Q2 Revenue Growth of 16.9% to $520.3
Million; Continued Revenue Per Unit Strength
Updates Full-Year 2022 Outlook
IAA, Inc. (NYSE: IAA) today announced its financial results for
the second quarter of fiscal 2022, which ended July 3, 2022.
John Kett, Chief Executive Officer and President, stated, “We
continue to navigate a dynamic macro environment as reflected in
our second quarter results. Our topline performance continued to
benefit from solid revenue per unit trends as well as progress
against our strategic initiatives, and as expected, profitability
was impacted by inflationary pressures and industry volume
headwinds. Despite the evolving environment, I am proud of our
team’s unwavering focus on operational efficiency and delivering
best-in-class service to our customers. As we look to the remainder
of the year, regardless of the macro environment, we remain
committed to executing on our strategic objectives, including
improving our digital marketplace through data analytics and
enhanced vehicle merchandising, while investing in technology and
automation to further improve profitability and deliver value to
all our stakeholders.”
Key Second Quarter
Measures:
(Dollars in millions, except per share amounts)
Quarter Ended
%
Change
Year to Date Ended
%
Change
July 3, 2022
June 27, 2021
July 3, 2022
June 27, 2021
Revenues
$520.3
$445.1
16.9%
$1,077.9
$868.6
24.1%
Net Income
$82.7
$82.9
(0.2)%
$164.2
$155.4
5.7%
Adjusted Net Income
$82.7
$93.3
(11.4)%
$172.0
$171.2
0.5%
Diluted EPS
$0.62
$0.61
1.6%
$1.22
$1.15
6.1%
Adjusted Diluted EPS
$0.62
$0.69
(10.1)%
$1.28
$1.27
0.8%
Adjusted EBITDA
$136.2
$152.6
(10.7)%
$286.0
$285.8
0.1%
Highlights for the Second Quarter Ended
July 3, 2022:
- Consolidated revenues increased 16.9% to $520.3 million from
$445.1 million in the second quarter of fiscal 2021. Foreign
currency movements had a negative impact of $4.1 million on revenue
for the quarter. Revenue from our recent acquisitions of Auto
Exchange and SYNETIQ was $39.5 million. Excluding these items,
organic revenue increased $39.8 million, or 8.9%, to $484.9
million, consisting of a higher revenue per unit of 12.6%,
partially offset by a decrease in volume of 3.2%. Service revenues
increased 8.9% to $416.6 million from $382.5 million in the second
quarter of fiscal 2021 due to higher revenue per unit and
incremental revenue from the SYNETIQ acquisition, partially offset
by lower volume of vehicles sold. Vehicle and parts sales increased
65.7% to $103.7 million, compared to $62.6 million in the second
quarter of fiscal 2021, primarily due to higher revenue per unit
and incremental revenue from the SYNETIQ acquisition, partially
offset by lower volume of vehicles sold. U.S. revenues increased by
6.5% to $418.5 million from $393.0 million in the second quarter of
fiscal 2021. U.S. revenues were driven by higher revenue per unit,
partially offset by lower volume. International revenues increased
by 95.4% to $101.8 million from $52.1 million in the second quarter
of fiscal 2021. International revenues increased primarily due to
the acquisition of SYNETIQ and higher volume in Canada.
- Gross profit, which is defined as total consolidated revenues
minus cost of services and vehicle and parts sales, and exclusive
of depreciation and amortization, decreased by 7.1% to $182.0
million from $195.9 million in the second quarter of fiscal 2021.
The decrease in gross profit was primarily due to a lower volume of
vehicles sold, a higher mix of lower margin purchased vehicle and
parts sales, market dynamics in our International segment, and
higher costs for towing, occupancy and wages, partially offset by
higher revenue per unit. Gross margin in the quarter declined by
900 basis points to 35.0% from 44.0% in the prior year period.
Purchased vehicle and parts mix accounted for approximately 200
basis points of this decline.
- Selling, general and administrative (“SG&A”) expenses
increased by 8.7% to $47.5 million from $43.7 million in the second
quarter of fiscal 2021. Adjusted SG&A expenses were $45.4
million, an increase of 4.8% compared to Adjusted SG&A expenses
of $43.3 million in the second quarter of fiscal 2021. Adjusted
SG&A expenses increased primarily due to incremental costs from
our recent acquisitions of Auto Exchange and SYNETIQ, higher
headcount and higher spending on information technology, partially
offset by lower incentive compensation.
