Lkq Corporation · NASDAQ:LKQ
Lkq — Q4 2021 Earnings Presentation
45 slides from Lkq's earnings presentation, Feb 17, 2022
Slide 1: Fourth Quarter & Full-Year 2021 Earnings Call
Fourth Quarter & Full-Year 2021 Earnings Call February 17, 2022 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: Q4 and Full Year 2021 Highlights
Q4 and Full Year 2021 Highlights • Strong organic revenue growth and profitability despite inflationary and supply chain pressures, and declines in precious metals prices ◦ Total Q4 revenue growth of 7.9%; organic revenue growth for parts and services of 6.6% (7.3% per day) ◦ Diluted EPS(1) of $0.81
Slide 4: Consolidated Results Q4 2021
Consolidated Results Q4 2021 Revenue(1) EPS(2) +7.9% +37.3% +26.1% $3,600 $1.10 $1.20 $1.00 $1.10 $3,400 $1.00 $3,186 $0.90 $3,200 $0.81 $0.90 $0.87 $0.80 $3,000 $2,954 $0.81 $0.87 $0.80 $0.70 $0.69 $2,800 $0.70 $0.60 $0.59 $0.69 $0.60 $2,600 $0.59 $0.50 $0.50 $2,400 $0.40 $0.40 $2,200 $0.30 $0.30 Q
Slide 5: Demand Impact
Demand Impact Organic Parts & Services Revenue Change (Per Day) 40% 33.0% 30.1% 30% 19.7% 19.2% 20% 16.6% 13.7% 9.9% 10% 7.3% 5.9% 5.4% 1.1% 1.8% 0.3% 0% (1.4)% (1.0)% (2.9)% (10)% (5.6)% (4.5)% (5.0)% (7.0)% (11.3)% (13.7)% (20)% (16.6)% (22.5)% (30)% Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021
Slide 6: Q4 2021 Revenue
Q4 2021 Revenue Revenue Changes by Source: Components of Revenue Acquisition 100.0% and Foreign 6.5% 6.8% (1) Organic Divestiture Exchange Total 12.0% 12.9% North America 8.3% 0.6% 0.2% 9.2% Europe 5.7% 0.5% (1.8)% 4.3% 75.0% Specialty 5.7% 9.6% 0.3% 15.6% Parts and Services 6.6% 1.7% (0.8)% 7.5% 48
Slide 7: Sustained OpEx Savings
Sustained OpEx Savings 28.6% 28.1% 27.3% Other 3.3% 3.5% 3.2% Facilities 3.5% 3.7% 3.5% 4.5% Delivery(1) 4.6% 4.5% Personnel 17.3% 16.3% 16.1% 2019 2020 2021 Significant sustained savings from headcount actions, route optimization & other cost reduction efforts Note: In the chart above, the sum of t
Slide 8: Financial Results
Financial Results a
Slide 9: Operating Results
Operating Results Fourth Quarter Change ($ in millions, except per share data) 2021 2020 F/(U) Revenue $3,186 $2,954 7.9% Gross Margin 1,270 1,170 8.5% Operating Expenses 920 815 (12.8)% Operating Income 280 267 4.8% Pre-tax Income 271 247 9.7% Net income from continuing operations attributable to L
Slide 10: North America – Q4 2021 Results
North America – Q4 2021 Results Change % of Revenue Gross Margin ($ in millions) 2021 2020 F/(U) 2021 2020 50.0% 49.0% Total Revenue $1,280 $1,167 9.8% 49.0% 48.0% 47.4% Gross Margin $594 $546 8.6% 46.4% 46.8% 48.0% 46.9% 46.4% Adjusted Gross Margin(1) $594 $547 8.5% 46.4% 46.9% 47.0% 46.0% 46.0% 45
Slide 11: Europe – Q4 2021 Results
Europe – Q4 2021 Results Change % of Revenue Gross Margin ($ in millions) 2021 2020 F/(U) 2021 2020 41.0% Total Revenue $1,497 $1,433 4.4% 39.6% 40.0% Gross Margin $565 $527 7.2% 37.7% 36.7% 38.4% 38.4% 39.0% (1) Adjusted Gross Margin $565 $527 7.3% 37.7% 36.7% 37.2% 38.0% 37.0% 37.1% Operating Expe
