LKQ Corporation · NASDAQ:LKQ
LKQ — Investor Presentation (February 2021)
55 slides from LKQ's investor presentation, February 2021
Slide 1: Investor Presentation February 2021
Investor Presentation February 2021
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: 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 4
Slide 5: LKQ's Evolution
LKQ’s Evolution Remanufacture Wholesale Keystone/ Self Serve d 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 Aftermarket Refurbished Keystone/ Europe – Heavy Duty Europe-ECP Collision Wheels Specialty Sta
Slide 6: Overview of LKQ
Overview of LKQ Company Overview Financial Performance LKQ is a global distributor of vehicle products, including replacement parts, Revenue ($mm) components and systems used in repair and maintenance of vehicles and specialty products and accessories Organic 7.0% 4.8% 4.1% 4.4% 0.3% (7.6%) Growth
Slide 7: Key Priorities
Key Priorities Profitable Growth Cash Flow Generation European Integration Talent Acquisition 7
Slide 8: 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 market in North America and develop parts in North America and mechanical scale across Sal
Slide 9: Fourth Quarter and Full Year 2020 Highlights
Fourth Quarter and Full Year 2020 Highlights COVID-19 pandemic impact on operations − Revenue declined in Q4 year-over-year as some mobility restrictions were put back into place in Europe and North America − Ongoing cost actions and cash management delivering as planned − Inventory availability i
Slide 10: Cost Structure Actions
Cost Structure Actions Opex quarterly run rate(1) Key cost reductions Opex Opex Opex 0% 18% 10% Revenue Revenue Revenue 3% Personnel costs down 11% 12% 16% – Headcount actions totaling ~5K FTEs include furlough, RIFs, decreased Other hours, reduction of overtime, temp workers and hiring freeze; le
Slide 11: Demand Impact - Organic Parts & Service Revenue Change (per day)
Demand Impact- Organic Parts & Service Revenue Change (per day) 11 Revenue recovery has slowed as second wave of the COVID-19 pandemic intensified in Q4 Note: Europe had one additional selling day in Q4 2020 compared to the same period of 2019
Slide 12: Q4 2020 Revenue
Q4 2020 Revenue Revenue Changes by Source: Components of Revenue Acquisition and Foreign Organic Divestiture Exchange Total(1) North America (13.7)% 0.1% 0.1% (13.5)% Europe (3.1)% (1.8)% 5.4% 0.5% Specialty 16.6% 0.5% 0.1% 17.2% Parts and Services (5.2)% (0.8)% 2.7% (3.3)% Other Revenue 24.4% —% 0.
Slide 13: 2020 Capital Allocation
2020 Capital Allocation $ in millions $312 Operating cash flows: − Operating cash flows of $1.44 billion represent a $380 million (or 36%) year over year increase owing to cash inflows from inventory, net receivables and lower interest payments partially offset by cash outflows from accounts payab
Slide 14: Operating Cash Flow & Free Cash Flow
Operating Cash Flow & Free Cash Flow $ in millions 42% 14 Note: FCF amounts only include FCF generated by continuing operations * Free Cash Flow is a non-GAAP measure. Refer to Appendix 6 for Free Cash Flow reconciliation ** EBITDA is a non-GAAP measure. Refer to Appendix 3 for EBITDA reconciliation
Slide 15: Leverage & Liquidity
Leverage & Liquidity ($ in millions ) ($ in millions ) Total Capacity(1) $4,072 $3,491 $3,474 $2,897 2.6x 1.9x Effective borrowing rate for Q4 2020 was 3.3% (2) (1) Total capacity includes our term loans and revolving credit facilities 15 (2) Including our interest rate swaps, approximately 95% of o
Slide 16: 2020 Performance Against Original (Pre-COVID) Guidance
2020 Performance Against Original (Pre-COVID) Guidance 2020 Original Full Year 2020 ($ in millions except for EPS) Guidance(1)(2) Actual(1) Organic Growth, Parts and Services 0.50% - 2.50% (7.6)% Net Income attributable to LKQ stockholders $678 - $714 $639 Adjusted Net Income attributable to LKQ $75
Slide 17: Outlook 2021
Outlook 2021 (effective only on the date issued: February 18, 2021) 2021 outlook(1): Full year parts and services revenue growth expected − Q1 decline year over year, Q2 growth on a light comparable period, followed by gradual recovery in the second half of the year − Two fewer selling days in Nor
Slide 18: Liquidity as of December 31, 2020
Liquidity as of December 31, 2020 Credit Rating • Rated Ba2 / BB+ (1) by Moody’s and S&P, respectively • Fixed Interest Rate Bonds: €1.50 billion ($1.83 billion) • Variable Interest Rate Bank Debt: $967 million ($839 million hedged to fixed rates - $689 million notional amount swaps Debt Structure m
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 19
