LKQ Corporation · NASDAQ:LKQ
LKQ — Q1 2022 Earnings Presentation
53 slides from LKQ's earnings presentation, 2022
Slide 1: First Quarter 2022 Investor Presentation
First Quarter 2022 Investor Presentation
Slide 2: Forward Looking Statements & Non-GAAP Financial Measures
Forward Looking Statements & 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 Act
Slide 3: Our Mission
Our Mission To be the leading global value-added sustainable 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 o
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
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 2021 2022 Aftermarket Refurbished Keystone/ Europe – Heavy Duty Europe-ECP Collision Wheels Spec
Slide 6: Overview of LKQ
Overview of LKQ Company Overview Financial Performance LKQ is a global distributor of vehicle products, including replacement Revenue parts, components and systems used in repair and maintenance of Organic vehicles and specialty products and accessories Growth(1) 4.4% 0.3% (7.6%) 7.9% 6.9% Found
Slide 7: We aligned our Financial Policy to Corporate Strategy
We aligned our Financial Policy to Corporate Strategy North America & Specialty witnessed highest margins in the company’s history Operational Excellence (2019 – Future) Made permanent cost structure changes, while navigating the • Drive operational excellence throughout the pandemic Strategy enterp
Slide 8: In 2019 we set Four Key Priorities for our Company
In 2019 we set Four Key Priorities for our Company Profitable Enhance Margins Cash Flow Talent Growth Generation Acquisition 8
Slide 9: Expanding Global ESG Programs
Expanding Global ESG Programs ENVIRONMENTAL Global Leader in Vehicle Recycling Our North American Recycling Achievements • Our salvage operations recycle more than 90% • Continue strategic real estate acquisitions to expand of materials from total loss & end-of-life vehicles our salvage capabilities
Slide 10: ESG Focus Areas
ESG Focus Areas Carbon Footprint Employee Talent Diversity, Equity Sustainable Community & Recycling Engagement Development & Inclusion Supply Chain Support 10
Slide 11: Q1 2022 Revenue
Q1 2022 Revenue Revenue Changes by Source: Components of Revenue Organic Acquisition and Foreign Divestiture Exchange Total(1) 100.0% 7.3% 7.5% 1.7% 1.6% Wholesale - North America 13.6% 0.6% —% 14.2% 13.7% 14.4% Europe 6.9% 0.3% (5.5)% 1.8% Specialty (8.3)% 8.8% —% 0.4% 75.0% Self Service 14.6% —% —
Slide 12: Q1 2022 Capital Allocation
Q1 2022 Capital Allocation ($ in millions) $750 $409 $(59) $(53) $500 $(144) $327 $274 $(71) $(23) $(6) $250 $0 Beginning Cash Operating Cash Capex Debt Repayments, Share Dividends Other FX Ending Cash 12/31/21 Flows Net Repurchases Activity, net 3/31/22 Operating cash flows Investing cash flows Fin
Slide 13: Operating Cash Flow and Free Cash Flow
Operating Cash Flow and Free Cash Flow (1) ($ in millions) $1,600 100% 98% 90% $1,400 Actual FCF 80% 80% conversion of EBITDA(2) $1,200 60% 70% 66% $1,000 60% Targeted annual FCF conversion of EBITDA- $800 50% 55%-60% $1,444 $1,367 $1,271 40% $600 $1,064 $1,074 30% $400 $798 20% $200 $409 $350 10% $
Slide 14: Leverage & Liquidity
Leverage & Liquidity ($ in millions) ($ in millions) Total $4,000 $4,000 Capacity(1) $3,500 $3,500 $3,150 $3,150 $3,000 $2,824 $3,000 $2,721 $274 $2,500 $327 $2,500 $1,194 $1,268 $2,550 $2,394 $2,000 $2,000 $69 $69 $1,500 1.4x $1,500 1.3x $1,000 $1,000 $1,887 $1,813 $500 $500 $0 $0 December 31, 2021
Slide 15: Share Repurchase Program
Share Repurchase Program # of Shares 17.3 1.5 6.2 4.3 5.3 2.7 Repurchased Million Million Million Million Million Million $469 M $304 M $297 M $27.09 $219 M $144 M $49.21 $56.57 $50.50 $57 M $53.20 $38.35 (1) (2) 2018-2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Invested $144 million repurchasing 2.
