Lkq Corporation · NASDAQ:LKQ
Lkq — Investor Day (September 2020)
92 slides from Lkq's investor day presentation, Sep 10, 2020
Slide 1: September 2020 Virtual Investor Day
September 2020 Virtual Investor Day
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: Agenda
Agenda 8:30AM-8:35AM Welcome - Joe Boutross 8:35AM-8:50AM LKQ Corporations Overall Strategy and Mission - Nick Zarcone 8:50AM-9:05AM Strategy & Innovation - Bob Reppa 9:05AM-9:35AM North America Operations - Justin Jude 9:35AM-9:45AM Break 9:45AM-10:15AM Europe Operations - Arnd Franz 10:15AM-10:45A
Slide 4: Nick Zarcone
Nick Zarcone President & Chief Executive Officer
Slide 5: Our Mission Statement
Our 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 o
Slide 6: Over 16 Years of Diversified Growth
Over 16 Years of Diversified Growth 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 Aftermarket Refurbished Keystone/ Europe – Heavy Duty Europe-ECP Collision Wheels
Slide 7: Key Strategic Pillars GEAR Forward!
Key Strategic Pillars Grow Expand Adapt Rationalize Diversified Global To Evolving Asset Base Offerings Footprint Technology GEAR Forward! 7
Slide 8: Recent Business Divestitures
Recent Business Divestitures PGW Glass Manufacturing Stahlgruber Non Core March 2017 Andrew Page Auto Parts Depots Telecommunications (11 Branches) Non Core, Low Margin Competition Authority Requirement May 2020 August 2018 Stahlgruber Czech Auto Parts Rationalize Recycled Aviation Parts Competition
Slide 9: Key Priorities
Key Priorities Profitable Growth Cash Flow Generation European Integration Talent Acquisition 9
Slide 10: Overview of Recent Talent Additions
Overview of Recent Talent Additions North America Europe Specialty Corporate • Vice President Self Service • CEO Euro Car Parts • Controller Specialty • CEO Stahlgruber Internal • CHRO LKQ Europe Hires • Controller LKQ Europe • CFO North America • CEO LKQ Europe • Global CIO • CFO LKQ Europe • Globa
Slide 11: 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 Unparalleled knowledge of LKQ business and Joseph Holsten 17 68 Former CEO of LKQ industry Dominick Zarcone 3 62 President and CEO Extensive finance expe
Slide 12: Sustainable Business Practices
Sustainable Business Practices Environmental 2019 Results(1) Social Governance • Our North American recycling operations harvest vehicle 887,000 • We have shared with our employees some of the benefits we received as • Experienced and diverse Board of Directors Number of vehicles procured components
Slide 13: Health & safety of our employees, customers and communities
One of our top priorities is the health & safety of our employees, customers and the communities in which we operate Exercised best efforts to follow the guidance provided by the CDC, WHO, Procured and provided PPE to our OSHA and other public health employees authorities and resources Implemented p
Slide 14: Bob Reppa
Bob Reppa Senior Vice President - Strategy & Innovation
Slide 15: Strategy and Innovation
Strategy and Innovation • Identify and implement • Execute strategic planning productivity initiatives process • Design and execute business • Develop growth strategies transformations • Measure and monitor Business Strategic progress Transformation Planning • Monitor megatrends • Generate customer
Slide 16: Specialty RV demand drivers
Specialty RV demand drivers Strategic Planning Historical Camping and RV Park Revenue1 and Regression Analysis of Camping and RV Park Specialty Organic RV Revenue Revenue1 and Specialty Organic RV Revenue CAGR Camping and RV Park Revenue in $B +3.8% 2.8 R2 = 0.75 Specialty RV Revenue in $M 2.6 KAO R
Slide 17: Diagnostics, calibration and sublet repairs offering
Diagnostics, calibration and sublet repairs offering Innovation US Market for Diagnostics, Calibration and Complex Sublet Diagnostic and Repair Services Repairs in $M CAGR +9.0% 1,100 850 2019 2022F Collision Shop Customers Sublet Complex Tasks 17