Slide 20: LKQ's Operating Segments Demonstrate Attractive Growth and Margin Profile
LKQ’s Operating Segments Demonstrate Attractive Growth and Margin Profile Product Overview Financial Overview Collision − Aftermarket automotive products 5.6% 2.9% 3.0% 5.7% 0.9% (12.9)% North America − Automotive glass distribution $4,119 $4,445 $4,800 $5,183 $ 5,209 $ 4,632 − Recycled & Refurbis
Slide 21: LKQ North America wins with industry leading fill-rates and strategic partnerships
LKQ North America wins with industry leading fill-rates, strong value proposition and strategic partnerships High Fulfillment Rates Value Proposition • Highly fragmented space Distribution & Wholesale North America 2011 Chevrolet 2014 GMC Footprint Equinox 2017 Nissan Altima Sierra 1500 • Nationwide
Slide 22: Collision Products, a $17 Billion Industry in the US
Collision Products, a $17 Billion Industry in the US Insurance Companies (Indirect Customers) New OEM Manufacturers Repair Shop 61% Refurbished & Recycled OEM Optional OE 11% Aftermarket Products 21% 7% Alternative parts = 39% of parts costs 22 Source: CCC Information Services – Crash Course 2019.
Slide 23: Segment Overview: The Market Leader in Europe
Segment Overview: The Market Leader in Europe UK & #1 Market Position in Top 6 Markets2 $5.5 B Netherlands, ROI Belgium, and France Revenue 2020 Italy and Switzerland Germany and Austria Central and Eastern Europe Scandinavia Germany United > 900,000 Kingdom Unique SKUs ~ 1,000 Italy Czech Locations
Slide 24: Specialty Overview: Focused on Profitable Growth
Specialty Overview: Focused on Profitable Growth Key Facts Financial Performance $ in M 2020 Sales: ~$1.5B Significant Acquisitions since Employees: 2,500+ 2014: • Stag Parkway Inc Customers: 20,000+ • The Coast Distribution System Suppliers: 1,000+ Inc Stocking SKUs: 185,000+ $1,500 • Warn Industri
Slide 25: 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 25
Slide 26: 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 simplification through Sator (Benelux & France) “1 LKQ Europe” Rhiag (Italy & 9 other European countries) Stahlgruber (Germany & Eastern Europe) Plan t
Slide 27: 1 LKQ Europe Project
1 LKQ Europe Project 22 Improved Customer … In the Hands Maintain Strong Different Experience…. of Local Entrepreneurial Culture Countries Managers Be ne fit fro m Sc Multiple ERP, al financial, E- e mail, Phone Transformati e Common ERP Platform systems… on it tiv p e m o n Rationalized Product Por
Slide 28: Confident in Achieving Our Committed Performance
Confident in Achieving Our Committed Performance 0.6% -0.3% 0.3% 11.1% 2.2% 0.2% 0.1% -0.5% September 1.9% 8.3% 2019 LKQE Segment 7.8% 9.5% EBITDA Margin Bridge1 Forecasted Key Initiatives Asset Rationalization Organic Growth Incremental Expected 2021 Segment 2019 Segment Transformation Costs EBITDA
Slide 29: Multiple Levers to Drive North American Results
Multiple Lever to Drive North American Results Key Initiatives A Great Stable of Brands Favorable collision tailwinds Collision & Mechanical Organic Revenue Expansion of product offerings Growth Monitoring opportunity of ADAS and EV Aftermarket Salvage Glass Paint (PBE) Further optimizing af
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 Focus on Free Target organic growth greater than market comps Cash Flow Achieve 1 LKQ Europe program and NA margin expansion Generation Convert high levels of EBITDA to Free Cash Flow with a focus on trade working capital efficiencies Targeting i
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 32
Slide 33: Corporate Governance Highlights
Corporate Governance Highlights Independent LKQ is governed by 12-member board of directors, 10 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 n
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 21 68 Former CEO of LKQ Unparalleled knowledge of LKQ business and industry Dominick Zarcone 3 62 President and CEO Extensive finance expe
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: LKQ plays an important role in enabling a circular and sustainable economy
LKQ plays an important role in enabling a circular and sustainable economy ENVIRONMENTAL SOCIAL GOVERNANCE • Our salvage operations recycle • Focused on employee health & • Experienced and diverse Board of more than 90% of materials from safety Directors end-of-life vehicles - Since the beginning of
Slide 38: 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 38
Slide 39: 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 40: 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.
