LKQ Corporation · NASDAQ:LKQ
LKQ — Investor Presentation (August 2021)
54 slides from LKQ's investor presentation, August 2021
Slide 1: Investor Presentation August 2021
Investor Presentation August 2021
Slide 2: Forward Looking Statements and Non-GAAP Financial Measures
Forward Looking Statements and Non‐GAAP Financial Measures Statements and information in this presentation that are not 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 A
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: Today's Agenda
Today’s Agenda LKQ Today LKQ Business Overview LKQ’s Strategy to Drive Shareholder Value Engaged Board with Strong Governance Practices Concluding Remarks 4
Slide 5: LKQ's Evolution
LKQ’s Evolution Wholesale Keystone/ Remanufactured Self Serve Europe‐Sator Europe‐Rhiag Services Salvage Paint US 1998 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Aftermarket Refurbished Keystone/ Europe – Heavy Duty Europe‐ECP Collision Wheels Specialty Stah
Slide 6: Overview of LKQ
Overview of LKQ Company Overview Financial Performance LKQ is a global distributor of vehicle products, including replacement parts, Revenue ($mm) components and systems used in repair and maintenance of vehicles and specialty products and accessories Organic 4.8% 4.1% 4.4% 0.3% (7.6%) 10.6% Fou
Slide 7: Key Priorities
Key Priorities Profitable Growth Cash Flow Generation European Integration Talent Acquisition 7
Slide 8: Aligning Corporate Strategy and Financial Policy
Aligning Corporate Strategy and Financial Policy Consolidation Focus Operational Excellence (1998 – 2018) (2019 – Future) • Professionalize alternative collision part • Be the leading distributor for collision parts market in North America and develop scale in North America and mechanical parts in a
Slide 9: Q2 2021 Highlights
Q2 2021 Highlights • Highest quarterly diluted EPS and Segment EBITDA in LKQ history ◦ Focus on operational excellence, ongoing benefits from rightsizing actions enacted in prior periods, and favorable scrap and precious metal prices drive record profitability • Total revenue growth of 30.8%; organi
Slide 10: Sustained OpEx Savings
Sustained OpEx Savings 29.1% 28.3% 26.5% Other Facilities Delivery(1) Personnel Significant sustained savings from headcount actions, route optimization & other cost reduction efforts, partially offset by higher freight costs and other inflationary pressures Note: In the chart above the sum of the i
Slide 11: Demand Impact: Organic Parts & Services Revenue Change
Demand Impact Organic Parts & Services Revenue Change (Per Day) (1.0)% (5.0)% (16.6)% Growth rates improved through the second quarter coming off low base as April ‐ May 2020 had significant negative effects from the stay‐at‐home mandates Columns reflect the YOY organic parts and services revenue ch
Slide 12: Q2 2021 Revenue
Q2 2021 Revenue Revenue Changes by Source: Components of Revenue Acquisition and Organic Divestiture Foreign Exchange Total(1) North America 19.7% 0.2% 0.7% 20.6% Europe 20.7% (0.9)% 10.3% 30.1% Specialty 30.1% 0.4% 1.1% 31.5% Parts and Services 21.9% (0.3)% 5.4% 27.0% Other Revenue 108.0% 0.0% 0.5%
Slide 13: Historical Capital Allocation
Historical Capital Allocation 3‐Year Capital Allocation Summary (7/1/18 ‐ 6/30/21)(1) ($ in millions) $ % Cash and Cash Equivalents, 6/30/18 $345 Operating Cash Inflow 3,823 Capital Allocation: Net Repayments of Credit Facilities and Other Debt (2,121) 55.2% Share Repurchases (813) 21.2% Capital Exp
Slide 14: 2021 Capital Allocation
2021 Capital Allocation $ in millions $329 • Operating cash flows: ▪ Operating cash flows of $933 million represent a $20 million (or 2%) year over year increase owing to cash inflows from higher operating income and accounts payable partially offset by inventory and receivables • Investing cash flo
Slide 15: Operating Cash Flow and Free Cash Flow
Operating Cash Flow and Free Cash Flow* Note: FCF amounts only include FCF generated by continuing operations 15 * Free Cash Flow is a non‐GAAP measure. Refer to Appendix 6 for Free Cash Flow reconciliation ** EBITDA is a non‐GAAP measure. Refer to Appendix 3 for EBITDA reconciliation
Slide 16: Leverage & Liquidity
