KAR AUCTION SERVICES, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

Forward-looking statements


This Quarterly Report on Form 10-Q contains 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 in this report on Form 10-Q that are not historical facts
(including, but not limited to, expectations, estimates, assumptions and
projections regarding the industry, business, future operating results,
potential acquisitions and anticipated cash requirements) 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,
including statements regarding the potential impacts of the COVID-19 pandemic;
our future growth; anticipated cost savings, revenue increases, credit losses
and capital expenditures; contractual obligations; dividend declarations and
payments; common stock repurchases; tax rates and assumptions; strategic
initiatives, acquisitions and dispositions; our competitive position and
retention of customers; and our continued investment in information technology,
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, but are not
limited to, those discussed in the section entitled "Risk Factors" in this
Quarterly Report on Form 10-Q and Item 1A "Risk Factors" in our Annual Report on
Form 10-K for the year ended December 31, 2021, filed on February 23, 2022, and
those described from time to time in our future reports filed with the
Securities and Exchange Commission. Many of these risk factors are outside of
our control, and as such, they involve risks which are not currently known that
could cause actual results to differ materially from those discussed or implied
herein. The forward-looking statements in this document are made as of the date
on which they are made and we do not undertake to update our forward-looking
statements.

Sale of ADESA WE Physical Auction Businesses and Discontinued Businesses


In February 2022, the Company announced that it had entered into a definitive
agreement with Carvana Group, LLC ("Carvana") and Carvana Co., pursuant to which
Carvana would acquire the ADESA U.S. physical auction business from KAR (the
"Transaction"). The Transaction was completed in May 2022 for approximately
$2.2 billion in cash and included all auction sales, operations and staff at
ADESA's U.S. vehicle logistic centers and use of the ADESA.com marketplace in
the U.S. The net proceeds received in connection with the Transaction are
included in "Net cash provided by investing activities - discontinued
operations" in the consolidated statement of cash flow. In connection with the
Transaction, the Company and Carvana entered into various agreements to provide
a framework for their relationship after the Transaction, including a transition
services agreement for a transitional period and a commercial agreement for a
term of 7 years that provides for platform and other fees for services rendered.
In addition, KAR will continue to own the ADESA tradename and the ADESA U.S.
physical auctions will continue to utilize the tradename, which has an
indefinite life.

The financial results of the ADESA U.S. physical auction business have been
accounted for as discontinued operations for all periods presented. The business
was formerly included in the Company's Marketplace reportable segment (formerly
referenced as ADESA Auctions). Goodwill was allocated to the ADESA U.S. physical
auctions based on relative fair value. Discontinued operations included
transaction costs of approximately $37.0 million for the three months ended June
30, 2022, in connection with the Transaction. These costs consisted of
consulting and professional fees associated with the Transaction. The
Transaction resulted in a pretax gain on disposal of approximately
$533.7 million. The results presented in the "Results of Operations" discussion
below only include continuing operations and do not include the results of the
ADESA U.S. physical auction business.

Automotive industry and economic impacts on our activities


The automotive industry has experienced unprecedented market conditions, caused
in part by supply chain issues, the shortage of semiconductors and associated
delays in new vehicle production. This reduction in supply of new vehicles has
caused increased new and used vehicle prices, as well as increased demand for
used vehicles. More lessees and dealers are therefore purchasing vehicles at
residual value, thus decreasing the number of off-lease vehicles coming to
auction. Further, government support and loan accommodations have resulted in
fewer repossessed vehicles coming to auction. These factors have contributed to
our commercial vehicle volumes declining in 2021 and 2022 and are expected to
continue for the foreseeable future.

In addition, macroeconomic factors, including inflationary pressures, rising
interest rates, volatility of oil and natural gas prices and declining consumer
confidence impact the affordability and demand for new and used vehicles.
Declining economic conditions present a risk to our operations and the stability
of the automotive industry. Given the nature of these factors, we cannot predict
whether or for how long certain trends will continue, nor to what degree these
trends will impact us in the future.


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Insight


We provide whole car auction services in North America and Europe. Our business
is divided into two reportable business segments, each of which is an integral
part of the vehicle remarketing industry: Marketplace (formerly referenced as
ADESA Auctions) and Finance (formerly referenced as AFC).

•The Marketplace segment serves a domestic and international customer base
through digital marketplaces for wholesale vehicles and 14 vehicle logistics
center locations across Canada that are developed and strategically located to
draw professional sellers and buyers together and allow the buyers to inspect
and compare vehicles remotely or in person. Powered with software developed by
Openlane, comprehensive private label remarketing solutions are offered to
automobile manufacturers, captive finance companies and other institutions to
offer vehicles via the Internet prior to arrival at on-premise marketplaces.
Vehicles sold on our digital platforms are typically sold by commercial fleet
operators, financial institutions, rental car companies, new and used vehicle
dealers and vehicle manufacturers and their captive finance companies to
franchise and independent used vehicle dealers. We also provide value-added
ancillary services including inbound and outbound transportation logistics,
reconditioning, vehicle inspection and certification, titling, administrative
and collateral recovery services. Our digital marketplaces include BacklotCars,
an app and web-based dealer-to-dealer wholesale vehicle platform utilized in the
United States, CARWAVE, an online dealer-to-dealer marketplace in the United
States, TradeRev, an online automotive remarketing platform in Canada where
dealers can launch and participate in real-time vehicle auctions at any time,
ADESA Remarketing Limited, an online whole car vehicle remarketing business in
the United Kingdom and ADESA Europe, an online wholesale vehicle auction
marketplace in Continental Europe.

• As noted above, Marketplace segment results no longer include the 56 ADESA
WE physical auction venues.


•Through AFC, the Finance segment provides short-term, inventory-secured
financing, known as floorplan financing, primarily to independent used vehicle
dealers throughout the United States and Canada. In addition, AFC provides
liquidity for customer trade-ins which encompasses settling lien holder payoffs.
AFC also provides title services for their customers. These services are
provided through AFC's digital servicing network as well as its physical
locations throughout North America.

From the first quarter of 2022, the results of ADESA WE physical auctions are now presented as discontinued operations (see Note 2). Prior period segment results have been reclassified to conform to the new presentation.


Industry Trends

Whole Car

We believe the North American wholesale used vehicle marketplace has a total
addressable market of approximately 22 million vehicles. This wholesale used
vehicle marketplace consists of the dealer-to-dealer market (franchise and
independent dealers that both buy and sell vehicles) and the commercial market
(commercial sellers). We believe digital applications, such as BacklotCars,
CARWAVE and TradeRev, may provide an opportunity to expand our total addressable
market for dealer-to-dealer transactions to 15 million units from approximately
5 million units in 2019. Commercial seller vehicles are estimated at
approximately 8 million vehicles per year.