- Interest expense was $11.5 million compared to $21.9 million in
the second quarter of fiscal 2021. The decrease in interest expense
was primarily due to a $10.3 million loss on early extinguishment
of debt that was recognized in the second quarter of 2021.
- The effective tax rate was 10.9% versus 24.7% in the second
quarter of fiscal 2021. The effective tax rate in the second
quarter of fiscal 2022 benefited from favorable adjustments of
$13.3 million resulting from a change in the estimate for Foreign
Derived Intangible Income (“FDII”). The adjustments are recorded as
an $8.6 million discrete item and a $4.7 million benefit in the
second quarter of 2022.
- Net income decreased by 0.2% to $82.7 million, or $0.62 per
diluted share, compared to $82.9 million, or $0.61 per diluted
share, in the second quarter of fiscal 2021. Adjusted net income
decreased by 11.4% to $82.7 million, or $0.62 per diluted share,
compared to $93.3 million, or 0.69 per diluted share, in the second
quarter of fiscal 2021.
- Adjusted EBITDA decreased by 10.7% to $136.2 million from
$152.6 million in the second quarter of fiscal 2021, primarily due
to lower gross profit and higher SG&A expenses. Adjusted EBITDA
includes unfavorable foreign currency movements of $0.1 million and
contributions from Auto Exchange and SYNETIQ of $3.4 million in the
second quarter of fiscal 2022. Excluding these items, organic
Adjusted EBITDA was $132.9 million, a decrease of 12.9% compared to
the second quarter of fiscal 2021.
Highlights for the Year-to-Date Ended
July 3, 2022:
- Consolidated revenues increased 24.1% to $1,077.9 million from
$868.6 million in the prior year period. Foreign currency movements
had a negative impact of $4.9 million on revenue for the year.
Revenue from our recent acquisitions of Auto Exchange and SYNETIQ
was $89.0 million. Excluding these items, organic revenue increased
14.4% to $993.8 million, consisting of higher revenue per unit of
14.2% as well as an increase in volume of 0.2%. Service revenues
increased 14.6% to $851.6 million from $742.9 million in the prior
year period due to higher revenue per unit, higher volume of
vehicles sold, and incremental revenue from the Auto Exchange and
SYNETIQ acquisitions. Vehicle and parts sales increased 80.0% to
$226.3 million, compared to $125.7 million in the prior year
period, primarily due to higher revenue per unit, higher volume of
vehicles sold, and incremental revenue from the SYNETIQ
acquisition. U.S. segment revenues increased by 14.1% to $857.3
million from $751.3 million in the prior year period. U.S. revenues
were driven by higher revenue per unit, partially offset by lower
volume. International segment revenues increased by 88.1% to $220.6
million from $117.3 million in the prior year period. International
revenues increased primarily due to the acquisition of SYNETIQ,
higher volume in Canada and higher revenue per unit.
- Gross profit, which is defined as total consolidated revenues
minus cost of services and vehicle and parts sales, and exclusive
of depreciation and amortization, increased by 4.0% to $383.2
million from $368.6 million in the prior year period. The increase
in gross profit was primarily due to higher revenue per unit and a
higher volume of vehicles sold, partially offset by a higher mix of
lower margin purchased vehicle and parts sales, and higher costs
for towing, wages and occupancy. Year-to-date gross margin
decreased by 680 basis points versus the prior year to 35.6%.
Purchased vehicle and parts mix accounted for approximately 195
basis points of this decline.
- SG&A expenses increased by 16.9% to $101.8 million from
$87.1 million in the prior year period. Adjusted SG&A expenses
were $96.9 million, an increase of 17.2% compared to Adjusted
SG&A expenses of $82.7 million in the prior year period.
Adjusted SG&A expenses increased primarily due to incremental
costs from our recent acquisitions of Auto Exchange and SYNETIQ,
higher headcount and higher spending on information technology,
partially offset by lower incentive compensation.
- Interest expense was $22.7 million compared to $34.9 million in
the prior year period. The decrease in interest expense was
primarily due to lower interest rates as a result of the
refinancing of our credit facility completed in the second quarter
of 2021, as well as a $10.3 million loss on early extinguishment of
debt recognized in the second quarter of 2021.
