Slide 1: First Quarter 2019 Earnings Call
First Quarter 2019 Earnings Call April 25, 2019 Nick Zarcone – President & Chief Executive Officer Varun Laroyia – Executive Vice President & Chief Financial Officer Joe Boutross – Vice President, 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: Q1 2019 Key Takeaways
Q1 2019 Key Takeaways • Total revenue growth of 13.9%; organic revenue growth of 0.1% for parts and services and 1.3% on a per day basis ◦ Europe achieved organic revenue growth of 1.3% and 2.1% on a per day basis ◦ Specialty achieved organic revenue growth of 1.0% and 2.6% on a per day basis • Q1 D
Slide 5: Consolidated Results
Consolidated Results Q1 2019 Revenue(1) $3,200 $3,100 $3,000 $2,800 $2,721 $2,600 .9% $2,400 13 $2,200 $2,000 Q1 2018 Q1 2019 • Organic revenue growth for parts and services of 0.1% on a reported basis; 1.3% on a per day basis (1) Revenue in millions 5
Slide 6: Consolidated Results
Consolidated Results Q1 2019 EPS(1) $0.50 $0.49 $0.60 $0.55 $0.56 $0.40 $0.50 $0.31 $0.40 $0.30 $0.30 $0.20 (3 6. 7% % ) $0.20 1.8 $0.10 $0.10 $0.00 $0.00 Q1 2018 Q1 2019 Q1 2018 Q1 2019 Diluted EPS Adjusted Diluted EPS(2) • Net income attributable to LKQ stockholders of $98 million (3.2% of revenue
Slide 7: Q1 2019 Revenue Growth
Q1 2019 Revenue Growth Revenue Changes by Source: Organic Acquisition Foreign Exchange Total(1) North America (1.4)% 0.3% (0.4)% (1.4)% Europe 1.3% 44.9% (7.3)% 38.9% Specialty 1.0% —% (0.4)% 0.5% Parts and Services 0.1% 18.3% (3.2)% 15.2% Other Revenue (6.4)% 1.0% (0.3)% (5.8)% Total (0.3)% 17.3% (
Slide 8: Q1 2019 Operating Highlights
Q1 2019 Operating Highlights North America • North America gross margin expanded by 90 basis points year over year • Entered into the diagnostics and calibration repair business on April 1, 2019 via acquisition of Elite Electronics • Continued to execute on pricing initiatives to offset inflationary
Slide 9: Inventory
Inventory Inventory Procurement: ($ in millions, Vehicles purchased in 000s) Q1 2019 Q1 2018 % Change Total aftermarket procurement $1,525 $1,300 17.3% Wholesale salvage cars and trucks 74 73 1.4% Europe wholesale salvage cars and trucks 8 8 —% Self service and "crush only" cars 139 141 (1.4)% • Inc
Slide 10: Financial Results
Corporation Financial Results
Slide 11: Operating Results
Operating Results First Quarter ($ in millions,except per share data) 2019 2018 Change Revenue $3,100 $2,721 13.9% Gross Margin 1,208 1,054 14.6% Operating Income 222 227 (1.8)% Pre-tax Income 190 201 (5.4)% Net income attributable to LKQ stockholders 98 153 (35.9)% Segment EBITDA(1) 320 295 8.4% Di
Slide 12: Q1 2019 Consolidated Margins
Q1 2019 Consolidated Margins Q1 Q1 Change (as a % of Revenue) 2019 2018 F/(U) Q1 Commentary Revenue 100.0% 100.0% —% Increased due to our North America and Europe segments; increase was partially offset by a negative mix Gross Margin 39.0% 38.7% 0.3% impact primarily from the growth of Europe, which
Slide 13: Components of Revenue
Components of Revenue $3.10B $2.72B 100.0% 4.8% 5.9% 11.4% 12.9% • North America historically has the 80.0% highest gross margins and EBITDA margins relative to the other segments 38.1% 60.0% 46.5% • Increase in Q1 2019 revenue as a percentage of consolidated revenue for our European businesses refl
Slide 14: North America – Q1 2019 Results
North America – Q1 2019 Results % of Revenue Gross Margin ($ in millions) 2019 2018 Change 2019 2018 Total Revenue $1,302 $1,330 (2.1)% 45.0% 44.2% Gross Margin $576 $576 0.0% 44.2% 43.3% 44.0% 43.5% 43.3% 43.1% Operating Expenses $407 $403 1.2% 31.3% 30.3% 43.0% 43.2% Other Income, net $7 $3 n/m 0.