BacklotCars, CARWAVE and TradeRev sold approximately 550,000 vehicles in the
North American digital dealer-to-dealer marketplace for the year ended December
31, 2021, compared with approximately 398,000 vehicles for the year ended
December 31, 2020. For the three months ended June 30, 2022 and 2021, vehicles
sold by these companies in the North American digital dealer-to-dealer
marketplace were approximately 126,000 and 147,000, respectively. For the six
months ended June 30, 2022 and 2021, vehicles sold by these companies in the
North American digital dealer-to-dealer marketplace were approximately 259,000
and 272,000, respectively. This volume data includes vehicles sold by CARWAVE
prior to its acquisition in October 2021 and vehicles sold by BacklotCars prior
to its acquisition in November 2020. The supply chain issues and current market
conditions facing the automotive industry, including the disruption of new
vehicle production, have had a material impact on the whole car auction industry
and we are unable to estimate future volumes.

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Automotive financing


AFC works with independent used vehicle dealers to improve their results by
providing a comprehensive set of business and financial solutions that leverage
its local presence of branches and in-market representatives, industry
experience and scale, as well as KAR affiliations. AFC's North American dealer
base was comprised of approximately 14,500 dealers in 2021, and loan
transactions, which includes both loans paid off and loans curtailed, were
approximately 1.4 million in 2021.

Key challenges for the independent used vehicle dealer include demand for used
vehicles, disruptions in pricing of used vehicle inventory, access to consumer
financing and increased used car retail activity of franchise and public
dealerships (most of which do not utilize AFC or its competitors for floorplan
financing). These same challenges, to the extent they occur, could result in a
material negative impact on AFC's results of operations. A significant decline
in used vehicle sales would result in a decrease in consumer auto loan
originations and an increased number of dealers defaulting on their loans. In
addition, volatility in wholesale vehicle pricing impacts the value of recovered
collateral on defaulted loans and the resulting severity of credit losses at
AFC. A decrease in wholesale used car pricing could lead to increased losses if
dealers are unable to satisfy their obligations.

Seasonality


The volume of vehicles sold through our auctions generally fluctuates from
quarter-to-quarter. This seasonality is caused by several factors including
weather, the timing of used vehicles available for sale from selling customers,
holidays, and the seasonality of the retail market for used vehicles, which
affects the demand side of the auction industry. Used vehicle auction volumes
tend to decline during prolonged periods of winter weather conditions. As a
result, revenues and operating expenses related to volume will fluctuate
accordingly on a quarterly basis. The fourth calendar quarter typically
experiences lower used vehicle auction volume as well as additional costs
associated with the holidays and winter weather.

Sources of income and expenses


Our revenue is derived from auction fees and various on-premise and off-premise
services, and from dealer financing fees, interest income and other revenue at
AFC. Although auction revenues primarily include the auction services and
related fees, our related receivables and payables include the gross value of
the vehicles sold.

Our operating expenses consist of cost of services, selling, general and
administrative and depreciation and amortization. Cost of services is composed
of payroll and related costs, subcontract services, the cost of vehicles
purchased, supplies, insurance, property taxes, utilities, service contract
claims, maintenance and lease expense related to the auction sites and loan
offices. Cost of services excludes depreciation and amortization. Selling,
general and administrative expenses are composed of payroll and related costs,
sales and marketing, information technology services and professional fees.

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Operating results

Overview of the results of KAR Auction Services, Inc. for the three months ended
June 30, 2022 and 2021:


                                                                               Three Months Ended June 30,
(Dollars in millions except per share amounts)                                   2022                  2021
Revenues from continuing operations
Auction fees                                                               $         99.2          $   106.3
Service revenue                                                                     147.3              141.0
Purchased vehicle sales                                                              45.8               60.1
Finance-related revenue                                                              91.9               68.6
Total revenues from continuing operations                                           384.2              376.0
Cost of services*                                                                   211.9              208.8
Gross profit*                                                                       172.3              167.2
Selling, general and administrative                                                 124.1              106.4
Depreciation and amortization                                                        25.9               27.4
Operating profit                                                                     22.3               33.4
Interest expense                                                                     25.9               31.0
Other (income) expense, net                                                           4.0               15.3
Loss on extinguishment of debt                                                        7.7                  -
Income (loss) from continuing operations before income taxes                        (15.3)             (12.9)
Income taxes                                                                         (9.9)               2.4
Income (loss) from continuing operations                                             (5.4)             (15.3)
Income from discontinued operations, net of income taxes                            215.6               26.8
Net income                                                                 $        210.2          $    11.5
Income (loss) from continuing operations per share
Basic                                                                      $        (0.10)         $   (0.16)
Diluted                                                                    $        (0.10)         $   (0.16)


* Excluding depreciation and amortization

Discontinued operations


The financial performance of the ADESA U.S. physical auction business is
presented as discontinued operations. As a result, revenue, cost of services and
all costs of discontinued operations (including the gain on sale) are presented
as one line item in the above table as "Income from discontinued operations."

Insight


For the three months ended June 30, 2022, we had revenue of $384.2 million
compared with revenue of $376.0 million for the three months ended June 30,
2021, an increase of 2%. Businesses acquired in the last 12 months accounted for
an increase in revenue of $16.6 million or 4% 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 $1.5 million, or 5%, to $25.9 million
for the three months ended June 30, 2022, compared with $27.4 million for the
three months ended June 30, 2021. The decrease in depreciation and amortization
was primarily the result of assets that have become fully depreciated and a
reduction in assets placed in service.

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Interest charges


Interest expense decreased $5.1 million, or 16%, to $25.9 million for the three
months ended June 30, 2022, compared with $31.0 million for the three months
ended June 30, 2021. The decrease was primarily attributable to an $8.0 million
favorable fair value adjustment related to the termination of the interest rate
swaps, as well as the prepayment of Term Loan B-6, partially offset by an
increase in interest expense at AFC of $6.8 million, which resulted from an
increase in the average finance receivables balance for the three months ended
June 30, 2022, as compared with the three months ended June 30, 2021.

Other (income) Expenses, net


For the three months ended June 30, 2022, we had other expense of $4.0 million
compared with $15.3 million for the three months ended June 30, 2021. The
decrease in other expense was primarily attributable to a decrease in unrealized
losses on investment securities of approximately $8.7 million, a decrease in
contingent consideration valuation adjustments of $4.5 million and a decrease in
other miscellaneous items aggregating $1.0 million, partially offset by an
increase in foreign currency losses of $2.9 million.

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. There were
no realized gains on these investments for the three months ended June 30, 2022.
The Company had unrealized losses of $3.2 million for the three months ended
June 30, 2022. Any future changes in the fair value of these investment
securities will be reflected as unrealized gains or losses until these
securities are sold.