- The effective tax rate was 18.2% versus 24.9% in the prior year
period. The effective tax rate in the current year period benefited
from favorable adjustments of $13.3 million resulting from a change
in the estimate for FDII. The adjustments are recorded as an $8.6
million discrete item and a $4.7 million benefit in the second
quarter of 2022.
- Net income increased by 5.7% to $164.2 million, or $1.22 per
diluted share, compared to $155.4 million, or $1.15 per diluted
share, in the prior year period. Adjusted net income increased by
0.5% to $172.0 million, or $1.28 per diluted share, compared to
$171.2 million, or $1.27 per diluted share, in the prior year
period.
- Adjusted EBITDA increased by 0.1% to $286.0 million from $285.8
million in the prior year period, primarily due to higher revenue
and gross profit, partially offset by higher SG&A expenses.
Adjusted EBITDA includes unfavorable foreign currency movements of
$0.1 million and contributions from Auto Exchange and SYNETIQ of
$10.6 million. Excluding these items, organic Adjusted EBITDA was
$275.5 million, a decrease of 3.6% over the prior year period.
Other Financial Highlights as of July
3, 2022:
- Net Debt: $1,032.8 million
- Leverage Ratio: 1.9x
- Year-to-date Net Cash Provided by Operating Activities: $230.3
million
- Year-to-date Free Cash Flow: $193.9 million
- Repurchased $27.2 million of stock during the first six months
of fiscal 2022; $338.8 million remaining on authorization
- Liquidity: $657.1 million
- Second quarter 2022 year-over-year vehicle inventory change:
-2.6%
Please refer to the accompanying financial tables for a
reconciliation of Net Debt, Leverage Ratio and Free Cash Flow to
U.S. GAAP.
Outlook:
For fiscal 2022, the Company is updating its outlook, and now
expects the following:
- Total revenue within a range of $2.020 billion - $2.075
billion, including a negative impact from currency of approximately
$14.0 - $16.0 million. The currency impact has increased from the
prior quarter guidance due to the strengthening of the U.S. dollar
versus the British Pound. In addition, SYNETIQ revenue is now
expected to be $160 million - $170 million.
- Organic revenue growth* is expected to be 3.5% - 6.0% from
fiscal 2021 revenues of $1,837.4 million.
- Total Adjusted EBITDA within a range of $540 million to $560
million, including a negative impact from currency of approximately
$2.0 - $3.0 million.
- Organic Adjusted EBITDA growth* is expected to be within a
range of flat to down 5.0% from fiscal 2021 Adjusted EBITDA of
$547.3 million.
- Interest expense, net, is expected to be in the range of $50.0
million - $52.0 million.
- Effective tax rate is expected to be in the range of 22.0% -
23.0% excluding discrete items.
- Depreciation and amortization is expected to be in the range of
$105.0 million - $110.0 million.
*Organic revenue growth and organic Adjusted EBITDA growth
exclude the impact of acquisitions prior to their first anniversary
as well as foreign currency movements.
The Company has not provided a reconciliation of organic
revenue, Adjusted EBITDA or organic Adjusted EBITDA outlook for
fiscal 2022 to GAAP revenues or net income, respectively, the most
directly comparable GAAP financial measures because, without
unreasonable efforts, it is unable to predict with reasonable
certainty the amount or timing of non-GAAP adjustments that are
used to calculate organic revenue, Adjusted EBITDA or organic
Adjusted EBITDA, including but not limited to: in the case of
organic revenue, (a) sales from acquired businesses recorded prior
to the first anniversary of the acquisition and (b) the impact of
foreign currency movements; in the case of Adjusted EBITDA, (a)
non-income, tax-related accruals, (b) fair value adjustments
related to contingent considerations, (c) severance, restructuring
and other retention expenses, (d) the net loss or gain on the sale
of assets or expenses associated with certain M&A, financing
and other transactions, (e) acquisition costs, (f) certain
professional fees, (g) other expenses that we do not believe are
indicative of our ongoing operations, and (h) gains and losses
related to foreign currency exchange rates; and in the case of
organic Adjusted EBITDA, the same adjustments that are used to
calculate Adjusted EBITDA, as well as (a) EBITDA from acquired
businesses recorded prior to the first anniversary of the
acquisition, and (b) the impact of foreign currency movements.