Slide 18: Market assessment framework
Market assessment framework Corporate Strategy Evaluation Framework and Opportunity Assessment Market / Channel/Geography New Current Core Current New Products / Technology 18
Slide 19: North American collision parts market
North American collision parts market Long Term Planning Market Drivers Total NA Collision Replacement Parts Market Size • ADAS technology Vehicles Aged 0 to 15 Years effectiveness and • Parc growth penetration CAGR • Parts proliferation • ADAS technology +1.1% • Parts inflation improvement • Parts
Slide 20: European parc electrification
European parc electrification Long Term Planning Powertrains in LKQ’s Primary European Hybrid Powertrains in LKQ’s Primary European Operating Regions Operating Regions 5+ Year Old Vehicle Parc 5+ Year Old Vehicle Parc 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% 20F 21F 22F 23F 24F 25F 26F 27F 28
Slide 21: Electrification of parts
Electrification of parts Long Term Planning New Categories of Service Parts For Electrified Vehicles Price Premium Multiple Nickel Metal Hydride Electric Battery Electric Turbo Electric Main Range of Hybrid to ICE Battery Remanufacturing Coolant Pump Chargers Coolant Pump Components 7.0x 6.0x Electr
Slide 22: Takeaways
Takeaways • Great businesses with solid underlying market fundamentals • Strong competitive advantage protected by scale position, differentiated capabilities and unmatched footprint • Strategy and Innovation team focused on driving insight and enhancing fact based decision making across the corpora
Slide 23: Justin Jude
Justin Jude President - North America
Slide 24: Agenda
Agenda • Introduction to North America ‒ Business overview ‒ Proven record of success • 2020 Year in review ‒ Disruptions due to COVID-19 ‒ Cost control and operational excellence • North America’s future is strong ‒ Positive market dynamics ‒ Positioned for growth Profitable Growth Accretive Margin
Slide 25: Largest provider of Collision, Mechanical, Heavy Truck, and Self Service alternative parts
Largest provider of Collision, Mechanical, Heavy Truck, and Self Service alternative parts 2019 Revenue: $5.2B | 2019 Segment EBITDA Margin: 13.7% | ~17.5K Employees | 551 Locations Wholesale Regions Self Service Leading provider of Leading provider of OEM aftermarket, OEM recycled auto parts with r
Slide 26: LKQ wins with industry leading fill-rates, strong value proposition and partnerships
LKQ wins with industry leading fill-rates, strong value proposition and strategic partnerships High Fulfillment Rates Distribution & Wholesale North AmericaFootprint Value Proposition • Highly fragmented space 2011 Chevrolet 2014 GMC Equinox 2017 Nissan Altima Sierra 1500 • Nationwide coverage Hood
Slide 27: North America's breadth and scale creates a strategic advantage
North America’s breadth and scale creates a strategic advantage for long-term success Highlights • Acquisitions +200 • Warehouse consolidations +250 Glass • System conversions + 75 acquisition Remanufacturing acquisition Aftermarket acquisition Organic Parts and Services CAGR since 2011 of 4.3% Reve
Slide 28: North America enters the expansion stage
North America enters the expansion stage; driving profitable growth and operational excellence Growth and Establishment Expansion 2006 - 2017 2018 & Beyond • Top-Line Revenue Growth • Profitable Revenue Growth Business Focus • Significant Acquisitions • Strategic/Tuck-in Acquisitions • Minimal focus
Slide 29: COVID-19 created disruption but increased market share
COVID-19 created disruption but increased market share and expedited planned cost reductions Distribution & Wholesale North AmericaFootprint Safety during COVID-19 Revenue and Gross Margin % Market ↓ 29% • Considered essential business throughout Revenue ↓ 23% • Created North American COVID-19 Task