Income taxes


We had an effective tax rate of 64.7% resulting in a benefit on a pre-tax loss
for the three months ended June 30, 2022, compared with an effective tax rate of
-18.6% resulting in expense on a pre-tax loss for the three months ended
June 30, 2021. The effective tax rate for the three months ended June 30, 2022
was favorably impacted by the state rate change impact on deferred taxes. The
effective tax rate for the three months ended June 30, 2021 was unfavorably
impacted by the expense for the increase in the estimated value of contingent
consideration for which no tax benefit has been recorded.

Income from discontinued operations


In May 2022, Carvana acquired the ADESA U.S. physical auction business from KAR.
As such, the financial results of the ADESA U.S. physical auction business have
been accounted for as discontinued operations for all periods presented. For the
three months ended June 30, 2022 and 2021, the Company's financial statements
included income from discontinued operations of $215.6 million and $26.8
million, respectively. For further discussion, reference the condensed notes to
the consolidated financial statements.

Foreign currency impact


For the three months ended June 30, 2022, fluctuations in the euro exchange rate
decreased revenue by $6.4 million, operating profit by $0.2 million and net
income by $0.1 million. For the three months ended June 30, 2022, fluctuations
in the Canadian exchange rate decreased revenue by $3.3 million, operating
profit by $0.8 million and net income by $0.5 million.


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Marketplace Results

                                                                               Three Months Ended June 30,
(Dollars in millions, except per vehicle amounts)                               2022                  2021
Auction fees                                                              $         99.2          $    106.3
Service revenue                                                                    147.3               141.0
Purchased vehicle sales                                                             45.8                60.1
Total Marketplace revenue from continuing operations                               292.3               307.4
Cost of services*                                                                  195.7               195.1
Gross profit*                                                                       96.6               112.3
Selling, general and administrative                                                110.5                97.6
Depreciation and amortization                                                       23.8                24.9
Operating profit (loss)                                                   $        (37.7)         $    (10.2)
Commercial vehicles sold                                                         177,000             274,000
Dealer consignment vehicles sold                                                 166,000             168,000
Total vehicles sold                                                              343,000             442,000
Auction fees per vehicle sold                                             $          289          $      240
Gross profit per vehicle sold*                                            $          282          $      254
Gross profit percentage, excluding purchased vehicles*                                39.2%               45.4%
On-premise mix                                                                          13%                 14%
Off-premise mix                                                                         87%                 86%


* Excluding depreciation and amortization

Revenue


Revenue from the Marketplace segment decreased $15.1 million, or 5%, to $292.3
million for the three months ended June 30, 2022, compared with $307.4 million
for the three months ended June 30, 2021. The decrease in revenue was the result
of a decrease in the number of vehicles sold, partially offset by an increase in
average revenue per vehicle sold. Businesses acquired in the last 12 months
accounted for an increase in revenue of $16.6 million. The change in revenue
included the impact of decreases in revenue of $6.4 million and $2.9 million due
to fluctuations in the euro exchange rate and the Canadian exchange rate,
respectively.

On-premise marketplace sales are initiated online for vehicles at any of our
locations across Canada 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 22% decrease in the
number of vehicles sold was comprised of a 35% decline in commercial volumes and
a 1% decrease in dealer consignment volumes. For the three months ended June 30,
2022, our marketplaces had a conversion rate of 36% of vehicles offered, as
compared with 48% for the three months ended June 30, 2021.

Auction fees per vehicle sold for the three months ended June 30, 2022 increased
$49, or 20%, reflecting higher vehicle values, the introduction of new dealer
off-premise auction fees and a smaller mix of lower-fee commercial off-premise
vehicles.

Service revenue for the three months ended June 30, 2022 increased $6.3 million,
or 4%, primarily as a result of an increase in repossession fees and platform
fees provided by third-parties, partially offset by a decrease in inspection
service revenue and 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 three months ended June 30, 2022, gross profit for the Marketplace
segment decreased $15.7 million, or 14%, to $96.6 million, compared with $112.3
million for the three months ended June 30, 2021. Cost of services increased
less than 1% for the three months ended June 30, 2022, while revenue decreased
5% during the same period. Gross profit for the Marketplace segment was 33.0% of
revenue for the three months ended June 30, 2022, compared with 36.5% of revenue
for the three

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months ended June 30, 2021. Excluding purchased vehicle sales, gross profit as a
percentage of revenue was 39.2% and 45.4% for the three months ended June 30,
2022 and 2021, respectively. The entire selling and purchase price of the
vehicle is recorded as revenue and cost of services for purchased vehicles sold.
Businesses acquired in the last 12 months accounted for an increase in cost of
services of $9.5 million for the three months ended June 30, 2022.

Gross profit as a percentage of revenue decreased for the three months ended
June 30, 2022 as compared with the three months ended June 30, 2021, primarily
due to the 22% decrease in vehicles sold. A decline in the mix of off-premise
commercial vehicles sold also resulted in a reduction of gross profit as a
percentage of revenue. In addition, the net gross profit on purchased vehicles
was lower as a result of declining used vehicle prices during the second quarter
of 2022, transportation costs increased and there were no benefits taken under
the Canada Emergency Wage Subsidy in the second quarter of 2022, resulting in a
reduction to gross profit as a percentage of revenue.

Selling, general and administrative expenses


Selling, general and administrative expenses for the Marketplace segment
increased $12.9 million, or 13%, to $110.5 million for the three months ended
June 30, 2022, compared with $97.6 million for the three months ended June 30,
2021, primarily as a result of increases in stock-based compensation of $8.1
million, selling, general and administrative expenses associated with
acquisitions of $4.0 million, bad debt expense of $2.2 million, severance of
$1.4 million, professional fees of $0.6 million and travel expenses of $0.5
million, partially offset by decreases in information technology costs of $1.8
million, fluctuations in the Canadian exchange rate of $0.9 million and
miscellaneous expenses aggregating $2.1 million. In addition, the Employee
Retention Credit provided under the Canada Emergency Wage Subsidy was $0.9
million less for the three months ended June 30, 2022, compared with the three
months ended June 30, 2021.

Finance Results

                                                                                Three Months Ended June 30,
(Dollars in millions except volumes and per loan amounts)                         2022                  2021
Finance-related revenue
Interest income                                                            $          46.5          $     33.1
Fee income                                                                            42.7                35.1
Other revenue                                                                          2.6                 2.2
Net recovery (provision) for credit losses                                             0.1                (1.8)
Total Finance revenue                                                                 91.9                68.6
Cost of services*                                                                     16.2                13.7
Gross profit*                                                                         75.7                54.9
Selling, general and administrative                                                   13.6                 8.8
Depreciation and amortization                                                          2.1                 2.5
Operating profit                                                           $          60.0          $     43.6
Loan transactions                                                                  401,000             356,000
Revenue per loan transaction                                               $           229          $      193


* Excluding depreciation and amortization

Revenue


For the three months ended June 30, 2022, the Finance segment revenue increased
$23.3 million, or 34%, to $91.9 million, compared with $68.6 million for the
three months ended June 30, 2021. The increase in revenue was primarily the
result of a 19% increase in revenue per loan transaction and a 13% increase in
loan transactions.

