Slide 1: Second Quarter 2016 Earnings Call
Second Quarter 2016 Earnings Call July 28, 2016 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 2016 YTD 2016 $4,372 $2,600 $0.60 $4,400 $1.00 $0.97 $2,451 $0.55 $0.95 $4,200 $2,400 $0.55 $0.90 $4,000 .8% $0.50 % .1% .0% % 22 7.9 $0.46 34 21 9.5 $2,200 1 $3,800 $0.85 % $0.81 33.3 $0.45 $3,612 $0.79 $0.41 $0.80 $2,000 $3,600 $0.39 $0.74 $0.40 $0.75 $1,838 $3,400 $1,800 $
Slide 5: Q2 2016 Revenue Growth
Q2 2016 Revenue Growth Revenue Changes by Source: Organic Acquisition Foreign Exchange Total(1) North America 3.1% 2.8% (0.3)% 5.6% Europe 8.0% 57.5% (3.7)% 61.8% Specialty 8.0% 11.1% (0.5)% 18.5% Glass nm nm nm nm Parts and Services 5.4% 32.8% (1.4)% 36.8% Other Revenue (16.2)% 5.2% (0.2)% (11.2)%
Slide 6: YTD 2016 Revenue Growth
YTD 2016 Revenue Growth Revenue Changes by Source: Organic Acquisition Foreign Exchange Total(1) North America 4.0% 3.0% (0.5)% 6.4% Europe 7.5% 34.2% (4.1)% 37.6% Specialty 9.3% 10.3% (0.6)% 19.0% Glass nm nm nm nm Parts and Services 5.8% 19.7% (1.6)% 23.9% Other Revenue (20.6)% 5.2% (0.2)% (15.6)%
Slide 7: Q2 2016 Operating Highlights
Q2 2016 Operating Highlights North America • Roadnet routing software installed in 80% of North American fleet representing over 3,400 vehicles. Currently tracking over 285,000 miles & 42,000 deliveries daily. On target to be fully installed & utilized by year-end • Increased outbound calls from 17.
Slide 8: Inventory
Inventory Inventory Procurement: Q2 YTD ($ in millions, Cars purchased in 000s) 2016 2015 % Change 2016 2015 % Change Total procurement $1,232 $698 76.5% $2,054 $1,389 47.9% Wholesale salvage cars and trucks 72 75 (2.9)% 144 145 (0.7)% Europe Wholesale salvage cars and trucks 6 5 20.0% 12 11 9.1% Se
Slide 9: Acquisition Activity
Acquisition Activity Number of Q2 TTM Number of YTD TTM Acquisitions Revenue* Acquisitions Revenue* North America — — — — Europe 1 $4.0 million 3 $1.0 billion Specialty — — — — Glass 1 $1.1 billion 1 $1.1 billion Total 2 $1.1 billion 4 $2.1 billion Europe • In Q1, we acquired Rhiag which expands LKQ
Slide 10: Financial Results
Corporation Financial Results
Slide 11: Operating Results
Operating Results Second Quarter YTD ($ in millions,except per share data) 2016 2015 Change 2016 2015 Change Revenue $2,451 $1,838 33.3% $4,372 $3,612 21.0% Gross Margin 922 724 27.4% 1,682 1,423 18.2% Segment EBITDA* 319 233 36.9% 556 454 22.3% Operating Income 243 200 21.4% 429 386 11.0% Pre-tax I
Slide 12: Q2 2016 Consolidated Margins
Q2 2016 Consolidated Margins Q2 Q2 Change (as a % of Revenue) 2016 2015 F/(U) QTD Commentary Revenue 100.0% 100.0% —% Reflects unfavorability of 1.8% and 0.7% from our PGW and Rhiag acquisitions, respectively. The 1.8% reduction in gross margin for PGW also reflects a one-time inventory step-up adju
Slide 13: YTD 2016 Consolidated Margins
YTD 2016 Consolidated Margins YTD YTD Change (as a % of Revenue) 2016 2015 F/(U) YTD Commentary Revenue 100.0% 100.0% —% Reflects unfavorability of 1.0% and 0.4% from our PGW and Rhiag acquisitions, respectively. The 1.0% decrease in gross margin related to PGW includes the impact of a one-time inve
Slide 14: Components of Quarterly Revenue
Components of Quarterly Revenue $2.45B $1.84B $4.37B $3.61B • A large portion of change in margins on a 100.0% 4.8% 7.3% 5.0% 7.3% consolidated basis is attributable to change in 8.6% 4.8% revenue mix 15.4% 14.5% 14.3% 80.0% 13.7% • North America historically has highest Gross margins and EBITDA mar
Slide 15: North America – Q2 2016 Results