These adjustments are uncertain, depend on factors that are beyond
our control, and could have a material impact on revenues or net
income for fiscal 2022.
Conference Call
Information:
A conference call to discuss the second quarter fiscal 2022
financial results is scheduled for today, August 9, 2022, at 9:00
a.m. Eastern Time. Investors and analysts interested in
participating in the call are invited to join a live audio webcast
of the conference call. The webcast is available online at
https://investors.iaai.com/.
A recorded replay of the conference call will be available
within two hours of the conclusion of the call and can be accessed
online at https://investors.iaai.com/ for one year.
About IAA, Inc.
IAA, Inc. (NYSE: IAA) is a leading global marketplace connecting
vehicle buyers and sellers. Leveraging leading-edge technology and
focusing on innovation, IAA’s unique platform facilitates the
marketing and sale of total-loss, damaged and low-value vehicles
for a full spectrum of sellers. Headquartered near Chicago in
Westchester, Illinois, IAA has nearly 4,500 employees and more than
210 facilities throughout the U.S., Canada and the United Kingdom.
IAA serves a global buyer base - located throughout over 170
countries - and a full spectrum of sellers, including insurers,
dealerships, fleet lease and rental car companies, and charitable
organizations. Buyers have access to multiple digital bidding and
buying channels, innovative vehicle merchandising, and efficient
evaluation services, enhancing the overall purchasing experience.
IAA offers sellers a comprehensive suite of services aimed at
maximizing vehicle value, reducing administrative costs, shortening
selling cycle time and delivering the highest economic returns. For
more information, visit IAAI.com and follow IAA on Facebook,
Twitter, Instagram, YouTube and LinkedIn.
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. In particular, statements
made that are not historical facts may be forward-looking
statements and can be identified by words such as “should,” “may,”
“will,” “anticipates,” “expects,” “intends,” “plans,” “believes,”
“seeks,” “estimates,” and similar expressions. In this release,
such forward-looking statements include statements regarding our
fiscal 2022 outlook, expectations regarding industry fundamentals
and the value proposition we offer to our customer base and our
ability to execute on our strategic initiatives. 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. These risks and uncertainties include, but are not
limited to: the impact of macroeconomic factors, including high
fuel prices and rising inflation, on our revenues, gross profit and
operating results; the loss of one or more significant vehicle
seller customers or a reduction in significant volume from such
sellers; our ability to meet or exceed customers’ demand and
expectations; significant current competition and the introduction
of new competitors or other disruptive entrants in our industry;
the risk that our facilities lack the capacity to accept additional
vehicles and our ability to obtain land or renew/enter into new
leases at commercially reasonable rates; our ability to effectively
maintain or update information and technology systems; our ability
to implement and maintain measures to protect against cyberattacks
and comply with applicable privacy and data security requirements;
our ability to successfully implement our business strategies or
realize expected cost savings and revenue enhancements, including
from our margin expansion plan; business development activities,
including acquisitions and the integration of acquired businesses,
and the risks that the anticipated benefits of any acquisitions may
not be fully realized or take longer to realize than expected; our
expansion into markets outside the U.S. and the operational,
competitive and regulatory risks facing our non-U.S. based
operations; our reliance on subhaulers and trucking fleet
operations; changes in used-vehicle prices and the volume of
damaged and total loss vehicles we purchase; economic conditions,
including fuel prices, commodity prices, foreign exchange rates and
interest rate fluctuations; trends in new- and used-vehicle sales
and incentives; uncertainties regarding ongoing surges of COVID-19
infections, including new more contagious and / or
vaccine-resistant variants, and the impact on the duration and
severity of the COVID-19 pandemic, and the measures taken to reduce
its spread, including the availability, rate of public acceptance
and efficacy of COVID-19 vaccines; and other risks and
uncertainties identified in our filings with the Securities and
Exchange Commission (the “SEC”), including under "Risk Factors" in
our Form 10-K for the year ended January 2, 2022 filed with the SEC
on February 28, 2022 and Item 1A “Risk Factors” in our Quarterly
Report on Form 10-Q filed with the SEC on May 10, 2022. Other risks
and uncertainties that are not presently known to us or that we
currently deem immaterial may also affect our business or operating
results. The forward-looking statements included in this release
are made as of the date hereof, and we undertake no obligation to
publicly update or revise any forward-looking statement to reflect
new information or events, except as required by law.
