhibits 99.2 and 99.3, respectively, and are incorporated herein by reference in their entirety.




Item 9.01    Financial Statements and Exhibits.

    (d) Exhibits

        EXHIBIT NO.            DESCRIPTION OF EXHIBIT
            
99.1    Press release dated February 16, 2022 – “KAR Auction Services, Inc. Reports 2021 Financial Results”

99.2    KAR Auction Services, Inc. Q4 and YTD 2021 Supplemental Financial Information – February 16, 2022

99.3    KAR Auction Services, Inc. Q4 2021 & Annual Earnings Slides – February 16, 2022

104    Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.


Dated:    February 16, 2022                KAR Auction Services, Inc.


                            /s/ Eric M. Loughmiller
                            Eric M. Loughmiller
Executive Vice President and Chief Financial Officer



EXHIBIT 99.1
EARNINGS RELEASE
image1.jpg

For Immediate Release

Analyst Inquiries:                                                      Media Inquiries:
Mike Eliason                                                             Jill Trudeau
(317) 249-4559                                                           (317) 796-0945
[email protected]                     [email protected]    

KAR Auction Services, Inc. Reports 2021 Financial Results
•KAR reported increased revenue and operating adjusted net income per share for 2021, driven by strong gross profit per unit and lower selling, general and administrative expenses (excluding acquisitions)
•For the fourth quarter, gross profit per vehicle sold increased year-over-year and sequentially to $297; Adjusted EBITDA increased year-over-year and sequentially to $97.9 million
•Continued growth in digital dealer-to-dealer volumes were driven by industry leading platforms, BacklotCars and TradeRev

Carmel, IN, February 16, 2022 — KAR Auction Services, Inc. (NYSE: KAR), today reported its fourth quarter financial results for the period ended December 31, 2021.

"Though commercial seller volumes remained constrained in the fourth quarter, I was pleased with our performance in the face of this challenge," said Peter Kelly, CEO of KAR Global. "We have maintained – and in some cases slightly increased – our share with commercial sellers while achieving strong double-digit growth in our digital dealer-to-dealer businesses. We are focused on improving gross profit per unit sold and Adjusted EBITDA as a percent of revenue, and continue to take meaningful, deliberate steps to reduce our labor and selling, general and administrative costs. We believe our digital transformation strategy and leaner cost structure position us for faster growth and higher profitability as volumes return."

Fourth Quarter 2021 Financial Highlights
•Total revenue for the fourth quarter of 2021 was $549.4 million, an increase of 4% compared with $529.6 million for the fourth quarter of 2020.
•Net income for the fourth quarter of 2021 of $5.1 million and a loss of $(0.04) per diluted share, compared with a net loss of $17.1 million, or $(0.21) per diluted share, in the fourth quarter of 2020.
•Adjusted EBITDA for the quarter ended December 31, 2021 was $97.9 million, compared with $67.5 million for the quarter ended December 31, 2020, an increase of 45%.
•Operating adjusted net income per diluted share was $0.11 for the quarter ended December 31, 2021, compared with an operating adjusted net loss per diluted share of $(0.01) for the quarter ended December 31, 2020.
•Year-over-year increase in ADESA's digital dealer-to-dealer marketplaces of 72% or 20%, when including CARWAVE and BacklotCars volumes in both years.
•ADESA gross profit per vehicle sold increased 30% to $297 for the quarter ended December 31, 2021, compared with $229 for the quarter ended December 31, 2020.
•AFC's strong fourth quarter performance was driven by increased loan transactions (5%), increased revenue per loan transaction (25%) and increased leverage of selling, general and administrative costs of $9.1 million in both the fourth quarter of 2021 and 2020.



2021 Financial Highlights
•Total revenue for the year ended December 31, 2021 was $2,251.6 million, an increase of 3% compared with $2,187.7 million for the year ended December 31, 2020.
•Net income for the year ended December 31, 2021 of $66.5 million, or $0.16 per diluted share, compared with net income of $0.5 million and a loss of $(0.16) per diluted share, for the year ended December 31, 2020.
•Adjusted EBITDA for the year ended December 31, 2021 was $434.2 million, compared with $375.3 million for the year ended December 31, 2020, an increase of 16%.
•Operating adjusted net income per diluted share was $0.81 for the year ended December 31, 2021, compared with operating adjusted net income per diluted share of $0.51 for the year ended December 31, 2020.
•Year-over-year increase in ADESA's digital dealer-to-dealer marketplaces of 110% or 34%, when including CARWAVE and BacklotCars volumes in both years.
•ADESA gross profit per vehicle sold increased 19% to $277 for the year ended December 31, 2021, compared with $233 for the year ended December 31, 2020.
•Strong growth in AFC's revenue (8%), operating profit (36%) and Adjusted EBITDA (46%) reflect strong used car pricing, low credit risk and the efficiency of its inventory floorplanning business model.
Investments in Early-Stage Automotive Companies
The company invests in certain early-stage automotive companies and funds that relate to the automotive industry. We believe these investments have resulted in the expansion of relationships in the vehicle remarketing industry. Realized gains on these investments were $4.8 million and $32.0 million for the three and twelve months ended December 31, 2021, respectively. The company had a net reduction in unrealized gains on investment securities of $9.3 million for the three months ended December 31, 2021 and a net increase in unrealized gains on investment securities of $1.4 million for the year ended December 31, 2021.
Earnings Conference Call Information
KAR will be hosting an earnings conference call and webcast on Thursday, February 17, 2022 at 8:30 a.m. ET. The call will be hosted by KAR's Chief Executive Officer, Peter Kelly and Executive Vice President and Chief Financial Officer, Eric Loughmiller. The conference call may be accessed by calling 1-844-778-4145 and entering participant passcode 8091348, while the live web cast will be available at the investors section of www.karglobal.com. Supplemental financial information for KAR’s fourth quarter 2021 results is available at the investors section of www.karglobal.com.
The archive of the webcast will also be available following the call and will be available at the investors section of www.karglobal.com for a limited time.
About KAR
KAR Auction Services, Inc. d/b/a KAR Global (NYSE: KAR), provides sellers and buyers across the global wholesale used vehicle industry with innovative, technology-driven remarketing solutions. KAR Global's unique end-to-end platform supports whole car, financing, logistics and other ancillary and related services, including the sale of nearly 2.6 million units valued at over $40 billion through our auctions in 2021. Our integrated physical, online and mobile marketplaces reduce risk, improve transparency and streamline transactions for customers in about 75 countries. Headquartered in Carmel, Indiana, KAR Global has employees across the United States, Canada, Europe, Mexico, Uruguay and the Philippines. For more information and the latest KAR Global news, go to www.karglobal.com and follow us on Twitter @KARSpeaks.
Forward-Looking Statements
Certain statements contained in this release include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and which are subject to certain risks, trends and uncertainties. In particular, statements made that are not historical facts may be forward-looking statements. Words such as “should,” “may,” “will,” "can," "of the opinion," "confident," “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” "continues," "outlook," "initiatives," "goals," "opportunities," and similar expressions identify forward-looking statements. Such statements are based on management's current expectations, are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results projected, expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include those uncertainties regarding the impact of the COVID-19 pandemic on our business and the economy generally, and those other matters disclosed in the Company’s Securities and Exchange Commission filings. The Company does not undertake any obligation to update any forward-looking statements.

2


KAR Auction Services, Inc.
Condensed Consolidated Statements of Income
(In millions) (Unaudited)
Three Months Ended December 31,Year Ended
December 31,
2021202020212020
Operating revenues
Auction fees$207.4 $207.0 $877.8 $887.7 
Service revenue168.2 173.5 707.2 737.4 
Purchased vehicle sales94.6 83.7 377.4 295.0 
Finance-related revenue79.2 65.4 289.2 267.6 
Total operating revenues549.4 529.6 2,251.6 2,187.7 
Operating expenses
Cost of services (exclusive of depreciation and amortization)323.2 325.4 1,299.9 1,284.8 
Selling, general and administrative134.8 139.7 558.1 545.4 
Depreciation and amortization45.9 50.6 183.0 191.3 
Goodwill and other intangibles impairment— — — 29.8 
Total operating expenses503.9 515.7 2,041.0 2,051.3 
Operating profit45.5 13.9 210.6 136.4 
Interest expense32.3 30.5 126.6 128.9 
Other (income) expense, net4.6 3.9 (17.5)2.1 
Income (loss) before income taxes8.6 (20.5)101.5 5.4 
Income taxes3.5 (3.4)35.0 4.9 
Net income (loss) $5.1 $(17.1)$66.5 $0.5 
Net income (loss) per share
Basic$(0.04)$(0.21)$0.16 $(0.16)
Diluted$(0.04)$(0.21)$0.16 $(0.16)
Dividends declared per common share$— $— $— $0.19 