Revenue per loan transaction, which includes both loans paid off and loans
curtailed, increased $36, or 19%, primarily as a result of an increase in loan
values, an increase in interest yields driven by an increase in prime rates, an
increase in floorplan fees and other fee income per unit, a decrease in net
credit losses and an increase in average portfolio duration.

Provision for credit losses decreased to 0.0% of average receivables managed for the three months ended June 30, 2022 0.4% for the three months ended June 30, 2021.

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Gross profit


For the three months ended June 30, 2022, gross profit for the Finance segment
increased $20.8 million, or 38%, to $75.7 million, or 82.4% of revenue, compared
with $54.9 million, or 80.0% of revenue, for the three months ended June 30,
2021. The increase in gross profit as a percent of revenue was primarily the
result of a 34% increase in revenue, partially offset by an 18% increase in cost
of services. The increase in cost of services was primarily the result of
increases in compensation expense of $1.2 million, incentive-based compensation
of $0.8 million, lot check expenses of $0.4 million and other miscellaneous
expenses aggregating $0.1 million.

Selling, general and administrative expenses


Selling, general and administrative expenses for the Finance segment increased
$4.8 million, or 55%, to $13.6 million for the three months ended June 30, 2022,
compared with $8.8 million for the three months ended June 30, 2021 primarily as
a result of increases in stock-based compensation of $2.2 million, compensation
expense of $1.0 million, incentive-based compensation of $0.5 million and other
miscellaneous expenses aggregating $1.1 million.

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Overview of the results of KAR Auction Services, Inc. for the semester ended
June 30, 2022 and 2021:


                                                                              Six Months Ended June 30,
(Dollars in millions except per share amounts)                                  2022                2021
Revenues from continuing operations
Auction fees                                                              $       200.6          $ 208.8
Service revenue                                                                   284.8            287.3
Purchased vehicle sales                                                            92.1            115.3
Finance-related revenue                                                           176.1            134.4
Total revenues from continuing operations                                         753.6            745.8
Cost of services*                                                                 422.7            412.6
Gross profit*                                                                     330.9            333.2
Selling, general and administrative                                               243.0            213.7
Depreciation and amortization                                                      51.9             54.3
Operating profit                                                                   36.0             65.2
Interest expense                                                                   51.5             61.8
Other (income) expense, net                                                         5.2            (34.4)
Loss on extinguishment of debt                                                      7.7                -
Income (loss) from continuing operations before income taxes                      (28.4)            37.8
Income taxes                                                                      (14.6)            26.9
Income (loss) from continuing operations                                          (13.8)            10.9
Income from discontinued operations, net of income taxes                          223.7             51.5
Net income                                                                $       209.9          $  62.4
Income (loss) from continuing operations per share
Basic                                                                     $       (0.23)         $ (0.06)
Diluted                                                                   $       (0.23)         $ (0.06)

* Excluding depreciation and amortization

Discontinued operations


The financial performance of the ADESA U.S. physical auction business is
presented as discontinued operations. As a result, revenue, cost of services and
all costs of discontinued operations (including the gain on sale) are presented
as one line item in the above table as "Income from discontinued operations."

Insight


For the six months ended June 30, 2022, we had revenue of $753.6 million
compared with revenue of $745.8 million for the six months ended June 30, 2021,
an increase of 1%. Businesses acquired in the last 12 months accounted for an
increase in revenue of $34.6 million or 5% 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 $2.4 million, or 4%, to $51.9 million
for the six months ended June 30, 2022, compared with $54.3 million for the six
months ended June 30, 2021. The decrease in depreciation and amortization was
primarily the result of assets that have become fully depreciated and a
reduction in assets placed in service.

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Interest charges


Interest expense decreased $10.3 million, or 17%, to $51.5 million for the six
months ended June 30, 2022, compared with $61.8 million for the six months ended
June 30, 2021. The decrease was primarily attributable to a realized gain of
$16.7 million related to the discontinuance of hedge accounting and termination
of the interest rate swaps, as well as the prepayment of Term Loan B-6,
partially offset by an increase in interest expense at AFC of $9.8 million,
which resulted from an increase in the average finance receivables balance for
the six months ended June 30, 2022, as compared with the six months ended
June 30, 2021.

Other (income) Expenses, net


For the six months ended June 30, 2022, we had other expense of $5.2 million
compared with other income of $34.4 million for the six months ended June 30,
2021. The increase in other expense was primarily attributable to unrealized
losses on investment securities of approximately $6.2 million for the six months
ended June 30, 2022, compared with unrealized gains on investment securities of
approximately $31.6 million for the six months ended June 30, 2021, as well as a
reduction in realized gains of approximately $17.2 million and an increase in
foreign currency losses of $1.9 million, partially offset by a decrease in
contingent consideration valuation adjustments of $15.7 million and a decrease
in other miscellaneous items aggregating $1.6 million.

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. There were
no realized gains on these investments for the six months ended June 30, 2022.
The Company had unrealized losses of $6.2 million for the six months ended
June 30, 2022. Any future changes in the fair value of these investment
securities will be reflected as unrealized gains or losses until these
securities are sold.

Income taxes


We had an effective tax rate of 51.4% resulting in a benefit on a pre-tax loss
for the six months ended June 30, 2022, compared with an effective tax rate of
71.2% for the six months ended June 30, 2021. The effective tax rate for the six
months ended June 30, 2022 was favorably impacted by the state rate change
impact on deferred taxes. The effective tax rate for the six months ended
June 30, 2021 was unfavorably impacted by the expense for the increase in the
estimated value of contingent consideration for which no tax benefit has been
recorded.

Income from discontinued operations


In May 2022, Carvana acquired the ADESA U.S. physical auction business from KAR.
As such, the financial results of the ADESA U.S. physical auction business have
been accounted for as discontinued operations for all periods presented. For the
six months ended June 30, 2022 and 2021, the Company's financial statements
included income from discontinued operations of $223.7 million and $51.5
million, respectively. For further discussion, reference the condensed notes to
the consolidated financial statements.