Non-GAAP Financial Information
We refer to certain financial measures that are not recognized
under United States generally accepted accounting principles
(“GAAP”). Please see “Note Regarding Non-GAAP Financial
Information" and “Reconciliation of GAAP to Non-GAAP Financial
Information” for additional information and a reconciliation of the
non-GAAP financial measures to the most comparable GAAP financial
measures.
IAA, Inc.
Consolidated Statements of Income
(Amounts in Millions, Except Per
Share)
(Unaudited)
Three Months Ended
Six Months Ended
July 3, 2022
June 27, 2021
July 3, 2022
June 27, 2021
Revenues:
Service revenues
$
416.6
$
382.5
$
851.6
$
742.9
Vehicle and parts sales
103.7
62.6
226.3
125.7
Total revenues
520.3
445.1
1,077.9
868.6
Operating expenses:
Cost of services
242.7
197.6
495.0
394.0
Cost of vehicle and parts sales
95.6
51.6
199.7
106.0
Selling, general and administrative
47.5
43.7
101.8
87.1
Depreciation and amortization
26.6
20.5
52.7
40.3
Total operating expenses
412.4
313.4
849.2
627.4
Operating profit
107.9
131.7
228.7
241.2
Interest expense, net
11.5
21.9
22.7
34.9
Other expense (income), net
3.6
(0.3
)
5.2
(0.7
)
Income before income taxes
92.8
110.1
200.8
207.0
Income taxes
10.1
27.2
36.6
51.6
Net income
$
82.7
$
82.9
$
164.2
$
155.4
Net income per share:
Basic
$
0.62
$
0.61
$
1.22
$
1.15
Diluted
$
0.62
$
0.61
$
1.22
$
1.15
Weighted average common shares
outstanding:
Basic
133.9
134.8
134.1
134.7
Diluted
134.0
135.3
134.3
135.3
IAA, Inc.
Consolidated Balance Sheets
(Amounts in Millions)
(Unaudited)
July 3, 2022
January 2, 2022
Assets
Current assets
Cash and cash equivalents
$
137.6
$
109.4
Restricted cash
—
53.0
Accounts receivable, net of allowances of
$9.3 and $9.1
394.8
465.7
Prepaid consigned vehicle charges
60.7
72.2
Other current assets
93.5
69.6
Total current assets
686.6
769.9
Non-current assets
Operating lease right-of-use assets, net
of accumulated amortization of $288.1 and $238.3
1,122.9
1,024.4
Property and equipment, net of accumulated
depreciation of $551.1 and $531.9
327.0
338.1
Goodwill
769.2
797.5
Intangible assets, net of accumulated
amortization of $578.1 and $549.6
188.6
197.5
Other assets
31.3
26.9
Total non-current assets
2,439.0
2,384.4
Total assets
$
3,125.6
$
3,154.3
Liabilities and Stockholders'
Equity
Current liabilities
Accounts payable
$
191.2
$
163.5
Short-term right-of-use operating lease
liability
88.0
94.3
Accrued employee benefits and compensation
expenses
27.1
44.2
Other accrued expenses
73.1
124.6
Current maturities of long-term debt
24.4
181.3
Total current liabilities
403.8
607.9
Non-current liabilities
Long-term debt
1,105.6
1,120.6
Long-term right-of-use operating lease
liability
1,079.4
984.8
Deferred income tax liabilities
70.9
74.8
Other liabilities
27.4
32.6
Total non-current liabilities
2,283.3
2,212.8
Stockholders' equity
Total stockholders' equity
438.5
333.6
Total liabilities and stockholders'
equity
$
3,125.6
$
3,154.3
IAA, Inc.