3

KAR Auction Services, Inc.
Condensed Consolidated Balance Sheets
(In millions) (Unaudited)
December 31,
2021		December 31,
2020
Cash and cash equivalents$190.0 $752.1 
Restricted cash25.8 60.2 
Trade receivables, net of allowances527.0 367.2 
Finance receivables, net of allowances2,506.0 1,889.0 
Other current assets109.5 106.7 
Total current assets3,358.3 3,175.2 
Goodwill2,578.4 2,140.2 
Customer relationships, net of accumulated amortization243.3 211.3 
Operating lease right-of-use assets325.7 350.6 
Property and equipment, net of accumulated depreciation579.2 589.9 
Intangible and other assets332.3 331.0 
Total assets$7,417.2 $6,798.2 
Current liabilities, excluding obligations collateralized by
     finance receivables and current maturities of debt		$1,267.2 $965.1 
Obligations collateralized by finance receivables1,692.3 1,261.2 
Current maturities of debt16.3 24.3 
Total current liabilities2,975.8 2,250.6 
Long-term debt1,849.7 1,853.8 
Operating lease liabilities317.1 344.2 
Other non-current liabilities170.7 184.0 
Temporary equity590.9 549.8 
Stockholders’ equity1,513.0 1,615.8 
Total liabilities, temporary equity and stockholders’ equity$7,417.2 $6,798.2 


4

KAR Auction Services, Inc.
Condensed Consolidated Statements of Cash Flows
(In millions) (Unaudited)
Year Ended
December 31,
20212020
Operating activities
Net income$66.5 $0.5 
     Adjustments to reconcile net income to net cash provided by operating activities:
     Depreciation and amortization183.0 191.3 
     Provision for credit losses8.8 43.8 
     Deferred income taxes7.8 (7.2)
     Amortization of debt issuance costs12.1 11.7 
     Stock-based compensation15.6 14.0 
     Contingent consideration adjustment24.3 4.7 
     Net decrease in unrealized gain on investment securities(1.4)— 
     Goodwill and other intangibles impairment— 29.8 
     Other non-cash, net(1.9)5.0 
     Changes in operating assets and liabilities, net of acquisitions:
     Trade receivables and other assets(94.1)117.9 
     Accounts payable and accrued expenses192.5 (27.1)
Net cash provided by operating activities413.2 384.4 
Investing activities
     Net (increase) decrease in finance receivables held for investment(618.6)170.6 
  Acquisition of businesses (net of cash acquired)(521.8)(421.0)
     Purchases of property, equipment and computer software(108.5)(101.4)
     Investments in securities(22.5)— 
     Proceeds from sale of investments38.5 — 
     Proceeds from the sale of PWI2.2 24.3 
     Proceeds from the sale of property and equipment12.1 0.9 
Net cash used by investing activities(1,218.6)(326.6)
Financing activities
  Net increase (decrease) in book overdrafts3.3 (6.9)
  Net (decrease) increase in borrowings from lines of credit(8.0)(14.0)
  Net increase (decrease) in obligations collateralized by finance receivables424.4 (191.1)
  Proceeds from issuance of Series A Preferred Stock— 550.1 
  Payments for issuance costs of Series A Preferred Stock— (21.9)
  Payments for debt issuance costs/amendments(0.6)(18.5)
     Payments on long-term debt(9.5)(9.5)
     Payments on finance leases(10.5)(16.1)
     Payments of contingent consideration and deferred acquisition costs(37.1)(31.2)
     Issuance of common stock under stock plans1.5 2.1 
     Issuance of common stock - private placement30.0 15.0 
     Tax withholding payments for vested RSUs(2.2)(4.0)
     Repurchase and retirement of common stock(180.9)(10.2)
     Dividends paid to stockholders— (49.0)
Net cash provided by financing activities 210.4 194.8 
Effect of exchange rate changes on cash(1.5)(1.2)
Net (decrease) increase in cash, cash equivalents and restricted cash(596.5)251.4 
Cash, cash equivalents and restricted cash at beginning of period812.3 560.9 
Cash, cash equivalents and restricted cash at end of period$215.8 $812.3 
Cash paid for interest, net of proceeds from interest rate derivatives$112.7 $116.6 
Cash paid for taxes, net of refunds$26.0 $16.6 

5

KAR Auction Services, Inc.
Reconciliation of Non-GAAP Financial Measures
EBITDA, Adjusted EBITDA, operating adjusted net income and operating adjusted net income per share as presented herein are supplemental measures of our performance that are not required by, or presented in accordance with, generally accepted accounting principles in the United States (“GAAP”). They are not measurements of our financial performance under GAAP and should not be considered as substitutes for net income (loss) or any other performance measures derived in accordance with GAAP. Management believes that these measures provide investors additional meaningful methods to evaluate certain aspects of the company’s results period over period and for the other reasons set forth below.
EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings as described in our senior secured credit agreement covenant calculations. Management believes that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional information to investors about one of the principal measures of performance used by our creditors. In addition, management uses EBITDA and Adjusted EBITDA to evaluate our performance.
Depreciation expense for property and equipment and amortization expense of capitalized internally developed software costs relate to ongoing capital expenditures; however, amortization expense associated with acquired intangible assets, such as customer relationships, software, tradenames and noncompete agreements are not representative of ongoing capital expenditures, but have a continuing effect on our reported results. Non-GAAP financial measures of operating adjusted net income and operating adjusted net income per share, in the opinion of the company, provide comparability of the company's performance to other companies that may not have incurred these types of non-cash expenses or that report a similar measure. In addition, operating adjusted net income and operating adjusted net income per share may include adjustments for certain other charges.
EBITDA, Adjusted EBITDA, operating adjusted net income and operating adjusted net income per share have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of the results as reported under GAAP. These measures may not be comparable to similarly titled measures reported by other companies.
The following table reconciles EBITDA and Adjusted EBITDA to net income (loss) for the periods presented:
Three Months Ended
December 31,		Year Ended
December 31,
(in millions), (unaudited)
2021202020212020
Net income (loss)$5.1 $(17.1)$66.5 $0.5 
Add back:
Income taxes3.5 (3.4)35.0 4.9 
Interest expense, net of interest income32.0 30.3 125.7 127.3 
Depreciation and amortization45.9 50.6 183.0 191.3 
EBITDA86.5 60.4 410.2 324.0 
Non-cash stock-based compensation1.9 3.0 16.7 15.1 
Acquisition related costs2.4 4.1 8.1 8.8 
Securitization interest(8.3)(6.2)(29.8)(27.3)
(Gain)/Loss on asset sales(0.8)0.2 (4.4)1.3 
Severance1.6 0.9 5.2 11.5 
Foreign currency (gains)/losses1.1 1.7 3.8 4.9 
Goodwill and other intangibles impairment— — — 29.8 
Contingent consideration adjustment4.2 4.7 24.3 4.7 
Net change in unrealized gains on investment securities9.3 — (1.4)— 
Other— (1.3)1.5 2.5 
  Total addbacks/(deductions)11.4 7.1 24.0 51.3 
Adjusted EBITDA$97.9 $67.5 $434.2 $375.3 
6

The following table reconciles operating adjusted net income (loss) and operating adjusted net income (loss) per diluted share to net income (loss) for the periods presented:
Three Months Ended
December 31,		Year Ended
December 31,
(in millions, except per share amounts), (unaudited)
2021202020212020
Net income (loss) (1)
$5.1 $(17.1)$66.5 $0.5 
   Acquired amortization expense13.0 15.3 54.6 57.7 
   Contingent consideration adjustment4.2 4.7 24.3 4.7 
   Goodwill and other intangibles impairment— — — 29.8 
   Income taxes (2)
(4.5)(4.6)(18.8)(17.3)
Operating adjusted net income (loss)$17.8 $(1.7)$126.6 $75.4 
Operating adjusted net income (loss) per share - diluted$0.11 $(0.01)$0.81 $0.51 
Weighted average diluted shares
156.1 161.8 157.2 147.0 

(1)The Series A Preferred Stock dividends and undistributed earnings allocated to participating securities have not been included in the calculation of operating adjusted net income (loss) and operating adjusted net income (loss) per diluted share.

(2)For the three and twelve months ended December 31, 2021, an effective tax rate of 34.5% was applied to the acquired amortization expense and for the three and twelve months ended December 31, 2020, an effective tax rate of 30% was applied to the acquired amortization expense. There was no income tax benefit related to the contingent consideration adjustment or the goodwill and other intangibles impairment because these items were not deductible for income tax purposes.


7

EXHIBIT 99.2






KAR Auction Services, Inc.    
Q4 and YTD 2021 Supplemental Financial Information
February 16, 2022


KAR Auction Services, Inc.
EBITDA and Adjusted EBITDA Measures
EBITDA and Adjusted EBITDA as presented herein are supplemental measures of our performance that are not required by, or presented in accordance with, generally accepted accounting principles in the United States (“GAAP”). They are not measurements of our financial performance under GAAP and should not be considered as substitutes for net income (loss) or any other performance measures derived in accordance with GAAP.
EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings as described in our senior secured credit agreement covenant calculations. Management believes that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional information to investors about one of the principal measures of performance used by our creditors. In addition, management uses EBITDA and Adjusted EBITDA to evaluate our performance. EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of the results as reported under GAAP. These measures may not be comparable to similarly titled measures reported by other companies.