Foreign currency impact


For the six months ended June 30, 2022, fluctuations in the euro exchange rate
decreased revenue by $9.5 million, operating profit by $0.2 million and net
income by $0.1 million. For the six months ended June 30, 2022, fluctuations in
the Canadian exchange rate decreased revenue by $3.7 million, operating profit
by $0.9 million and net income by $0.6 million.
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Marketplace Results

                                                                                  Six Months Ended June 30,
(Dollars in millions, except per vehicle amounts)                                   2022                2021
Auction fees                                                                  $       200.6          $  208.8
Service revenue                                                                       284.8             287.3
Purchased vehicle sales                                                                92.1             115.3
Total Marketplace revenue from continuing operations                                  577.5             611.4
Cost of services*                                                                     391.5             385.4
Gross profit*                                                                         186.0             226.0
Selling, general and administrative                                                   218.9             196.1
Depreciation and amortization                                                          47.7              49.4
Operating profit (loss)                                                       $       (80.6)         $  (19.5)
Commercial vehicles sold                                                            351,000           594,000
Dealer consignment vehicles sold                                                    343,000           306,000
Total vehicles sold                                                                 694,000           900,000
Auction fees per vehicle sold                                                 $         289          $    232
Gross profit per vehicle sold*                                                $         268          $    251
Gross profit percentage, excluding purchased vehicles*                                   38.3%             45.6%
On-premise mix                                                                             14%               13%
Off-premise mix                                                                            86%               87%

* Excluding depreciation and amortization

Revenue


Revenue from the Marketplace segment decreased $33.9 million, or 6%, to $577.5
million for the six months ended June 30, 2022, compared with $611.4 million for
the six months ended June 30, 2021. The decrease in revenue was the result of a
decrease in the number of vehicles sold, partially offset by an increase in
average revenue per vehicle sold. Businesses acquired in the last 12 months
accounted for an increase in revenue of $34.6 million. The change in revenue
included the impact of decreases in revenue of $9.5 million and $3.3 million due
to fluctuations in the euro exchange rate and the Canadian exchange rate,
respectively.

On-premise marketplace sales are initiated online for vehicles at any of our
locations across Canada 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 23% decrease in the
number of vehicles sold was comprised of a 41% decline in commercial volumes,
partially offset by a 12% increase in dealer consignment volumes.

Auction fees per vehicle sold for the six months ended June 30, 2022 increased
$57, or 25%, reflecting higher vehicle values, the introduction of new dealer
off-premise auction fees and a smaller mix of lower-fee commercial off-premise
vehicles.

Service revenue for the six months ended June 30, 2022 decreased $2.5 million,
or 1%, 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 repossession fees, reconditioning revenue and platform
fees provided by third-parties. Typically consigned vehicles located at our
facilities utilize our service offerings at a higher rate than off-premise
vehicles.

Gross profit


For the six months ended June 30, 2022, gross profit for the Marketplace segment
decreased $40.0 million, or 18%, to $186.0 million, compared with $226.0 million
for the six months ended June 30, 2021. Cost of services increased 2% for the
six months ended June 30, 2022, while revenue decreased 6% during the same
period. Gross profit for the Marketplace segment was 32.2% of revenue for the
six months ended June 30, 2022, compared with 37.0% of revenue for the six
months ended June 30, 2021. Excluding purchased vehicle sales, gross profit as a
percentage of revenue was 38.3% and 45.6% for the six months ended June 30, 2022
and 2021, respectively. The entire selling and purchase price of the vehicle is
recorded as revenue

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and cost of services for purchased vehicles sold. Businesses acquired in the
last 12 months accounted for an increase in cost of services of $19.1 million
for the six months ended June 30, 2022.

Gross profit as a percentage of revenue decreased for the six months ended
June 30, 2022 as compared with the six months ended June 30, 2021, primarily due
to the 23% decrease in vehicles sold. A decline in the mix of off-premise
commercial vehicles sold also resulted in a reduction of gross profit as a
percentage of revenue. In addition, the net gross profit on purchased vehicles
was lower, transportation costs increased and there were no benefits taken under
the Canada Emergency Wage Subsidy in the first six months of 2022, resulting in
a reduction to gross profit as a percentage of revenue.

Selling, general and administrative expenses


Selling, general and administrative expenses for the Marketplace segment
increased $22.8 million, or 12%, to $218.9 million for the six months ended
June 30, 2022, compared with $196.1 million for the six months ended June 30,
2021, primarily as a result of increases in selling, general and administrative
expenses associated with acquisitions of $8.2 million, stock-based compensation
of $8.1 million, professional fees of $6.8 million, severance of $3.6 million,
bad debt expense of $3.5 million, compensation expense of $1.1 million and
travel expenses of $1.1 million, partially offset by decreases in
incentive-based compensation of $3.4 million, information technology costs of
$2.7 million, fluctuations in the Canadian exchange rate of $0.9 million and
miscellaneous expenses aggregating $4.7 million. In addition, the Employee
Retention Credit provided under the Canada Emergency Wage Subsidy was $2.1
million less for the six months ended June 30, 2022, compared with the six
months ended June 30, 2021.

Finance Results

                                                                                 Six Months Ended June 30,
(Dollars in millions except volumes and per loan amounts)                         2022               2021
Finance-related revenue
Interest income                                                                $   89.7          $    64.6
Fee income                                                                         82.9               72.2
Other revenue                                                                       4.8                4.2
Provision for credit losses                                                        (1.3)              (6.6)
Total Finance revenue                                                             176.1              134.4
Cost of services*                                                                  31.2               27.2
Gross profit*                                                                     144.9              107.2
Selling, general and administrative                                                24.1               17.6
Depreciation and amortization                                                       4.2                4.9
Operating profit                                                               $  116.6          $    84.7
Loan transactions                                                               773,000            728,000
Revenue per loan transaction                                                

$228 $185

* Excluding depreciation and amortization

Revenue


For the six months ended June 30, 2022, the Finance segment revenue increased
$41.7 million, or 31%, to $176.1 million, compared with $134.4 million for the
six months ended June 30, 2021. The increase in revenue was primarily the result
of a 23% increase in revenue per loan transaction and a 6% increase in loan
transactions.

Revenue per loan transaction, which includes both loans paid off and loans
curtailed, increased $43, or 23%, primarily as a result of an increase in loan
values, an increase in interest yields driven by an increase in prime rates, an
increase in floorplan fees and other fee income per unit and a decrease in
provision for credit losses for the six months ended June 30, 2022.

Provision for credit losses decreased to 0.1% of average receivables managed for the six months ended June 30, 2022 0.7% for the half-year ended June 30, 2021.

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Gross profit


For the six months ended June 30, 2022, gross profit for the Finance segment
increased $37.7 million, or 35%, to $144.9 million, or 82.3% of revenue,
compared with $107.2 million, or 79.8% of revenue, for the six months ended
June 30, 2021. The increase in gross profit as a percent of revenue was
primarily the result of a 31% increase in revenue, partially offset by a 15%
increase in cost of services. The increase in cost of services was primarily the
result of increases in compensation expense of $1.7 million, incentive-based
compensation of $1.2 million, lot check expenses of $0.8 million and credit
check expenses of $0.5 million, partially offset by a decrease in other
miscellaneous expenses aggregating $0.2 million.

