Slide 1: Fourth Quarter & Full Year 2022 Earnings Call Presentation
Fourth Quarter & Full Year 2022 Earnings Call Presentation February 23, 2023
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
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Slide 4: 2022 Highlights
2022 Highlights • Strong full year organic revenue growth for parts and services of 5.0% (5.2% per day) ◦ Wholesale - North America: 11.4% / Europe: 5.1% (5.6% per day) • Focus on key operational excellence initiatives drove profitability ◦ Segment EBITDA(3) of $1.72 billion for a margin of 13.4% ◦
Slide 5: 2022 Adjusted EPS Walk
(2) 2022 Adjusted EPS Walk $4.5 $4 $3.96 $0.23 $3.85 ($0.16) $0.40 $3.5 ($0.29) ($0.14) ($0.04) ($0.11) $3 (3) FY 2021 Fx Rates Scrap & Precious Tax Rate Equity Investment Investments,(1) Operating Results Share Repurchases FY 2022 Metal Prices Fair Value Government Adjustment Programs, T&E Strong o
Slide 6: Outlook 2023
Outlook 2023(1) (effective only on the date issued: February 23, 2023) Full Year 2023 Outlook Organic parts and services revenue growth 6.0% to 8.0% Diluted EPS(2) $3.68 to $3.98 Adjusted diluted EPS(2)(3) $3.90 to $4.20 Operating cash flow approx. $1.275 billion Free cash flow(4) approx. $975 milli
Slide 7: 2023 Adjusted EPS Guidance Walk
2023 Adjusted EPS Guidance Walk (2) $4.5 (3) $0.10 $4.05 $4 $0.24 $3.85 $0.02 $0.01 ($0.02) ($0.13) ($0.02) $3.5 FY 2022 Fx Rates Scrap & Precious Tax Rate Interest PGW Divestiture Operating Results Share Repurchases (1) FY 2023 Metal Prices Operational improvements and strategic capital deployment
Slide 8: 2023 Free Cash Flow Guidance Walk
2023 Free Cash Flow Guidance Walk (2) ($ in millions) $1,500 $1,200 $135 $1,028 ($50) $975 ($60) $900 ($78) $600 $300 FCF/EBITDA FCF/EBITDA (1) Conversion Conversion 60% 55% $0 FY 2022 Earnings Growth, TWC Interest Payments Tax Payments Capital Expenditures FY 2023 Improvements & Other Operational i
Slide 9: Consolidated Results Q4 2022
Consolidated Results Q4 2022 Revenue(1) EPS(2) (5.8)% (11.1)% (10.3)% • Organic growth of $4,000 3.3% $1.20 $1.20 • Currency translation $3,800 effect: (5.7)% $1.10 $1.10 • Acquisition and $3,600 Divestiture: (3.4)% $1.00 $1.00 $3,400 $3,186 $0.90 $0.90 $0.87 $3,200 $0.81 $3,001 $0.80 $0.80 $0.78 $3
Slide 10: Consolidated Results 2022
Consolidated Results 2022 Revenue(1) EPS(2) • Organic growth of 12.3% (2.8)% 4.1% (2.3)% • Currency translation $16,500 $4.50 $4.50 effect: (5.1)% (3) • Acquisition and 4.11 $15,000 $4.20 $4.20 $3.96 Divestiture: (1.2)% $3.85 $13,089 $3.90 $3.90 $13,500 $12,794 $3.66 $3.60 $3.60 $12,000 $3.30 $3.30
Slide 11: Financial Results Q4 2022
Financial Results Q4 2022 LKQ
Slide 12: Q4 2022 Revenue
Q4 2022 Revenue Revenue Changes by Source: Components of Revenue Acquisition and Foreign 100.0% Organic Divestiture Exchange Total(1) 5.8% 6.8% 1.8% 1.6% Wholesale - North America 10.3% (9.4)% (0.4)% 0.6% 12.1% 12.9% Europe 4.6% 0.2% (11.7)% (7.0)% Specialty (10.6)% —% (0.5)% (11.1)% 75.0% Self Serv
Slide 13: Operating Results - Q4
Operating Results - Q4 Fourth Quarter ($ in millions, except per share data) 2022 2021 Change F/(U) Revenue $3,001 $3,186 (5.8)% Gross Margin 1,223 1,269 (3.7)% Operating Expenses 861 920 6.4% Operating Income 293 280 4.6% Income from continuing operations before provision for income taxes 272 270 0
Slide 14: Wholesale – North America – Q4 2022