The following tables reconcile EBITDA and Adjusted EBITDA to net income (loss) for the periods presented:
Three Months Ended December 31, 2021
(Dollars in millions), (Unaudited)
ADESAAFCConsolidated
Net income (loss)
$(23.9)$29.0 $5.1 
Add back:
Income taxes(5.9)9.4 3.5 
Interest expense, net of interest income21.5 10.5 32.0 
Depreciation and amortization43.6 2.3 45.9 
Intercompany interest— — — 
EBITDA35.3 51.2 86.5 
Non-cash stock-based compensation1.6 0.3 1.9 
Acquisition related costs2.4 — 2.4 
Securitization interest— (8.3)(8.3)
(Gain)/Loss on asset sales(0.8)— (0.8)
Severance1.4 0.2 1.6 
Foreign currency (gains)/losses1.1 — 1.1 
Contingent consideration adjustment4.2 — 4.2 
Net change in unrealized gains on investment securities— 9.3 9.3 
Other0.1 (0.1)— 
  Total addbacks/(deductions)10.0 1.4 11.4 
Adjusted EBITDA$45.3 $52.6 $97.9 
2

Three Months Ended December 31, 2020
(Dollars in millions), (Unaudited)
ADESAAFCConsolidated
Net income (loss)
$(38.5)$21.4 $(17.1)
Add back:
Income taxes(9.7)6.3 (3.4)
Interest expense, net of interest income21.5 8.8 30.3 
Depreciation and amortization47.7 2.9 50.6 
Intercompany interest0.1 (0.1)— 
EBITDA21.1 39.3 60.4 
Non-cash stock-based compensation2.5 0.5 3.0 
Acquisition related costs4.1 — 4.1 
Securitization interest— (6.2)(6.2)
Loss on asset sales0.2 — 0.2 
Severance0.9 — 0.9 
Foreign currency (gains)/losses1.7 — 1.7 
Contingent consideration adjustment4.7 — 4.7 
Other(1.7)0.4 (1.3)
  Total addbacks/(deductions)12.4 (5.3)7.1 
Adjusted EBITDA$33.5 $34.0 $67.5 

Year Ended December 31, 2021
(Dollars in millions), (Unaudited)
ADESAAFCConsolidated
Net income (loss)$(58.9)$125.4 $66.5 
Add back:
Income taxes(6.5)41.5 35.0 
Interest expense, net of interest income86.2 39.5 125.7 
Depreciation and amortization173.6 9.4 183.0 
Intercompany interest0.2 (0.2)— 
EBITDA194.6 215.6 410.2 
Non-cash stock-based compensation14.5 2.2 16.7 
Acquisition related costs8.1 — 8.1 
Securitization interest— (29.8)(29.8)
(Gain)/Loss on asset sales(3.6)(0.8)(4.4)
Severance4.8 0.4 5.2 
Foreign currency (gains)/losses3.8 — 3.8 
Contingent consideration adjustment24.3 — 24.3 
Net change in unrealized gains on investment securities— (1.4)(1.4)
Other1.8 (0.3)1.5 
Total addbacks/(deductions)53.7 (29.7)24.0 
Adjusted EBITDA$248.3 $185.9 $434.2 
3

Year Ended December 31, 2020
(Dollars in millions), (Unaudited)
ADESAAFCConsolidated
Net income (loss)$(79.1)$79.6 $0.5 
Add back:
Income taxes(17.0)21.9 4.9 
Interest expense, net of interest income88.3 39.0 127.3 
Depreciation and amortization178.8 12.5 191.3 
Intercompany interest1.1 (1.1)— 
EBITDA172.1 151.9 324.0 
Non-cash stock-based compensation12.8 2.3 15.1 
Acquisition related costs8.8 — 8.8 
Securitization interest— (27.3)(27.3)
Loss on asset sales1.3 — 1.3 
Severance11.1 0.4 11.5 
Foreign currency (gains)/losses4.9 — 4.9 
Goodwill and other intangibles impairment29.8 — 29.8 
Contingent consideration adjustment4.7 — 4.7 
Other2.1 0.4 2.5 
Total addbacks/(deductions)75.5 (24.2)51.3 
Adjusted EBITDA$247.6 $127.7 $375.3 

Certain of our loan covenant calculations utilize financial results for the most recent four consecutive fiscal quarters. The following table reconciles EBITDA and Adjusted EBITDA to net income (loss) for the periods presented:

Three Months EndedTwelve Months Ended
(Dollars in millions),
(Unaudited)
March 31,
2021		June 30,
2021		September 30,
2021		December 31,
2021		December 31,
2021
Net income (loss)$50.9 $11.5 $(1.0)$5.1 $66.5 
Add back:
Income taxes23.6 9.1 (1.2)3.5 35.0 
Interest expense, net of interest income30.7 31.0 32.0 32.0 125.7 
Depreciation and amortization47.0 45.4 44.7 45.9 183.0 
EBITDA152.2 97.0 74.5 86.5 410.2 
Non-cash stock-based compensation5.6 4.9 4.3 1.9 16.7 
Acquisition related costs1.5 1.8 2.4 2.4 8.1 
Securitization interest(6.8)(6.8)(7.9)(8.3)(29.8)
(Gain)/Loss on asset sales0.2 — (3.8)(0.8)(4.4)
Severance0.7 1.2 1.7 1.6 5.2 
Foreign currency (gains)/losses2.2 0.4 0.1 1.1 3.8 
Contingent consideration adjustment11.2 4.5 4.4 4.2 24.3 
Net change in unrealized gains on investment securities(43.5)11.9 20.9 9.3 (1.4)
Other(0.1)1.6 — — 1.5 
  Total addbacks/(deductions)(29.0)19.5 22.1 11.4 24.0 
Adjusted EBITDA$123.2 $116.5 $96.6 $97.9 $434.2 
4

Results of Operations

KAR Results
 Three Months Ended December 31,Year Ended December 31,
(Dollars in millions except per share amounts)2021202020212020
Revenues  
Auction fees$207.4 $207.0 $877.8 $887.7 
Service revenue168.2 173.5 707.2 737.4 
Purchased vehicle sales94.6 83.7 377.4 295.0 
Finance-related revenue79.2 65.4 289.2 267.6 
Total revenues549.4 529.6 2,251.6 2,187.7 
Cost of services*323.2 325.4 1,299.9 1,284.8 
Gross profit*226.2 204.2 951.7 902.9 
Selling, general and administrative134.8 139.7 558.1 545.4 
Depreciation and amortization45.9 50.6 183.0 191.3 
Goodwill and other intangibles impairment— — — 29.8 
Operating profit45.5 13.9 210.6 136.4 
Interest expense32.3 30.5 126.6 128.9 
Other (income) expense, net4.6 3.9 (17.5)2.1 
Income (loss) before income taxes8.6 (20.5)101.5 5.4 
Income taxes3.5 (3.4)35.0 4.9 
Net income (loss)$5.1 $(17.1)$66.5 $0.5 
Net income (loss) per share  
Basic$(0.04)$(0.21)$0.16 $(0.16)
Diluted$(0.04)$(0.21)$0.16 $(0.16)

* Exclusive of depreciation and amortization
Overview of KAR Results for the Three Months Ended December 31, 2021 and 2020
Overview
For the three months ended December 31, 2021, we had revenue of $549.4 million compared with revenue of $529.6 million for the three months ended December 31, 2020, an increase of 4%. Businesses acquired since the fourth quarter of 2020 accounted for an increase in revenue of $35.4 million or 6% of revenue. For a further discussion of revenues, gross profit and selling, general and administrative expenses, see the segment results discussions below.
Depreciation and Amortization
Depreciation and amortization decreased $4.7 million, or 9%, to $45.9 million for the three months ended December 31, 2021, compared with $50.6 million for the three months ended December 31, 2020. The decrease in depreciation and amortization was primarily the result of fixed assets that have become fully depreciated and a reduction in assets placed in service.
Interest Expense
Interest expense increased $1.8 million, or 6%, to $32.3 million for the three months ended December 31, 2021, compared with $30.5 million for the three months ended December 31, 2020. The increase was primarily attributable to an increase in interest expense at AFC of $1.7 million, which resulted from an increase in the average finance receivables balance for the three months ended December 31, 2021, as compared with the three months ended December 31, 2020.
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Other (Income) Expense, Net
The Company invests in certain early-stage automotive companies and funds that relate to the automotive industry. We believe these investments have resulted in the expansion of relationships in the vehicle remarketing industry. Realized gains on these investments were $4.8 million for the three months ended December 31, 2021. The Company had a net reduction in unrealized gains of $9.3 million for the three months ended December 31, 2021, as a result of the change in fair value for one of these investment securities which had a recent public offering. Any future changes in the fair value of these investment securities will be reflected as unrealized gains or losses until these securities are sold.
For the three months ended December 31, 2021, we had other expenses of $4.6 million compared with $3.9 million for the three months ended December 31, 2020. The increase in other expense was primarily attributable to a net reduction in unrealized gains on investment securities of approximately $9.3 million, partially offset by increases in realized gains on investment securities of approximately $4.8 million, a decrease in foreign currency losses of $0.6 million, a decrease in contingent consideration valuation adjustments of $0.5 million and other miscellaneous items aggregating $2.7 million.

