Slide 1: Third Quarter 2015 Earnings Call
Third Quarter 2015 Earnings Call October 29, 2015 Rob Wagman – President & Chief Executive Officer Nick Zarcone – Executive Vice President & Chief Financial Officer Joe Boutross – Director, Investor Relations
Slide 2: Forward Looking Statements
Forward Looking Statements Statements and information included in this presentation that are not purely 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 . Forward-lo
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
Consolidated Results Q3 2015 YTD 2015 $1,850 $1,832 $0.35 $5,500 $1.10 $5,444 $1.07 $0.33 $5,400 $1,800 $0.33 $1.05 $5,300 $1,750 $0.31 $0.30 $5,200 $1,721 $1.00 $5,100 $0.98 $1,700 $0.29 $5,056 $5,000 $0.95 $1,650 $0.27 $4,900 $1,600 $0.25 $4,800 $0.90 Q3 2014 Q3 2015 Q3 2014 Q3 2015 YTD 2014 YTD 2
Slide 5: Q3 2015 Revenue Growth
Q3 2015 Revenue Growth Revenue Changes by Source: Organic Acquisition Foreign Exchange Total(1) North America 5.9% 3.3% (1.3%) 7.9% Europe 7.2% 5.7% (9.9%) 3.0% Specialty 10.0% 33.9% (2.5%) 41.4% Parts and Services 6.8% 8.1% (4.2%) 10.7% Other Revenue (33.7%) 3.4% (0.4%) (30.8%) Total 2.6% 7.6% (3.8
Slide 6: YTD 2015 Revenue Growth
YTD 2015 Revenue Growth Revenue Changes by Source: Organic Acquisition Foreign Exchange Total(1) North America 5.6% 1.9% (1.0%) 6.4% Europe 10.2% 9.7% (10.8%) 9.1% Specialty 7.7% 30.0% (2.0%) 35.7% Parts and Services 7.3% 7.9% (4.1%) 11.1% Other Revenue (24.3%) 1.5% (0.4%) (23.2%) Total 4.1% 7.3% (3
Slide 7: Q3 2015 Operating Highlights
Q3 2015 Operating Highlights North America • Cumulative miles driven witnessed a YOY increase of 4.2% through July; 12-month moving average for miles driven through July 2015 reached its highest level since 1990. • Q3 average price of unleaded regular was $2.60 a gallon compared to an average of $3.
Slide 8: Inventory
Inventory Inventory Procurement: Q3 2015 Q3 2014 % Change Aftermarket inventory (millions) $747 $665 12.3% Wholesale salvage cars and trucks 71,000 72,000 (1.4%) Self service and "crush only" cars 128,000 134,000 (4.5%) • Aftermarket inventory levels sufficient to achieve our growth targets • Adjust
Slide 9: Acquisition Activity
Acquisition Activity Number of Q3 TTM Number of YTD TTM Acquisitions Revenue* Acquisitions Revenue* North America 2 $150 million 5 $162 million Europe 4 $13 million 11 $88 million Specialty 1 $135 million 1 $135 million Total 7 $298 million 17 $385 million North America • In Q3, the Company acquired
Slide 10: Financial Results
Financial Results
Slide 11: Operating Results
Operating Results Third Quarter YTD ($ in millions, except per share data) 2015 2014 Change 2015 2014 Change Revenue $1,832 $1,721 6.4% $5,444 $5,056 7.7% Gross Margin 713 664 7.3% 2,136 1,987 7.5% Segment EBITDA 207 192 8.2% 662 608 8.8% Operating Income 167 156 6.8% 553 504 9.8% Pre-tax Income 155
Slide 12: Q3 2015 Consolidated Margins
Q3 2015 Consolidated Margins Q3 Q3 Change (as a % of Revenue) 2015 2014 F/(U) QTD Commentary Revenue 100.0% 100.0% — • Improvement in European and North American gross margins; partially offset by Gross Margin 38.9% 38.6% 0.3% mix – lower margin Specialty business acquired in October 2014 Facility a
Slide 13: YTD 2015 Consolidated Margins
