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ADESA parent says Q1 net, revenue rise 14% on more auction activity

ADESA parent KAR Auction Services Inc. reported a 14 percent gain in first-quarter net income, to $69.2 million, driven in large part by a surge in income at its auctions, the company said Tuesday.

Revenue also rose 14 percent from the year-earlier quarter to $866.6 million.

“Our first quarter 2017 results reflect a solid start to the year with contributions from across our diversified platform of businesses,” KAR CEO Jim Hallett said in a statement. “We are well positioned for continued growth, and our development and acquisition of new capabilities like [used-car data startup] DRIVIN will enhance the products, services and value we deliver to our customers.”

On the other hand, ADESA’s performance came despite a weak showing in February, sandwiched between decent results in January and March, Hallett said on a conference call with investors on Wednesday. He said ADESA was negatively impacted by a delay in federal tax refunds in February.

“The month-to-month performance within the quarter is what I would describe as very choppy,” he said.

ADESA surge

Net income at ADESA surged 31 percent to $51.3 million, as revenue jumped 20 percent to $498 million.

ADESA’s revenue and income gains were due in large part to a 16 percent increase in vehicles it sold during the quarter, to 818,000 units. Excluding acquisitions, sales by the auction company grew 4 percent.

The auction realized $755 in revenue per physical vehicle sold at physical auctions, up from $737 a year earlier. It brought in $111 in revenue for each online-only unit it sold, about even with the $110 it made in the first quarter of 2016.

Gains in ADESA’s revenue per unit sold come despite weakening used-car prices, a trend fueled by rising new- and used-vehicle inventories and rising new-car incentives. KAR credited its ADESA revenue gains to its “increased commercial mix.”

KAR said ADESA sold 42 percent of its vehicles online vs. 43 percent a year earlier. It sold 215,000 vehicles through its online-only programs, up from 188,000. Physical auction sales rose 17 percent to 603,000 units, although they were flat when excluding the company’s acquisitions.

Dealer consignment vehicles accounted for 44 percent of ADESA’s physical sales mix in the first quarter, down from 47 percent.

IAA gains

Net income at KAR’s IAA Salvage Services unit gained 29 percent to $32.2 million, as revenue rose 10 percent to $297.4 million. KAR said IAA stands to gain from falling used-car prices because vehicles are now more likely to be declared totaled as a result.

Meanwhile, net income dipped 13 percent at its American Finance Corp. to $20.9 million, as revenue slipped 3.7 percent to $71.2 million. AFC was weighed down by more than doubling its provisions for credit losses to $11.1 million. The increased credit-loss provisions more than outweighed modest gains in revenue from interest and fees and a slight rise in loan transactions.

You can reach John Irwin at jirwin@crain.com -- Follow John on Twitter: @JohnDIrwin

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