Income Taxes
We had an effective tax rate of 40.7% for the three months ended December 31, 2021, compared with an effective tax rate of 16.6% on a pre-tax loss for the three months ended December 31, 2020. The effective tax rate for the three months ended December 31, 2021 was unfavorably impacted by the expense for the increase in the estimated value of contingent consideration for which no tax benefits have been recorded, partially offset by the benefit of discrete items. The effective tax rate for the three months ended December 31, 2020 was unfavorably impacted by expense for the increase in the estimated value of contingent consideration for which no tax benefit has been recorded, as well as a greater proportion of earnings in higher tax jurisdictions. These were partially offset by the tax benefit from deductions related to stock-based compensation expenses and other discrete benefits.
Impact of Foreign Currency
For the three months ended December 31, 2021, fluctuations in the Canadian exchange rate increased revenue by $3.2 million, operating profit by $1.1 million and net income by $0.7 million. For the three months ended December 31, 2021, fluctuations in the European exchange rate decreased revenue by $2.4 million, operating profit by $0.1 million and net loss by $0.1 million.
Overview of KAR Results for the Year Ended December 31, 2021 and 2020
Overview
For the year ended December 31, 2021, we had revenue of $2,251.6 million compared with revenue of $2,187.7 million for the year ended December 31, 2020, an increase of 3%. Businesses acquired since the fourth quarter of 2020 accounted for an increase in revenue of $139.1 million or 6% of revenue. For a further discussion of revenues, gross profit and selling, general and administrative expenses, see the segment results discussions below.
Depreciation and Amortization
Depreciation and amortization decreased $8.3 million, or 4%, to $183.0 million for the year ended December 31, 2021, compared with $191.3 million for the year ended December 31, 2020. The decrease in depreciation and amortization was primarily the result of fixed assets that have become fully depreciated and a reduction in assets placed in service.
Goodwill and Other Intangibles Impairment
In the second quarter of 2020 a $25.5 million non-cash goodwill impairment charge and a $4.3 million non-cash customer relationship impairment charge were recorded in our ADESA Remarketing Limited reporting unit (doing business as ADESA U.K.). The impairments resulted from the changes in economic circumstances which caused the outlook for the business to be significantly reduced.
Interest Expense
Interest expense decreased $2.3 million, or 2%, to $126.6 million for the year ended December 31, 2021, compared with $128.9 million for the year ended December 31, 2020. The decrease was primarily attributable to a decrease in the weighted average interest rate on corporate debt and a decrease of approximately $9.2 million in the average
6

outstanding balance of corporate debt for the year ended December 31, 2021, as compared with the year ended December 31, 2020. This was partially offset by an increase in interest expense at AFC of $0.4 million for the year ended December 31, 2021, as compared with the year ended December 31, 2020.
Other (Income) Expense, Net
The Company invests in certain early-stage automotive companies and funds that relate to the automotive industry. We believe these investments have resulted in the expansion of relationships in the vehicle remarketing industry. Realized gains on these investments were $32.0 million for the year ended December 31, 2021. The Company had net unrealized gains of $1.4 million at December 31, 2021, as a result of a recent public offering for one of these investment securities. Any future changes in the fair value of these investment securities will be reflected as unrealized gains or losses until these securities are sold.
For the year ended December 31, 2021, we had other income of $17.5 million compared with other expenses of $2.1 million for the year ended December 31, 2020. The increase in other income was primarily attributable to an increase in realized and unrealized gains on investment securities of approximately $33.4 million, a decrease in foreign currency losses of $1.1 million and an increase in other miscellaneous items aggregating $4.7 million, partially offset by an increase in contingent consideration valuation adjustments of $19.6 million.
Income Taxes
We had an effective tax rate of 34.5% for the year ended December 31, 2021, compared with an effective tax rate of 90.7% for the year ended December 31, 2020. The 2021 rate was unfavorably impacted by the expense for the increase in the estimated value of contingent consideration for which no tax benefits have been recorded, partially offset by the benefit of discrete items. The 2020 rate was unfavorably impacted by the goodwill and other intangibles impairment charge and expense for the increase in the estimated value of contingent consideration for which no tax benefits have been recorded, as well as significantly reduced earnings and a greater proportion of earnings in higher tax jurisdictions. These were partially offset by the tax benefit from law changes, deductions related to stock-based compensation expenses and other discrete benefits.
Impact of Foreign Currency
For the year ended December 31, 2021, fluctuations in the Canadian exchange rate increased revenue by $20.0 million, operating profit by $6.7 million and net income by $3.6 million. For the year ended December 31, 2021, fluctuations in the European exchange rate increased revenue by $7.7 million, operating profit by $0.4 million and decreased net income by $0.3 million.
Impact of COVID-19 on Our Operations
The Company has been subject to numerous orders and directives that have impacted our ability to operate our business throughout North America and in Europe. As a result of these COVID-19 related restrictions on our operations, we have adjusted our business processes so that we can continue to meet the needs of our customers while complying with the various laws, regulations, mandates and directives in each of the markets in which we operate. In many cases, we have had to limit the number of employees and customers at our physical locations at any given time and modify the delivery of services to our customers. However, these adjustments have also resulted in improvements in our operations.

During this challenging time, the Company has worked to meet the needs of the wholesale used car marketplace with its technology-based auction platforms throughout North America and in Europe. The Company believes that certain changes to its business processes that were necessitated by the COVID-19 outbreak are sustainable going forward. For example, the Company has reduced the labor required to process wholesale auction transactions and reduced its selling, general and administrative expenses (excluding acquisitions).
7

ADESA Results
Three Months Ended December 31,Year Ended December 31,
(Dollars in millions, except per vehicle amounts)2021202020212020
Auction fees$207.4 $207.0 $877.8 $887.7 
Service revenue168.2 173.5 707.2 737.4 
Purchased vehicle sales94.6 83.7 377.4 295.0 
Total ADESA revenue470.2 464.2 1,962.4 1,920.1 
Cost of services*308.8 308.4 1,244.5 1,205.7 
Gross profit*161.4 155.8 717.9 714.4 
Selling, general and administrative125.7 130.6 522.9 508.8 
Depreciation and amortization43.6 47.7 173.6 178.8 
Goodwill and other intangibles impairment— — — 29.8 
Operating profit (loss)$(7.9)$(22.5)$21.4 $(3.0)
Commercial vehicles sold266,000 474,000 1,503,000 2,265,000 
Dealer consignment vehicles sold277,000207,000 1,090,000797,000 
Total vehicles sold543,000681,0002,593,0003,062,000
Auction fees per vehicle sold$382 $304 $339 $290 
Gross profit per vehicle sold*$297 $229 $277 $233 
Gross profit percentage, excluding purchased vehicles*43.0%40.9%45.3%44.0%
On-premise mix47%48%47%49%
Off-premise mix53%52%53%51%

