The following discussion and analysis contains forward-looking statements within
the meaning of the federal securities laws, and should be read in conjunction
with the disclosures we make concerning risks and other factors that may affect
our business and operating results. See "Statement Regarding Forward-Looking
Statements" preceding Part I, Item 1 in this Quarterly Report on Form 10-Q.

Unless the context suggests otherwise, all reference in this Quarterly Report on
Form 10-Q to the "Company," "we," "us," refer to IAA, Inc. together with its
subsidiaries.
Executive Overview
Our Business
We are a leading global digital marketplace connecting vehicle buyers and
sellers. Leveraging leading-edge technology and focusing on innovation, our
unique platform facilitates the marketing and sale of total-loss, damaged and
low-value vehicles for a full spectrum of sellers. Headquartered in Westchester,
IL, we have two operating segments: United States and International. We maintain
operations in the United States, which make up the United States segment and
operations in Canada and the United Kingdom, which make up the International
segment. We have more than 200 facilities across both business segments.
We serve a global buyer base and a full spectrum of sellers, including insurance
companies, dealerships, fleet lease and rental car companies, and charitable
organizations. We offer sellers a comprehensive suite of services aimed at
maximizing vehicle value, reducing administrative costs, shortening selling
cycle time and delivering the highest economic returns. Our solutions provide
global buyers with the vehicles they need to, among other things, fulfill their
vehicle rebuild requirements, replacement part inventory or scrap demand. We
provide global buyers with multiple bidding/buying digital channels, innovative
vehicle merchandising, efficient evaluation services and digital bidding tools,
enhancing the overall purchasing experience.
We completed the roll-out of our buyer digital transformation in the United
States in April 2020 and in Canada in July 2020. IAA UK has operated an online,
digital only auction since 2005. As a result, we have shifted to a fully online,
digital auction model, resulting in a reduction of costs previously associated
with the physical auctions.
COVID-19 Impact on our Business
The outbreak of the coronavirus pandemic (COVID-19) has severely impacted, and
continues to impact worldwide economic activities. Although many of the
governmental restrictions that were imposed in 2020 to contain and combat the
spread of COVID-19 have since been lifted or scaled back, ongoing surges of
COVID-19 infections, including new more contagious and/or vaccine resistant
variants, have resulted in the re-imposition of certain restrictions from time
to time, and may lead to other restrictions being re-implemented in response to
efforts to reduce the spread of COVID-19.
Given the nature of our operations, we are deemed "essential" and have remained
open for business. We continue to follow strict health and sanitization
protocols across all of our locations aimed at keeping our employees, customers,
and other business partners safe.

Our business in fiscal 2020 was significantly impacted due to lower vehicle
assignment volume, primarily during the first half of fiscal 2020, as the
stay-at-home orders executed in March 2020 significantly reduced the number of
car accidents. Beginning in the second half of fiscal 2020, as certain economies
began to re-open, we saw a gradual recovery in miles driven that has resulted in
improved vehicle assignments. While improving through the first half of fiscal
2021, vehicles assignments continue to remain below pre-COVID-19 levels.