Consolidated Statements of Cash Flows
(Amounts in Millions)
(Unaudited)
Six Months Ended
July 3, 2022
June 27, 2021
Operating activities
Net income
$
164.2
$
155.4
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
52.7
40.3
Operating lease expense
86.8
73.3
Stock-based compensation
5.8
5.4
Provision for credit losses
0.4
(0.2
)
Loss on extinguishment of debt
—
10.3
Amortization of debt issuance costs
1.4
1.9
Deferred income taxes
(2.3
)
5.6
Change in contingent consideration
liabilities
3.0
—
Other
3.7
(0.2
)
Changes in operating assets and
liabilities:
Operating lease payments
(95.9
)
(69.7
)
Accounts receivable and other assets
66.7
32.2
Accounts payable and accrued expenses
(56.2
)
(3.6
)
Net cash provided by operating
activities
230.3
250.7
Investing activities
Acquisition of business, net of cash
acquired
—
(4.0
)
Purchases of property, equipment and
computer software
(75.1
)
(57.8
)
Proceeds from the sale of property and
equipment
38.7
0.4
Other
(1.6
)
(1.3
)
Net cash used by investing
activities
(38.0
)
(62.7
)
Financing activities
Net increase in book overdrafts
49.3
—
Proceeds from debt issuance
—
650.0
Payments of long-term debt
(173.1
)
(774.0
)
Deferred financing costs
(0.1
)
(4.6
)
Finance lease payments
(6.7
)
(5.9
)
Purchase of treasury stock
(27.2
)
—
Issuance of common stock under stock
plans
0.3
0.4
Proceeds from issuance of employee stock
purchase plan shares
0.7
0.8
Tax withholding payments for vested
RSUs
(6.9
)
(7.2
)
Payment of contingent consideration
(51.4
)
—
Net cash used by financing
activities
(215.1
)
(140.5
)
Effect of exchange rate changes on cash
and restricted cash
(2.0
)
1.8
Net (decrease) increase in cash, cash
equivalents and restricted cash
(24.8
)
49.3
Cash, cash equivalents and restricted cash
at beginning of period
162.4
232.8
Cash, cash equivalents and restricted cash
at end of period
$
137.6
$
282.1
Cash paid for interest, net
$
21.8
$
23.5
Cash paid for taxes, net
$
53.5
$
44.7
Note Regarding Non-GAAP Financial
Information
This press release includes the following non-GAAP financial
measures: organic revenue growth, Adjusted SG&A expenses,
Adjusted net income, Adjusted diluted earnings per share (“Adjusted
EPS”), Adjusted earnings before interest, income taxes,
depreciation and amortization (“Adjusted EBITDA"), organic Adjusted
EBITDA, free cash flow, and leverage ratio (defined as Net Debt
divided by latest twelve month’s (“LTM”) Adjusted EBITDA). These
measures are reconciled to their most directly comparable GAAP
financial measures as provided in “Reconciliation of GAAP to
Non-GAAP Financial Information” below.
Each of the non-GAAP measures disclosed in this press release
should be considered in addition to, and not as a replacement for
or superior to, the comparable GAAP measure, and may not be
comparable to similarly titled measures reported by other
companies. Management uses these financial measures and key
performance indicators to assess the Company’s financial operating
performance, and we believe that these measures provide useful
information to investors by offering additional ways of viewing the
Company’s results, as noted below.
- Organic revenue growth is growth in GAAP revenue adjusted to
exclude (a) sales from acquired businesses recorded prior to the
first anniversary of the acquisition, and (b) the impact of foreign
currency movements. We believe that this measure helps investors
analyze revenue on a comparable basis versus the prior year.
- Adjusted SG&A expense is a non-GAAP financial measure
calculated as GAAP SG&A expenses further adjusted for items
that management believes are not representative of ongoing
operations, including, but not limited to, (a) non-income,
tax-related accruals, (b) fair value adjustments related to
contingent consideration, (c) severance, restructuring and other
retention expenses, (d) certain professional fees and (e)
acquisition costs. We believe this measure helps investors
understand the Company’s ongoing cost and expense structure and
compare it to prior and future periods.
- Adjusted net income and Adjusted EPS are non-GAAP financial
measures calculated as net income further adjusted for items that
management believes are not representative of ongoing operations
including, but not limited to, (a) loss on extinguishment of debt,
(b) non-income, tax-related accruals, (c) fair value adjustments
related to contingent consideration, (d) severance, restructuring
and other retention expenses, (e) the net loss or gain on the sale
of assets or expenses associated with certain M&A, financing
and other transactions, (f) acquisition costs, and (g) certain
professional fees, as well as (h) gains and losses related to
foreign currency exchange rates, and (i) the amortization of
acquired intangible assets, and further adjusted to reflect the tax
impact of these items. We believe that these measures help
investors understand the long-term profitability of our Company and
compare our profitability to prior and future periods.