* Exclusive of depreciation and amortization
Overview of ADESA Results for the Three Months Ended December 31, 2021 and 2020
Revenue
Revenue from ADESA increased $6.0 million, or 1%, to $470.2 million for the three months ended December 31, 2021, compared with $464.2 million for the three months ended December 31, 2020. The increase in revenue was the result of an increase in average revenue per vehicle sold, partially offset by a decrease in the number of vehicles sold. Businesses acquired since the fourth quarter of 2020 accounted for an increase in revenue of $35.4 million. The change in revenue included the impact of an increase in revenue of $2.9 million due to fluctuations in the Canadian exchange rate and a decrease of $2.4 million due to fluctuations in the European exchange rate.
On-premise marketplace sales are initiated online for vehicles at any of our locations across North America and include ADESA Simulcast, Simulcast+ and DealerBlock sales. Off-premise marketplace sales are initiated online and include Openlane, BacklotCars, CARWAVE, TradeRev and ADESA Europe sales. The 20% decrease in the number of vehicles sold was comprised of a decline in both on-premise and off-premise commercial volumes aggregating 44%, partially offset by an increase in both on-premise and off-premise dealer consignment volumes aggregating 34%. The decrease in the number of vehicles sold was driven by a lack of supply caused by high vehicle values.
Auction fees per vehicle sold for the three months ended December 31, 2021 increased $78, or 26%, reflecting higher vehicle values and a smaller mix of lower-fee commercial off-premise vehicles.
Service revenue for the three months ended December 31, 2021 decreased $5.3 million, or 3%, primarily as a result of a decrease in inspection service revenue and transportation revenue resulting from the decrease in vehicles sold, partially offset by an increase in reconditioning revenue. Typically consigned vehicles located at our facilities utilize our service offerings at a higher rate than off-premise vehicles.
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Gross Profit
For the three months ended December 31, 2021, gross profit for ADESA increased $5.6 million, or 4%, to $161.4 million, compared with $155.8 million for the three months ended December 31, 2020. Cost of services increased less than 1% for the three months ended December 31, 2021, while revenue increased 1% during the same period. Gross profit for ADESA was 34.3% of revenue for the three months ended December 31, 2021, compared with 33.6% of revenue for the three months ended December 31, 2020. Excluding purchased vehicle sales, gross profit as a percentage of revenue was 43.0% and 40.9% for the three months ended December 31, 2021 and 2020, respectively. The entire selling and purchase price of the vehicle is recorded as revenue and cost of services for purchased vehicles sold. Businesses acquired since the fourth quarter of 2020 accounted for an increase in cost of services of $20.0 million for the three months ended December 31, 2021.
Selling, General and Administrative
Selling, general and administrative expenses for the ADESA segment decreased $4.9 million, or 4%, to $125.7 million for the three months ended December 31, 2021, compared with $130.6 million for the three months ended December 31, 2020, primarily due to decreases in incentive-based compensation of $14.0 million, compensation expense of $6.9 million, professional fees of $2.5 million, telecom expenses of $1.1 million and stock-based compensation of $1.0 million, partially offset by increases in selling, general and administrative expenses associated with acquisitions of $14.2 million, bad debt expense of $2.4 million, medical expenses of $2.1 million, travel expenses of $0.6 million, fluctuations in the Canadian exchange rate of $0.6 million and other miscellaneous expenses aggregating $1.3 million. In addition, the Employee Retention Credit provided under the Canada Emergency Wage Subsidy was $0.6 million less for the three months ended December 31, 2021, compared with the three months ended December 31, 2020. Likewise, there were net gains on the sales of assets aggregating $1.0 million for the three months ended December 31, 2021, compared with net losses on the sales of assets aggregating $0.2 million for the three months ended December 31, 2020.
Overview of ADESA Results for the Year Ended December 31, 2021 and 2020
Revenue
Revenue from ADESA increased $42.3 million, or 2%, to $1,962.4 million for the year ended December 31, 2021, compared with $1,920.1 million for the year ended December 31, 2020. The increase in revenue was the result of an increase in average revenue per vehicle sold, partially offset by a decrease in the number of vehicles sold. Businesses acquired since the fourth quarter of 2020 accounted for an increase in revenue of $139.1 million. The change in revenue included the impact of an increase in revenue of $18.5 million due to fluctuations in the Canadian exchange rate and an increase of $7.7 million due to fluctuations in the European exchange rate.
On-premise marketplace sales are initiated online for vehicles at any of our locations across North America and include ADESA Simulcast, Simulcast+ and DealerBlock sales. Off-premise marketplace sales are initiated online and include Openlane, BacklotCars, CARWAVE, TradeRev and ADESA Europe sales. The 15% decrease in the number of vehicles sold was comprised of a decline in both on-premise and off-premise commercial volumes aggregating 34%, partially offset by an increase in both on-premise and off-premise dealer consignment volumes aggregating 37%. The decrease in the number of vehicles sold was driven by a lack of supply caused by high vehicle values.
Auction fees per vehicle sold for the year ended December 31, 2021 increased $49, or 17%, reflecting higher vehicle values and a smaller mix of lower-fee commercial off-premise vehicles.
Service revenue for the year ended December 31, 2021 decreased $30.2 million, or 4%, primarily as a result of a decrease in transportation revenue resulting from the decrease in vehicles sold. Typically consigned vehicles located at our facilities utilize our service offerings at a higher rate than off-premise vehicles.
Gross Profit
For the year ended December 31, 2021, gross profit for ADESA increased $3.5 million, or less than 1%, to $717.9 million, compared with $714.4 million for the year ended December 31, 2020. Gross profit for ADESA was 36.6% of revenue for the year ended December 31, 2021, compared with 37.2% of revenue for the year ended December 31, 2020. We have taken measures to reduce expenses to help protect our business and vehicles sold online require less labor. In 2021 we also recorded a benefit of $3.7 million taken under the Canada Emergency Wage Subsidy as compared with an aggregate of $14.2 million taken under the CARES Act and the Canada Emergency Wage Subsidy in 2020. On March 20, 2020 our on-premise auctions were shut down in response to the COVID-19
9

pandemic. While revenue decreased during the closure, cost of services remained consistent, as all non-essential auction employees were paid during the closure. In addition, our gross profit as a percentage of revenue is impacted by purchased vehicles. Excluding purchased vehicle sales, gross profit as a percentage of revenue was 45.3% and 44.0% for the years ended December 31, 2021 and 2020, respectively. The entire selling and purchase price of the vehicle is recorded as revenue and cost of services for purchased vehicles sold. Businesses acquired since the fourth quarter of 2020 accounted for an increase in cost of services of $80.4 million for the year ended December 31, 2021.
Selling, General and Administrative
Selling, general and administrative expenses for the ADESA segment increased $14.1 million, or 3%, to $522.9 million for the year ended December 31, 2021, compared with $508.8 million for the year ended December 31, 2020, primarily due to increases in selling, general and administrative expenses associated with acquisitions of $77.3 million, fluctuations in the Canadian exchange rate of $4.6 million, stock-based compensation of $1.2 million and information technology costs of $1.1 million, partially offset by decreases in compensation expense of $35.9 million, incentive-based compensation of $10.9 million, professional fees of $6.4 million, telecom expenses of $4.2 million, severance of $3.8 million, marketing costs of $3.1 million, bad debt expense of $3.0 million, supplies expense of $1.8 million, travel expenses of $1.8 million and other miscellaneous expenses aggregating $1.4 million. In addition, the Employee Retention Credit provided under the CARES Act and the Canada Emergency Wage Subsidy was $7.7 million less for the year ended December 31, 2021, compared with the year ended December 31, 2020. Likewise, there were net gains on the sales of assets aggregating $4.2 million for the year ended December 31, 2021, compared with net losses on the sales of assets aggregating $1.3 million for the year ended December 31, 2020.
Goodwill and Other Intangibles Impairment
In the second quarter of 2020 a $25.5 million non-cash goodwill impairment charge and a $4.3 million non-cash customer relationship impairment charge were recorded in our ADESA Remarketing Limited reporting unit (doing business as ADESA U.K.). The impairments resulted from the changes in economic circumstances which caused the outlook for the business to be significantly reduced.