Leverage & Liquidity ($ in millions ) ($ in millions ) Total Capacity(1) $3,474 $3,150 1.9x 1.2x Effective borrowing rate for Q2 2021 was 2.6% (2) (1) Total capacity includes our term loan (repaid in full during Q2 2021) and revolving credit facilities (2) Approximately 38% of our bank borrowings at
Slide 17: Metal Prices
Metal Prices Q2 scrap steel prices increased YoY and Q2 precious metal prices increased YoY QoQ • Average price for scrap steel increased from $108 and were mixed QoQ per ton in Q2 2020 to $251 per ton in Q2 2021 • Sequential change was positive $38 per ton, or up 18% • Sequential changes in scrap s
Slide 18: Outlook 2021
Outlook 2021 (effective only on the date issued: July 29, 2021) 2021 outlook(1): • Diluted EPS attributable to LKQ stockholders in the range of $3.23 to $3.43 • Adjusted diluted EPS attributable to LKQ stockholders in the range of $3.55 to $3.75(2)(3) • Free cash flow in the range of $0.95 billion t
Slide 19: Liquidity as of June 30, 2021
Liquidity as of June 30, 2021 • Rated Ba1 / BB+ by Moody's and S&P, respectively Credit Rating • Rated BBB‐ (investment grade) by Fitch (initiated in May 2021) • Fixed Interest Rate Bonds: €750 million ($889 million) in aggregate due in 2024 and 2028 • Variable Interest Rate Credit Facility Borrowin
Slide 20: Today's Agenda
Today’s Agenda LKQ Today LKQ Business Overview LKQ’s Strategy to Drive Shareholder Value Engaged Board with Strong Governance Practices Concluding Remarks 20
Slide 21: LKQ's Operating Segments Demonstrate Attractive Growth and Margin Profiles
LKQ’s Operating Segments Demonstrate Attractive Growth and Margin Profiles Product Overview Financial Overview Collision North America Aftermarket automotive products 2.9% 3.0% 5.7% 0.9% (12.9)% 4.1% $4,445 $4,800 $5,183 Automotive glass distribution $4,119 $4,632 Recycled & Refurbished $2,5
Slide 22: LKQ North America wins with industry leading fill-rates and strategic partnerships
LKQ North America wins with industry leading fill‐rates, strong value proposition and strategic partnerships High Fulfillment Rates Value Proposition • Highly fragmented space 2011 Chevrolet 2014 GMC • Nationwide coverage Equinox 2017 Nissan Altima Sierra 1500 Distribution & Wholesale North AmericaF
Slide 23: Collision Products, a $17 Billion Industry in the US
Collision Products, a $17 Billion Industry in the US Insurance Companies (Indirect Customers) New OEM Manufacturers Repair Shop 61% Refurbished & Optional Recycled OEM OE Products 11% Aftermarket 7% 21% Alternative parts = 39% of parts costs 23 Source: CCC Information Services – Crash Course 2020
Slide 24: Segment Overview: The Market Leader in Europe
Segment Overview: The Market Leader in Europe UK & ROI #1 Market Position in Top 6 Markets2 $5.5 B Netherlands, Belgium, and France Revenue 2020 Italy and Switzerland Germany and Austria Central and Eastern Europe Scandinavia Germany United Kingdom > 900,000 Unique SKUs ~ 1,000 Italy Czech Republic
Slide 25: Specialty Overview: Focused on Profitable Growth
Specialty Overview: Focused on Profitable Growth Key Facts Financial Performance 2020 Sales: ~$1.5B $ in M Employees: 2,500+ Significant Acquisitions since 2014: Customers: 20,000+ • Stag Parkway Inc Suppliers: 1,000+ • The Coast Distribution System Inc Stocking SKUs: 185,000+ • Warn Industries Loca
Slide 26: Today's Agenda
Today’s Agenda LKQ Today LKQ Business Overview LKQ’s Strategy to Drive Shareholder Value Engaged Board with Strong Governance Practices Concluding Remarks 26
Slide 27: LKQ's Plan to Drive Shareholder Value
LKQ’s Plan to Drive Shareholder Value Expansion into new markets mostly complete Euro Car Parts (United Kingdom & ROI) Enhanced European Fource (Benelux & France) simplification through “1 LKQ Europe” Rhiag (Italy & 9 other European countries) Stahlgruber (Germany & Eastern Europe) Plan to int
Slide 28: 1 LKQ Europe Project
1 LKQ Europe Project 21 Improved Customer … In the Hands of Maintain Strong Different Experience…. Local Managers Entrepreneurial Culture Countries Multiple ERP, financial, E‐mail, Phone systems… Transformation Common ERP Platform Rationalized Product Portfolio … And Fragmented Procurement and LKQ E
Slide 29: Confident in Achieving Our Committed Performance
