Slide 1: First Quarter 2017 Earnings Call
First Quarter 2017 Earnings Call April 27, 2017 Rob Wagman – President & Chief Executive Officer Nick Zarcone – Executive Vice President & Chief Financial Officer Joe Boutross – Director, Investor Relations
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: Consolidated Results - Continuing operations
Consolidated Results - Continuing operations Q1 2017 Revenue* $2,400 $2,343 $2,200 .9% 21 $2,000 $1,921 $1,800 $1,600 $1,400 Q1 2016 Q1 2017 • Organic growth of parts and services revenue of 4.5% • Income from continuing operations $140.8 million Q1 2017 vs. $112.2 million Q1 2016 • Segment EBITDA M
Slide 5: Consolidated Results - Continuing operations
Consolidated Results - Continuing operations Q1 2017* $0.60 $0.50 $0.45 $0.50 $0.49 $0.40 $0.36 $0.42 .7% .0% $0.40 16 25 $0.30 $0.30 $0.20 $0.20 $0.10 $0.10 $0.00 $0.00 Q1 2016 Q1 2017 Q1 2016** Q1 2017** Diluted EPS Adjusted Diluted EPS * Earnings per share figures refer to income from continuing
Slide 6: Q1 2017 Revenue Growth
Q1 2017 Revenue Growth Revenue Changes by Source: Organic Acquisition Foreign Exchange Total(1) North America 1.8% 8.3% 0.2% 10.4% Europe 8.5% 51.5% (9.9)% 50.1% Specialty 6.3% 0.1% 0.3% 6.7% Parts and Services 4.5% 20.0% (2.8)% 21.7% Other Revenue 25.9% 0.2% (0.1)% 25.9% Total 5.7% 18.9% (2.7)% 21.
Slide 7: Q1 2017 Operating Highlights
Q1 2017 Operating Highlights North America • In Q1 2017, we closed the sale of the automotive glass manufacturing business of PGW to a subsidiary of Vitro S.A.B., a glass manufacturer based in Mexico. This divestiture allows our team to focus on the existing aftermarket glass distribution business a
Slide 8: Inventory
Inventory Inventory Procurement: ($ in millions, Vehicles purchased in 000s) Q1 2017 Q1 2016 % Change Total aftermarket procurement $1,025 $821 24.8% Wholesale salvage cars and trucks 75 72 4.2% Europe wholesale salvage cars and trucks 7 6 16.7% Self service and "crush only" cars 133 125 6.4% • We b
Slide 9: Acquisition Activity
Acquisition Activity Number of Q1 Acquisitions TTM Revenue* North America 1 $51.1 million Europe 1 $4.0 million Specialty 1 $1.3 million Total 3 $56.4 million • In Q1, we acquired a parts recycling business in Michigan and Sweden and a Specialty products business in Pennsylvania * Approximate TTM Re
Slide 10: Financial Results
Corporation Financial Results
Slide 11: Operating Results - Continuing Operations
Operating Results - Continuing Operations First Quarter ($ in millions,except per share data) 2017 2016 Change Revenue $2,343 $1,921 21.9% Gross Margin 930 760 22.3% Operating Income 236 186 26.9% Pre-tax Income 213 166 28.4% Income from continuing operations 141 112 25.5% Segment EBITDA* 290 237 22
Slide 12: Q1 2017 Consolidated Margins - Continuing operations
Q1 2017 Consolidated Margins - Continuing operations Q1 Q1 Change (as a % of Revenue) 2017 2016 F/(U) QTD Commentary Revenue 100.0% 100.0% —% Cost of goods sold decreased 1.2% as a result of our North America segment. Partially offsetting this decrease Gross Margin 39.7% 39.6% 0.1% was an increase o
Slide 13: Components of Quarterly Revenue
Components of Quarterly Revenue $2.34B $1.92B • A portion of the change in margins on a 100.0% 5.5% 5.4% consolidated basis is attributable to change in 13.4% 15.3% revenue mix 80.0% • North America historically has highest gross margins and EBITDA margins 35.0% 28.4% 60.0% • Increase in YTD revenue
Slide 14: North America – Q1 2017 Results
North America – Q1 2017 Results % of Revenue Gross Margin ($ in millions) 2017 2016 Change 2017 2016 46.0% Total Revenue $1,208 $1,081 11.8% 44.4% 44.0% 43.5% 43.4% Gross Margin $536 $461 16.4% 44.4% 42.6% 43.3% Operating Expenses $362 $318 13.8% 29.9% 29.4% 42.0% 42.6% Segment EBITDA* $176 $146 20.