10

AFC Results
Three Months Ended December 31,Year Ended December 31,
(Dollars in millions except volumes and per loan amounts)2021202020212020
Finance-related revenue
   Interest and fee income$76.1 $61.4 $284.1 $266.1 
   Other revenue2.2 1.9 8.6 8.7 
   Net recovery (provision) for credit losses0.9 (2.7)(3.5)(38.6)
   Warranty contract revenue— 4.8 — 31.4 
Total AFC revenue79.2 65.4 289.2 267.6 
Cost of services*14.4 17.0 55.4 79.1 
Gross profit*64.8 48.4 233.8 188.5 
Selling, general and administrative9.1 9.1 35.2 36.6 
Depreciation and amortization2.3 2.9 9.4 12.5 
Operating profit$53.4 $36.4 $189.2 $139.4 
Loan transactions342,000327,000 1,421,0001,519,000 
Revenue per loan transaction, excluding Warranty contract revenue$232 $186 $204 $156 
* Exclusive of depreciation and amortization
Overview of AFC Results for the Three Months Ended December 31, 2021 and 2020
Revenue
For the three months ended December 31, 2021, AFC revenue increased $13.8 million, or 21%, to $79.2 million, compared with $65.4 million for the three months ended December 31, 2020. The increase in revenue was primarily the result of a 25% increase in revenue per loan transaction and a 5% increase in loan transactions, partially offset by the elimination of Warranty contract revenue as a result of the sale of PWI in December 2020.
Revenue per loan transaction, which includes both loans paid off and loans curtailed, increased $46, or 25%, primarily as a result of an increase in loan values, a decrease in provision for credit losses for the three months ended December 31, 2021, an increase in floorplan fee and other fee income per unit and an increase in average portfolio duration.
For the three months ended December 31, 2021, recoveries and the decrease in the allowance for credit losses exceeded write-offs, resulting in the provision for credit losses decreasing to (0.2%) of the average managed receivables for the three months ended December 31, 2021 from 0.6% for the three months ended December 31, 2020.
Gross Profit
For the three months ended December 31, 2021, gross profit for the AFC segment increased $16.4 million, or 34%, to $64.8 million, or 81.8% of revenue, compared with $48.4 million, or 74.0% of revenue, for the three months ended December 31, 2020. Excluding PWI for the three months ended December 31, 2020, AFC's gross profit as a percent of revenue was 78.7%. The increase in gross profit as a percent of revenue was primarily the result of a 15% decrease in cost of services. The decrease in cost of services was primarily the result of a decrease in PWI expenses of $4.1 million, partially offset by increases in compensation expense of $0.5 million, incentive-based compensation of $0.4 million and other miscellaneous expenses aggregating $0.6 million.
Selling, General and Administrative
Selling, general and administrative expenses at AFC were $9.1 million for both the three months ended December 31, 2021 and 2020. Fluctuations between the periods included an increase in compensation expense of $1.0 million, an increase in other miscellaneous expenses aggregating $0.1 million, a decrease in incentive-based compensation of $0.6 million and a decrease in PWI expenses of $0.5 million.
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Overview of AFC Results for the Year Ended December 31, 2021 and 2020
Revenue
For the year ended December 31, 2021, AFC revenue increased $21.6 million, or 8%, to $289.2 million, compared with $267.6 million for the year ended December 31, 2020. The increase in revenue was primarily the result of a 31% increase in revenue per loan transaction, largely as a result of a decrease in the provision for credit losses, partially offset by a 6% decrease in loan transactions and the elimination of Warranty contract revenue as a result of the sale of PWI in December 2020.
Revenue per loan transaction, which includes both loans paid off and loans curtailed, increased $48, or 31%, primarily as a result of a decrease in provision for credit losses for the year ended December 31, 2021, an increase in loan values and an increase in interest yields, partially offset by a decrease in average portfolio duration.
The provision for credit losses decreased to 0.2% of the average managed receivables for the year ended December 31, 2021 from 2.1% for the year ended December 31, 2020.
Gross Profit
For the year ended December 31, 2021, gross profit for the AFC segment increased $45.3 million, or 24%, to $233.8 million, or 80.8% of revenue, compared with $188.5 million, or 70.4% of revenue, for the year ended December 31, 2020. Excluding PWI for the year ended December 31, 2020, AFC's gross profit as a percent of revenue was 76.3%. The increase in gross profit as a percent of revenue was primarily the result of a 30% decrease in cost of services. The decrease in cost of services was primarily the result of decreases in PWI expenses of $23.1 million, compensation expense of $2.1 million and lot check expenses of $0.6 million, partially offset by increases in incentive-based compensation of $1.1 million, rent expense of $0.5 million, collection expenses of $0.4 million and other miscellaneous expenses aggregating $0.1 million.
Selling, General and Administrative
Selling, general and administrative expenses at AFC decreased $1.4 million, or 4%, to $35.2 million for the year ended December 31, 2021, compared with $36.6 million for the year ended December 31, 2020 primarily as a result of decreases in PWI expenses of $2.7 million and other miscellaneous expenses aggregating $0.5 million, partially offset by increases in information technology costs of $1.3 million and compensation expense of $0.5 million.
LIQUIDITY AND CAPITAL RESOURCES
We believe that the significant indicators of liquidity for our business are cash on hand, cash flow from operations, working capital and amounts available under our Credit Facility. Our principal sources of liquidity consist of cash generated by operations and borrowings under our Revolving Credit Facility.
December 31,
(Dollars in millions)20212020
Cash and cash equivalents$190.0 $752.1 
Restricted cash25.860.2
Working capital382.5924.6
Amounts available under the Revolving Credit Facility*325.0325.0
Cash flow from operations for the year ended413.2384.4
*    There were related outstanding letters of credit totaling approximately $27.6 million and $28.5 million at December 31, 2021 and 2020, respectively, which reduced the amount available for borrowings under the Revolving Credit Facility.
In 2021, we used approximately $522 million of cash for business acquisitions. This includes CARWAVE and Auction Frontier. We regularly evaluate alternatives for our capital structure and liquidity given our expected cash flows, growth and operating capital requirements as well as capital market conditions. The COVID-19 pandemic has had, and is continuing to have, an adverse impact on our business. As a result, during 2020 we implemented several measures that we believe will enhance liquidity for the foreseeable future. Some of these measures included furloughs, prohibiting non-essential business travel, suspending non-essential services provided by certain third parties at our locations, delaying or canceling capital projects at our on-premise marketplace locations and suspending the Company's quarterly dividend.
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We also took advantage of legislation introduced to assist companies during the pandemic. For the year ended December 31, 2021, we recorded a total of approximately $5.8 million claimed under the Canada Emergency Wage Subsidy. These credits partially offset salaries paid in Canada. We will continue to monitor and assess the impact similar legislation in other countries may have on our business and financial results. As the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs. A continued disruption could materially affect our liquidity.
Summary of Cash Flows
Year Ended
December 31,
(Dollars in millions)20212020
Net cash provided by (used by):
   Operating activities$413.2 $384.4 
   Investing activities(1,218.6)(326.6)
   Financing activities210.4 194.8 
   Effect of exchange rate on cash(1.5)(1.2)
Net (decrease) increase in cash, cash equivalents and restricted cash$(596.5)$251.4 
Cash flow provided by operating activities was $413.2 million for the year ended December 31, 2021, compared with $384.4 million for the year ended December 31, 2020. The increase in operating cash flow was primarily attributable to increased profitability and changes in operating assets and liabilities as a result of the timing of collections and the disbursement of funds to consignors for auctions held near period-ends, partially offset by a net decrease in non-cash item adjustments.
Net cash used by investing activities was $1,218.6 million for the year ended December 31, 2021, compared with $326.6 million for the year ended December 31, 2020. The increase in net cash used by investing activities was primarily attributable to:
•an increase in the additional finance receivables held for investment of approximately $789.2 million;
•an increase in cash used for acquisitions of approximately $100.8 million;
•an increase in investment in securities of approximately $22.5 million; and
•a decrease in the proceeds from the sale of businesses of $22.1 million;
partially offset by:
•proceeds from sale of investments of approximately $38.5 million; and
•an increase in proceeds from the sale of property and equipment of approximately $11.2 million.
Net cash provided by financing activities was $210.4 million for the year ended December 31, 2021, compared with $194.8 million for the year ended December 31, 2020. The increase in net cash provided by financing activities was primarily attributable to:
•an increase in the additional obligations collateralized by finance receivables of approximately $615.5 million;
•a decrease in dividends paid to stockholders of approximately $49.0 million;
•a decrease in payments for debt issuance costs of approximately $17.9 million;
•an increase in proceeds from the issuance of common stock (private placement) of approximately $15.0 million; and
•a net increase in book overdrafts of approximately $10.2 million;
partially offset by:
•a decrease in net proceeds from Series A Preferred Stock of approximately $528.2 million; and
•an increase in the repurchase of common stock of approximately $170.7 million.
13
Q4 2021 & Annual Earnings Slides February 16, 2022

 
2 Forward-Looking Statements This presentation includes forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward looking statements are based on management’s current expectations, are not guarantees of future performance and are subject to certain risks, trends, and uncertainties that could cause actual results to differ materially from those projected, expressed or implied by such forward-looking statements. Many of these risk factors are outside of the company’s control, and as such, they involve risks which are not currently known to the company that could cause actual results to differ materially from forecasted results. Factors that could cause or contribute to such differences include those uncertainties regarding the impact of the COVID-19 pandemic on our business and the economy generally, and those other matters disclosed in the company’s Securities and Exchange Commission filings. The forward-looking statements in this document are made as of the date hereof and the company does not undertake to update its forward-looking statements.

 
3 Fourth Quarter Summary ❑ KAR Financial Performance o Consolidated revenue of $549.4M ($454.8M excluding purchased vehicles) o Gross profit of $226.2M was 49.7% of net revenue1 o SG&A of $134.8 o Adjusted EBITDA of $97.9M o Cash flow from operations $60.6M o Operating adjusted EPS of $0.11 – includes $9.3M reduction in unrealized gains on investment securities or $0.04 per share ❑ ADESA Financial Performance o 543K vehicles sold, a decrease of 20% over the prior year o 53% of vehicles sold were off-premise o $297 gross profit per unit sold o SG&A of $125.7M resulted in $231 per vehicle sold ❑ AFC Financial Performance o 342K loan transaction units o $232 revenue per loan transaction, an increase of 25% over the prior year ❑ Digital Dealer-to-Dealer o Total KAR - 141K vehicles sold in Q4 2021, an increase of 72% over the prior year, or 20%, when including CARWAVE and BacklotCars volumes in both years o ADESA North America - 131K vehicles sold in Q4 2021, an increase of 81% over the prior year, or 22%, when including CARWAVE and BacklotCars volumes in both years 1 Exclusive of depreciation and amortization

 
4 F o u r t h Q u a r t e r & Y e a r - t o - D a t e R e s u l t s

 
5 KAR 2021 Highlights* ($ in millions, except per share amounts) KAR Q4 2021 Q4 2020 YTD 2021 YTD 2020 Total operating revenues $549.4 $529.6 $2,251.6 $2,187.7 Gross profit** $226.2 $204.2 $951.7 $902.9 % of revenue** 41.2% 38.6% 42.3% 41.3% SG&A $134.8 $139.7 $558.1 $545.4 Other (income) expense, net $4.6 $3.9 ($17.5) $2.1 EBITDA $86.5 $60.4 $410.2 $324.0 Adjusted EBITDA $97.9 $67.5 $434.2 $375.3 Net income (loss) $5.1 ($17.1) $66.5 $0.5 Net income (loss) per share – diluted ($0.04) ($0.21) $0.16 ($0.16) Weighted average diluted shares 121.0 129.6 123.6 129.3 Operating adjusted net income (loss) per share – diluted $0.11 ($0.01) $0.81 $0.51 Weighted average diluted shares – including assumed conversion of preferred shares 156.1 161.8 157.2 147.0 Dividends declared per common share $-- $-- $-- $0.19 Effective tax rate 40.7% 16.6% 34.5% 90.7% Capital expenditures $31.2 $27.1 $108.5 $101.4 * For a more complete explanation of these changes, see the MD&A in the company's supplemental financial information and Form 10-K, both for the period ended December 31, 2021. ** Exclusive of depreciation and amortization

