LKQ Corporation · NASDAQ:LKQ
LKQ — J.P. Morgan Auto Conference 2015
38 slides from LKQ's conference presentation, Aug 11, 2015
Slide 1: J.P. Morgan Auto Conference
z2LKQ Corporation J.P. Morgan Auto Conference August 11 & 12, 2015 J.P. Morgan, 383 Madison Avenue, New York, NY as of 7/31/15
Slide 2: Forward Looking Statement
Forward Looking Statement 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-look
Slide 3: Company Overview
Company Overview
Slide 4: LKQ's Evolution
LKQ’s Evolution July 1998 February 2004 October 2007 November 2010 May 2013 January 2014 Wholesale Salvage Self Serve Keystone / Paint Reman EUROPE-Benelux Keystone Specialty February 2004 January 2006 March 2008 October 2011 August 2013 Aftermarket Collision Refurbished Wheels Heavy Duty EUROPE-UK
Slide 5: Market Leading Positions in Key Markets
Market Leading Positions in Key Markets 2014 LTM 5 Year CAGR* (as of 6/30/2015) Revenue (in millions) $6,740 $7,018 27% Net Income (in millions) $382 $399 25% Earnings Per Share $1.25 $1.30 23% #1 or #2 in Key Markets •Alternative parts distributor to the collision repair industry in US and Canada •
Slide 6: Operating Unit Overview
Operating Unit Overview Operating Units* Total Revenue Other North America 8% Sell more than 101,000 SKUs of aftermarket automotive products Purchased 290,000 vehicles for dismantling Includes aftermarket, recycled, refurbished, and remanufactured Parts & Services Purchased 482,000 vehicles at 73 se
Slide 7: North America
Corporation North America
Slide 8: Clear Value Proposition
Clear Value Proposition High quality products at lower cost than OEM replacement products Recycled OEM Front Door Engine Rear Bumper New OEM $1,376 $3,458 $531 Recycled OEM $805 $1,125 $237 Savings 41% 67% 55% Aftermarket Fender Door Mirror Hood New OEM $209 $160 $446 Aftermarket $163 $92 $307 Savin
Slide 9: US Automotive Repair Industry
US Automotive Repair Industry Automotive Repair Market $213 bn Do It For Me (DIFM) DIY* $165 bn $48 bn Retail Collision Mechanical Price $40 bn $125 bn Parts & Collision Parts Labor Mechanical Parts Labor Labor $22 bn $18 bn $68 bn $57 bn Collision Markup Mechanical Markup (Wholesale) $7 bn (Wholesa
Slide 10: Collision Products, a $15 Billion Industry
Collision Products, a $15 Billion Industry Insurance Companies (Indirect Customers) New OEM Manufacturers Repair Shop 64% Refurbished & Recycled OEM Optional OE Products 12% Aftermarket 6% 18% Alternative parts = 36% of parts costs 10 Source: CCC Information Services –Crash Course 2015
Slide 11: Average Parts Replaced Per Claim by Part Type
Average Parts Replaced Per Claim by Part Type Over 19 million repairable claims 10.0 2009 2010 2011 2012 2013 2014 8.9 8.0 7.8 6.3 6.0 5.8 4.0 2.6 2.0 2.0 0.0 OEM Alternative Parts Total Source: CCC Information Services Inc. 11
Slide 12: Regional Distribution Improves Fulfillment
Regional Distribution Improves Fulfillment Mid-Atlantic Region-Transfer Routes Salvage/AM Aftermarket Salvage Cross Dock 12
Slide 13: Locations Provide Strategic Advantage
Locations Provide Strategic Advantage Next day delivery leveraging regional distribution infrastructure 13
Slide 14: Age & Size of US Car Parc Improving
Age & Size of US Car Parc Improving 140 4 year time 50 horizon 117 119 118 117 45 114 115 113 112 Number of Vehicles (millions) 120 107 105 40 102 97 98 95 94 94 100 35 30 80 67 68 68 67 67 67 66 66 63 63 25 59 56 54 60 51 48 49 18 20 17 17 17 17 17 18 17 16 17 16 14 40 13 13 15 12 10 10 20 5 - - 20
Slide 15: Europe
Corporation Europe ZLKQ Coatings “=
Slide 16: Europe - Market Observations
Europe - Market Observations • Large car parc • Fragmented industry • Dominated by country champions • In transition from 3 step to 2 step distribution • Professional repairer focused • Segmented by the suppliers • Focused on mechanical parts • Low penetration of alternative collision parts with ~7%
Slide 17: Euro Car Parts