Slide 15: Scrap Steel Prices
Scrap Steel Prices Q1 year over year scrap steel prices per ton down 24% $225 • Average price we received for scrap steel decreased by 24% $199 from $197 per ton in Q1 2018 $197 $200 to $150 per ton in Q1 2019 • Sequential change was $175 $168 $164 negative ($14) per ton or down (8.5)% $150 $150 • C
Slide 16: Europe – Q1 2019 Results
Europe – Q1 2019 Results % of Revenue Gross Margin ($ in millions) 2019 2018 Change 2019 2018 Total Revenue $1,446 $1,040 38.9% 38.0% Gross Margin $532 $373 42.7% 36.8% 35.9% Operating Expenses $426 $300 42.0% 29.4% 28.8% 37.0% 36.7% 36.8% Other Income, net $(4) $(1) n/m (0.3)% (0.1)% 36.6% 36.0% 36
Slide 17: Foreign Exchange
Foreign Exchange $1.45 • £ down 6.4% Q1 2019 vs. Q1 2018 $1.39 $1.40 • € down 7.6% Q1 2019 vs. Q1 2018 $1.36 $1.35 • $75 million unfavorable impact of translation of weaker Q1 rates $1.30 $1.30 $1.30 $1.29 relative to the US dollar on Europe parts and services revenue growth $1.25 • Europe constant
Slide 18: Specialty – Q1 2019 Results
Specialty – Q1 2019 Results % of Revenue Gross Margin ($ in millions) 2019 2018 Change 2019 2018 Total Revenue $354 $352 0.6% 31.0% 30.2% Gross Margin $100 $105 (4.8)% 28.4% 30.0% 30.0% Operating Expenses $63 $65 (1.8)% 17.9% 18.4% 29.0% 28.4% 29.0% 28.6% Other Income, net $0 $0 n/m 0.1% 0.0% 27.0%
Slide 19: 2019 Capital Allocation
2019 Capital Allocation $ in millions $600 $177 $(53) $337 $(70) $321 $300 $(60) $(5) $(5) $0 Beginning Cash Operating Cash Capex Share Net Repayments of Acquisitions Other Financing, Ending Cash and Restricted Flows Repurchases Credit Facilities Investing and FX and Restricted Cash 12/31/18 Cash 3/
Slide 20: Leverage & Liquidity
Leverage & Liquidity ($ in millions ) ($ in millions ) Total Capacity(1) $4,500 $4,348 $4,000 $4,264 $332 $316 $3,500 $3,498 $4,000 $4,016 $3,500 $3,948 $3,500 $3,000 $3,000 $1,698 $1,722 $2,500 $2,500 $2,000 $2,000 $65 $65 2.9x 2.9x $1,500 $1,500 $1,000 $1,000 $1,737 $1,711 $500 $500 $0 $0 December
Slide 21: Return on Invested Capital
Return on Invested Capital Return on Invested Capital(1) 12.0% 10.8% 10.9% 10.0% 9.8% 9.7% 9.7% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2014 2015 2016 2017 2018 TTM Q1 2019 ² ³ (1) Amortization of acquired intangibles and lease obligations have been excluded from the calculation of Return on Invested Capital
Slide 22: Guidance 2019
Guidance 2019 (effective only on the date issued: April 25, 2019) Full Year 2018 Full Year 2019 ($ in millions excluding EPS) Actual Guidance(1) Organic Growth, Parts and Services 4.4% 2.0% - 4.0% Net Income attributable to LKQ stockholders $485 $586 - $625 Adjusted Net Income attributable to LKQ $6
Slide 23: 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 23
Slide 24: 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. 24
Slide 25: 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, 2019 Consolidated Europe Parts & Services Revenue growth as reported 15.2%
Slide 26: Appendix 2 - Revenue and Segment EBITDA by segment
Appendix 2 - Revenue and Segment EBITDA by segment Three Months Ended March 31(1) % of % of (in millions) 2019 revenue 2018 revenue Revenue North America $1,302 $1,330 Europe 1,446 1,040 Specialty 354 352 Eliminations (1) (1) Total Revenue $3,100 $2,721 Segment EBITDA North America $177 13.6% $178 1
Slide 27: 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(1) (in millions) 2019 2018 Net income $99 $153 Subtract: Net income (loss) attributable to noncontrolling interest 1 (0) Net income attributable to LKQ stockholders $98 $153 Add: Depreciation and Amort
Slide 28: Appendix 3 - 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 ne
Slide 29: 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 Three Months Ended March 31(1) (in millions, except per share data) 2019 2018 Net income $99 $153 Subtract: Net income (loss) attributable to noncontrolling interest 1 (0) Net income attributable to LKQ stockho
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 We have presented Adjusted Net Income and Adjusted Diluted Earnings per Share Attributable to LKQ Stockholders as we believe these measures are useful for evaluating the core operating performance of our contin
Slide 31: Appendix 5 - Forecasted EPS Reconciliation
(1) Appendix 5 - Forecasted EPS Reconciliation For the year ending December 31, 2019 (in millions, except per share data) Minimum Guidance Maximum Guidance Net income attributable to LKQ stockholders $586 $625 Adjustments: Amortization of acquired intangibles 125 125 Restructuring and acquisition re
Slide 32: Appendix 6 - 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 March 31(1) (in millions) 2019 2018 Net cash provided by operating activities $177 $145 Less: purchases of property, plant and equipment 53 62 Free cash flow $124 $83 We have presented free