Slide 15: Scrap Steel Prices
Scrap Steel Prices $200 Q1 YoY scrap steel prices per ton up 55% • Average price we received for $150 $144 scrap steel in Q1 increased by 55%, from $93 per ton in Q1 2016 $138 to $144 per ton in Q1 2017 $118 $118 • Estimated positive EPS impact of slightly more than a penny in Q1 $100 $93 • Scrap st
Slide 16: Europe – Q1 2017 Results
Europe – Q1 2017 Results % of Revenue Gross Margin ($ in millions) 2017 2016 Change 2017 2016 Total Revenue $821 $547 50.1% 40.0% Gross Margin $304 $209 45.7% 37.0% 38.1% 38.1% Operating Expenses $226 $152 48.6% 27.6% 27.9% 38.0% 37.4% 37.0% Segment EBITDA* $79 $57 36.9% 9.6% 10.5% 36.1% 36.0% 36.2%
Slide 17: Foreign Exchange
Foreign Exchange $1.55 $1.44 • UK referendum to leave the EU $1.45 $1.43 had an impact on Q1 2017 average rate $1.35 • £ down 13% Q1 2017 vs. Q1 2016 $1.31 • € down 3% Q1 2017 vs. Q1 2016 $1.24 $1.24 • Translation impact of stronger $1.25 dollar on Europe revenue growth: – Q1: $(54) million $1.15 •
Slide 18: Specialty – Q1 2017 Results
Specialty – Q1 2017 Results % of Revenue Gross Margin ($ in millions) 2017 2016 Change 2017 2016 32.0% 30.9% Total Revenue $315 $295 6.7% 29.8% 30.0% 28.5% 28.5% Gross Margin $90 $91 (1.3)% 28.5% 30.9% 28.0% Operating Expenses $55 $58 (5.8)% 17.4% 19.7% 26.2% 26.0% Segment EBITDA* $35 $33 6.0% 11.3%
Slide 19: 2017 Capital Allocation - Continuing operations
2017 Capital Allocation - Continuing operations $ in millions $600 $176 $400 $301 $4 $265 $227 $(76) $(41) $200 $(326) $0 Beginning Cash Operating Cash Financing Net proceeds from Acquisitions & Capex F/X and other Ending Cash 12/31/16 Flows disposal of Other Investing 3/31/17 business Activities •
Slide 20: Leverage & Liquidity
Leverage & Liquidity ($ in millions ) ($ in millions ) Revolver Availability(1) $3,600 8.0x $4,000 $3,366 $3,200 $227 $3,048 $3,500 $3,139 $3,183 $3,174 $265 $2,800 $2,783 6.0x $3,000 $2,400 $1,019 $2,500 $1,360 $2,000 $73 4.0x $2,000 $1,600 2.7x $72 2.6x $1,500 $1,200 2.0x $1,000 $2,091 $800 $1,742
Slide 21: Key Return Metrics
Key Return Metrics Return on Equity Return on Invested Capital* 14.0% 14.9% 15.0% 14.4% 14.5% 14.5% 14.2% 13.8% 12.0% 10.9% 10.8% 10.9% 10.5% 12.0% 10.0% 9.8% 10.0% 9.0% 8.0% 6.0% 6.0% 4.0% 3.0% 2.0% 0.0% 0.0% 2012 2013 2014 2015 2016 TTM Q1 2012 2013 2014 2015 2016 TTM Q1 2017 2017 * Amortization o
Slide 22: Guidance 2017
Guidance 2017 (effective only on the date issued: April 27, 2017) Full Year 2016 Full Year 2017 ($ in millions excluding EPS) Actual Guidance(1) Organic Growth, Parts and Services 4.8% 4.0% - 6.0% Adjusted Net Income- continuing operations(2) $522 $565 - $595 Adjusted Diluted EPS- continuing operati
Slide 23: 2017 Adjusted Diluted EPS Guidance Bridge
2017 Adjusted Diluted EPS Guidance Bridge* $2.00 $0.03 $0.03 $(0.01) $1.90 $0.19 $(0.03) $1.87 $(0.02) $(0.01) $1.80 $1.70 $1.69 $1.60 2016 Year over year Full year Shared PGW Shared PGW Impact of Tamworth 2 Incremental 2017 Actual Business Growth Rhiag & ARG Corporate Corporate exchange rate increm
Slide 24: Q1 2017 Key Takeaways
Q1 2017 Key Takeaways • Organic revenue growth of 4.5% for parts and services in Q1 • Constant currency* revenue growth of 24.5% for parts and services in Q1 • Income from continuing operations improvement of 25.5% for Q1 • Segment EBITDA** margin improvement primarily due to improvement in gross ma
Slide 25: 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 25
Slide 26: Appendix 1 - Constant Currency Reconciliation
Appendix 1- Constant Currency Reconciliation • The following unaudited table reconciles consolidated revenue growth for Parts & Services to constant currency revenue growth for the same measure: Three Months Ended March 31, 2017 Consolidated Europe Parts & Services Revenue Growth as reported 21.7% 5
Slide 27: Appendix 2 - Revenue and Segment EBITDA by segment
Appendix 2 - Revenue and Segment EBITDA by segment Three Months Ended March 31* % of % of (in millions) 2017 revenue 2016 revenue Revenue North America $1,208.2 $1,080.8 Europe 820.9 546.8 Specialty 314.9 295.1 Eliminations (1.2) (1.2) Total Revenue $2,342.8 $1,921.5 Segment EBITDA North America $17
Slide 28: Appendix 3 - Reconciliation of Net Income to EBITDA and Segment EBITDA
Appendix 3 - Reconciliation of Net Income to EBITDA and Segment EBITDA Three Months Ended March 31** (in millions) 2017 2016 Net income $136.3 $112.2 Subtract: Loss from discontinued operations, net of tax (4.5) — Income from continuing operations $140.8 $112.2 Add: Depreciation and Amortization 50.
Slide 29: Appendix 3 - Reconciliation of Net Income to EBITDA and Segment EBITDA
Appendix 3- Reconciliation of Net Income to EBITDA and Segment EBITDA 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 calcul
Slide 30: Appendix 4 - Reconciliation of Net Income and EPS to Adjusted Net Income
Appendix 4 - Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS from continuing operations Three Months Ended March 31* (in millions, except per share data) 2017 2016 Net income $136.3 $112.2 Subtract: Loss from discontinued operations, net of tax (4.5) — Income from contin
Slide 31: Appendix 4 - Reconciliation of Net Income and EPS to Adjusted
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 as we believe these measures are useful for evaluating the core operating perf
Slide 32: Appendix 5 - Forecasted EPS reconciliation
Appendix 5 - Forecasted EPS reconciliation* For the year ending December 31, 2017 (in millions, except per share data) Minimum Guidance Maximum Guidance Income from continuing operations $511 $541 Adjustments: Amortization of acquired intangibles 85 85 Restructuring and acquisition related expenses