Slide 1: Second Quarter 2015 Earnings Call
Second Quarter 2015 Earnings Call July 30, 2015 Rob Wagman – President & Chief Executive Officer Nick Zarcone – Executive Vice President & Chief Financial Officer Joe Boutross – Director, Investor Relations
Slide 2: Forward Looking Statements
Forward Looking Statements Statements and information included in this presentation that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are made pursuant to the “safe harbor” provisions of such Act . Forward-loo
Slide 3: Mission Statement
Mission Statement To be the leading global value-added distributor of vehicle parts and accessories by offering our customers the most comprehensive, available and cost effective selection of part solutions while building strong partnerships with our employees and the communities in which we operate
Slide 4: Consolidated Results
Consolidated Results Q2 2015 YTD 2015 $3,750 $0.90 $1,850 $1,838 $0.50 $0.74 $0.75 $0.39 $3,612 $0.69 $1,800 $0.40 $3,600 $0.34 $0.60 $1,750 $0.30 $3,450 $0.45 $1,709 $1,700 $0.20 $3,335 $0.30 $3,300 $1,650 $0.10 $0.15 $- $1,600 $- $3,150 YTD-2014 YTD-2015 Q2-2014 Q2-2015 Q2-2014 Q2-2015 YTD-2014 YT
Slide 5: Q2 2015 Revenue Growth
Q2 2015 Revenue Growth Q2 revenue changes by source: Foreign Organic Acquisition Exchange Total (1) North America 6.3% 0.9% (0.9%) 6.3% Europe 10.1% 11.1% (11.7%) 9.5% Specialty 6.6% 25.3% (1.9%) 30.0% Parts and services 7.5% 7.4% (4.3%) 10.6% Other Revenue (20.6%) 0.4% (0.4%) (20.5%) Total 4.7% 6.7
Slide 6: YTD 2015 Revenue Growth
YTD 2015 Revenue Growth YTD revenue changes by source: Foreign Organic Acquisition Exchange Total (1) North America 5.4% 1.1% (0.9%) 5.7% Europe 12.0% 11.9% (11.2%) 12.6% Specialty 6.5% 28.0% (1.7%) 32.7% Parts and services 7.5% 7.8% (4.0%) 11.3% Other Revenue (19.2%) 0.5% (0.3%) (19.0%) Total 4.9%
Slide 7: Q2 2015 Operating Highlights
Q2 2015 Operating Highlights North America • Cumulative miles driven witnessed a YOY increase of 3.4% through May; 12-month moving average for miles driven through May 2015 reached its highest level since 1990 • YTD average price of unleaded regular gas was $2.42 a gallon through May 2015 compared t
Slide 8: Inventory
Inventory Inventory Procurement Q2 2015 Q2 2014 % Change Aftermarket inventory (millions) $698.2 $654.0 6.8% Wholesale salvage cars and trucks 75,000 71,000 5.6% Self service and “crush only” cars 131,000 143,000 (8.4%) • Aftermarket inventory levels sufficient to achieve our growth targets • Adjust
Slide 9: Acquisition Activity
Acquisition Activity Number of Q2 Number of YTD Acquisitions TTM Revenue* Acquisitions TTM Revenue* North America 2 Less than $10 million 3 Less than $12 million Europe 6 Less than $75 million 7 Less than $76 million Specialty 0 - 0 - Total 8 Less than $85 million 10 Less than $88 million North Amer
Slide 10: Q2 2015 Key Initiatives
Q2 2015 Key Initiatives New ECP Distribution Center (Tamworth, UK) •750,000 square feet •Significant level of automation •Will ultimately replace two existing facilities •Key Timeline •2015 – Construction •2016/2017 – Automation installation & transition from existing facilities •2018 – Fully operat
Slide 11: New ECP Distribution Center
New ECP Distribution Center 11
Slide 12: Financial Results
Financial Results
Slide 13: Operating Results
Operating Results Second Quarter YTD ($ in millions, except per share data) 2015 2014 Change 2015 2014 Change Revenue $1,838 $1,709 7.5% $3,612 $3,335 8.3% Gross Margin 724 671 7.9% 1,423 1,323 7.6% Segment EBITDA 233 211 10.2% 454 417 9.1% Operating Income 200 174 15.4% 386 347 11.2% Pre-tax Income