 
6 ADESA 2021 Highlights* ($ in millions, except RPU) ADESA Q4 2021 Q4 2020 YTD 2021 YTD 2020 Auction fees $207.4 $207.0 $877.8 $887.7 Service revenue $168.2 $173.5 $707.2 $737.4 Purchased vehicle sales $94.6 $83.7 $377.4 $295.0 Total ADESA Revenue $470.2 $464.2 $1,962.4 $1,920.1 Gross profit** $161.4 $155.8 $717.9 $714.4 % of revenue, excluding purchased vehicles** 43.0% 40.9% 45.3% 44.0% SG&A $125.7 $130.6 $522.9 $508.8 Other (income) expense, net $0.1 $3.9 ($0.5) $2.2 EBITDA $35.3 $21.1 $194.6 $172.1 Adjusted EBITDA $45.3 $33.5 $248.3 $247.6 % of revenue 9.6% 7.2% 12.7% 12.9% Commercial vehicles sold 266,000 474,000 1,503,000 2,265,000 Dealer consignment vehicles sold 277,000 207,000 1,090,000 797,000 Total vehicles sold 543,000 681,000 2,593,000 3,062,000 Auction fees per vehicle sold $382 $304 $339 $290 Gross profit per vehicle sold** $297 $229 $277 $233 On-premise mix 47% 48% 47% 49% Off-premise mix 53% 52% 53% 51% * For a more complete explanation of these changes, see the MD&A in the company's supplemental financial information and Form 10-K, both for the period ended December 31, 2021. ** Exclusive of depreciation and amortization

 
7 AFC 2021 Highlights* * For a more complete explanation of these changes, see the MD&A in the company's supplemental financial information and Form 10-K, both for the period ended December 31, 2021. ** Exclusive of depreciation and amortization *** Excludes Warranty contract revenue in 2020 ($ in millions, except for revenue per loan transaction) AFC Q4 2021 Q4 2020 YTD 2021 YTD 2020 Interest and fee income $76.1 $61.4 $284.1 $266.1 Other revenue $2.2 $1.9 $8.6 $8.7 Net recovery (provision) for credit losses $0.9 ($2.7) ($3.5) ($38.6) Warranty contract revenue $-- $4.8 $-- $31.4 Total AFC revenue $79.2 $65.4 $289.2 $267.6 Gross profit** $64.8 $48.4 $233.8 $188.5 % of revenue** 81.8% 74.0% 80.8% 70.4% SG&A $9.1 $9.1 $35.2 $36.6 Other (income) expense, net $4.5 $-- ($17.0) ($0.1) EBITDA $51.2 $39.3 $215.6 $151.9 Adjusted EBITDA $52.6 $34.0 $185.9 $127.7 Loan transactions 342,000 327,000 1,421,000 1,519,000 Revenue per loan transaction*** $232 $186 $204 $156 Provision for credit losses % of finance receivables (0.2%) 0.6% 0.2% 2.1% Managed receivables $2,529.0 $1,911.0 $2,529.0 $1,911.0 Obligations collateralized by finance receivables $1,692.3 $1,261.2 $1,692.3 $1,261.2

 
8 December 31, 2021 Leverage (US$ in millions) Corporate Credit Ratings: S&P B, Moodys B2 * As defined in the Credit Agreement Balance Maturity Term Loan B-6 (Adjusted LIBOR + 2.25%) $929 2026 Revolving Credit Facility (Adjusted LIBOR + 1.75%) - 2024 Senior Notes (Fixed 5.125%) 950 2025 Finance Leases & Other 18 Total 1,897 Less: Available Cash* (175) Net Debt $1,722 Senior Secured Net Leverage Ratio 1.8 Total Net Debt Ratio 3.97

 
9 H I S T O R I C A L D A TA

 
10 ADESA Revenue 2021 4Q21 3Q21 2Q21 1Q21 2020 4Q20 3Q20 2Q20 1Q20 Auction Fees $877.8 $207.4 $198.2 $236.7 $235.5 $887.7 $207.0 $247.6 $177.8 $255.3 Service Revenue $707.2 $168.2 $169.2 $182.2 $187.6 $737.4 $173.5 $192.9 $134.8 $236.2 Purchased Vehicle Sales $377.4 $94.6 $92.2 $97.9 $92.7 $295.0 $83.7 $86.2 $49.6 $75.5 Total ADESA Revenue $1,962.4 $470.2 $459.6 $516.8 $515.8 $1,920.1 $464.2 $526.7 $362.2 $567.0 Gross Profit $717.9 $161.4 $160.3 $197.3 $198.9 $714.4 $155.8 $217.3 $145.0 $196.3 Gross Profit % 36.6% 34.3% 34.9% 38.2% 38.6% 37.2% 33.6% 41.3% 40.0% 34.6% Gross Profit %, Net of Purchased Vehicle Sales 45.3% 43.0% 43.6% 47.1% 47.0% 44.0% 40.9% 49.3% 46.4% 39.9%

 
11 ADESA Metrics - Annual 1 Includes purchased vehicle sales 2 Includes vehicles sold by BacklotCars & CARWAVE pre-acquisition 3 Excludes vehicles sold by BacklotCars & CARWAVE pre-acquisition (TradeRev only) 4 Includes vehicles sold by CARWAVE pre-acquisition 2021 2020 2019 2018 2017 Revenue1 $1,962.4 $1,920.1 $2,429.0 $2,101.9 $1,937.5 Commercial vehicles sold 1,503 2,265 2,726 2,446 2,148 Dealer consignment vehicles sold 1,090 797 1,058 1,026 1,032 Total vehicles sold 2,593 3,062 3,784 3,472 3,180 Auction fees per vehicle sold $339 $290 $295 $302 $311 Gross profit per vehicle sold $277 $233 $240 $251 $256 Gross profit percentage1 36.6% 37.2% 37.4% 41.4% 42.0% Gross profit percentage, excluding purchased vehicles 45.3% 44.0% 42.6% 43.9% 43.8% On-premise mix 47% 49% 56% 61% 69% Off-premise mix 53% 51% 44% 39% 31% Dealer-to-dealer vehicles sold (N.A.) 5504 3982 2582 1173 193 Gross auction proceeds ($B) $41.8 $44.7 na na na

 
12 ADESA Metrics - Quarter 1 Includes purchased vehicle sales 2 Includes vehicles sold by BacklotCars & CARWAVE pre-acquisition 3 Includes vehicles sold by CARWAVE pre-acquisition 4Q21 3Q21 2Q21 1Q21 4Q20 3Q20 2Q20 1Q20 Revenue1 $470.2 $459.6 $516.8 $515.8 $464.2 $526.7 $362.2 $567.0 Commercial vehicles sold 266 312 420 505 474 642 511 638 Dealer consignment vehicles sold 277 274 291 248 207 229 137 224 Total vehicles sold 543 586 711 753 681 871 648 862 Auction fees per vehicle sold $382 $338 $333 $313 $304 $284 $274 $296 Gross profit per vehicle sold $297 $274 $277 $264 $229 $249 $224 $228 Gross profit percentage1 34.3% 34.9% 38.2% 38.6% 33.6% 41.3% 40.0% 34.6% Gross profit percentage, excluding purchased vehicles 43.0% 43.6% 47.1% 47.0% 40.9% 49.3% 46.4% 39.9% On-premise mix 47% 49% 47% 46% 48% 46% 48% 54% Off-premise mix 53% 51% 53% 54% 52% 54% 52% 46% Dealer-to-dealer vehicles sold (N.A.) 1353 1433 1473 1253 1112 1242 932 702 Gross auction proceeds ($B) $9.3 $9.2 $11.7 $11.6 $10.0 $13.4 $9.6 $11.7

 
13 AFC Metrics - Annual 2021 2020 2019 2018 2017 Revenue $289.2 $267.6 $352.9 $340.9 $301.3 Loan Transaction Units (LTU) 1,421 1,519 1,783 1,760 1,688 Revenue per Loan Transaction, Excluding Warranty Contract Revenue $204 $156 $178 $175 $159 Ending Managed Finance Receivables $2,529.0 $1,911.0 $2,115.2 $2,014.8 $1,912.6 Ending Obligations Collateralized by Finance Receivables $1,692.3 $1,261.2 $1,461.2 $1,445.3 $1,358.1 % Vehicles Purchased at Any Auction 90% 87% 84% 83% 85% Active Dealers 11,400 10,900 12,900 12,300 12,400 Vehicles per Active Dealer 14 15 16 15 15 Average Credit Line $350,000 $290,000 $270,000 $270,000 $250,000 Avg Value Outstanding per Vehicle $15,300 $11,800 $10,000 $10,200 $9,900