Slide 30: North America continues to invest in technology
North America continues to invest in technology to further improve its cost position Continuous Improvements • Towing Centralization • Part Cataloguing Implementation of Artificial Intelligence 7M+ vehicles at auction Hood Driver Door Mirror Grille Driver Headlamp 4M+ vehicles evaluated Bumper Cover
Slide 31: Network optimization and alignment around KPIs
Network optimization and alignment around KPIs will help create sustainability with operational excellence Network Optimization Operational sustainability • Maintain or improve delivery performance • Aligned on 6 critical key performance indicators • Align with changing market • Developed daily oper
Slide 32: Management has united the team on clear objectives
Management has united the team on clear and concise objectives for long-term sustainability Cash Profits Drive FCF through continued optimization of trade Grow Improve operating working capital leverage of 20-30 bps per year (excluding Responsibly Organically & profitably grow commodities) revenue 2
Slide 33: Market growth plus LKQ's strategic position
Market growth plus LKQ’s strategic position will deliver growth expectations with increased optimism Total NA Collision Replacement Parts Market Size APU Growth Vehicles Aged 0 to 15 Years CAGR Market share gain +1.1% Diagnostics and calibrations Adjacent products 21F 22F 23F 24F 25F 26F 27F 28F 29F
Slide 34: North America is well positioned for sustainable growth
North America is well positioned to capture sustainable growth and margin expansion 01 Breadth and scale that LKQ North America has developed is a strategic advantage 02 Market growth, product expansion, and ability to take advantage of adjacent markets leave room for future growth 03 Focus on conti
Slide 35: Justin Jude Questions and Answers
Justin Jude Questions and Answers
Slide 36: Break
Corporation
Slide 37: Arnd Franz
Arnd Franz Chief Executive Officer - LKQ Europe
Slide 38: Segment Overview: The Market Leader in Europe
Segment Overview: The Market Leader in Europe UK & ROI #1 Market Position in Top 6 Markets2 $5.8 B Netherlands, Belgium, and France Revenue 2019 Italy and Switzerland Germany and Austria Central and Eastern Europe Scandinavia Germany United Kingdom > 900,000 Unique SKUs ~ 1,000 Italy Czech Republic
Slide 39: The Leading Auto Service System in Europe
The Leading Auto Service System in Europe 1 • Largest distribution network in Europe • Well diversified across top European markets OPERATIONAL EXCELLENCE • Strong private label brands • Continuous Improvement mindset 2 • Purchasing Leverage / Supply Chain Financing • Strong 1 LKQ Europe organizatio
Slide 40: COVID-19 Business Impacts
COVID-19 Business Impacts Monthly Organic Growth1 Revenue and Gross Margin2 1.8% Revenue ↓ 20.1% $1,516 -0.9% $1,211 -4.3% -8.4% -13.7% -12.7% 37.0% 36.0% -28.9% Jan Feb Mar Apr May Jun Jul Q2 2019 Q2 2020 OPEX Reductions Expected Permanent Reduction in SG&A OPEX ↓ 16.8% >80 bps Improvement 28.9% 28
Slide 41: European GDP Historical Data and Forecasts
European GDP Historical Data and Forecasts Historical and Forecasted European GDP Growth by Quarter Historical and Forecasted GDP Growth Real GDP Growth vs. PY for LKQE’s Top 6 Markets1 By Year and Country, Real GDP Growth vs. PY 15% 10% 2019 2020F 2021F 2022F 5% Germany 0.6% -6.3% 5.0% 1.9% 0% UK 1
Slide 42: European VIO & Market Growth Forecasts
European VIO & Market Growth Forecasts Vehicles In Operation (VIO) and Average Vehicle Age – LKQ Europe’s Top 6 Markets Millions of Vehicles by Vehicle Age, Average Parc Age CAGR CAGR +1.0% +1.8% ’15-’19 ‘19-’23 161 163 164 165 CAGR CAGR 154 156 159 148 151 45 43 43 3.4% (2.6%) 46 48 46 42 43 45 10.