Slide 41: Appendix 1 - 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 Year Ended December 31, 2020 December 31, 2020 Consolidate Consolidate d Europe d Europe Parts & S
Slide 42: Appendix 2 - Revenue and Segment EBITDA by segment
Appendix 2 - Revenue and Segment EBITDA by segment Three Months Ended Year Ended December 31(1) December 31(1) % of % of % of % of (in millions) 2020 revenue 2019 revenue 2020 revenue 2019 revenue Revenue North America $1,167 $1,283 $4,632 $5,209 Europe 1,433 1,425 5,492 5,838 Specialty 355 303 1,50
Slide 43: 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 December 31(1) Year Ended December 31(1) (in millions) 2020 2019 2020 2019 Net income $182 $141 $640 $545 Subtract: Net income attributable to continuing noncontrolling interest 1 0 2 3 Net income attributable
Slide 44: 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(1) September 30, (in millions) March 31, 2020 June 30, 2020 2020 Net income $146 $119 $194 Subtract: Net income (loss) attributable to continuing noncontrolling interest 1 (0) 0 Net income attributable to disco
Slide 45: 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(1) June 30, September 30, (in millions) March 31, 2019 2019 2019 Net income $99 $152 $153 Subtract: Net income (loss) attributable to continuing noncontrolling interest 1 1 (0) Net income attributable to discon
Slide 46: 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(1) June 30, September 30, December 31, (in millions) March 31, 2018 2018 2018 2018 Net income $153 $158 $134 $38 Subtract: Net (loss) income attributable to noncontrolling interest (0) 1 0 2 Net income attribut
Slide 47: Appendix 3 - 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) (in millions) 2015 2016 2017 2018 Net income $423 $464 $530 $483 Subtract: Net (loss) income attributable to continuing noncontrolling interest — — (4) 3 Net income attributable to LKQ stockholders $423
Slide 48: 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 49: Appendix 4 - Reconciliation of Net Income and EPS 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 Year Ended December 31(1) December 31(1) (in millions, except per share data) 2020 2019 2020 2019 Net income $182 $141 $640 $545 Subtract: Net income attributable t
Slide 50: Appendix 4 - Reconciliation of Net Income and EPS 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 Attributable to LKQ Stockholders as we believe these measures are useful for e
Slide 51: Appendix 5 - Forecasted EPS Reconciliation
Appendix 5 - Forecasted EPS Reconciliation(1) For the year ending December 31, 2021 (in millions, except per share data) Minimum Outlook Maximum Outlook Net income from continuing operations attributable to LKQ stockholders $731 $791 Adjustments: Amortization of acquired intangibles 77 77 Restructur
Slide 52: 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 Year Ended December December 31(1) 31(1) (in millions) 2020 2019 2020 2019 Net cash provided by operating activities $309 $99 $1,444 $1,064 Less: purchases of property, plant and equipment 6
Slide 53: Appendix 7 - Reconciliation of Gross Margin to Adjusted Gross Margin
Appendix 7 - Reconciliation of Gross Margin to Adjusted Gross Margin Consolidated Adjusted Gross Margin Three Months Ended(1) Year Ended(1) December 31, December 31, December 31, December 31, (in millions) 2020 2019 2020 2019 Gross margin $1,170 $1,196 $4,593 $4,852 Add: Restructuring expenses - cos
Slide 54: Appendix 7 - Reconciliation of Gross Margin to Adjusted Gross Margin
Appendix 7 - Reconciliation of Gross Margin to Adjusted Gross Margin North America Adjusted Gross Margin Three Months Ended(1) (in millions) September 30, 2019 June 30, 2020 September 30, 2020 Gross margin $576 $454 $534 Add: Restructuring expenses - cost of goods sold 0 3 1 Adjusted gross margin $5
Slide 55: Appendix 8 - Reconciliation of Total Debt to Net Debt
Appendix 8 - Reconciliation of Total Debt to Net Debt December 31, December 31, (in millions) 2020(1) 2019(1) Current portion of long-term obligations $58 $326 Long-term obligations, excluding current portion 2,813 3,715 Total debt, net of debt issuance costs $2,871 $4,042 Add: Debt issuance costs 2