Slide 14: Q2 2015 Consolidated Margins
Q2 2015 Consolidated Margins Q2 Q2 Change (As a % of Revenue) 2015 2014 F/(U) QTD Commentary Revenue 100.0% 100.0% - Gross margin 39.4% 39.3% 0.1% Improvement in European and North American gross margins; partially offset by mix – lower margin Specialty business acquired in October 2014 Facility and
Slide 15: YTD 2015 Consolidated Margins
YTD 2015 Consolidated Margins YTD YTD Change (As a % of Revenue) 2015 2014 F/(U) YTD Commentary Revenue 100.0% 100.0% - Gross margin 39.4% 39.7% (0.3%) Decline primarily due to mix – lower margin Specialty business acquired in October 2014 Facility and warehouse 7.4% 7.6% 0.2% Improvement due to mix
Slide 16: Components of Quarterly Revenue
Components of Quarterly Revenue $1.71B $1.84B $3.34B $3.61B • Other Revenue (primarily related to self 100% service) continues to become a lower 9.8% 7.3% 9.8% 7.3% percentage of total revenue as scrap prices fall and we grow our other lines of 15.4% 11.8% 14.5% business 12.8% 80% • North America se
Slide 17: North America – Q2 2015 Results
North America – Q2 2015 Results Gross Margin % of Revenue 45% ($ in millions) 2015 2014 Change 2015 2014 43% 41% Revenue $1,045 $1,026 1.9% 39% Gross Margin $443 $431 2.8% 42.4% 42.0% Segment EBITDA Margin 15% Operating Expenses $306 $296 3.4% 29.4% 28.9% 14% Segment EBITDA $139 $137 1.5% 13.3% 13.4
Slide 18: North America – YTD 2015 Results
North America – YTD 2015 Results % of Revenue ($ in millions) 2015 2014 Change 2015 2014 Revenue $2,091 $2,055 1.8% Gross Margin $890 $872 2.1% 42.6% 42.5% Operating Expenses $604 $593 1.9% 28.9% 28.9% Segment EBITDA $288 $283 1.8% 13.8% 13.8% North America Segment EBITDA Margin Bridge 15.0% 0.2% 14
Slide 19: Scrap Prices
Scrap Prices $250 • Decrease in other revenue Monthly Scrap Price primarily attributable to $224 Average Quarterly Scrap Price lower scrap prices $230 $217 $215 $210 • Average price we receive for scrap steel was ~36% $187 lower YOY, at $140 for $190 YTD June 2015 vs. $217 per ton in 2014 $170 • Est
Slide 20: Europe – Q2 2015 Results
Europe – Q2 2015 Results % of Revenue Gross Margin 40% ($ in millions) 2015 2014 Change 2015 2014 38% Revenue $510 $465 9.7% 36% 34% Gross Margin $193 $173 11.6% 37.9% 37.2% Segment EBITDA Margin Operating Expenses $138 $126 9.5% 27.1% 27.2% 11% 10% Segment EBITDA $54 $46 17.4% 10.6% 9.9% 9% 8% ECP
Slide 21: Europe-YTD 2015 Results
Europe-YTD 2015 Results % of Revenue ($ in millions) 2015 2014 Change 2015 2014 Revenue $997 $885 12.7% Gross Margin $374 $329 13.7% 37.6% 37.1% Operating Expenses $270 $240 12.5% 27.2% 27.2% Segment EBITDA $100 $87 14.9% 10.1% 9.8% ECP Branches 194 165 29 Sator Branches 82 52 30 Europe Segment EBIT
Slide 22: Foreign Exchange
Foreign Exchange $/£ $1.68 • £ down 9% Q2 2015 vs. Q2 $1.70 $1.66 $1.67 $/€ 2014 Quarterly $1.60 $1.58 • € down 19% Q2 2015 vs. Q2 Average 2014 $1.50 $1.53 • Translation impact of stronger $1.52 dollar on European revenue growth: $1.37 $1.37 $1.40 $1.33 • Q2: $(54) million • YTD: $(99) million $1.30
Slide 23: Specialty– Q2 2015 Results
Specialty– Q2 2015 Results % of Revenue 34% Gross Margin ($ in millions) 2015 2014 Change 2015 2014 32% Revenue $284 $218 30.3% 30% 28% Gross Margin $87 $67 29.9% 30.8% 30.9% Segment EBITDA Margin 16% Operating Expenses $47 $39 20.5% 16.7% 17.9% 14% 12% Segment EBITDA $40 $28 42.9% 14.1% 13.0% 10% 8
Slide 24: Specialty – YTD 2015 Results