Slide 43: 1 LKQ Europe Project
1 LKQ Europe Project 22 Improved Customer … In the Hands of Maintain Strong Different Experience…. Local Managers Entrepreneurial Culture Countries Multiple ERP, financial, E-mail, Phone systems… Transformation Common ERP Platform Rationalized Product Portfolio … And Fragmented Procurement and LKQ E
Slide 44: 1 LKQ Europe Organizational Design
1 LKQ Europe Organizational Design Create and maximize value Build a common 1 LKQ Establish common Leverage best based on effective Europe corporate culture policies / procedures practices decision making / accountability CEO LKQ Europe Regions European Functions LKQ Corporate Arnd Franz CEO, Fource
Slide 45: 1 LKQ Europe – Key Initiatives
1 LKQ Europe – Key Initiatives • Pan-European Programs Direct & Indirect Procurement / Procurement • Leverage Scale Vendor Financing Program • Working Capital Improvement • Standardized Product Portfolio Components Brands Rationalization / • Improve Speed to Market Product Strategy Product Managemen
Slide 46: Covid Impact on LKQ Europe Initiatives
Covid Impact on 1 LKQ Europe Initiatives: Some Minor Delays, But Generally on Track Delayed 2 – 4 Months Accelerated 3 – 12 Months • Procurement initiatives • Talent Management • Headquarters in Switzerland • Platform rationalization • EOS (Common ERP) and IT harmonization projects • Shared Services
Slide 47: Key Initiatives – Updated Impact on Segment EBITDA
Key Initiatives – Updated Impact on Segment EBITDA: Confident in Achieving Our Committed Performance 0.6% 2.2% September 2019 0.5% 0.5% LKQE Initiatives 0.5% 0.3% Expected Segment EBITDA 0.8% 0.4% 1.9% Contribution 0.7% 2019 – 20211 Procurement Product Strategy Revenue Optimization Local Initiatives
Slide 48: Confident in Achieving Our Committed Performance
Confident in Achieving Our Committed Performance 0.3% 0.6% -0.3% 11.1% 2.2% 0.2% 0.1% -0.5% 8.3% 1.9% September 2019 LKQE Segment 9.5% EBITDA Margin 7.8% Bridge1 Forecasted Key Initiatives Asset Organic Growth Incremental Expected 2021 2019 Segment Rationalization Transformation Segment EBITDA Margi
Slide 49: EBITDA Margin 2019-2021
EBITDA Margin 2019-2021 LKQE Segment EBITDA Margin % 2019 – 2021 10.3% 8.5% 7.8% 6.5% 9.2% 8.0% 2019A H1 2020A H2 2020F 2021F Potential Range Expected Segment EBITDA % Same Period Sales as % of 2019 Sales 2019 Sales 49
Slide 50: Well positioned to exceed expectations on cash flow generation
Well positioned to exceed expectations on cash flow generation TWC / Cash Flow Supplier Payment Terms & Vendor Financing Program • Trade Working Capital (TWC) • European annual direct spend over $3.5B improvement in Europe launched as a ‒ Top 40 suppliers represent ~60% key objective in 2019 • Negot
Slide 51: LKQ Europe Digital Strategy
LKQ Europe Digital Strategy Primary Drivers of Market Digitalization Our Digital Vision INEFFICIENCIES IN THE ADVENT OF DIGITAL PLAYERS & AFTERMARKET MARKETPLACES To create the leading TRADITIONAL European fully B2B integrated digital experience for B2B LMS GMS customers to support the longevity of
Slide 52: Main Takeaways
Main Takeaways • Acceleration in car parc aging provides growth opportunities, recovery likely in 2021. • Covid-19 has delayed 1 LKQ Europe projects and lower volumes are affecting EBITDA product related improvements. We remain committed to achieve our targets. • Accelerating restructuring and physi
Slide 53: Arnd Franz Questions and Answers
Arnd Franz Questions and Answers
Slide 54: Bill Rogers
Bill Rogers Senior Vice President - Specialty
Slide 55: Specialty Overview: Focused on Profitable Growth