North America – Q2 2016 Results % of Revenue Gross Margin ($ in millions) 2016 2015 Change 2016 2015 44.1% Total Revenue $1,081 $1,045 3.4% 44.0% 43.2% Gross Margin $477 $443 7.5% 44.1% 42.4% 42.7% 42.7% Operating Expenses $314 $306 2.6% 29.1% 29.4% 42.0% 42.4% 42.2% Segment EBITDA* $164 $139 18.0%
Slide 16: North America – YTD 2016 Results
North America – YTD 2016 Results % of Revenue ($ in millions) 2016 2015 Change 2016 2015 Total Revenue $2,168 $2,091 3.7% Gross Margin $941 $890 5.8% 43.4% 42.6% Operating Expenses $634 $604 5.0% 29.3% 28.9% Segment EBITDA* $311 $288 8.0% 14.4% 13.8% *Refer to segment EBITDA reconciliation on page 3
Slide 17: Scrap Steel Prices
Scrap Steel Prices $200 • Decrease in other revenue for YTD 2016 primarily attributable to the sale of a metals processing business near the end of Q2 2015 $150 $141 and lower precious metals prices $140 Q2 YOY Scrap Steel Price Per Ton (1%) YOY $123 $138 • Average price we received for scrap steel
Slide 18: Europe – Q2 2016 Results
Europe – Q2 2016 Results % of Revenue Gross Margin ($ in millions) 2016 2015 Change 2016 2015 40.0% 38.9% Total Revenue $824 $510 61.6% 37.9% 38.1% Gross Margin $308 $193 59.6% 37.4% 37.9% 38.0% 38.3% 37.4% Operating Expenses $218 $138 57.7% 26.5% 27.1% 37.0% Segment EBITDA* $90 $54 66.8% 10.9% 10.6
Slide 19: Europe – YTD 2016 Results
Europe – YTD 2016 Results % of Revenue ($ in millions) 2016 2015 Change 2016 2015 Total Revenue $1,371 $997 37.5% Gross Margin $517 $374 38.3% 37.7% 37.6% Operating Expenses $371 $270 36.9% 27.0% 27.2% Segment EBITDA* $147 $100 46.8% 10.8% 10.1% ECP Branches 206 194 12 Sator Branches 87 71 16 *Refer
Slide 20: Foreign Exchange
Foreign Exchange $1.65 • £ down 6% Q2 2016 vs. Q2 2015 – UK referendum to leave the EU $1.55 $1.55 $1.53 $1.52 had a minor impact on Q2 2016 $1.52 average rate as sharp decline in GBP occurred late in the quarter $1.45 $1.43 • € up 2% Q2 2016 vs. Q2 2015 $1.44 • Translation impact of stronger $1.35
Slide 21: Specialty – Q2 2016 Results
Specialty – Q2 2016 Results % of Revenue Gross Margin ($ in millions) 2016 2015 Change 2016 2015 32.0% 30.8% Total Revenue $337 $284 18.5% 30.3% 30.0% 30.1% Gross Margin $98 $87 12.4% 29.2% 30.8% 29.2% Operating Expenses $57 $47 20.9% 17.0% 16.7% 28.0% 27.9% 27.7% Segment EBITDA* $42 $40 4.0% 12.4%
Slide 22: Specialty – YTD 2016 Results
Specialty – YTD 2016 Results % of Revenue ($ in millions) 2016 2015 Change 2016 2015 Total Revenue $625 $526 19.0% Gross Margin $186 $160 16.0% 29.7% 30.5% Operating Expenses $113 $94 19.6% 18.1% 18.0% Segment EBITDA* $74 $66 12.1% 11.8% 12.5% *Refer to segment EBITDA reconciliation on page 31 Speci
Slide 23: Glass – Q2 2016 Results
Glass – Q2 2016 Results % of Revenue ($ in millions) 2016 2016 Total Revenue $210 Gross Margin* $39 18.4% Operating Expenses $27 12.9% Segment EBITDA** $23 11.1% *Includes a $10 million one time inventor step-up adjustment recorded upon acquisition ** **Refer to segment EBITDA reconciliation on page
Slide 24: 2016 Capital Allocation
2016 Capital Allocation $ in millions $1,721 $2,200 $2,000 $(102) $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $355 $400 $273 $200 $87 $(1,782) $(6) $0 Beginning Cash Operating Cash Financing Capex Acquisitions & F/X and other Ending Cash 12/31/15 Flows Other Investing 6/30/16 Activities • Operating
Slide 25: Leverage & Liquidity
Leverage & Liquidity ($ in millions ) ($ in millions ) Revolver Availability(1) $3,600 8.0x $4,000 $3,370 $3,200 $273 $3,500 $3,097 $3,200 $2,800 6.0x $3,000 $2,400 $1,085 $2,500 $2,261 $2,000 4.0x $2,000 $72 $1,600 $1,600 $87 $1,513 2.8x $1,500 $1,304 $1,200 2.0x $1,000 $2,043 $800 1.7x $66 $400 $5