- Adjusted EBITDA is a non-GAAP financial measure calculated as
net income before income taxes, interest expense, and depreciation
and amortization (“EBITDA”) and further adjusted for items that
management believes are not representative of ongoing operations
including, but not limited to, (a) non-income, tax-related
accruals, (b) fair value adjustments related to contingent
consideration (c) severance, restructuring and other retention
expenses, (d) the net loss or gain on the sale of assets or
expenses associated with certain M&A, financing and other
transactions, (e) acquisition costs, and (f) certain professional
fees, as well as (g) gains and losses related to foreign currency
exchange rates. Organic Adjusted EBITDA is further adjusted to
exclude (a) EBITDA from acquired businesses recorded prior to the
first anniversary of the acquisition, and (b) the impact of foreign
currency movements. We believe that these measures provide useful
information regarding our operational performance because they
enhance an investor’s overall understanding of our core financial
performance and help investors compare our performance to prior and
future periods.
- Free cash flow is a non-GAAP measure defined as cash flows from
operating activities less purchases of property, equipment and
computer software, and plus proceeds from the sale of equipment. We
believe that this measure helps investors understand our ability to
generate cash without external financings, invest in our business,
grow our business through acquisitions and return capital to
shareholders. A limitation of free cash flow is that is does not
consider the Company’s debt service requirements and other
non-discretionary expenditures. As a result, free cash flow is not
necessarily representative of cash available for discretionary
expenditures.
- Leverage ratio is a non-GAAP measure defined as Net Debt
divided by LTM Adjusted EBITDA. Net Debt is defined as total debt
less cash. LTM Adjusted EBITDA is defined as Adjusted EBITDA over
the prior twelve month period. We believe these measures help
investors understand our capital structure and level of debt
compared to prior and future periods.
Reconciliation of GAAP to Non-GAAP Financial
Information
IAA, Inc.
Reconciliation of Organic Revenue
Growth
(Amounts in Millions)
(Unaudited)
Three Months Ended July
3, 2022 vs. June 27, 2021
Six Months Ended July
3, 2022 vs. June 27, 2021
Revenue Growth
$
75.2
$
209.3
Add:
Acquisitions revenue
(39.5
)
(89.0
)
Foreign currency impact
4.1
4.9
Organic Revenue Growth
$
39.8
$
125.2
IAA, Inc.
Reconciliation of Adjusted Selling,
General and Administrative Expenses
(Amounts in Millions)
(Unaudited)
Three Months Ended
Six Months Ended
July 3, 2022
June 27, 2021
July 3, 2022
June 27, 2021
Selling, general and administrative
expenses
$
47.5
$
43.7
$
101.8
$
87.1
Less non-GAAP adjustments:
Non-income, tax related accrual
—
—
—
2.7
Fair value adjustments related to
contingent consideration
1.2
—
3.0
—
Retention / severance / restructuring
—
—
0.1
0.6
Professional fees
0.9
0.3
1.3
1.0
Acquisition costs
—
0.1
0.5
0.1
Adjusted selling, general and
administrative expenses
$
45.4
$
43.3
$
96.9
$
82.7
IAA, Inc.
Reconciliation of Adjusted Net Income
(Amounts in Millions, Except Per
Share)
(Unaudited)
Three Months Ended
Six Months Ended
July 3, 2022
June 27, 2021
July 3, 2022
June 27, 2021
Net Income
$
82.7
$
82.9
$
164.2
$
155.4
Add back non-GAAP adjustments
Loss on extinguishment of debt
—
10.3
—
10.3
Non-income, tax related accrual
—
—
—
2.7
Fair value adjustments related to
contingent consideration
1.2
—
3.0
—
Retention / severance / restructuring
—
—
0.1
0.6
Gain on sale of assets
(0.4
)
—
(0.6
)
(0.2
)
Professional fees
0.9
0.3
1.3
1.0
Acquisition costs
—
0.1
0.5
0.1
Non-operating foreign exchange
loss/(gain)
3.6
(0.3
)
5.5
(0.6
)
Amortization of acquired intangible
assets
5.6
3.2
11.4
6.4
Non-GAAP adjustments to income before
income taxes
10.9
13.6
21.2
20.3
Income tax impact of Non-GAAP adjustments
to income before income taxes
(2.3
)
(3.4
)
(4.8
)
(5.1
)
Discrete tax items
(8.6
)
0.2
(8.6
)
0.6
Non-GAAP adjustments to net income
—
10.4
7.8
15.8
Adjusted net income
$
82.7
$
93.3
$
172.0
$
171.2
GAAP diluted EPS
$
0.62
$
0.61
$
1.22
$
1.15
EPS impact of Non-GAAP Adjustments
—
0.08
0.06
0.12
Adjusted diluted EPS
$
0.62
$
0.69
$
1.28
$
1.27
Note: Amounts will not always recalculate due to rounding
IAA, Inc.