Slide 12: Specialty – Q4 2021 Results
Specialty – Q4 2021 Results Change % of Revenue Gross Margin ($ in millions) 2021 2020 F/(U) 2021 2020 29.9% Total Revenue $410 $355 15.5% 30.0% 28.8% 28.5% Gross Margin $111 $97 15.1% 27.1% 27.2% 27.7% 28.2% Operating Expenses $82 $68 (20.8)% 19.9% 19.1% 28.0% 27.3% Segment EBITDA(1) $31 $30 2.5% 7
Slide 13: 2021 Capital Allocation
2021 Capital Allocation ($ in millions) $1,367 $85 $1,500 $(293) $1,000 $500 $312 $(877) $(73) $274 $(89) $(124) $(33) $(1) $0 Beginning Operating Capex Net Share Dividends Derivative Acquisitions Other FX Ending Cash Cash Cash Borrowings on Repurchases Settlement Investing 12/31/21 12/31/20 Flows C
Slide 14: Operating Cash Flow and Free Cash Flow
Operating Cash Flow and Free Cash Flow (1) ($ in millions) (FCF Conversion %) $1,600 98% $1,400 60% 100% $1,200 66% $1,000 75% $800 42% $1,444 $1,271 $1,367 50% $600 $1,064 $1,074 $400 $798 $715 25% $465 $200 $0 0% 2018 2019 2020 2021 (1) (2) Free Cash Flow ("FCF") Operating Cash Flow FCF/EBITDA Not
Slide 15: Leverage & Liquidity
Leverage & Liquidity ($ in millions) ($ in millions) Total Capacity(1) $3,500 $4,000 $3,000 $2,897 $2,824 $3,500 $3,474 $312 $274 $3,150 $2,500 $3,000 $2,585 $2,550 $2,500 $1,194 $2,000 $2,436 $2,000 $69 $1,500 $1,500 1.9x $1,000 $71 $1,000 $1,887 1.4x $500 $500 $967 $0 $0 December 31, 2020 December
Slide 16: Share Repurchase Program
Share Repurchase Program # of Shares 17.3 1.5 6.2 4.3 5.3 Repurchased Million Million Million Million Million $469 M $304 M $297 M $27.09 $219 M $49.21 $56.57 $50.50 $57 M $38.35 Life to date through Q1 2021 Q2 2021(1) Q3 2021(2) Q4 2021 2020 Invested $877 million acquiring 17.2 million shares; $654
Slide 17: Expanding Global ESG Programs
Expanding Global ESG Programs Focused on employee health & safety Giving back Our North American SOCIAL • Specialty received Department of Transportation Pre-Pass • Launched LKQ Cares Holiday Vote which allowed employees to Recycling Achievements 2021 Designation for their high safety scores and pos
Slide 18: Outlook 2022
Outlook 2022 (effective only on the date issued: February 17, 2022) 2022 outlook(1): • Organic parts and services revenue growth in the range of 3.0% to 5.0% • Diluted EPS attributable to LKQ stockholders(2) in the range of $3.50 to $3.80 • Adjusted diluted EPS attributable to LKQ stockholders(2)(3)
Slide 19: 2022 Adjusted EPS Guidance Walk
2022 Adjusted EPS Guidance Walk +9% $4.00 $3.96 (2) $0.13 $3.87 ($0.04) $0.28 ($0.10) ($0.27) $3.56 ($0.03) $3.50 ($0.06) FY 2021 FX Rates Scrap & Precious Equity Tax Rate FY 2021 Pro Operating Investments, 2021 Share FY 2022 Metal Prices Investment Fair Forma Results Gov Programs, Repurchases Value
Slide 20: 2021 Results and Supplementary Information
2021 Results and Supplementary Information
Slide 21: Consolidated Results 2021
Consolidated Results 2021 Revenue(1) EPS(2) +12.6% +75.1% +55.3% $3.96 $14,000 $3.90 $3.90 $3.66 $3.96 $13,500 $3.60 $3.60 $13,089 $3.66 $13,000 $3.30 $3.30 $12,500 $3.00 $3.00 $12,000 $11,629 $2.70 $2.70 $2.55 $11,500 $2.40 $2.40 $2.55 $11,000 $2.09 $2.10 $2.10 $10,500 $2.09 $10,000 $1.80 $1.80 $9,