Specialty – YTD 2015 Results % of Revenue ($ in millions) 2015 2014 Change 2015 2014 Revenue $526 $395 33.2% Gross Margin $160 $122 31.1% 30.5% 30.9% Operating Expenses $94 $76 23.7% 18.0% 19.2% Segment EBITDA $66 $46 43.5% 12.5% 11.7% Specialty Segment EBITDA Margin Bridge 13.0% 0.9% (0.2%) (0.1%)
Slide 25: YTD 2015 Capital Allocation
YTD 2015 Capital Allocation $450 $283 $400 $350 $300 ($67) $250 ($42) $200 $150 ($145) ($1) $100 $115 $143 $50 $- Beginning cash Operating cash flows Capex Acquisitions & other Financing F/X Ending cash 6/30/15 12/31/14 investing activities • Operating cash flows: • $34M increase in consolidated EBI
Slide 26: Leverage & Liquidity
Leverage & Liquidity ($ in millions ) $2,000 $1,865 $2,370 $115 $1,691 $2,380 $2,400 $1,600 $143 $2,000 Revolver $1,239 $1,128 Availability* $1,200 $1,600 $1,750 $72 $1,200 $60 $800 $1,548 $800 2.4x $1,059 $400 $1,192 2.1x $400 $0 $0 12/31/2014 06/30/2015 12/31/2014 06/30/2015 Cash & equivalents Net
Slide 27: Key Return Metrics
Key Return Metrics Return on Equity* Return on Invested Capital* 12% 14% 10% 12% 10% 8% 8% 14.90% 6% 14.40% 14.50% 14.50% 13.70% 10.60% 10.60% 10.60% 13.10% 10.20% 10.20% 10.00% 6% 4% 4% 2% 2% 0% 0% 2010 2011 2012 2013 2014 Q2-'15 2010 2011 2012 2013 2014 Q2-'15 *Amounts above represent TTM ROE & RO
Slide 28: Guidance 2015
Guidance 2015 (effective only on the date issued: July 30, 2015) ($ in millions excluding EPS) Full Year Full Year 2014 2015 Actual Guidance (a) Organic revenue growth, for parts & services 9.0% 7.0% to 8.5% Net Income $382 $425 to $445 Diluted EPS $1.25 $1.38 to $1.45 Cash flow from operations $371
Slide 29: Key Takeaways
Key Takeaways • Solid organic revenue growth of 7.5% for parts & services in Q2 & YTD • Constant currency revenue growth of 15% for parts & services in Q2 & YTD • Segment EBITDA margin improvement for Q2 & YTD periods • Adjusted YTD EPS of $0.76 vs. $0.70 • Unfavorable swings in scrap prices ($0.03)
Slide 30: Consistent Business Model & Strategy
Consistent Business Model & Strategy Niche & Fragmented Markets High Superior Management Fulfillment Rates Attractive Synergy & Adjacent Leverage Markets Opportunities Sustainable Growth & Margin Expansion 30
Slide 31: Appendix - Non-GAAP Financial Measures
Appendix - Non-GAAP Financial Measures The financial data contained in the presentation materials includes earnings before interest, taxes, depreciation and amortization ("EBITDA") and provides a reconciliation of net income to EBITDA. The financial data contained in the presentation materials also
Slide 32: EBITDA & Segment EBITDA Reconciliation
EBITDA & Segment EBITDA Reconciliation QTD YTD Q2-2015 Q2-2014 Q2-2015 Q2-2014 (in thousands) Segment EBITDA North America $ 138,880 $ 137,150 $ 288,268 $ 283,288 Europe 53,943 45,945 100,466 87,100 Specialty 40,198 28,356 65,602 46,160 Total Segment EBITDA 233,021 211,451 454,336 416,548 Deduct: Re
Slide 33: Adjusted Net Income & Adjusted EPS Reconciliation
Adjusted Net Income & Adjusted EPS Reconciliation QTD YTD Q2-2015 Q2-2014 YTD-2015 YTD-2014 (In thousands, except per share data) Net income $ 119,722 $ 104,882 $ 226,817 $ 209,535 Adjustments: Restructuring and acquisition related expenses, net of tax 1,079 3,895 5,290 6,087 Loss on debt extinguish
Slide 34: Constant Currency Reconciliation
Constant Currency Reconciliation The following unaudited table reconciles revenue growth for Parts & Services to constant currency revenue growth for the same measure: Three Months Ended June Six Months Ended June 30, 30, 2015 2015 Consolidated Europe Consolidated Europe Parts & Services Revenue gro