The extent to which the COVID-19 outbreak impacts our business and results of
operations will depend on future developments that are highly uncertain and
cannot be predicted, including new information that may emerge concerning the
actions to contain its impact, resurgences of COVID-19 or variants thereof that
may continue to occur, the availability and public acceptance of vaccines for
COVID-19, any delays or complications in vaccine production and distribution,
the efficacy of vaccines for COVID-19 and how quickly and to what extent normal
economic and operating conditions resume. However, we expect COVID-19 and the
efforts taken to reduce its spread will continue to have a negative impact on
our vehicle assignments in fiscal 2021, the impact of which could be material.
Acquisition
On June 18, 2021, we acquired Marisat, Inc. d/b/a Auto Exchange ("Auto
Exchange"), a salvage auction provider located in New Jersey. The estimated
acquisition date fair value of the total consideration was $7.3 million, which
consisted of $2.0 million of cash, and the fair value of contingent
consideration of $5.3 million, $2.0 million of which was paid at closing. The
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remaining $3.3 million of contingent consideration is payable over five years
subject to the achievement of certain performance targets. See Note 9 -
Acquisition in the notes to consolidated financial statements for additional
information on this acquisition.
Share Repurchase Program
On August 2, 2021, our Board of Directors authorized a share repurchase program
under which we can repurchase up to $400.0 million (exclusive of fees and
commissions) of shares of our common stock (the "Repurchase Program"). The
Repurchase Program expires on August 3, 2026. The shares under the Repurchase
Program may be repurchased through open market, privately negotiated
transactions, accelerated share repurchase transactions or other means,
including under plans complying with the provisions of Rule 10b5-1 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The timing and
amount of common stock to be repurchased under this Repurchase Program will be
subject to the discretion of the Company based upon market conditions and other
opportunities the Company may have to deploy capital. The Repurchase Program
does not obligate us to acquire any specific number of shares, and the
Repurchase Program may be suspended or discontinued at any time.
Sources of Revenues and Expenses
A significant portion of our revenue is derived from auction fees and related
services associated with our salvage auctions. Our revenue earned from buyers
represents fees charged based on a tiered structure that increases with the
sales price of the vehicle as well as service fees for additional services such
as storage, transportation, and vehicle condition reporting. Our revenue earned
from sellers represents the combination of the inbound tow, processing, storage,
titling, enhancing and auctioning of the vehicle. The majority of our business
comprises auctioning vehicles on a consignment basis, meaning that our sellers
continue to own their vehicles until they are sold to buyers through one of our
digital marketplaces. We record revenue for consigned vehicles on a net basis as
we have no influence on the vehicle auction selling price agreed to by the
seller and the buyer at the auction. When we purchase vehicles for reselling, we
record the entire sale price as revenue and the purchase price as cost of
services, which results in lower gross margin than we recognize for vehicles
sold at an auction on a consignment basis.
Our operating expenses consist of cost of services, cost of vehicle sales,
selling, general and administrative and depreciation and amortization. Cost of
services is comprised of payroll and related costs, subcontract services,
supplies, insurance, property taxes, utilities, service contract claims,
maintenance, and lease expense related to the auction sites. Cost of vehicle
sales is comprised of the cost of purchased vehicles. Cost of services and
vehicle sales exclude depreciation and amortization. Selling, general and
administrative expenses are comprised of, among other things, payroll and
related costs, sales and marketing, information technology services and
professional fees.
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Results of Operations
                                            Three Months Ended                            Change                             Six Months Ended                             Change
(Dollars in millions,                                      Jun 28, 2020
except per share data)              Jun 27, 2021                                    $                %              Jun 27, 2021           Jun 28, 2020             $                %

Revenues:
Service revenues                  $    382.5             $       264.8          $ 117.7             44.4  %       $       742.9          $       598.8          $ 144.1             24.1  %
Vehicle sales                           62.6                      32.0             30.6             95.6  %               125.7                   64.6             61.1             94.6  %
Total revenues                         445.1                     296.8            148.3             50.0  %               868.6                  663.4            205.2             30.9  %
Operating expenses:
Cost of services                       197.6                     158.9             38.7             24.4  %               394.0                  362.1             31.9              8.8  %
Cost of vehicle sales                   51.6                      26.2             25.4             96.9  %               106.0                   54.0             52.0             96.3  %
Selling, general and
administrative                          43.7                      34.3              9.4             27.4  %                87.1                   72.3             14.8             20.5  %
Depreciation and
amortization                            20.5                      19.6              0.9              4.6  %                40.3                   42.1             (1.8)            (4.3) %
Total operating expenses               313.4                     239.0             74.4             31.1  %               627.4                  530.5             96.9             18.3  %
Operating profit                       131.7                      57.8             73.9            127.9  %               241.2                  132.9            108.3             81.5  %
Interest expense, net                   21.9                      13.8              8.1             58.7  %                34.9                   29.8              5.1             17.1  %
Other (income) expense, net             (0.3)                      0.1             (0.4)            NM*                    (0.7)                  (0.6)            (0.1)            NM*
Income before income taxes             110.1                      43.9             66.2            150.8  %               207.0                  103.7            103.3             99.6  %
Income taxes                            27.2                      10.7             16.5            154.2  %                51.6                   25.8             25.8            100.0  %
Net income                        $     82.9             $        33.2          $  49.7            149.7  %       $       155.4          $        77.9          $  77.5             99.5  %
Net income per share
Basic                             $     0.61             $        0.25          $  0.36            144.0  %       $        1.15          $        0.58          $  0.57             98.3  %
Diluted                           $     0.61             $        0.25          $  0.36            144.0  %       $        1.15          $        0.58          $  0.57             98.3  %


________________
* NM - Not meaningful
Service Revenues
                                               Three Months Ended                            Change                             Six Months Ended                             Change
(Dollars in millions)                  Jun 27, 2021           Jun 28, 2020             $                %              Jun 27, 2021           Jun 28, 2020             $                %
United States                        $    359.0             $       246.5          $ 112.5             45.6  %       $       691.4          $       551.5          $ 139.9             25.4  %
International                              23.5                      18.3              5.2             28.4  %                51.5                   47.3              4.2              8.9  %
Total service revenues               $    382.5             $       264.8          $ 117.7             44.4  %       $       742.9          $       598.8          $ 144.1             24.1  %