Slide 22: 2021 Revenue
2021 Revenue Revenue Changes by Source: Components of Revenue Acquisition and Foreign 100.0% 5.7% Organic Divestiture Exchange Total(1) 7.2% North America 5.6% 0.4% 0.4% 6.4% 13.0% 14.2% Europe 6.2% (0.4)% 4.6% 10.3% 75.0% Specialty 20.2% 3.0% 0.6% 23.8% Parts and Services 7.9% 0.3% 2.5% 10.7% 47.0%
Slide 23: Operating Results
Operating Results Fiscal Year Change ($ in millions, except per share data) 2021 2020 F/(U) Revenue $13,089 $11,629 12.6% Gross Margin 5,322 4,593 15.9% Operating Expenses 3,568 3,266 (9.2)% Operating Income 1,474 986 49.6% Pre-tax Income 1,399 885 58.1% Net income from continuing operations attribu
Slide 24: North America – 2021 Results
North America – 2021 Results Change % of Revenue ($ in millions) 2021 2020 F/(U) 2021 2020 Total Revenue $5,165 $4,632 11.5% Gross Margin $2,452 $2,146 14.3% 47.5% 46.3% (1) Adjusted Gross Margin $2,452 $2,151 14.0% 47.5% 46.4% Operating Expenses $1,519 $1,392 (9.1)% 29.4% 30.1% Other Income, net $6
Slide 25: Europe – 2021 Results
Europe – 2021 Results Change % of Revenue ($ in millions) 2021 2020 F/(U) 2021 2020 Total Revenue $6,062 $5,492 10.4% Gross Margin $2,336 $2,029 15.1% 38.5% 36.9% (1) Adjusted Gross Margin $2,336 $2,032 15.0% 38.5% 37.0% Operating Expenses $1,733 $1,615 (7.3)% 28.6% 29.4% Other Income (Expense), net
Slide 26: Specialty – 2021 Results
Specialty – 2021 Results Change % of Revenue ($ in millions) 2021 2020 F/(U) 2021 2020 Total Revenue $1,867 $1,509 23.7% Gross Margin $534 $418 27.8% 28.6% 27.7% Operating Expenses $315 $259 (21.8)% 16.9% 17.1% (1) Segment EBITDA $223 $163 37.2% 12.0% 10.8% (1) Segment EBITDA for each segment is a G
Slide 27: Liquidity as of December 31, 2021
Liquidity as of December 31, 2021 • Rated Ba1 / BB+ by Moody's and S&P, respectively, and S&P upgraded to 'positive outlook' on August 5, 2021 Credit Rating • Rated BBB- (investment grade) by Fitch (initiated in May 2021) • Fixed Interest Rate Bonds: €750 million ($853 million) in aggregate due in 2
Slide 28: Metals Prices
Metals Prices Q4 scrap steel prices increased YoY Q4 precious metal prices declined • Average price for scrap steel increased from and were flat QoQ YoY and QoQ $158 per ton in Q4 2020 to $255 per ton in Q4 $2,835 2021 $2,440 $2,333 $275 $250 $1,940 • Sequential changes in scrap steel prices $2,438
Slide 29: Foreign Exchange
Foreign Exchange $1.45 • £ up 2.0% Q4 2021 vs Q4 2020 $1.40 $1.40 $1.38 $1.38 • € down 4.2% Q4 2021 vs Q4 2020 $1.35 • $26 million unfavorable impact of $1.35 % $1.32 GBP 2.0 weaker Q4 2021 rates relative to the US dollar on Europe parts and services $1.30 revenue growth $1.29 $1.28 $1.24 $1.25 • Fo
Slide 30: Inventory
Inventory Inventory Procurement: Q4 Fiscal Year ($ in millions, Vehicles purchased in 000s) 2021 2020 % Change 2021 2020 % Change Total aftermarket procurement $1,623 $1,662 (2.3)% $6,388 $5,593 14.2% Wholesale salvage cars and trucks 65 65 —% 239 230 3.9% Europe wholesale salvage cars and trucks 7