Confident in Achieving Our Committed Performance 0.6% ‐0.3% 0.3% 11.1% 2.2% 0.2% 0.1% ‐0.5% 8.3% 1.9% September 2019 LKQE Segment 7.8% 9.5% EBITDA Margin Bridge1 Forecasted Key Initiatives Asset Rationalization Organic Growth Incremental Expected 2021 Segment 2019 Segment Transformation Costs EBITDA
Slide 30: Multiple Levers to Drive North American Results
Multiple Lever to Drive North American Results Key Initiatives A Great Stable of Brands Favorable collision tailwinds Collision & Mechanical Organic Expansion of product offerings Revenue Growth Monitoring opportunity of ADAS and EV Aftermarket Salvage Glass Paint (PBE) Further optimizing af
Slide 31: Leading Brands and Multiple Levers to Drive Strong Specialty Growth
Leading Brands and Multiple Levers to Drive Strong Specialty Growth Key Initiatives A Great Stable of Brands New product lines through the same distribution (target $25M/year) New New products within existing lines Product Lines New services New customers (Jobbers, Dealers, Retailers, Instal
Slide 32: Financial Policy to Enhance Shareholder Value
Financial Policy to Enhance Shareholder Value Target organic growth greater than market comps Focus on Free Achieve 1 LKQ Europe program and NA margin expansion Cash Flow Generation Convert high levels of EBITDA to Free Cash Flow with a focus on trade working capital efficiencies Targeting i
Slide 33: Today's Agenda
Today’s Agenda LKQ Today LKQ Business Overview LKQ’s Strategy to Drive Shareholder Value Engaged Board with Strong Governance Practices Concluding Remarks 33
Slide 34: Corporate Governance Highlights
Corporate Governance Highlights Independent LKQ is governed by 11‐member board of directors, 9 of whom are independent directors under NASDAQ guidelines Leadership & Separate Chairman / CEO roles Oversight Ongoing process to refresh and strengthen board composition with shareholder input; 6 ne
Slide 35: LKQ's Directors are Well Equipped to Drive Shareholder Value Creation
LKQ’s Directors are Well Equipped to Drive Shareholder Value Creation Treasury/ Capital Allocation/ Finance/ Government Human Capital Executive Automotive Digital Corporate Accounting/Audi Relations/ Management/Com Corporate Europe / Other Supply Chain/ Risk Assessment Investor Director Leadership I
Slide 36: LKQ's Directors are Well Equipped to Drive Shareholder Value Creation
LKQ’s Directors are Well Equipped to Drive Shareholder Value Creation Years on Photo Name Age Relevant Experience Key Skills Independent Board Joseph Holsten 21 68 Former CEO of LKQ Unparalleled knowledge of LKQ business and industry Dominick Zarcone 3 62 President and CEO Extensive finance expe
Slide 37: LKQ Performance-Based Compensation Practices
LKQ Performance‐Based Compensation Practices The Compensation Committee of LKQ’s board carefully considers the most effective ways to motivate and incentivize management to accomplish specific strategic goals Objective, tailored metrics with challenging performance targets are chosen annually to
Slide 38: Enabling a Circular and Inclusive Economy
Enabling a Circular and Inclusive Economy Second Quarter 2021 ENVIRONMENTAL Global Leader in Automobile Recycling Our North American Our salvage operations recycle more than 90% of materials Recycling Achievements from end-of-life vehicles Number of 208,629 vehicles procured • Focused on employee he
Slide 39: Today's Agenda
Today’s Agenda LKQ Today LKQ Business Overview LKQ’s Strategy to Drive Shareholder Value Engaged Board with Strong Governance Practices Concluding Remarks 39
Slide 40: What LKQ Offers Investors
What LKQ Offers Investors Market leading position in almost everything we do The broadest product line amongst automotive parts distributors ‒ Mechanical ‒ Collision ‒ Accessories The broadest geographic coverage amongst automotive parts distributors ‒ United States ‒ Canada ‒ Europe (21 count
Slide 41: Appendix: Non-GAAP Financial Measures
Appendix Non‐GAAP Financial Measures This presentation contains non-GAAP financial measures. Following are reconciliations of each non-GAAP financial measure with the most directly comparable financial measure calculated in accordance with GAAP. 41
Slide 42: Constant Currency Reconciliation
Appendix 1 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 Six Months Ended June 30, 2021 June 30, 2021 Consolidated Europe Consolidated Europe Parts & Service