Three Months Ended June 27, 2021 versus June 28, 2020
United States service revenues increased by $112.5 million due to a higher
volume of vehicles sold, which increased by 24% due to higher miles driven as
the United States segment is gradually recovering from the impact of the
COVID-19 pandemic. In addition, United States service revenues also benefited
from an increase in revenue per unit of 17%, which primarily resulted from
higher average selling prices due to increased buyer participation, enhanced
product and service offerings, and favorable industry dynamics.
International service revenues increased by $5.2 million due to a higher volume
of vehicles sold, which increased by 5%, and an increase in revenue per unit of
23%, which resulted from higher average selling prices due to increased buyer
participation, enhanced product and service offerings, and favorable industry
dynamics.
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Six Months Ended June 27, 2021 versus June 28, 2020
United States service revenues increased by $139.9 million due to a higher
volume of vehicles sold, which increased by 5% due to higher miles driven as the
United States segment is gradually recovering from the impact of the COVID-19
pandemic. In addition, United States service revenues also benefited from an
increase in revenue per unit of 19%, which primarily resulted from higher
average selling prices due to increased buyer participation, enhanced product
and service offerings, and favorable industry dynamics.
International service revenues increased by $4.2 million due to an increase in
revenue per unit of 25%, which primarily resulted from higher average selling
prices due to increased buyer participation, enhanced product and service
offerings, and favorable industry dynamics. This increase was partially offset
by a lower volume of vehicles sold, which decreased by 13% as the International
segment continues to be impacted by the COVID-19 pandemic.
Vehicle Sales
                                               Three Months Ended                            Change                            Six Months Ended                            Change
(Dollars in millions)                  Jun 27, 2021           Jun 28, 2020             $               %              Jun 27, 2021          Jun 28, 2020             $               %
United States                       $     34.0               $       19.4          $ 14.6             75.3  %       $        59.9          $       35.5          $ 24.4             68.7  %
International                             28.6                       12.6            16.0            127.0  %                65.8                  29.1            36.7            126.1  %
Total vehicle sales                 $     62.6               $       32.0          $ 30.6             95.6  %       $       125.7          $       64.6          $ 61.1             94.6  %



Three Months Ended June 27, 2021 versus June 28, 2020
United States vehicle sales increased by $14.6 million due to a higher volume of
vehicles sold, which increased by 43%, primarily due to higher miles driven as
the United States segment is gradually recovering from the impact of the
COVID-19 pandemic. In addition, United States vehicle sales also benefited from
an increase in revenue per unit sold of 22%, which primarily resulted from
higher average selling prices due to increased buyer participation, enhanced
product and service offerings, and favorable industry dynamics.

International vehicle sales increased by $16.0 million due to a higher volume of
vehicles sold, which increased by 53% primarily due to the impact of a provider
switching from a consignment model to a purchase vehicle model, and an increase
in revenue per unit sold of 48%, which primarily resulted from higher average
selling prices due to increased buyer participation, enhanced product and
service offerings, and favorable industry dynamics.

Six Months Ended June 27, 2021 versus June 28, 2020
United States vehicle sales increased by $24.4 million due to a higher volume of
vehicles sold, which increased by 24%, primarily due to higher miles driven as
the United States segment is gradually recovering from the impact of the
COVID-19 pandemic. In addition, United States vehicle sales also benefited from
an increase in revenue per unit sold of 36%, which primarily resulted from
higher average selling prices due to increased buyer participation, enhanced
product and service offerings, and favorable industry dynamics.

International vehicle sales increased by $36.7 million due to higher volume of
vehicles sold, which increased by 34% primarily due to the impact of a provider
switching from a consignment model to a purchased vehicle model, and an increase
in revenue per unit sold of 69%, which mainly resulted from higher average
selling prices due to increased buyer participation, enhanced product and
service offerings, and favorable industry dynamics.

Cost of Services
                                                Three Months Ended                            Change                            Six Months Ended                            Change
(Dollars in millions)                   Jun 27, 2021           Jun 28, 2020             $               %              Jun 27, 2021           Jun 28, 2020             $               %
United States                         $    182.7             $       146.6          $ 36.1             24.6  %       $       360.8          $       331.6          $ 29.2             8.8  %
International                               14.9                      12.3             2.6             21.1  %                33.2                   30.5             2.7             8.9  %
Total cost of services                $    197.6             $       158.9          $ 38.7             24.4  %       $       394.0          $       362.1          $ 31.9             8.8  %



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Three Months Ended June 27, 2021 versus June 28, 2020
United States cost of services increased by $36.1 million primarily due to a
higher volume of vehicles sold, higher incentive-based compensation costs and
higher occupancy costs.