Wholesale – North America – Q4 2022 Change % of Revenue Gross Margin ($ in millions) 2022 2021 F/(U) 2022 2021 50.0% 49.1% 49.1% Total Revenue $1,102 $1,097 0.5% 49.0% Gross Margin $540 $521 3.7% 49.0% 47.5% 49.0% Operating Expenses $338 $357 5.1% 30.7% 32.5% 48.0% 47.5% 47.6% 48.3% Segment EBITDA(1
Slide 15: Europe – Q4 2022
Europe – Q4 2022 Change % of Revenue Gross Margin ($ in millions) 2022 2021 F/(U) 2022 2021 Total Revenue(1) $1,390 $1,497 (7.1)% 40.0% 39.6% 39.7% Gross Margin $526 $565 (6.8)% 37.8% 37.7% 39.2% Operating Expenses $395 $435 9.4% 28.4% 29.1% 39.0% Segment EBITDA(2) $139 $134 3.7% 10.0% 8.9% Transfor
Slide 16: Specialty – Q4 2022
Specialty – Q4 2022 Change % of Revenue Gross Margin ($ in millions) 2022 2021 F/(U) 2022 2021 29.9% 29.9% 29.7% Total Revenue $365 $410 (11.1)% 30.0% 28.8% Gross Margin $101 $111 (9.4)% 27.7% 27.1% Operating Expenses $79 $82 3.3% 21.7% 19.9% 28.0% 28.2% 28.7% Segment EBITDA(1) $23 $30 (25.6)% 6.2%
Slide 17: Self Service – Q4 2022
Self Service – Q4 2022 Change % of Revenue Gross Margin ($ in millions) 2022 2021 F/(U) 2022 2021 50.1% 51.0% 48.6% (1) Total Revenue $144 $184 (21.1)% 48.0% 43.1% Gross Margin $56 $72 (23.6)% 38.4% 39.7% 45.0% 42.0% 38.4% Operating Expenses $49 $46 (5.4)% 33.5% 25.1% 42.5% 39.5% 39.0% 39.7% Segment
Slide 18: 2022 Capital Allocation
2022 Capital Allocation $2,000 ($ in millions) $399 $1,250 $(222) $1,500 $(48) $1,000 $500 $(1,040) $274 $278 $(284) $(27) $(24) $0 Beginning Cash Operating Cash Proceeds from Capex Debt Share Dividends Other Activity, FX Ending Cash 12/31/21 Flows disposal of Repayments, Repurchases net 12/31/22 bu
Slide 19: Operating Cash Flow and Free Cash Flow
(1) Operating Cash Flow and Free Cash Flow (1) $1,600 ($ in millions) 100% 98% $1,400 90% Actual FCF 80% conversion of $1,200 EBITDA(2) 66% 70% (3) 60% 60% $1,000 60% Targeted annual FCF conversion of $800 50% EBITDA (55%-60%) $1,444 $1,367 $600 $1,271 $1,250 40% $1,064 $1,074 $1,028 30% $400 $798 2
Slide 20: Leverage & Liquidity
Leverage & Liquidity ($ in millions) ($ in millions) Total Capacity(1) $4,000 $4,000 $3,500 $3,500 $3,150 $3,150 $3,000 $2,824 $3,000 $2,662 $274 $2,500 $278 $2,500 $1,194 $2,500 $2,550 $1,295 $2,384 $645 $2,000 $2,000 $69 $69 $69 $1,500 $1,500 1.4x 1.4x $1,000 $1,887 $1,000 $1,786 $1,786 $500 $500
Slide 21: Share Repurchase Program
Share Repurchase Program # of Shares 5.3 2.7 8.1 6.8 3.0 Repurchased Million Million Million Million Million $404 M $343 M $297 M $49.63 $50.89 $152 M $56.57 $144 M $53.20 $50.72 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 On October 25, 2022, our Board of Directors authorized an additional $1.0 billion
Slide 22: Expanding Global ESG Programs
Expanding Global ESG Programs 22
Slide 23: 2022 Results and Supplementary Information
2022 Results and Supplementary Information
Slide 24: 2022 Revenue
2022 Revenue Revenue Changes by Source: Components of Revenue Acquisition and Foreign 100.0% 6.7% 7.2% (1) Organic Divestiture Exchange Total 1.8% 1.6% Wholesale - North America 11.4% (7.0)% (0.2)% 4.2% 14.0% 14.2% Europe 5.1% 0.4% (10.8)% (5.3)% 75.0% Specialty (9.9)% 6.1% (0.3)% (4.1)% Self Servic
Slide 25: Operating Results
Operating Results Fiscal Year Change ($ in millions, except per share data) 2022 2021 F/(U) Revenue $12,794 $13,089 (2.3)% Gross Margin 5,223 5,322 (1.9)% Operating Expenses 3,544 3,568 0.7% Operating Income 1,581 1,474 7.2% Income from continuing operations before provision for income taxes 1,518 1
