In the fourth quarter, KAR’s net revenue dropped 21 percent to $529.6 million. The company posted a net loss of $17.1 million, compared with net income of $15.3 million in the same quarter a year ago.
For the full year, KAR’s revenue declined 21 percent to $2.19 billion. KAR’s full-year net income plunged to $500,000, compared with net income of $92.4 million in 2019.
In speaking about the company’s fourth-quarter results, Hallett pointed to challenges in the wholesale sector brought on by the coronavirus pandemic. KAR permanently cut some 5,000 positions in the wake of the pandemic, reducing annual payroll costs by $150 million.
Hallett said the company had its headcount and cost structure aligned by last fall, leading favorable third-quarter results, but a resurgence of the virus led to impacts that went beyond what it experienced in the spring, he said. “Lower transaction volumes led to reduced performance in the fourth quarter, despite all the reductions that we’ve made to our cost structure,” Hallett said.
KAR shifted its wholesale vehicle auctions to a digital format last March and has continued to not run vehicles physically through lanes, even as Manheim and independent competitors do, to varying degrees.
“It is true that many of our competitors are running cars through the lane, despite the increased COVID numbers over the past several months,” Hallett said Wednesday. “But we have not returned to the old way of doing business, and don’t believe there’s any evidence that running cars across the block improves the financial outcomes for our customers.”
Hallett said he believes the factors that hit the company’s fourth-quarter performance are temporary.
The lower-than-expected results sent KAR’s shares tumbling 19.5 percent to $14.87 in midday trading on Wednesday.
On an earnings call, an analyst asked if, with the stock price around $14, the company would consider going private.
CFO Eric Loughmiller said the current stock price does not reflect the long-term value of the company.
“We won’t worry about who owns us,” he said. “We’ll just run the business for our owners.”
