Digital-focused wholesale auctions provider KAR Global's net income rose in the fourth quarter amid revenue gains and a strong performance from its finance segment.
For the fourth quarter, KAR reported $41.9 million net income from continuing operations, which include its digital and hybrid wholesaling units such as BacklotCars, Openlane and TradeRev. That's compared with $15.2 million in net income from continuing operations for the same quarter in 2021. The company said it closed on the sale of land in Montreal in October 2022 for a $33.9 million gain.
KAR's fourth-quarter net income was $37.1 million, up from $5.1 million in the year earlier quarter. Its fourth-quarter 2022 net income figure factors in a $4.8 million pretax loss from the company's discontinued operations pertaining to ADESA U.S., the large auction unit it sold to Carvana Co. on May 9. KAR now lists ADESA U.S. as discontinued operations on its financial statement.
KAR's fourth-quarter revenue, not including ADESA U.S. operations, was $372.8 million, up 4.2 percent from the same period a year earlier.
In a Wednesday fourth-quarter earnings call, KAR Global CEO Peter Kelly said some of the market challenges that existed for the company in 2022 are still present in 2023, including below-normal new-vehicle production, below-normal wholesale marketplace volumes and weaker conversion rates.
Kelly said that while lower used-vehicle values "will help drive more volume and will be a long-term positive," an environment where used-vehicle values are declining could put short-term pressure on conversion rates. He added that price declines, coupled with high interest rates, may create higher-risk environments in KAR's finance business.