KAR increases net income by 23% -Cars Automobiles

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The ongoing investment in TradeRev, an online auctioning and valuation tool, has reduced KAR Auction Services Inc.'s operating income in 2018, but the company still posted significant earnings growth in the third quarter.

KAR's net income increased 23 percent to $ 77.5 million in the third quarter, and revenue increased 11 percent to $ 933.5 million. KAR CFO Eric Loughmiller recounted Automotive News Net income increased on Wednesday as results from the core businesses were "pretty strong" offsetting the cost that TradeRev recorded during that period. TradeRev spent more than $ 15 million in revenue over the period.

Earnings before interest, taxes, depreciation and amortization rose 4.1 percent to $ 216 million.

In a teleconference on Wednesday discussing third-quarter results, CEO Jim Hallett said TradeRev has been rolled out across Canada and in many major US markets. The company is working to expand into smaller markets.

The company sees a potential network of 55,000 dealers using the platform in the US, based on the total number of franchise and independent businesses, Hallett said.

The company expects TradeRev to "lose money over the next few years as we focus on opening up new markets and expanding our existing markets and adapting the customer service model to our customers' needs," Hallett said. "… The focus is now on volume and we need to win the volume and we need to win that leadership position."

KAR bought 50% of TradeRev in 2014 and acquired the rest of the company in October 2017 for $ 50 million in cash. An additional $ 75 million was paid over the next four years, with TradeRev depending on conditions and conditions.

During the quarter, the total volume of the ADESA auction unit increased by 11 percent, while the same store volume increased by 7 percent. Off-lease vehicles are driving growth, the company said. The offer of off-lease vehicles should reach its peak in 2019.

The company's IAA Salvage Auction inventory increased 6 percent overall, but declined 9 percent in North America, as higher year-over-year levels were posted in the hurricane-damaged vehicles. KAR's planned spin-off of the auction business is proceeding as planned and is expected to be completed in 2019.

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