Selling, general and administrative expenses


Selling, general and administrative expenses for the Finance segment increased
$6.5 million, or 37%, to $24.1 million for the six months ended June 30, 2022,
compared with $17.6 million for the six months ended June 30, 2021 primarily as
a result of increases in stock-based compensation of $2.3 million, compensation
expense of $1.5 million, professional fees of $1.3 million, incentive-based
compensation of $0.5 million and other miscellaneous expenses aggregating $0.9
million.

CASH 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.

                                                           June 30,            December 31,           June 30,
(Dollars in millions)                                        2022                  2021                 2021
Cash and cash equivalents                                $    804.4          $       177.6          $    583.5
Restricted cash                                                28.1                   25.8                53.8
Working capital                                               448.6                  382.5               731.3

Amounts available under the revolving credit facility* 325.0

          325.0               325.0

Cash flow generated by operating activities for the six months ended

                                                         128.5                                      188.7


*  There were related outstanding letters of credit totaling approximately $27.3
million, $27.6 million and $29.7 million at June 30, 2022, December 31, 2021 and
June 30, 2021, respectively, which reduced the amount available for borrowings
under the Revolving Credit Facility.

The increase in cash and cash equivalents is the result of net proceeds received
from the sale of the ADESA U.S. physical auction business in May 2022, partially
offset by the use of such proceeds to repay a portion of the Company's debt. 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.

Working Capital

A substantial amount of our working capital is generated from the payments
received for services provided. The majority of our working capital needs are
short-term in nature, usually less than a week in duration. Most of the
financial institutions place a temporary hold on the availability of the funds
deposited that generally can range up to two business days, resulting in cash in
our accounts and on our balance sheet that is unavailable for use until it is
made available by the various financial institutions. There are outstanding
checks (book overdrafts) to sellers and vendors included in current liabilities.
Because a portion of these outstanding checks for operations in the U.S. are
drawn upon bank accounts at financial institutions other than the financial
institutions that hold the cash, we cannot offset all the cash and the
outstanding checks on our balance sheet. Changes in working capital vary from
quarter-to-quarter as a result of the timing of collections and disbursements of
funds to consignors from auctions held near period end.

Approximately $112.9 million of the available cash was held by our foreign subsidiaries in the June 30, 2022. If funds held by our foreign subsidiaries were to be repatriated, we expect that applicable taxes will be minimal.


AFC offers short-term inventory-secured financing, also known as floorplan
financing, to independent used vehicle dealers. Financing is primarily provided
for terms of 30 to 90 days. AFC principally generates its funding through the
sale of its receivables. The receivables sold pursuant to the securitization
agreements are accounted for as secured borrowings. For further discussion of
AFC's securitization arrangements, see "Securitization Facilities."

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Credit facilities


On September 19, 2019, we entered into the seven-year, $950 million Term Loan
B-6 and the $325 million, five-year Revolving Credit Facility. In May 2022, the
Company prepaid the $926.2 million outstanding balance on Term Loan B-6 with
proceeds from the Transaction. As a result of the prepayment, we incurred a
non-cash loss on the extinguishment of debt of $7.7 million in the second
quarter of 2022. The loss was primarily a result of the write-off of unamortized
debt issuance costs/discounts associated with Term Loan B-6.

The Revolving Credit Facility is available for letters of credit, working
capital, permitted acquisitions and general corporate purposes. The Revolving
Credit Facility also includes a $50 million sub-limit for issuance of letters of
credit and a $60 million sub-limit for swingline loans.

As set forth in the Credit Agreement, loans under the Revolving Credit Facility
will bear interest at a rate calculated based on the type of borrowing (either
adjusted LIBOR or Base Rate) and the Company's Consolidated Senior Secured Net
Leverage Ratio (as defined in the Credit Agreement), with such rate ranging from
2.25% to 1.75% for adjusted LIBOR loans and from 1.25% to 0.75% for Base Rate
loans. The Company also pays a commitment fee between 25 to 35 basis points,
payable quarterly, on the average daily unused amount of the Revolving Credit
Facility based on the Company's Consolidated Senior Secured Net Leverage Ratio,
from time to time.

On June 30, 2022, there were no borrowings on the Revolving Credit Facility. We
had related outstanding letters of credit in the aggregate amount of $27.3
million and $27.6 million at June 30, 2022 and December 31, 2021, respectively,
which reduce the amount available for borrowings under the Revolving Credit
Facility. Our European operations have lines of credit aggregating $31.5 million
(€30 million) of which $10.9 million was drawn at June 30, 2022.

The obligations of the Company under the Credit Facilities are guaranteed by
certain of our domestic subsidiaries (the "Subsidiary Guarantors") and are
secured by substantially all of the assets of the Company and the Subsidiary
Guarantors, including but not limited to: (a) pledges of and first priority
security interests in 100% of the equity interests of certain of the Company's
and the Subsidiary Guarantors' domestic subsidiaries and 65% of the equity
interests of certain of the Company's and the Subsidiary Guarantors' first tier
foreign subsidiaries and (b) first priority security interests in substantially
all other tangible and intangible assets of the Company and each Subsidiary
Guarantor, subject to certain exceptions.

Certain covenants contained within the Credit Agreement are critical to an
investor's understanding of our financial liquidity, as the failure to maintain
compliance with these covenants could result in a default and allow the lenders
under the Credit Agreement to declare all amounts borrowed immediately due and
payable. The Credit Agreement contains a financial covenant requiring compliance
with a Consolidated Senior Secured Net Leverage Ratio not to exceed 3.5 as of
the last day of each fiscal quarter if revolving loans are outstanding. The
Consolidated Senior Secured Net Leverage Ratio is calculated as consolidated
total debt (as defined in the Credit Agreement) divided by the last four
quarters consolidated Adjusted EBITDA. Consolidated total debt includes term
loan borrowings, revolving loans, finance lease liabilities and other
obligations for borrowed money less unrestricted cash as defined in the Credit
Agreement. Consolidated Adjusted EBITDA is EBITDA (earnings before interest
expense, income taxes, depreciation and amortization) adjusted to exclude among
other things (a) gains and losses from asset sales; (b) unrealized foreign
currency translation gains and losses in respect of indebtedness; (c) certain
non-recurring gains and losses; (d) stock-based compensation expense; (e)
certain other non-cash amounts included in the determination of net income; (f)
charges and revenue reductions resulting from purchase accounting; (g) minority
interest; (h) consulting expenses incurred for cost reduction, operating
restructuring and business improvement efforts; (i) expenses realized upon the
termination of employees and the termination or cancellation of leases, software
licenses or other contracts in connection with the operational restructuring and
business improvement efforts; (j) expenses incurred in connection with permitted
acquisitions; (k) any impairment charges or write-offs of intangibles; and (l)
any extraordinary, unusual or non-recurring charges, expenses or losses. Our
Consolidated Senior Secured Net Leverage Ratio was negative at June 30, 2022.