Slide 16: Outlook 2022
Outlook 2022 (1) (effective only on the date issued: April 28, 2022) Full Year 2022 Full Year 2022 Original Outlook(6) Updated Outlook Organic parts and services revenue growth 3.0% to 5.0% 4.5% to 6.5% Diluted EPS(2) $3.50 to $3.80 $3.57 to $3.87 Adjusted diluted EPS(2)(3) $3.72 to $4.02 $3.80 to $
Slide 17: 2022 Adjusted EPS Guidance Walk
2022 Adjusted EPS Guidance Walk $5 $4.5 $0.08 $0.10 $0.10 $3.95(1) $4 $3.87(1) ($0.09) ($0.06) ($0.05) $3.5 $3 Previous FY 2022 Operating Scrap & Precious Share PGW Ukraine/ Russia FX Rates Current FY 2022 Adjusted EPS Results Metals & Prices Repurchases Divestiture Conflict Adjusted EPS (1) The amo
Slide 18: Liquidity as of March 31, 2022
Liquidity as of March 31, 2022 • Rated BBB- (investment grade) by S&P Global Ratings (upgraded in April 2022) Credit Rating • Rated BBB- (investment grade) by Fitch (initiated in May 2021) • Rated Ba1 by Moody's • Fixed Interest Rate Bonds: €750 million ($830 million) in aggregate due in 2024 and 20
Slide 19: 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
Slide 20: Wholesale - North America and Europe Segments
LKQ’s Operating Segments Demonstrate Attractive Growth and Margin Profiles Product Overview Financial Overview 0.9% (13.7%) 5.8% 13.6% Collision 17.6% 18.1% Aftermarket automotive products North America 16.5% Wholesale - 14.2% Automotive glass distribution Recycled & Refurbished Mechanical
Slide 21: Specialty and Self Service Segments
LKQ’s Operating Segments Demonstrate Attractive Growth and Margin Profiles Product Overview Financial Overview (0.7%) 3.0% 20.2% (8.3%) Performance products 12.6% 11.0% 12.0% Appearance & accessories 10.8% Specialty RV, trailer & other Specialty wheels & tires Marine 2019 2020 2021 Q1 2022
Slide 22: LKQ wins through scale, strong value proposition, and strategic partnerships
LKQ wins through scale, strong value proposition, and strategic partnerships Distribution & Wholesale North America Footprint 2014 GMC Extensive distribution network Value proposition 2014 Ford F-150 2018 Nissan Altima Sierra 1500 Hood Headlamp Transmission 95% of customers delivered by LKQ’s New OE
Slide 23: Electrification of Parts
Electrification of Parts LKQ ATK Reman expansion into installation services Nickel Metal Hydride (NiMH) NiMH Battery Reconditioning Well-Positioned to Take Advantage of Battery Sourcing and Installation Future Li-Ion Growth Unmatched Supply of Cores 8+ yrs of age US BEV VIO 1493 +42.7% 1011 • Propri
Slide 24: LKQ Europe
LKQ Europe Indicates LKQE has market Leading Position 20 26,000 Countries Employees 1,000 $6.1B Branches Revenue 2021 10,000 900,000 Franchise workshops Unique SKUs 100,000 #1 Independent workshops Ranking in Europe 24
Slide 25: Specialty Overview
Specialty Overview Financial Performance $ in M Sales CAGR : 12.9% EBITDA CAGR: 15.4% Key Facts $2,000 12.5% 2021 Sales: ~$1.9B $1,800 12.0% Employees: 3,100+ $1,600 $1,400 11.5% Customers: 18,000+ $1,200 11.0% Suppliers: 1,000+ $1,000 10.5% Stocking SKUs: 185,000+ $800 $600 10.0% 8 DCs 38 Cross Doc
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
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 Sator (Benelux & France) simplification through Rhiag (Italy & 9 other European countries) “1 LKQ Europe” Stahlgruber (Germany & Eastern Europe) Plan to inte
Slide 28: 1 LKQ Europe Program
1 LKQ Europe Program 21 Maintain Strong Improved Customer … In the Hands of Different Entrepreneurial Culture Experience…. Local Managers Countries Multiple ERP, financial, E-mail, Phone systems… Transformation Common ERP Platform Rationalized Product Portfolio … And Fragmented Procurement and Produ
Slide 29: Multiple Levers to Drive North American Results
Multiple Levers to Drive North American Results Key Initiatives A Great Stable of Brands Favorable collision tailwinds Collision & Mechanical Organic Revenue Expansion of product offerings Monitoring opportunity of ADAS and EV Aftermarket Salvage Paint (PBE) Growth Further optimizing afterma
Slide 30: 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 Product Lines New products within existing lines New services New customers (Jobbers, Dealers, Retailers, Instal