Slide 26: Wholesale – North America – 2022 Results
Wholesale – North America – 2022 Results Change % of Revenue ($ in millions) 2022 2021 F/(U) 2022 2021 Total Revenue $4,556 $4,379 4.1% Gross Margin $2,209 $2,095 5.4% 48.5% 47.9% Operating Expenses $1,372 $1,337 (2.7)% 30.1% 30.5% Segment EBITDA(1) $852 $769 10.7% 18.7% 17.6% (1) Segment EBITDA for
Slide 27: Europe – 2022 Results
Europe – 2022 Results Change % of Revenue ($ in millions) 2022 2021 F/(U) 2022 2021 Total Revenue(1) $5,735 $6,062 (5.4)% Gross Margin $2,215 $2,336 (5.2)% 38.6% 38.5% Operating Expenses $1,651 $1,733 4.8% 28.8% 28.6% Segment EBITDA(2) $585 $618 (5.4)% 10.2% 10.2% (3) Transformation Expenses $15 $14
Slide 28: Specialty – 2022 Results
Specialty – 2022 Results Change % of Revenue ($ in millions) 2022 2021 F/(U) 2022 2021 Total Revenue $1,791 $1,867 (4.1)% Gross Margin $521 $534 (2.5)% 29.1% 28.6% Operating Expenses $325 $315 (3.3)% 18.2% 16.9% Segment EBITDA(1) $199 $223 (10.9)% 11.1% 12.0% (1) Segment EBITDA for each segment is a
Slide 29: Self Service – 2022 Results
Self Service – 2022 Results Change % of Revenue ($ in millions) 2022 2021 F/(U) 2022 2021 (1) Total Revenue $715 $787 (9.0)% Gross Margin $278 $357 (22.3)% 38.8% 45.4% Operating Expenses $196 $183 (6.9)% 27.4% 23.3% Segment EBITDA(2) $83 $175 (52.3)% 11.7% 22.3% (1) Includes Other Revenue of $488 mi
Slide 30: Liquidity as of December 31, 2022
Liquidity as of December 31, 2022 • Rated Baa3 (investment grade) by Moody's Credit Rating • Rated BBB- (investment grade) by S&P Global Ratings • Rated BBB- (investment grade) by Fitch • Fixed Interest Rate Bonds: €750 million ($803 million) in aggregate due in 2024 and 2028 Debt Structure • Variab
Slide 31: Metals Prices
Metals Prices Scrap steel impact Q4 scrap steel prices decreased YoY Q4 precious metal prices were Sequential changes in scrap steel prices impact to Segment and QoQ mixed YoY and QoQ EBITDA: (sequential decrease of 9% in Q4 2022) Self Service: • Q4 2022 unfavorable by $4 million; 2022 unfavorable $
Slide 32: Lag Effect - Scrap Steel Prices
Lag Effect - Scrap Steel Prices Self Service Lag Effect $300 $279 $279 • Margin benefit or detriment based on the movement in market prices $265 between purchase date and scrap $255 date (we typically scrap cars within $251 $251 90 days of purchase) $265 $250 $255 $250 $250 • Purchase price reflects
Slide 33: Foreign Exchange
Foreign Exchange $1.45 • £ down 12.8% Q4 2022 vs Q4 2021 $1.40 $1.40 • € down 10.6% Q4 2022 vs Q4 2021 $1.35 $1.38 $1.38 $1.35 • $175 million unfavorable impact $1.34 of translation of weaker Q4 rates $1.30 relative to the US Dollar on $1.26 GBP European parts and services $1.25 (12. 8)% revenue gro
Slide 34: Inventory Procurement
Inventory Procurement ($ in millions, vehicles purchased in 000s) Q4 Fiscal Year 2022 2021 % Change 2022 2021 % Change Total aftermarket procurement $1,328 $1,624 (18.2)% $5,974 $6,388 (6.5)% Wholesale - North America salvage vehicles 58 65 (10.8)% 246 239 2.9% Europe wholesale salvage vehicles 6 7
Slide 35: Inventory Balances
Inventory Balances ($ in millions) Wholesale - North America Europe $1,600 $2,000 2 Q4 2022 $1,400 to Q4 202 ild Q4 2021 to ntory build Q4 2021 tory bu $1,800 8M inven 9M inve To tal $14 (Glass) Total $18 ivestiture FX ($98M ) $1,200 ($102M) D $1,600 $1,000 $961 $1,418 $1,402 $1,400 $817 $822 $1,327
Slide 36: Inventory Balances (cont.)