YTD 2015 Consolidated Margins YTD YTD Change (as a % of Revenue) 2015 2014 F/(U) YTD Commentary Revenue 100.0% 100.0% — • Decline primarily due to mix of 0.3% – lower margin Specialty business acquired Gross Margin 39.2% 39.3% (0.1%) in October 2014 partially offset as a result of internalizing gros
Slide 14: Components of Quarterly Revenue
Components of Quarterly Revenue $1.72B $1.83B $5.06B $5.44B 100.0% • Other Revenue continues to become a lower 6.6% 9.9% 7.2% 10.3% percentage of total revenue as scrap steel and 15.5% 14.8% other metals prices fall and we grow our other 11.6% 11.8% 80.0% lines of business • North America historical
Slide 15: North America – Q3 2015 Results
North America – Q3 2015 Results % of Revenue Gross Margin ($ in millions) 2015 2014 Change 2015 2014 44.0% Revenue $1,037 $1,025 1.2% 42.9% 42.7% 42.2% Gross Margin $438 $429 2.0% 42.2% 41.9% 41.9% 42.0% 42.3% 42.4% Operating Expenses $312 $298 4.8% 30.1% 29.1% 42.0% Segment EBITDA $129 $132 (2.5%)
Slide 16: North America – YTD 2015 Results
North America – YTD 2015 Results % of Revenue ($ in millions) 2015 2014 Change 2015 2014 Revenue $3,129 $3,080 1.6% Gross Margin $1,328 $1,302 2.0% 42.5% 42.3% Operating Expenses $916 $891 2.9% 29.3% 28.9% Segment EBITDA $417 $415 0.4% 13.3% 13.5% North America Segment EBITDA Margin Bridge 15.0% 0.4
Slide 17: Scrap Steel Prices
Scrap Steel Prices $260 • Decrease in other revenue primarily attributable to $224 lower scrap steel prices $217 $215 $220 • Average price we received for scrap steel was ~43% $187 lower YOY, at $215 per ton $180 for Q3 2014 vs. $123 per ton in Q3 2015 $141 $140 • Estimated negative EPS $140 $123 im
Slide 18: Europe – Q3 2015 Results
Europe – Q3 2015 Results % of Revenue Gross Margin ($ in millions) 2015 2014 Change 2015 2014 40.0% Revenue $511 $496 3.1% 38.0% Gross Margin $196 $177 10.7% 38.3% 35.6% 38.0% 37.2% 37.3% 38.3% Operating Expenses $145 $136 7.2% 28.4% 27.3% 36.0% 37.0% 37.0% Segment EBITDA $53 $42 26.4% 10.3% 8.4% 35
Slide 19: Europe – YTD 2015 Results
Europe – YTD 2015 Results % of Revenue ($ in millions) 2015 2014 Change 2015 2014 Revenue $1,508 $1,381 9.3% Gross Margin $569 $505 12.7% 37.7% 36.6% Operating Expenses $416 $376 10.7% 27.6% 27.2% Segment EBITDA $153 $129 18.9% 10.2% 9.3% ECP Branches 198 179 19 Sator Branches 86 79 7 Europe Segment
Slide 20: Foreign Exchange
Foreign Exchange $1.80 • £ down 7% Q3 2015 vs. Q3 2014 $1.68 • € down 16% Q3 2015 vs. Q3 2014 $1.70 $1.66 $1.67 • Translation impact of stronger $1.60 $1.58 $1.55 dollar on European revenue $1.53 growth: $1.52 $1.50 – Q3: $(49) million $1.40 – YTD: $(148) million $1.37 $1.37 • European constant curr
Slide 21: Specialty – Q3 2015 Results
Specialty – Q3 2015 Results % of Revenue Gross Margin ($ in millions) 2015 2014 Change 2015 2014 32.0% 30.8% 30.5% 30.8% Revenue $284 $201 41.4% 30.0% 30.8% Gross Margin $79 $58 35.5% 27.9% 29.1% 30.1% 28.0% 29.1% Operating Expenses $53 $41 30.6% 18.7% 20.2% 27.9% Segment EBITDA $26 $18 45.0% 9.2% 8
Slide 22: Specialty – YTD 2015 Results
Specialty – YTD 2015 Results % of Revenue ($ in millions) 2015 2014 Change 2015 2014 Revenue $810 $596 35.8% Gross Margin $239 $181 32.4% 29.6% 30.3% Operating Expenses $148 $117 26.6% 18.2% 19.6% Segment EBITDA $92 $64 42.9% 11.3% 10.8% Specialty Segment EBITDA Margin Bridge 12.0% 0.8% 11.3% 11.0%