Reconciliation of Adjusted EBITDA and
Organic Adjusted EBITDA
(Amounts in Millions)
(Unaudited)
Three Months Ended
Six Months Ended
July 3, 2022
June 27, 2021
July 3, 2022
June 27, 2021
Net income
$
82.7
$
82.9
$
164.2
$
155.4
Add: income taxes
10.1
27.2
36.6
51.6
Add: interest expense, net
11.5
21.9
22.7
34.9
Add: depreciation & amortization
26.6
20.5
52.7
40.3
EBITDA
130.9
152.5
276.2
282.2
Add back non-GAAP adjustments
Non-income, tax related accrual
—
—
—
2.7
Fair value adjustments related to
contingent consideration
1.2
—
3.0
—
Retention / severance / restructuring
—
—
0.1
0.6
Gain on sale of assets
(0.4
)
—
(0.6
)
(0.2
)
Professional fees
0.9
0.3
1.3
1.0
Acquisition costs
—
0.1
0.5
0.1
Non-operating foreign exchange
loss/(gain)
3.6
(0.3
)
5.5
(0.6
)
Adjusted EBITDA
136.2
152.6
286.0
285.8
Currency movements
0.1
—
0.1
—
Acquisitions EBITDA
(3.4
)
—
(10.6
)
—
Organic Adjusted EBITDA
$
132.9
$
152.6
$
275.5
$
285.8
Note: Amounts will not always recalculate due to rounding
IAA, Inc.
Reconciliation of Adjusted LTM EBITDA
(Amounts in millions)
(Unaudited)
Quarter Ended
LTM Ended
9/26/21
1/2/22
4/3/22
7/3/22
7/3/22
Net income
$
65.7
$
73.3
$
81.5
$
82.7
$
303.2
Add: income taxes
19.8
22.2
26.5
10.1
78.6
Add: interest expense, net
11.1
11.7
11.2
11.5
45.5
Add: depreciation & amortization
21.2
25.0
26.1
26.6
98.9
EBITDA
117.8
132.2
145.3
130.9
526.2
Add back non-GAAP adjustments
Fair value adjustments related to
contingent consideration
—
2.3
1.8
1.2
5.3
Retention / severance / restructuring
1.3
0.4
0.1
—
1.8
(Gain)/Loss on sale of assets
(0.2
)
0.3
(0.2
)
(0.4
)
(0.5
)
Acquisition costs
1.7
4.8
0.5
—
7.0
Professional fees
—
—
0.4
0.9
1.3
Non-operating foreign exchange loss
0.5
0.4
1.9
3.6
6.4
Adjusted EBITDA
$
121.1
$
140.4
$
149.8
$
136.2
$
547.5
Note: Amounts will not always recalculate due to rounding
IAA, Inc.
Reconciliation of Net Debt
(Amounts in Millions)
(Unaudited)
July 3, 2022
Term Loan
$
641.9
Senior Notes
500.0
Capital Leases
28.5
Total Debt
1,170.4
Less: Cash
137.6
Net Debt
$
1,032.8
IAA, Inc.
Reconciliation of Free Cash Flow
(Amounts in Millions)
(Unaudited)
Three Months Ended
Six Months Ended
July 3, 2022
June 27, 2021
July 3, 2022
June 27, 2021
Net cash provided by operating
activities
$
132.6
$
129.4
$
230.3
$
250.7
Proceeds from the sale of property and
equipment
1.6
0.2
38.7
0.4
Less: Purchases of property, equipment and
computer software
(44.2
)
(27.5
)
(75.1
)
(57.8
)
Free cash flow
$
90.0
$
102.1
$
193.9
$
193.3
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220809005306/en/
Media Inquiries: Jeanene O’Brien SVP Marketing and
Communications jobrien@iaai.com | (708) 492-7328
Investor Inquiries: Farah Soi/Caitlin Churchill ICR
IAA_ICR@icrinc.com | (203) 682-8200
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