International cost of services increased by $2.6 million due to a higher volume
of vehicles sold, higher incentive-based compensation costs and higher occupancy
costs.
Six Months Ended June 27, 2021 versus June 28, 2020
United States cost of services increased by $29.2 million primarily due to a
higher volume of vehicles sold, higher incentive-based compensation costs and
higher occupancy costs, partially offset by cost savings from adopting a
fully-digital
auction model.

International cost of services increased by $2.7 million due to higher incentive-based compensation costs and higher occupancy costs, partially offset by a lower volume of vehicles sold.

Cost of Vehicle Sales


                                              Three Months Ended                            Change                            Six Months Ended                            Change
(Dollars in millions)                 Jun 27, 2021           Jun 28, 2020             $               %              Jun 27, 2021          Jun 28, 2020             $               %
United States                      $     26.7               $       15.8          $ 10.9             69.0  %       $        47.7          $       28.8          $ 18.9             65.6  %
International                            24.9                       10.4            14.5            139.4  %                58.3                  25.2            33.1            131.3  %
Total cost of vehicle sales        $     51.6               $       26.2          $ 25.4             96.9  %       $       106.0          $       54.0          $ 52.0             96.3  %

Three Months Ended June 27, 2021 versus June 28, 2020 United States cost of vehicle sales increased by $10.9 million due to higher volume and higher average purchase prices.



International cost of vehicle sales increased by $14.5 million primarily due to
the impact of an international provider switching from a consignment model to a
purchase vehicle model and higher average purchase prices.
Six Months Ended June 27, 2021 versus June 28, 2020
United States cost of vehicle sales increased by $18.9 million due to higher
volume and higher average purchase prices.

International cost of vehicle sales increased by $33.1 million primarily due to
the impact of an international provider switching from a consignment model to a
purchase vehicle model and higher average purchase prices.

Selling, General and Administrative


                                              Three Months Ended                           Change                           Six Months Ended                            Change
(Dollars in millions)                 Jun 27, 2021           Jun 28, 2020            $               %             Jun 27, 2021          Jun 28, 2020             $               %
United States                      $     40.5               $       32.9          $ 7.6             23.1  %       $    81.0             $       68.0          $ 13.0             19.1  %
International                             3.2                        1.4            1.8            128.6  %             6.1                      4.3             1.8             41.9  %
Total selling, general and
administrative expenses            $     43.7               $       34.3          $ 9.4             27.4  %       $    87.1             $       72.3          $ 14.8             20.5  %



Three Months Ended June 27, 2021 versus June 28, 2020
United States selling, general and administrative expenses increased by $7.6
million primarily due to higher incentive-based compensation costs. These
increases were partially offset by a $3.6 million decrease in bad debt expense
in the second quarter of fiscal 2021.

International selling, general and administrative expenses increased by $1.8 million primarily due to higher compensation costs.


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Six Months Ended June 27, 2021 versus June 28, 2020
United States selling, general and administrative expenses increased by $13.0
million primarily due to higher incentive-based compensation costs, a $2.7
million non-income, tax related accrual and a $3.8 million decrease in bad debt
expense in the first half of fiscal 2021.

International selling, general and administrative expenses increased by $1.8 million primarily due to higher compensation costs.



Depreciation and Amortization
                                          Three Months Ended                           Change                           Six Months Ended                            Change
(Dollars in millions)             Jun 27, 2021           Jun 28, 2020            $               %             Jun 27, 2021          Jun 28, 2020             $               %
United States                  $     18.4               $       18.0          $ 0.4              2.2  %       $    36.3             $       38.8          $ (2.5)            (6.4) %
International                         2.1                        1.6            0.5             31.3  %             4.0                      3.3             0.7             21.2  %
Total depreciation and
amortization                   $     20.5               $       19.6          $ 0.9              4.6  %       $    40.3             $       42.1          $ (1.8)            (4.3) %