Slide 26: Key Return Metrics
Key Return Metrics Return on Equity Return on Invested Capital* 14.0% 14.9% 15.0% 14.4% 14.5% 14.5% 14.2% 13.7% 12.0% 10.9% 10.9% 10.8% 10.9% 10.7% 10.5% 12.0% 10.0% 9.0% 8.0% 6.0% 6.0% 4.0% 3.0% 2.0% 0.0% 0.0% 2011 2012 2013 2014 2015 TTM Q2 2011 2012 2013 2014 2015 TTM Q2 2016 2016 (*) Amortizatio
Slide 27: Guidance 2016
Guidance 2016 (effective only on the date issued: July 28, 2016) Full Year 2015 Full Year 2016 ($ in millions excluding EPS) Actual Guidance(1) Organic Revenue Growth, for parts and services 7.0% 5.5%-7.0% Adjusted Net Income $459 $555-$580 Adjusted Diluted EPS $1.49 $1.79-$1.87 Cash Flow from Opera
Slide 28: Q2 2016 Key Takeaways
Q2 2016 Key Takeaways • Solid organic revenue growth of 5.4% and 5.8% for parts and services in Q2 and YTD 2016, respectively • Constant currency* revenue growth of 38.2% and 25.5% for parts and services in Q2 and YTD 2016, respectively • Net Income improvement of 17.6% and 9.5% for Q2 and YTD, resp
Slide 29: Consistent Business Model and Strategy
Consistent Business Model and Strategy Niche and Fragmented Markets High Industry Leading Fulfillment Management Rates Attractive Synergy and Adjacent Leverage Markets Opportunities Sustainable Growth and Margin Expansion 28
Slide 30: 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 31: Appendix 1- Constant Currency Reconciliation
Appendix 1- Constant Currency Reconciliation • The following unaudited table reconciles revenue growth for Parts and Services to constant currency revenue growth for the same measure: Three Months Ended Six Months Ended June 30, 2016 June 30, 2016 Consolidated Europe Consolidated Europe Parts and Se
Slide 32: Appendix 2- EBITDA and Segment EBITDA Reconciliation
Appendix 2- EBITDA and Segment EBITDA Reconciliation QTD** YTD** % of % of % of % of (in millions) Q2 2016 revenue Q2 2015 revenue Q2 2016 revenue Q2 2015 revenue Segment EBITDA North America $ 163.8 15.2% $ 138.9 13.3% $ 311.2 14.4% $ 288.3 13.8% Europe 90.0 10.9% 53.9 10.6% 147.5 10.8% 100.5 10.1%
Slide 33: Appendix 3- Adjusted Net Income and EPS Reconciliation
Appendix 3- Adjusted Net Income and EPS Reconciliation* QTD YTD (in millions, except per share data) Q2 2016* Q2 2015* Q2 2016* Q2 2015* Net Income $140.7 $119.7 $248.5 $226.8 Adjustments: Restructuring and acquisition related expenses 9.1 1.7 23.9 8.2 Loss of debt extinguishment — — 26.7 — Amortiza
Slide 34: Appendix 4- Adjusted Net Income and EPS Reconciliation
Appendix 4- Adjusted Net Income and EPS Reconciliation* (in millions, except per share data) 2015** 2014** 2013** 2012** 2011** Net Income $423.2 $381.5 $311.6 $261.2 $210.3 Adjustments: Restructuring and acquisition related expenses 19.5 14.8 10.2 2.8 7.6 Loss on debt extinguishment — 0.3 2.8 — 5.3
Slide 35: Appendix 5- 2015 Quarterly Adjusted Net Income and EPS Reconciliation
Appendix 5- 2015 Quarterly Adjusted Net Income and EPS Reconciliation* (in millions, except per share data) Q4** Q3** Q2** Q1** Net Income $95.1 $101.3 $119.7 $107.1 Adjustments: Restructuring and acquisition related expenses 6.8 4.6 1.7 6.5 Change in fair value of contingent consideration liabiliti
Slide 36: Appendix 6- Forecasted EPS reconciliation
Appendix 6- Forecasted EPS reconciliation* (in millions, except per share data) Minimum Guidance Maximum Guidance Net Income $478.0 $503.0 Adjustments: Restructuring and acquisition related expenses 24.0 24.0 Loss of debt extinguishment 27.0 27.0 Amortization of acquired intangibles 75.0 75.0 Invent