Slide 31: Inventory Balances
Inventory Balances ($ in millions) $1,600 North America $2,000 Europe $1,600 Specialty 1 Q4 202 $1,800 Q3 to tory build 1 $1,400 inven )M FX $1,400 Q4 202 s 1 $76M s; $(16 Q3 to i n o Q4 202 qui si t i on t i acquis build Q3 to tory build $1,600 $5M ac $15M ory $1,200 $26M inven $1,200 8 1M invent $
Slide 32: 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. 32
Slide 33: 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, 2021 December 31, 2021 Consolidated Europe Consolidated Europe Parts & Servi
Slide 34: 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) 2021 revenue 2020 revenue 2021 revenue 2020 revenue Revenue North America $1,280 $1,167 $5,165 $4,632 Europe 1,497 1,433 6,062 5,492 Specialty 410 355 1,867
Slide 35: 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) 2021 2020 2021 2020 Net income $237 $182 $1,092 $640 Subtract: Net income attributable to continuing noncontrolling interest 0 1 1 2 Net income attributable
Slide 36: 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 37: Reconciliation of Net Income and EPS to 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) 2021 2020 2021 2020 Net income $237 $182 $1,092 $640 Subtract: Net income attributable t
Slide 38: Adjusted Net Income and EPS Definitions
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 eva
Slide 39: 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 attributable to LKQ stockholders $1,008 $1,095 Adjustments: Amortization of acquired intangibles 65 65 Restructuring expe
Slide 40: Reconciliation to Free Cash Flow
Appendix 6 Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Three Months Ended Year Ended December 31(1) December 31(1) (in millions) 2021 2020 2021 2020 Net cash provided by operating activities $5 $309 $1,367 $1,444 Less: purchases of property, plant and equipment 161
Slide 41: Free Cash Flow Definition
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 42: Reconciliation of Gross Margin to Adjusted Gross Margin
Appendix 7 Reconciliation of Gross Margin to Adjusted Gross Margin Three Months Ended Year Ended Consolidated Adjusted Gross Margin December 31(1) December 31(1) (in millions) 2021 2020 2021 2020 Gross margin $1,270 $1,170 $5,322 $4,593 Add: Restructuring expenses - cost of goods sold 0 1 0 7 Adjust
Slide 43: 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) September 30, June 30, March 31, September 30, June 30, March 31, (in millions) 2021 2021 2021 2020 2020 2020 Gross margin $608 $651 $599 $534 $454 $612 Add: Restructuring exp
Slide 44: Adjusted Gross Margin Definition
Appendix 7 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 a
Slide 45: Reconciliation of Total Debt to Net Debt
Appendix 8 Reconciliation of Total Debt to Net Debt December 31, December 31, (in millions) 2021(1) 2020(1) Current portion of long-term obligations $35 $58 Long-term obligations, excluding current portion 2,777 2,813 Total debt, net of debt issuance costs $2,812 $2,871 Add: Debt issuance costs 12 2