Three Months Ended June 27, 2021 versus June 28, 2020
Depreciation and amortization increased by $0.9 million as there were more
intangible assets to amortize in both segments in the second quarter of fiscal
2021 compared to the prior year comparable period.
Six Months Ended June 27, 2021 versus June 28, 2020
Depreciation and amortization decreased by $1.8 million as there were fewer
fixed assets to depreciate within the United States segment during the first six
months of fiscal 2021.
Interest Expense
Three Months Ended June 27, 2021 versus June 28, 2020
Interest expense increased by $8.1 million as compared to the prior year period
primarily due to the $10.3 million loss on early extinguishment of debt in
conjunction with the refinancing of our credit facilities in April 2021,
partially offset by lower interest rates on our floating rate debt.
Six Months Ended June 27, 2021 versus June 28, 2020
Interest expense increased by $5.1 million as compared to the prior year period
primarily due to the $10.3 million loss on early extinguishment of debt in
conjunction with the refinancing of our credit facilities in April 2021,
partially offset by lower interest rates on our floating rate debt.
Liquidity and Capital Resources
We believe that the significant indicators of liquidity for our business are
cash on hand, cash flow from operations and working capital. Our principal
source of liquidity consists of cash generated by operations. Our 2021 Revolving
Credit Facility (as defined below) provides another source of liquidity as
needed.
Our cash flow is used to invest in new products and services, fund capital
expenditures and working capital requirements and, coupled with borrowings under
our 2021 Revolving Credit Facility, is expected to be adequate to satisfy our
cash requirements, including those listed below, fund future acquisitions, and
repurchase shares of our common stock, if any. Our ability to fund our cash
requirements will depend on our ongoing ability to generate cash from operations
and to access borrowings under our 2021 Revolving Credit Facility. We believe
that our cash on hand, future cash from operations, borrowings available under
our 2021 Revolving Credit Facility and access to the debt and capital markets
will provide adequate resources to fund our operating and financing needs for
the next twelve months and beyond.
Approximately $74.1 million of available cash was held by our foreign
subsidiaries as of June 27, 2021. We do not currently expect to incur
significant additional tax liabilities if funds held by our foreign subsidiaries
were to be repatriated.
There have been no material changes to our cash requirements from known
contractual and other obligations reported in our Annual Report on Form 10-K for
the fiscal year ended December 27, 2020 filed with the Securities and Exchange
Commission (the "SEC") on February 22, 2021 other than those described below:

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Debt Service Obligations

On April 30, 2021, we entered into a new credit agreement with JPMorgan Chase
Bank, N.A., as administrative agent, and the other lenders from time to time
party thereto (the "2021 Credit Agreement"). The 2021 Credit Agreement provides
for, among other things: (i) a senior secured term loan in an aggregate
principal amount of $650 million (the "2021 Term Loan") and (ii) a senior
secured revolving credit facility with revolving commitments in an aggregate
principal amount of $525 million (the "2021 Revolving Credit Facility" and,
together with the 2021 Term Loan, the "2021 Credit Facility"). Borrowing
availability under the 2021 Revolving Credit Facility is subject to no default
or event of default under the 2021 Credit Agreement having occurred at the time
of borrowing. The proceeds of the 2021 Credit Facility, along with cash on hand,
were used to repay in full the $774.0 million in outstanding borrowings under
our prior seven-year senior secured term loan. The 2021 Credit Facility matures
on April 30, 2026.

As of June 27, 2021, $650.0 million was outstanding under the 2021 Term Loan and
no borrowings were outstanding under the 2021 Revolving Credit Facility. See
Note 6 - Long-term Debt in the notes to consolidated financial statements for
additional information on the 2021 Credit Facility and our outstanding
indebtedness.
Capital Expenditures

Capital expenditures for the six months ended June 27, 2021 and June 28, 2020
were $57.8 million and $22.1 million, respectively. The increase in capital
expenditures during the six months ended June 27, 2021 as compared to the prior
year period was due to the timing of projects and a higher level of spend on
real estate expansion and technology-based investments. Our capital expenditures
during the six months ended June 27, 2021 primarily related to real estate
development and technology-based investments, including improvements in
information technology systems and infrastructure. Capital expenditures were
funded primarily from cash flow from operations. We continue to invest in our
core information technology capabilities and capacity expansion. Future capital
expenditures could vary substantially based on capital project timing, the
opening of new auction facilities, capital expenditures related to acquired
businesses and the initiation of new information systems projects to support our
business strategies.
Acquisition
On June 18, 2021, we acquired Auto Exchange, a salvage auction provider located
in New Jersey. The estimated acquisition date fair value of the total
consideration was $7.3 million, which consisted of $2.0 million of cash, and the
fair value of contingent consideration of $5.3 million, $2.0 million of which
was paid at closing. The remaining $3.3 million of contingent consideration is
payable over five years subject to the achievement of certain performance
targets. See Note 9 - Acquisition in the notes to consolidated financial
statements for additional information on this acquisition.

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