Specialty Overview: Focused on Profitable Growth Key Facts Financial Performance $ in M 2019 Sales: ~$1.5B Employees: 2,500+ Significant Acquisitions since 2014: • Stag Parkway Inc Customers: 20,000+ • The Coast Distribution System Inc Suppliers: 1,000+ • Warn Industries $1,500 12% Stocking SKUs: 18
Slide 56: COVID-19 Comments: The Business has Navigated Through the Uncertainty
COVID-19 Comments: The Business has Navigated Through the Uncertainty 2020 Distribution Net Product Sales (NPS) by Fiscal Week Key Actions Taken • Took immediate steps to reduce cost and conserve cash • Established teams and processes to operate safely and efficiently in all essential functions • St
Slide 57: Specialty Network: Continue to Improve on Competitive Advantages
Specialty Network: Continue to Improve on Competitive Advantages Key Facts • 2.5M sq ft Warehouse Space • Fleet of 90 Tractor Trailers and 600 Delivery Vehicles • 40 million+ miles driven annually • Next Day delivery to over 90% of North America • 99.6% Delivery Accuracy Rate 57
Slide 58: Delivery Illustration: Order to Delivery in Less Than 24 Hours
Delivery Illustration: Order to Delivery in Less Than 24 Hours 58
Slide 59: Specialty Markets: Leading Position in Hot Markets
Specialty Markets: Leading Position in Hot Markets with Strong Growth Outlook Specialty • Truck Bed • Wheels & Tires Distribution • Performance • Interior / Exterior Acc. SEMA Revenue • Cargo Management • Suspension Market • Tubular • Air Intake & Exhaust $10B* • Chemical • Lighting SEMA • Appliance
Slide 60: RV OEM Warranty: Leverage Our Position in the Market
RV OEM Warranty: Leverage Our Position in the Market to Support OE Warranty Fulfilment Establishing Relationship and Seizing the Opportunity Positive Press Recognition The Issue The Opportunity Typical RV repair takes 18 days, when part is not in stock and peak RV usage season is short Only fulf
Slide 61: Specialty Adjacent Markets: Core Logistics Network
Specialty Adjacent Markets: Core Logistics Network, Processes, & Products Enable Expansion Marine: $1.5B Powersports: $2.0B Bike Shops: $1.3B Close Adjacencies Core ** Values represent Specialty’s estimate of the addressable market. 61
Slide 62: Market Assessment Framework
Market Assessment Framework: Systematically Assessing Opportunities to Drive Growth Market / Channel/Geography New Current Core Current New Products / Technology 62
Slide 63: Specialty Adjacent Markets: Well in Place to Enter the Marine Market
Specialty Adjacent Markets: All Key Attributes are Well in Place to Enter the Marine Market Marine Opportunity Examples of Overlap with RV and Towing Products Market Size Attractiveness Marine Products Market Market Growth Margin Opportunity Towing Cargo management Fragmented Structure Cabin
Slide 64: Ecommerce for B2B: Significant Progress Over the Last Several Years
Ecommerce for B2B: Significant Progress Over the Last Several Years Best B2B Platform in the Industry B2C to Support Our Brick & Mortar Customers and Sell Direct to Consumers Choose Delivery Method Enabling the Manufacturers and Partners to Reach Consumers Through KAO Plus: Mobile Application, Innov
Slide 65: E-Commerce – Consumer Shopping: Big Shift in e-Commerce Share
E-Commerce – Consumer Shopping: Big Shift in e- Commerce Share… 50% Higher During COVID-19 Drop The Best in the Ship Industry Innovative D2C D2C Solution 65
Slide 66: Specialty Advantages: Very Difficult to Replicate
Specialty Advantages: Very Difficult to Replicate • North America – best coverage, next day • Company fleet and drivers (600 cube Logistics Network • Late cut off times, 99.9% fill rate vans, 90 TT) • Big & bulky items • Best online sales fulfillment option • Biggest (up to $380M in DC’s) Inventory
Slide 67: Specialty Summary