In addition, the Credit Agreement and the indenture governing our senior notes
(see Note 6, "Long-Term Debt" for additional information) contain certain
limitations on our ability to pay dividends and other distributions, make
certain acquisitions or investments, grant liens and sell assets, and the Credit
Agreement contains certain limitations on our ability to incur indebtedness. The
applicable covenants in the Credit Agreement affect our operating flexibility
by, among other things, restricting our ability to incur expenses and
indebtedness that could be used to grow the business, as well as to fund general
corporate purposes. We were in compliance with the covenants in the Credit
Agreement and the indenture governing our senior notes at June 30, 2022.

We believe our sources of liquidity from our cash and cash equivalents on hand,
working capital, cash provided by operating activities, and availability under
our Credit Facility are sufficient to meet our operating needs for the
foreseeable future. In addition, we believe the previously mentioned sources of
liquidity will be sufficient to fund our capital requirements and debt service
payments for the foreseeable future. A lack of recovery in market conditions, or
further deterioration in market conditions, could materially affect the
Company's liquidity.

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Senior Notes

On May 31, 2017, we issued $950 million of 5.125% senior notes due June 1, 2025.
The Company pays interest on the senior notes semi-annually in arrears on June 1
and December 1 of each year, which commenced on December 1, 2017. The senior
notes may be redeemed at 101.281% currently and at par as of June 1, 2023. The
senior notes are guaranteed by the Subsidiary Guarantors.

On August 2, 2022, the Company commenced an offer to purchase for cash (the
"Tender Offer") up to $600 million principal amount of its 5.125% Senior Notes
due 2025 (the "Notes"), exclusive of any applicable premiums paid in connection
with the Tender Offer and accrued and unpaid interest.

The Tender Offer is being made only by and pursuant to the terms set forth in
the offer to purchase, dated August 2, 2022 (as it may be amended from time to
time, the "Offer to Purchase"), and is subject to a number of conditions set
forth therein that may be waived or changed.

Holders of Notes must validly tender and not validly withdraw their Notes on or
before 5:00 p.m., New York City time, on August 15, 2022, unless extended, in
order to be eligible to receive the Total Consideration (as defined in the Offer
to Purchase). Holders of Notes who validly tender their Notes after such early
tender date and on or before the Expiration Date (as defined below) will be
eligible to receive only the applicable Base Consideration (as defined in the
Offer to Purchase). In addition to the applicable consideration, Holders whose
Notes are accepted for purchase in the Tender Offer will receive accrued and
unpaid interest to, but excluding, the date on which the Tender Offer is
settled.

The Tender Offer is scheduled to expire at 11:59 p.m., New York City time, on
August 29, 2022, unless extended (the "Expiration Date"). Any Notes purchased in
the Tender Offer will be retired and canceled.

Intended use of transaction proceeds


The Company generated gross proceeds from the sale of the U.S. physical auction
business of approximately $2.2 billion. The Transaction closed in May 2022.
Under terms of the Credit Agreement, net cash proceeds from the Transaction were
used to repay Term Loan B-6 within three days of the Transaction. The Company
also repaid the outstanding balance on the Revolving Credit Facility. The terms
of the senior notes specify that excess proceeds must be reinvested or used to
pay down a portion of the senior notes. Therefore, at June 30, 2022,
$750.0 million of the senior notes are classified as current debt.

Securitization facilities


AFC sells the majority of its U.S. dollar denominated finance receivables on a
revolving basis and without recourse to AFC Funding Corporation. A
securitization agreement allows for the revolving sale by AFC Funding
Corporation to a group of bank purchasers of undivided interests in certain
finance receivables subject to committed liquidity. The agreement expires on
January 31, 2024. AFC Funding Corporation had committed liquidity of $1.70
billion for U.S. finance receivables at June 30, 2022.

We also have an agreement for the securitization of AFCI's receivables, which
expires on January 31, 2024. AFCI's committed facility is provided through a
third-party conduit (separate from the U.S. facility) and was C$225 million at
June 30, 2022. The receivables sold pursuant to both the U.S. and Canadian
securitization agreements are accounted for as secured borrowings.

AFC managed total finance receivables of $2,681.6 million and $2,529.0 million
at June 30, 2022 and December 31, 2021, respectively. AFC's allowance for losses
was $21.5 million and $23.0 million at June 30, 2022 and December 31, 2021,
respectively.

As of June 30, 2022 and December 31, 2021, $2,647.8 million and $2,482.2
million, respectively, of finance receivables and a cash reserve of 1 or 3
percent of the obligations collateralized by finance receivables served as
security for the $1,781.3 million and $1,692.3 million of obligations
collateralized by finance receivables at June 30, 2022 and December 31, 2021,
respectively. The amount of the cash reserve depends on circumstances which are
set forth in the securitization agreements. There were unamortized
securitization issuance costs of approximately $11.5 million and $15.1 million
at June 30, 2022 and December 31, 2021, respectively. After the occurrence of a
termination event, as defined in the U.S. securitization agreement, the banks
may, and could, cause the stock of AFC Funding Corporation to be transferred to
the bank facility, though as a practical matter the bank facility would look to
the liquidation of the receivables under the transaction documents as their
primary remedy.

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Proceeds from the revolving sale of receivables to the bank facilities are used
to fund new loans to customers. AFC, AFC Funding Corporation and AFCI must
maintain certain financial covenants including, among others, limits on the
amount of debt AFC and AFCI can incur, minimum levels of tangible net worth, and
other covenants tied to the performance of the finance receivables portfolio.
The securitization agreements also incorporate the financial covenants of our
Credit Facility. At June 30, 2022, we were in compliance with the covenants in
the securitization agreements.

EBITDA and Adjusted EBITDA


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, or GAAP. They are
not measurements of our financial performance under GAAP and should not be
considered 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 above in the discussion of
certain restrictive loan covenants under "Credit Facilities."