Slide 31: 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 enhance NA margins Cash Flow Generation Convert high levels of EBITDA to Free Cash Flow (“FCF”) with a focus on trade working capital efficiencies. Targe
Slide 32: 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
Slide 33: 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 & Oversight Separate Chairman / CEO roles Ongoing process to refresh and strengthen board composition with shareholder input; 6 ne
Slide 34: 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 35: 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 22 69 Former CEO and Chairman of LKQ Unparalleled knowledge of LKQ business and industry Dominick Zarcone 4 64 President and CEO Extensive
Slide 36: 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 37: 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
Slide 38: 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 39: Supplementary Information
Supplementary Information L KQ Keeping you moving
Slide 40: Metals Prices
Metals Prices Q1 scrap steel prices increased Q1 precious metal prices declined YoY but Scrap steel impact YoY and QoQ increased sequentially • Average price for scrap steel increased from $213 per ton in Q1 2021 to $265 per ton in Q1 2022 $275 • Sequential changes in scrap steel prices impacted Who
Slide 41: Foreign Exchange
Foreign Exchange $ 1.45 $ 1.40 • £ down 2.8% Q1 2022 vs Q1 2021 $ 1.40 • € down 6.9% Q1 2022 vs Q1 2021 $ 1.38 $ 1.38 $ 1.35 $ 1.34 • $79 million unfavorable impact of $ 1.35 weaker Q1 2022 rates relative to the US dollar on Europe parts and services $ 1.30 revenue growth $ 1.25 • Foreign exchange (
Slide 42: 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. 42
Slide 43: 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 March 31, 2022 Consolidated Europe Parts & Services Revenue growth as reported 5.9% 1.8% Less: Currenc
Slide 44: Revenue and Segment EBITDA by segment
Appendix 2 Revenue and Segment EBITDA by segment Year Ended December 31(1) Three Months Ended March 31(1) % of % of % of % of % of % of (in millions) 2018 2019 2020 2021 2022 2021 revenue revenue revenue revenue revenue revenue Revenue Wholesale - North America $4,671 $4,682 $4,040 $4,378 $1,201 $1,
Slide 45: Reconciliation of Net Income to EBITDA and Segment EBITDA
Appendix 3 Reconciliation of Net Income to EBITDA and Segment EBITDA Year Ended December 31(1) Three Months Ended March 31(1) (in millions) 2018 2019 2020 2021 2022 2021 Net income $483 $545 $640 $1,092 $273 $266 Subtract: Net income attributable to continuing noncontrolling interest 3 3 2 1 - - Net
Slide 46: 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 47: Reconciliation 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 March 31(1) (in millions, except per share data) 2022 2021 Net income $273 $266 Subtract: Net income from discontinued operations 4 — Net income from continuing opera
Slide 48: Reconciliation 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 as we believe these measures are useful for evaluating the core operating perfor
Slide 49: Forecasted EPS Reconciliation
Appendix 5 Forecasted EPS Reconciliation(1) Forecasted Fiscal Year 2022 (in millions, except per share data) Minimum Outlook Maximum Outlook Net income from continuing operations $1,006 $1,090 Adjustments: Amortization of acquired intangibles 66 66 Restructuring expenses 18 18 Other adjustments 5 5
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 Year Ended December 31(1) Three Months Ended March 31(1) (in millions) 2018 2019 2020 2021 2022 2021 Net cash provided by operating activities (2) $715 $1,064 $1,444 $1,367 $409 $523 Less: purchases of property,
Slide 51: 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 52: Reconciliation of Total Debt to Net Debt
Appendix 7 Reconciliation of Total Debt to Net Debt (in millions) March 31, 2022(1) December 31, 2021(1) Current portion of long-term obligations $31 $35 Long-term obligations, excluding current portion 2,680 2,777 Total debt, net of debt issuance costs $2,711 $2,812 Add: Debt issuance costs 10 12 T
Slide 53: LKQ
LKQ