Slide 23: YTD 2015 Capital Allocation
YTD 2015 Capital Allocation $800 $491 $600 ($100) $400 ($154) $200 $115 $137 ($213) ($2) $0 Beginning Cash Operating Cash Capex Acquisitions & Financing F/X Ending Cash 12/31/14 Flows Other Investing 9/30/15 Activities • Operating cash flows: – $432M of cash earnings(1) in YTD 2015 compared to $398M
Slide 24: Leverage & Liquidity
Leverage & Liquidity ($ in millions ) Revolver Availability* $2,500 $2,380 $2,363 $2,000 3.4x $1,865 $115 3.2x $1,750 $1,607 $1,600 $2,000 $137 3.0x $1,128 $1,470 $1,311 2.8x $1,200 $1,500 2.6x 2.4x $60 2.4x $800 $71 $1,000 2.2x 2.0x $1,192 $400 2.0x $500 $981 1.8x $0 1.6x 12/31/2014 9/30/2015 $0 12
Slide 25: Key Return Metrics
Key Return Metrics Return on Equity Return on Invested Capital 16.0% 14.0% 14.9% 12.0% 15.0% 14.4% 14.5% 14.4% 10.6% 10.6% 10.6% 10.2% 10.2% 10.2% 10.0% 14.0% 13.7% 13.1% 8.0% 13.0% 6.0% 12.0% 4.0% 11.0% 2.0% 10.0% 0.0% 2010 2011 2012 2013 2014 TTM Q3 2010 2011 2012 2013 2014 TTM Q3 2015 2015 24
Slide 26: Guidance 2015
Guidance 2015 (effective only on the date issued: October 29, 2015) Full Year Full Year ($ in millions excluding EPS) 2014 Actual 2015 Guidance(1) Organic Revenue Growth, for parts and services 9.0% 7.0% to 7.5% Adjusted Net Income $382 $428 to $442 Adjusted Diluted EPS $1.25 $1.39 to $1.44 Cash Flo
Slide 27: Q3 2015 Key Takeaways
Q3 2015 Key Takeaways • Solid organic revenue growth of 6.8% and 7.3% for parts and services in Q3 and YTD, respectively • Constant currency revenue growth of 15% for parts and services in Q3 and YTD • Segment EBITDA margin improvement for Q3 and YTD periods • Adjusted YTD EPS of $1.10 vs. $1.01 • I
Slide 28: 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 27
Slide 29: Appendix - Non-GAAP Financial Measures
Appendix - Non-GAAP Financial Measures The financial data contained in the presentation materials includes earnings before interest, taxes, depreciation and amortization ("EBITDA") and provides a reconciliation of net income to EBITDA. The financial data contained in the presentation materials also
Slide 30: EBITDA and Segment EBITDA Reconciliation
EBITDA and Segment EBITDA Reconciliation QTD YTD % of % of % of % of (in thousands) Q3 2015 revenue Q3 2014 revenue Q3 2015 revenue Q3 2014 revenue Segment EBITDA North America $128,506 12.4% $131,851 12.9% $416,774 13.3% $415,139 13.5% Europe 52,733 10.3% 41,726 8.4% 153,199 10.2% 128,826 9.3% Spec
Slide 31: Adjusted Net Income and Adjusted EPS Reconciliation
Adjusted Net Income and Adjusted EPS Reconciliation QTD YTD (in thousands) Q3 2015 Q3 2014 Q3 2015 Q3 2014 Net Income $101,346 $91,515 $328,163 $301,050 Adjustments: Restructuring and acquisition related expenses, net 3,016 2,372 8,306 8,459 of tax Loss on debt extinguishment, net of tax — — — 214 C
Slide 32: Constant Currency Reconciliation
Constant Currency Reconciliation • The following unaudited table reconciles revenue growth for Parts and Services to constant currency revenue growth for the same measure: Three Months, Nine Months, Ended September 30, 2015 Ended September 30, 2015 Consolidated Europe Consolidated Europe Parts and S