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 profit from continuing operations for the periods presented:


                                                                               Three Months Ended June 30, 2022
(Dollars in millions)                                               Marketplace             Finance           Consolidated
Income (loss) from continuing operations                          $       (36.3)         $     30.9          $       (5.4)
Add back:
Income taxes                                                              (20.2)               10.3                  (9.9)
Interest expense, net of interest income                                    9.0                16.2                  25.2
Depreciation and amortization                                              23.8                 2.1                  25.9
Intercompany interest                                                       0.6                (0.6)                    -
EBITDA                                                                    (23.1)               58.9                  35.8
Non-cash stock-based compensation                                          11.7                 2.8                  14.5
Loss on extinguishment of debt                                              7.7                   -                   7.7
Acquisition related costs                                                   0.3                   -                   0.3
Securitization interest                                                       -               (14.3)                (14.3)
Severance                                                                   3.1                 0.2                   3.3
Foreign currency (gains)/losses                                             3.3                   -                   3.3
Net change in unrealized (gains) losses on investment securities              -                 3.2                   3.2
Professional fees related to business improvement efforts                   0.7                 0.1                   0.8
Other                                                                       1.3                 0.2                   1.5
 Total addbacks/(deductions)                                               28.1                (7.8)                 20.3
Adjusted EBITDA                                                   $         5.0          $     51.1          $       56.1




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                                                                               Three Months Ended June 30, 2021
(Dollars in millions)                                               Marketplace            Finance            Consolidated
Income (loss) from continuing operations                          $      (32.0)         $     16.7          $       (15.3)
Add back:
Income taxes                                                              (3.3)                5.7                    2.4
Interest expense, net of interest income                                  21.4                 9.4                   30.8
Depreciation and amortization                                             24.9                 2.5                   27.4
Intercompany interest                                                      0.1                (0.1)                     -
EBITDA                                                                    11.1                34.2                   45.3
Non-cash stock-based compensation                                          3.7                 0.6                    4.3
Acquisition related costs                                                  1.6                   -                    1.6
Securitization interest                                                      -                (6.8)                  (6.8)
Severance                                                                  0.6                   -                    0.6
Foreign currency (gains)/losses                                            0.4                   -                    0.4
Contingent consideration adjustment                                        4.5                   -                    4.5
Net change in unrealized (gains) losses on investment securities             -                11.9                   11.9
Other                                                                      0.2                 0.1                    0.3
 Total addbacks/(deductions)                                              11.0                 5.8                   16.8
Adjusted EBITDA                                                   $       22.1          $     40.0          $        62.1



                                                                       Six Months Ended June 30, 2022
(Dollars in millions)                                       Marketplace           Finance            Consolidated
Income (loss) from continuing operations                  $      (75.7)         $    61.9          $       (13.8)
Add back:
Income taxes                                                     (35.3)              20.7                  (14.6)
Interest expense, net of interest income                          22.2               28.5                   50.7
Depreciation and amortization                                     47.7                4.2                   51.9
Intercompany interest                                              0.7               (0.7)                     -
EBITDA                                                           (40.4)             114.6                   74.2
Non-cash stock-based compensation                                 16.1                3.6                   19.7
Loss on extinguishment of debt                                     7.7                  -                    7.7
Acquisition related costs                                          0.6                  -                    0.6
Securitization interest                                              -              (24.7)                 (24.7)
(Gain)/Loss on asset sales                                        (0.1)                 -                   (0.1)
Severance                                                          6.3                0.4                    6.7
Foreign currency (gains)/losses                                    4.5                  -                    4.5

Net change in unrealized (gains) losses on investment securities

                                                           -                6.2                    6.2

Professional fees related to business improvement efforts 8.0

          0.9                    8.9
Other                                                              1.3                0.2                    1.5
 Total addbacks/(deductions)                                      44.4              (13.4)                  31.0
Adjusted EBITDA                                           $        4.0          $   101.2          $       105.2



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                                                                        Six Months Ended June 30, 2021
(Dollars in millions)                                       Marketplace            Finance            Consolidated
Income (loss) from continuing operations                  $      (62.5)         $     73.4          $        10.9
Add back:
Income taxes                                                       1.7                25.2                   26.9
Interest expense, net of interest income                          42.7                18.7                   61.4
Depreciation and amortization                                     49.4                 4.9                   54.3
Intercompany interest                                              0.2                (0.2)                     -
EBITDA                                                            31.5               122.0                  153.5
Non-cash stock-based compensation                                  8.1                 1.3                    9.4
Acquisition related costs                                          2.9                   -                    2.9
Securitization interest                                              -               (13.6)                 (13.6)
(Gain)/Loss on asset sales                                           -                (0.8)                  (0.8)
Severance                                                          0.8                 0.2                    1.0
Foreign currency (gains)/losses                                    2.6                   -                    2.6
Contingent consideration adjustment                               15.7                   -                   15.7
Net change in unrealized (gains) losses on investment
securities                                                           -               (31.6)                 (31.6)
Other                                                              0.4                (0.2)                   0.2
 Total addbacks/(deductions)                                      30.5               (44.7)                 (14.2)
Adjusted EBITDA                                           $       62.0          $     77.3          $       139.3



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Certain of our loan covenant calculations utilize financial results for the most
recent four consecutive fiscal quarters (total KAR results, including the ADESA
U.S. physical auctions shown as discontinued operations). The following table
reconciles EBITDA and Adjusted EBITDA to net income (loss) for the periods
presented:

                                                                                                                                             Twelve
                                                                                                                                             Months
                                                                                 Three Months Ended                                           Ended
                                                      September 30,          December 31,           March 31,          June 30,
(Dollars in millions)                                     2021                   2021                 2022               2022             June 30, 2022
Net income (loss)                                   $         (1.0)         

$5.1 $(0.3) $210.2 $214.0
Less: Income from discontinued operations

                     25.9                 (10.1)                8.1             215.6                   239.5
Income (loss) from continuing operations                     (26.9)                 15.2                (8.4)             (5.4)                  (25.5)
Add back:
Income taxes                                                  10.3                 (22.1)               (4.7)             (9.9)                  (26.4)
Interest expense, net of interest income                      31.7                  31.7                25.5              25.2                   114.1
Depreciation and amortization                                 27.4                  28.2                26.0              25.9                   107.5
EBITDA                                                        42.5                  53.0                38.4              35.8                   169.7
Non-cash stock-based compensation                              3.6                   1.3                 5.2              14.5                    24.6
Loss on extinguishment of debt                                   -                     -                   -               7.7                     7.7
Acquisition related costs                                      2.1                   2.1                 0.3               0.3                     4.8
Securitization interest                                       (7.9)                 (8.3)              (10.4)            (14.3)                  (40.9)
(Gain)/Loss on asset sales                                       -                   0.1                (0.1)                -                       -
Severance                                                      0.8                   1.5                 3.4               3.3                     9.0
Foreign currency (gains)/losses                                0.1                   1.1                 1.2               3.3                     5.7
Contingent consideration adjustment                            4.4                   4.2                   -                 -                     8.6
Net change in unrealized (gains) losses on
investment securities                                         20.9                   9.3                 3.0               3.2                    36.4
Professional fees related to business improvement
efforts                                                          -                     -                 8.1               0.8                     8.9
Other                                                          0.1                     -                   -               1.5                     1.6
   Total addbacks/(deductions)                                24.1                  11.3                10.7              20.3                    66.4
Adjusted EBITDA from continuing ops                 $         66.6          

$64.3 $49.1 $56.1 $236.1
Adjusted EBITDA from discontinued operations

                         30.0                  33.6                22.6               2.2                    88.4
Adjusted EBITDA                                     $         96.6          $       97.9          $     71.7          $   58.3          $        324.5



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