Inventory Balances (cont.) ($ in millions) Self Service Specialty $100 $700 022 Q4 2 $600 t o Q4 2 ild 021 02 1 bu $7M inven to Q4 20 Q4 2 nventory i tory 2 redu 2 $11M ction $500 $458 $463 $469 $56 $400 $380 $362 $50 $50 $43 $43 $301 $300 $38 $32 $30 $212 $200 $100 $0 $0 9 0 0 1 1 2 2 9 0 0 1 1 2 2
Slide 37: Non-GAAP Financial Measures
Appendix Non-GAAP Financial Measures This presentation contains non-GAAP financial measures. Following are reconciliations of each non-GAAP financial measure with the most directly comparable financial measure calculated in accordance with GAAP. 37
Slide 38: Constant Currency Reconciliation
Appendix 1 Constant Currency Reconciliation The following unaudited table reconciles revenue and revenue growth for parts & services and total revenue to constant currency revenue and revenue growth for the same measures: Three Months Ended Year Ended December 31, 2022 December 31, 2022 ($ in millio
Slide 39: Constant Currency Reconciliation (cont.)
Appendix 1(cont.) Constant Currency Reconciliation Three Months Ended Year Ended December 31, 2022 December 31, 2022 Consolidated Europe Consolidated Europe Parts & Services Revenue growth as reported (4.8)% (7.0)% (1.7)% (5.3)% Less: Currency impact (6.1)% (11.7)% (5.5)% (10.8)% Revenue growth at c
Slide 40: Revenue and Segment EBITDA by segment
Appendix 2 Revenue and Segment EBITDA by segment Three Months Ended December 31(1) Year Ended December 31(1) % of % of % of % of ($ in millions) 2022 revenue 2021 revenue 2022 revenue 2021 revenue Revenue Wholesale - North America $1,102 $1,097 $4,556 $4,379 Europe 1,390 1,497 5,735 6,062 Specialty
Slide 41: Reconciliation of Net Income to EBITDA and Segment EBITDA
Appendix 3 Reconciliation of Net Income to EBITDA and Segment EBITDA Three Months Ended December 31(1) Year Ended December 31(1) ($ in millions) 2022 2021 2022 2021 Net income $195 $236 $1,150 $1,092 Subtract: Net income attributable to continuing noncontrolling interest 1 — 1 1 Net income attributa
Slide 42: EBITDA and Segment EBITDA Reconciliation
Appendix 3 EBITDA and Segment EBITDA Reconciliation We have presented EBITDA solely as a supplemental disclosure that offers investors, securities analysts and other interested parties useful information to evaluate our operating performance and the value of our business. We calculate EBITDA as net
Slide 43: Reconciliation of Net Income and Diluted EPS to Adjusted Net Income
Appendix 4 Reconciliation of Net Income and Diluted EPS to Adjusted Net Income from Continuing Operations Attributable to LKQ Stockholders and Adjusted EPS from Continuing Operations Attributable to LKQ Stockholders (1) (1) Three Months Ended December 31 Year Ended December 31 ($ in millions, except
Slide 44: Reconciliation of Net Income and Diluted EPS to Adjusted Net Income
Appendix 4 Reconciliation of Net Income and Diluted EPS to Adjusted Net Income Attributable to LKQ Stockholders and Adjusted EPS from Continuing Operations Attributable to LKQ Stockholders We have presented Adjusted Net Income and Adjusted Diluted Earnings per Share from Continuing Operations Attrib
Slide 45: Forecasted EPS Reconciliation
Appendix 5 Forecasted EPS Reconciliation (1) Forecasted Fiscal Year 2023 ($ in millions, except per share data) Minimum Outlook Maximum Outlook Net income from continuing operations attributable to LKQ stockholders $989 $1,070 Adjustments: Amortization of acquired intangibles 58 58 Restructuring and
Slide 46: Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
Appendix 6 Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Three Months Ended December 31(1) Year Ended December 31(1) ($ in millions) 2022 2021 2022 2021 Net cash provided by operating activities $240 $5 $1,250 $1,367 Less: purchases of property, plant and equipment 74
Slide 47: Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
Appendix 6 Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow We have presented free cash flow solely as a supplemental disclosure that offers investors, securities analysts and other interested parties useful information to evaluate our liquidity. We calculate free cash f
Slide 48: Reconciliation of Total Debt to Net Debt
Appendix 7 Reconciliation of Total Debt to Net Debt ($ in millions) December 31, 2022(1) December 31, 2021(1) Current portion of long-term obligations $34 $35 Long-term obligations, excluding current portion 2,622 2,777 Total debt, net of debt issuance costs $2,656 $2,812 Add: Debt issuance costs 6