SecProbe.io

United States securities and exchange commission logo
December 27, 2022
Scott A. Anderson
Chief Accounting Officer
KAR Auction Services, Inc.
11299 N. Illinois Street
Carmel , Indiana 46032
Re:KAR Auction Services, Inc.
Form 10-K for Fiscal Year Ended December 31, 2021
Filed February 23, 2022
Form 10-Q for Fiscal Period Ended September 30, 2022
Filed November 2, 2022
File No. 001-34568
Dear Scott A. Anderson:
            We have limited our review of your filing to the financial statements and related
disclosures and have the following comments.  In some of our comments, we may ask you to
provide us with information so we may better understand your disclosure.
            Please respond to these comments within ten business days by providing the requested
information or advise us as soon as possible when you will respond.  If you do not believe our
comments apply to your facts and circumstances, please tell us why in your response.
            After reviewing your response to these comments, we may have additional comments.
Form 10-K for the Fiscal Year Ended December 31, 2021
Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Overview of Results of KAR Auction Services, Inc. for the Years Ended December 31, 2021 and
2020
ADESA Results
Revenue, page 35
1.It appears the increase in total ADESA/Marketplace revenue in 2021 compared to 2020
was due to the increase in purchased vehicle sales.   Also, it appears this revenue
category was the primary reason for the decrease in total revenue for the nine months
ended September 30, 2022 compared to the corresponding prior year period.  We further

 FirstName LastNameScott A. Anderson
 Comapany NameKAR Auction Services, Inc.
 December 27, 2022 Page 2
 FirstName LastName
Scott A. Anderson
KAR Auction Services, Inc.
December 27, 2022
Page 2
note that for each quarter in fiscal 2022 the quarterly amount of revenue in the current
year period was lower than that for the corresponding prior year period for this revenue
category.  However, there does not appear to be discussion of any of these points as well
the reason for the decreased trend of contribution of this revenue category to total
revenue.in fiscal 2022.  Please explain these points to us and any related trend information
pursuant to Item 303(b)(2)(ii) of Regulation S-K with view toward disclosure as
appropriate to the extent relevant to interim and annual periods.
2.You disclose the increase in ADESA total revenue in fiscal 2021 compared to fiscal 2020
is due to the increase in average revenue per vehicle sold, partially offset by a decrease in
the number of vehicles sold.  You also quantify the incremental increase in ADESA total
revenue in fiscal 2021 from businesses acquired and fluctuations in exchange rates.
Excluding these incremental impacts, it appears ADESA total revenue in 2021 decreased
from 2020, with an apparent reverse price/volume relationship from that disclosed (i.e.,
would now be due to a decrease in the number of vehicles sold with a partial offset by an
increase in average revenue per vehicle sold).  However, this point is not discussed nor
any related consequential trend information.  Please explain to us why ADESA
total revenue decreased on this basis and any related trend information with view toward
disclosure as appropriate to the extent relevant to interim and annual periods.
Gross Profit, page 36
3.You disclose here and in the same sections for each period presented in the Form 10-Q for
the fiscal year ended September 30, 2022 that the entire selling and purchase price of the
vehicle are recorded as revenue and cost of services for purchased vehicles sold.  From
your disclosures it appears the gross profit of purchased vehicles reduces the overall gross
profit margin percentage.  However, the reason for this is not disclosed nor how the
recording of the entire selling and purchase price factors into the amount of gross profit
and the related percentage.  Please explain to us the reason for these points and any related
trend information with view toward disclosure as appropriate to the extent relevant to
interim and annual periods.
Form 10-Q for the Fiscal Period Ended September 30, 2022
Condensed Notes to Consolidated Financial Statements
Note 2 - Sale of ADESA U.S. Physical Auction Business and Discontinued Operations, page 12
4.In connection with your sale of the ADESA U.S. physical auction business, you disclose
you will continue to own the ADESA tradename, which has an indefinite life.  Please
explain to us with a view toward disclosure how the book value of this asset will be
maintained and you will assess this asset for impairment..

 FirstName LastNameScott A. Anderson
 Comapany NameKAR Auction Services, Inc.
 December 27, 2022 Page 3
 FirstName LastName
Scott A. Anderson
KAR Auction Services, Inc.
December 27, 2022
Page 3
Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations, page 28
5.Service revenue is the largest category of revenue in each period presented in fiscal 2022
for Marketplace, whereas it was not the largest category in fiscal 2021.  Also, it appears
increases in service revenue in each period in fiscal 2022 compared to the corresponding
prior year period is the reason for the increase in total Marketplace revenue in each period
in fiscal 2022 compared to the corresponding prior year period.  However, these points do
not appear to be discussed.  Please explain to us the reason for these points and any related
trend information with view toward disclosure as appropriate to the extent relevant to
interim and annual periods.
6.Please quantify to the extent practicable the amount of each variance factor cited for
Marketplace service revenue for each period presented.  Refer to section 501.04 of our
Codification of Financial Reporting Policies for guidance.
7.For each period presented regarding Marketplace revenue, it appears you initially attribute
the change in the total amount of Marketplace revenue to a price/volume assessment (i.e.,
the change in revenue is the result of the change in the number of vehicles sold and the
change in the average revenue per vehicle sold).  It appears the average revenue per
vehicle sold is computed by dividing the total amount of Marketplace revenue by the total
number of vehicles sold.  Please explain to us with a view toward disclosure as
appropriate in relevant interim and annual periods the extent you dictate changes in the
amount of the pricing of each factor cited as a service revenue variance or whether the
pricing of these factors is determined by other parties or other considerations that you pass
along in calculating the average revenue per vehicle sold.
Liquidity and Capital Resources
Summary of Cash Flows, page 43
8.For discontinued operations for the nine months ended 2022, we note the relatively large
amount of income, net of income taxes with a relatively large amount of net cash used by
operating activities.  Please explain to us the factors that contributed to this use of
operating cash flows.
9.Please explain to us with a view toward disclosure as appropriate in relevant interim and
annual periods the operational reasons for the significantly lower net cash provided by
operating activities of continuing operations in 2022 versus 2021.  In connection with this,
we note the mention of non-cash adjustments which do not affect actual operating cash.
Also discuss the prospects of this reduced level of operating cash flow continuing, and to
the extent it is expected to continue, how you intend to meet your cash requirements and
maintain operations.

 FirstName LastNameScott A. Anderson
 Comapany NameKAR Auction Services, Inc.
 December 27, 2022 Page 4
 FirstName LastName
Scott A. Anderson
KAR Auction Services, Inc.
December 27, 2022
Page 4
            In closing, we remind you that the company and its management are responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review, comments, action or
absence of action by the staff.
            You may contact Aamira Chaudhry at 202-551-3389 or Doug Jones at 202-551-
3309 with any questions.
Sincerely,
Division of Corporation Finance
Office of Trade & Services