Specialty Summary Strong leadership position in the markets we serve Multiple competitive advantages that are very difficult to duplicate Markets are responding favorably to new environmental conditions Very strong team responsive to changing market & driving market leadership Sound business strateg
Slide 68: Bill Rogers Questions and Answers
Bill Rogers Questions and Answers
Slide 69: Varun Laroyia
Varun Laroyia Executive Vice President and Chief Financial Officer
Slide 70: LKQ – Q2 2020 Snapshot
LKQ – Q2 2020 Snapshot Financial Measures TTM Q2 2020 in $M Third Party Revenue (6) Specialty Revenue $11,785 Segment EBITDA (1) $1,263 12.0% North America 42.0% 46.0% Net Debt (2) $2,802 Europe Total Liquidity (3) $2,527 Segment EBITDA (1)(6) Specialty Market Capitalization (4) $9,766 12.0% Credit
Slide 71: Aligning Corporate Strategy and Financial Policy
Aligning Corporate Strategy and Financial Policy Consolidation Focus Operational Excellence (1998 – 2018) (2019 – Future) • Professionalize alternative collision part • Be the leading distributor for collision parts market in North America and develop scale in North America and mechanical parts in a
Slide 72: Our Approach to Balance Sheet and Capital Allocation
Our Approach to Balance Sheet and Capital Allocation Now Targeting Sustained Investment Grade Profile Balance Sheet Management and Capital Allocation Key Takeaways Driving Increased Organic Growth / Taking Share from Competitors Organic growth focus – outgrow markets and continue to expand in near
Slide 73: 2019 Demonstrates Potential of Operational Focus
2019 Demonstrates Potential of Operational Focus Segment EBITDA1 $ in M A Profitable +6.2% C Strong Revenue Growth $1,251 $1,328 Cash Generation 10.5% 10.6% Revenue Free Cash Flow1 $ in B 2018 2019 $ in M Segment EBITDA Segment EBITDA % +5.3% +71.6% $11.9 $12.5 $798 39.0% $465 66.2% 38.5% B Accretiv
Slide 74: LKQ Operates in a Growing and Economically Resilient Industry
LKQ Operates in a Growing and Economically Resilient Industry Stable Vehicle Miles Traveled Provide Consistent Demand for Aftermarket Auto Parts (in Trillions of Miles) 2001 Great Unique Recession CAGR Recession Lock- +1.3% Down Decrease +2% -2% 3.1 3.2 3.2 3.2 3.3 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.
Slide 75: Total Vehicle Kilometers Traveled in Europe Exhibit Similar Patterns as in the US
Total Vehicle Kilometers Traveled in Europe Exhibit Similar Patterns as in the US Historical Vehicle Kilometers Traveled in Trillions of Km CAGR +0.9% 1.65 1.65 1.69 1.68 1.55 1.55 1.53 1.53 1.57 1.59 UK Italy Germany 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Stable vehicle kilometers travel
Slide 76: Performance During COVID-19 Reflects Resilience of Business Model
Performance During COVID-19 Reflects Resilience of Business Model and Clear Financial Priorities Revenue $ in M Adjusted Gross Margin1 in % SG&A $ in M -19.1% +30 BPS -17.9% $3,248 38.4% 38.7% $898 $2,626 $737 Q2 2019 Q2 2020 Q2 2019 Q2 2020 Q2 2019 Q2 2020 Segment EBITDA1 in % Free Cash Flow1 $ in
Slide 77: Focus on Free Cash Flow Generation
Focus on Free Cash Flow Generation New Incentives and Operating Initiatives Operating & Free Cash Flow to Drive Free Cash Flow Conversion $ in M 136% • Changed Incentive Program throughout organization Free Cash Flow1 starting 2019 $1,064 Operating Cash Flow • Metrics deployed across all key Trade W
Slide 78: Working Toward Optimal Net Leverage of 2.0x
Working Toward Optimal Net Leverage of 2.0x Which Provides Potential for Investment Grade Historical LKQ Share Net Leverage1 Debt Maturity Profile3 and Effective Interest Rate2 in Multiples and % 3.4% 3.4% 3.3% 3.2% 3.2% 3,654 2.8% 2.9x 1,679 2.7x 2.7x 2.6x 2.2x 1,139 1.7x 844 562 843 294 76 32 29 2