Euro Car Parts Leading distributor of automotive aftermarket parts in the UK • Nearly 55,000 commercial customers • 3 National Distribution Centers totaling 1.2MM square feet • 13 regional hubs, 194 branches, 25 paint distribution locations • Over 2,200 delivery routes • Launched collision parts pro
Slide 18: Benelux Markets-Sator
Benelux Markets-Sator • Leading distributor of automotive aftermarket mechanical parts in the Benelux offering more than 171,000 SKUs • Proprietary, best-in-class online ordering technology for local distributors & repair shops • Opportunity for meaningful purchasing synergies with Euro Car Parts •
Slide 19: Specialty
Corporation Specialty
Slide 20: Keystone Specialty
Keystone Specialty Keystone Overview Keystone’s Directly Addressable Market * Wheels & Tires • Leading distributor and marketer of specialty $0.5 aftermarket equipment, accessories, and products in 8% North America RV ,Trailer & Performance Other • Critical link between 800+ suppliers and approximat
Slide 21: Financial Overview
Financial Overview
Slide 22: Acquisition Strategy
Acquisition Strategy Strong Brands • Seek markets where we can be #1 or #2 • Keep discipline on return metrics • Criteria in new markets • Among the leaders in the market • Well run companies • LKQ culture • Ability to achieve synergies • Attractive Returns of Capital • High fulfillment rates • Crit
Slide 23: Unique Combination of Strong Organic & Acquisition Revenue Growth
Unique Combination of Strong Organic & Acquisition Revenue Growth 30% 27.8% 23.6% 25% 21.3% 20% 13.7% 15% 11.0% 9.0% 8.3% 7.9% 10% 6.6% 6.0% 7.5% 7.4% 6.1% 4.0% 5% 0% 2009 2010 2011 2012 2013 2014 Q2-'15 Organic Revenue Growth Rates* Acquisition Revenue Growth Rates* * Parts and services only 23
Slide 24: Historical Financials
Historical Financials Revenue Earnings Per Share ($ in millions) $1.40 $7,000 $6,740 $1.25 $1.20 $6,000 $1.02 $5,063 $1.00 $5,000 $0.87 $4,123 $0.80 $4,000 $0.71 $3,270 $0.57 $3,000 $0.60 $2,470 $2,000 $0.40 $1,000 $0.20 $- $- 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 24
Slide 25: Second Quarter 2015 Overview
Second Quarter 2015 Overview
Slide 26: 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 $- $3,150 YTD-2014 YTD-2015 Q2-2014 Q2-2015 Q2-2014 Q2-2015 YTD-2014 YT
Slide 27: Q2 2015 Revenue Growth
Q2 2015 Revenue Growth Q2 revenue changes by source: Foreign Organic Acquisition Exchange Total (1) North America 6.3% 0.9% (0.9%) 6.3% Europe 10.1% 11.1% (11.7%) 9.5% Specialty 6.6% 25.3% (1.9%) 30.0% Parts and services 7.5% 7.4% (4.3%) 10.6% Other Revenue (20.6%) 0.4% (0.4%) (20.5%) Total 4.7% 6.7
Slide 28: North America – Q2 2015 Results
North America – Q2 2015 Results Gross Margin % of Revenue 45% ($ 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 $137 1.5% 13.3% 13.4
Slide 29: Europe – Q2 2015 Results
Europe – Q2 2015 Results % of Revenue Gross Margin 40% ($ 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 $46 17.4% 10.6% 9.9% 9% 8% ECP
Slide 30: Specialty– Q2 2015 Results
Specialty– Q2 2015 Results % of Revenue 34% Gross Margin ($ 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 $28 42.9% 14.1% 13.0% 10% 8
Slide 31: Leverage & Liquidity
Leverage & Liquidity ($ 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 $0 12/31/2014 06/30/2015 12/31/2014 06/30/2015 Cash & equivalents Net
Slide 32: Key Return Metrics
Key Return Metrics Return on Equity* Return on Invested Capital* 12% 14% 10% 12% 10% 8% 8% 14.90% 6% 14.40% 14.50% 14.50% 13.70% 10.60% 10.60% 10.60% 13.10% 10.20% 10.20% 10.00% 6% 4% 4% 2% 2% 0% 0% 2010 2011 2012 2013 2014 Q2-'15 2010 2011 2012 2013 2014 Q2-'15 *Amounts above represent TTM ROE & RO
Slide 33: Guidance 2015
Guidance 2015 (effective only on the date issued: July 30, 2015) ($ 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 34: Appendix
Appendix Corporation
Slide 35: 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 36: 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 37: 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 38: 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