 
14 AFC Metrics - Quarter 4Q21 3Q21 2Q21 1Q21 4Q20 3Q20 2Q20 1Q20 Revenue $79.2 $75.6 $68.6 $65.8 $65.4 $66.9 $56.8 $78.5 Loan Transaction Units (LTU) 342 351 356 372 327 324 420 448 Revenue per Loan Transaction, Excluding Warranty Contract Revenue $232 $215 $193 $177 $186 $179 $115 $155 Ending Managed Finance Receivables $2,529.0 $2,191.7 $2,108.9 $1,984.4 $1,911.0 $1,744.8 $1,548.3 $1,954.8 Ending Obligations Collateralized by Finance Receivables $1,692.3 $1,385.7 $1,324.2 $1,239.1 $1,261.2 $1,101.0 $735.9 $1,349.9

 
15 AFC Provision for Credit Losses - Annual 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 Ending Managed Receivables $2,529.0 $1,911.0 $2,115.2 $2,014.8 $1,912.6 $1,792.2 $1,641.0 $1,371.1 $1,107.6 $1,004.2 $883.2 $771.6 $613.0 $506.6 Average Managed Receivables $2,145.0 $1,854.8 $2,059.9 $1,959.8 $1,802.2 $1,732.5 $1,474.9 $1,208.4 $1,051.4 $925.8 $798.8 $688.6 $516.4 $744.4 Provision for Credit Losses $3.5 $38.6 $35.3 $32.9 $33.9 $30.7 $16.0 $12.3 $9.6 $7.2 $6.1 $11.2 $17.1 $44.7 % of Managed Receivables 0.2% 2.1% 1.7% 1.7% 1.9% 1.8% 1.1% 1.0% 0.9% 0.8% 0.8% 1.6% 3.3% 6.0%

 
16 AFC Provision for Credit Losses - Quarterly 4Q21 3Q21 2Q21 1Q21 4Q20 3Q20 2Q20 1Q20 Ending Managed Receivables $2,529.0 $2,191.7 $2,108.9 $1,984.4 $1,911.0 $1,744.8 $1,548.3 $1,954.8 Average Managed Receivables $2,360.4 $2,150.3 $2,046.7 $1,947.7 $1,827.9 $1,646.6 $1,751.6 $2,035.0 Net (Recovery) Provision for Credit Losses ($0.9) ($2.2) $1.8 $4.8 $2.7 $-- $19.0 $16.9 % of Managed Receivables (0.2%) (0.4%) 0.4% 1.0% 0.6% 0.0% 4.3% 3.3%

 
17 A P P E N D I X

 
18 Non-GAAP Financial Measures EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings as described in the company's senior secured credit agreement covenant calculations. Management believes that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional information to investors about one of the principal measures of performance used by the company’s creditors. In addition, management uses EBITDA and Adjusted EBITDA to evaluate the company’s performance. Depreciation expense for property and equipment and amortization expense of capitalized internally developed software costs relate to ongoing capital expenditures; however, amortization expense associated with acquired intangible assets, such as customer relationships, software, tradenames and non-compete agreements are not representative of ongoing capital expenditures but have a continuing effect on our reported results. Non-GAAP financial measures of operating adjusted net income (loss) and operating adjusted net income (loss) per share, in the opinion of the company, provide comparability to other companies that may not have incurred these types of non-cash expenses or that report a similar measure. In addition, net income (loss) and net income (loss) per share have been adjusted for certain other charges, as seen in the following reconciliation. EBITDA, Adjusted EBITDA, operating adjusted net income (loss) and operating adjusted net income (loss) per share have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of the results as reported under GAAP. These measures may not be comparable to similarly titled measures reported by other companies.

 
19 Q4 2021 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended December 31, 2021 ADESA AFC Consolidated Net income (loss) ($23.9) $29.0 $5.1 Add back: Income taxes (5.9) 9.4 3.5 Interest expense, net of interest income 21.5 10.5 32.0 Depreciation and amortization 43.6 2.3 45.9 Intercompany interest - - - EBITDA $35.3 $51.2 $86.5 Non-cash stock-based compensation 1.6 0.3 1.9 Acquisition related costs 2.4 - 2.4 Securitization interest - (8.3) (8.3) (Gain)/Loss on asset sales (0.8) - (0.8) Severance 1.4 0.2 1.6 Foreign currency (gains)/losses 1.1 - 1.1 Contingent consideration adjustment 4.2 - 4.2 Net change in unrealized gains on investment securities - 9.3 9.3 Other 0.1 (0.1) - Total Addbacks/(Deductions) 10.0 1.4 11.4 Adjusted EBITDA $45.3 $52.6 $97.9 Revenue $470.2 $79.2 $549.4 Adjusted EBITDA % margin 9.6% 66.4% 17.8%

 
20 Q4 2020 Adjusted EBITDA Reconciliation ($ in millions) Three Months ended December 31, 2020 ADESA AFC Consolidated Net income (loss) ($38.5) $21.4 ($17.1) Add back: Income taxes (9.7) 6.3 (3.4) Interest expense, net of interest income 21.5 8.8 30.3 Depreciation and amortization 47.7 2.9 50.6 Intercompany interest 0.1 (0.1) - EBITDA $21.1 $39.3 $60.4 Non-cash stock-based compensation 2.5 0.5 3.0 Acquisition related costs 4.1 - 4.1 Securitization interest - (6.2) (6.2) Loss on asset sales 0.2 - 0.2 Severance 0.9 - 0.9 Foreign currency (gains)/losses 1.7 - 1.7 Contingent consideration adjustment 4.7 - 4.7 Other (1.7) 0.4 (1.3) Total Addbacks/ (Deductions) 12.4 (5.3) 7.1 Adjusted EBITDA $33.5 $34.0 $67.5 Revenue $464.2 $65.4 $529.6 Adjusted EBITDA % margin 7.2% 52.0% 12.7%

 
21 YTD 2021 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2021 ADESA AFC Consolidated Net income (loss) ($58.9) $125.4 $66.5 Add back: Income taxes (6.5) 41.5 35.0 Interest expense, net of interest income 86.2 39.5 125.7 Depreciation and amortization 173.6 9.4 183.0 Intercompany interest 0.2 (0.2) - EBITDA $194.6 $215.6 $410.2 Non-cash stock-based compensation 14.5 2.2 16.7 Acquisition related costs 8.1 - 8.1 Securitization interest - (29.8) (29.8) (Gain)/Loss on asset sales (3.6) (0.8) (4.4) Severance 4.8 0.4 5.2 Foreign currency (gains)/losses 3.8 - 3.8 Contingent consideration adjustment 24.3 - 24.3 Net change in unrealized gains on investment securities - (1.4) (1.4) Other 1.8 (0.3) 1.5 Total Addbacks/(Deductions) 53.7 (29.7) 24.0 Adjusted EBITDA $248.3 $185.9 $434.2 Revenue $1,962.4 $289.2 $2,251.6 Adjusted EBITDA % margin 12.7% 64.3% 19.3%

 
22 YTD 2020 Adjusted EBITDA Reconciliation ($ in millions) Year ended December 31, 2020 ADESA AFC Consolidated Net income (loss) ($79.1) $79.6 $0.5 Add back: Income taxes (17.0) 21.9 4.9 Interest expense, net of interest income 88.3 39.0 127.3 Depreciation and amortization 178.8 12.5 191.3 Intercompany interest 1.1 (1.1) - EBITDA $172.1 $151.9 $324.0 Non-cash stock-based compensation 12.8 2.3 15.1 Acquisition related costs 8.8 - 8.8 Securitization interest - (27.3) (27.3) Loss on asset sales 1.3 - 1.3 Severance 11.1 0.4 11.5 Foreign currency (gains)/losses 4.9 - 4.9 Goodwill and other intangibles impairment 29.8 - 29.8 Contingent consideration adjustment 4.7 - 4.7 Other 2.1 0.4 2.5 Total Addbacks/ (Deductions) 75.5 (24.2) 51.3 Adjusted EBITDA $247.6 $127.7 $375.3 Revenue $1,920.1 $267.6 $2,187.7 Adjusted EBITDA % margin 12.9% 47.7% 17.2%

 
23 (1) The Series A Preferred Stock dividends and undistributed earnings allocated to participating securities have not been included in the calculation of operating adjusted net income (loss) and operating adjusted net income (loss) per diluted share. (2) For the three and twelve months ended December 31, 2021, an effective tax rate of 34.5% was applied to the acquired amortization expense and for the three and twelve months ended December 31, 2020, an effective tax rate of 30% was applied to the acquired amortization expense. There was no income tax benefit related to the contingent consideration adjustment or the goodwill and other intangibles impairment because these items were not deductible for income tax purposes. Operating Adjusted Net Income per Share Reconciliation ($ in millions, except per share amounts), (unaudited) Three Months ended December 31, Year ended December 31, 2021 2020 2021 2020 Net income (loss)(1) $5.1 ($17.1) $66.5 $0.5 Acquired amortization expense 13.0 15.3 54.6 57.7 Contingent consideration adjustment 4.2 4.7 24.3 4.7 Goodwill and other intangibles impairment - - - 29.8 Income taxes (2) (4.5) (4.6) (18.8) (17.3) Operating adjusted net income (loss) $17.8 ($1.7) $126.6 $75.4 Operating adjusted net income (loss) per share − diluted $0.11 ($0.01) $0.81 $0.51 Weighted average diluted shares 156.1 161.8 157.2 147.0