Slide 79: Poised to Generate Consistent Free Cash Flow and Allocated to Highest Return Opportunities
Poised to Generate Consistent Free Cash Flow and Allocated to Highest Return Opportunities 2015 to June 2020 - Capital Allocation Priorities for Next 3 Years $4.4 Billion of Operating Cash Flows Operating Maintain Higher Cash Flow Conversion $4.8 Billion of Capital Deployed Capital Similar Level Exp
Slide 80: 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 NA margin expansion Cash Flow Generation Convert high levels of EBITDA to Free Cash Flow with a focus on trade working capital efficiencies Targeting i
Slide 81: LKQ's Investment Thesis
LKQ’s Investment Thesis Organic Growth & Focus on Cash Flow Strong Market Position Operational Excellence and Capital Allocation • Market leadership in all three • Ability to grow revenue • Convert EBITDA to FCF by reporting segments: organically faster than market maintaining rigorous working ‒ Nor
Slide 82: Nick Zarcone Closing Remarks
Nick Zarcone Closing Remarks
Slide 83: Consistent Business Model
Consistent Business Model Niche & Fragmented Markets Industry Leading High Fulfillment Management Rates Attractive Synergy & Leverage Adjacent Opportunities Markets Sustainable Growth & Margin Expansion 83
Slide 84: 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 (22 count
Slide 85: Appendix - Non-GAAP Financial Measures
Appendix - Non-GAAP Financial Measures
Slide 86: Reconciliation of Net Income to EBITDA and Segment EBITDA
Appendix 1 - Reconciliation of Net Income to EBITDA and Segment EBITDA Year Ended December 31 (1) (in millions) 2015 2016 2017 2018 2019 TTM Q2 2020 Net income $423.2 $464.0 $530.2 $483.2 $545.0 $558.6 Subtract: Net (loss) income attributable to continuing noncontrolling interest -- -- (3.5) 3.1 2.8
Slide 87: Reconciliation of Net Income to EBITDA and Segment EBITDA
Appendix 1 - Reconciliation of Net Income to EBITDA and Segment EBITDA Three Months Ended June 30(1) (in millions) 2020 2019 Net income $118.8 $152.1 Subtract: Net (loss) income attributable to continuing noncontrolling interest (0.0) 1.4 Net income attributable to discontinued noncontrolling intere
Slide 88: Reconciliation of Net Income to EBITDA and Segment EBITDA
Appendix 1 - 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 calcu
Slide 89: Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
Appendix 2 - Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Three Months Ended Six Months Ended June 30(1) June 30(1) (in millions) 2020 2019 2020 2019 Net cash provided by operating activities $718 $461 $913 $638 Less: purchases of property, plant and equipment 33 48
Slide 90: Reconciliation of Gross Margin to Adjusted Gross Margin
Appendix 3 - Reconciliation of Gross Margin to Adjusted Gross Margin Consolidated Adjusted Gross Margin Three Months Ended(1) (in millions) June 30, 2020 June 30, 2019 Gross margin $1,011 $1,247 Add: Restructuring expenses - cost of goods sold 6 — Adjusted gross margin $1,017 $1,247 Gross margin % 3
Slide 91: Reconciliation of Gross Margin to Adjusted Gross Margin
Appendix 3 - Reconciliation of Gross Margin to Adjusted Gross Margin We have presented adjusted gross margin solely as a supplemental disclosure that offers investors, securities analysts and other interested parties useful information to evaluate the operating performance of our continuing business
Slide 92: Reconciliation of Total Debt to Net Debt
Appendix 4 - Reconciliation of Total Debt to Net Debt (in millions) June 30, 2020 (1) June 30, 2019 (1) Current portion of long-term obligations $93 $133 Long-term obligations, excluding current portion 3,158 3,920 Total debt, net of debt issuance costs 3,251 4,053 Add: Debt issuance costs 28 34 Tot