Slide 43: Revenue and Segment EBITDA by segment
Appendix 2 Revenue and Segment EBITDA by segment Three Months Ended Six Months Ended June 30(1) June 30(1) (in millions) 2021 % of revenue 2020 % of revenue 2021 % of revenue 2020 % of revenue Revenue North America $1,328 $1,011 $2,577 $2,302 Europe 1,577 1,211 3,040 2,575 Specialty 532 405 991 753
Slide 44: Reconciliation of Net Income to EBITDA and Segment EBITDA
Appendix 3 Reconciliation of Net Income to EBITDA and Segment EBITDA Three Months Ended June 30(1) Six Months Ended June 30(1) (in millions) 2021 2020 2021 2020 Net income $305 $119 $571 $265 Subtract: Net income (loss) attributable to continuing noncontrolling interest 0 (0) 1 1 Net income attribut
Slide 45: EBITDA and Segment EBITDA Reconciliation
Appendix 3 EBITDA and Segment EBITDA Reconciliation We have presented EBITDA solely as a supplemental disclosure that offers investors, securities analysts and other interested parties useful information to evaluate our operating performance and the value of our business. We calculate EBITDA as net
Slide 46: Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS
Appendix 4 Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS from Continuing Operations Three Months Ended Six Months Ended June 30(1) June 30(1) (in millions, except per share data) 2021 2020 2021 2020 Net income $305 $119 $571 $265 Subtract: Net income (loss) attributabl
Slide 47: Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS
Appendix 4 Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS from Continuing Operations We have presented Adjusted Net Income and Adjusted Diluted Earnings per Share from Continuing Operations Attributable to LKQ Stockholders as we believe these measures are useful for eva
Slide 48: Forecasted EPS Reconciliation
Appendix 5 Forecasted EPS Reconciliation(1) For the year ending December 31, 2021 (in millions, except per share data) Minimum Outlook Maximum Outlook Net income from continuing operations attributable to LKQ stockholders $967 $1,027 Adjustments: Amortization of acquired intangibles 77 77 Restructur
Slide 49: Reconciliation of Operating Cash Flow to Free Cash Flow
Appendix 6 Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Three Months Ended Six Months Ended June 30(1) June 30(1) (in millions) 2021 2020 2021 2020 Net cash provided by operating activities $411 $718 $933 $913 Less: purchases of property, plant and equipment 46 33 88
Slide 50: Reconciliation of Operating Cash Flow to Free Cash Flow
Appendix 6 Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow We have presented free cash flow solely as a supplemental disclosure that offers investors, securities analysts and other interested parties useful information to evaluate our liquidity. We calculate free cash f
Slide 51: Reconciliation of Gross Margin to Adjusted Gross Margin
Appendix 7 Reconciliation of Gross Margin to Adjusted Gross Margin Consolidated Adjusted Gross Margin Three Months Ended(1) Six Months Ended(1) (in millions) June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Gross margin $1,416 $1,011 $2,709 $2,225 Add: Restructuring expenses ‐ cost of goods s
Slide 52: Reconciliation of Gross Margin to Adjusted Gross Margin
Appendix 7 Reconciliation of Gross Margin to Adjusted Gross Margin North America Adjusted Gross Margin Three Months Ended(1) December 31, September (in millions) March 31, 2021 2020 30, 2020 March 31, 2020 Gross margin $599 $546 $534 $612 Add: Restructuring expenses ‐ cost of goods sold (0) 1 1 0 Ad
Slide 53: Reconciliation of Gross Margin to Adjusted Gross Margin
Appendix 7 Reconciliation of Gross Margin to Adjusted Gross Margin We have presented adjusted gross margin solely as a supplemental disclosure that offers investors, securities analysts and other interested parties useful information to evaluate the operating performance of our continuing business a
Slide 54: Reconciliation of Total Debt to Net Debt
Appendix 8 Reconciliation of Total Debt to Net Debt December 31, (in millions) June 30, 2021(1) 2020(1) Current portion of long‐term obligations $91 $58 Long‐term obligations, excluding current portion 2,361 2,813 Total debt, net of debt issuance costs $2,452 $2,871 Add: Debt issuance costs 15 26 To