Slide 1: Second Quarter 2021 Earnings Call
Second Quarter 2021 Earnings Call July 29, 2021 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
Slide 3: Q2 2021 Highlights
Q2 2021 Highlights • Highest quarterly diluted EPS and Segment EBITDA in LKQ history ◦ Focus on operational excellence, ongoing benefits from rightsizing actions enacted in prior periods, and favorable scrap and precious metal prices drive record profitability • Total revenue growth of 30.8%; organi
Slide 4: Consolidated Results - Continuing Operations
Consolidated Results - Continuing Operations Q2 2021 Revenue(1) Q2 2021 EPS(2) +30.8% +159.0% +113.2% $3,600 $1.10 $1.20 $1.13 $3,435 $1.01 $1.00 $1.10 $3,400 $1.13 $1.01 $1.00 $0.90 $3,200 $0.90 $0.80 $3,000 $0.80 $0.70 $2,800 $0.70 $2,626 $0.60 $0.60 $2,600 $0.53 $0.50 $0.50 $0.53 $2,400 $0.39 $0.
Slide 5: Demand Impact
Demand Impact Organic Parts & Services Revenue Change (Per Day) 90% 82.3% 80% 70% 60% 50% 41.6% 38.9% 40% 33.0% 30% 22.3% 20% 16.6% 16.4% 15.6% 10% 6.2% 8.3% 5.7% 1.1% 1.8% 0% (1.4)% (1.0)% (10)% (2.9)% (5.6)% (4.5)% (5.0)% (7.0)% (11.3)% (20)% (13.7)% (16.6)% (30)% (22.5)% Q1 2020 Q2 2020 Q3 2020 Q
Slide 6: Q2 2021 Revenue
Q2 2021 Revenue Revenue Changes by Source: Components of Revenue Acquisition 100.0% and Foreign 7.5% 4.7% (1) Organic Divestiture Exchange Total 15.4% North America 19.7% 0.2% 0.7% 20.6% 15.5% Europe 20.7% (0.9)% 10.3% 30.1% 75.0% Specialty 30.1% 0.4% 1.1% 31.5% Parts and Services 21.9% (0.3)% 5.4%
Slide 7: Sustained OpEx Savings
Sustained OpEx Savings 29.1% 28.3% 26.5% Other 3.2% 3.8% 3.0% Facilities 3.5% 3.8% 3.4% 4.4% 4.6% Delivery(1) 4.4% Personnel 17.2% 16.8% 15.6% June 2019 YTD June 2020 YTD June 2021 YTD Significant sustained savings from headcount actions, route optimization & other cost reduction efforts, partially
Slide 8: Financial Results
Fe @ K VSP ll Corporation Financial Results
Slide 9: Operating Results - Continuing Operations
Operating Results - Continuing Operations Second Quarter Change ($ in millions, except per share data) 2021 2020 F/(U) Revenue $3,435 $2,626 30.8% Gross Margin 1,416 1,011 40.0% Operating Expenses 902 737 (22.3)% Operating Income 445 180 146.4% Pre-tax Income 409 163 151.1% Net income from continuin
Slide 10: North America – Q2 2021 Results
North America – Q2 2021 Results Change % of Revenue Gross Margin ($ in millions) 2021 2020 F/(U) 2021 2020 50.0% 49.0% Total Revenue $1,328 $1,011 31.3% 49.0% 48.0% Gross Margin $651 $454 43.5% 49.0% 44.9% 48.0% 47.4% 46.9% Adjusted Gross Margin* $651 $457 42.5% 49.0% 45.2% 47.0% 46.0% 48.0% Operati
Slide 11: Europe – Q2 2021 Results
Europe – Q2 2021 Results Change % of Revenue Gross Margin ($ in millions) 2021 2020 F/(U) 2021 2020 40.0% Total Revenue $1,577 $1,211 30.2% 38.4% 38.4% Gross Margin $605 $445 36.0% 38.4% 36.8% 39.0% Adjusted Gross Margin* $605 $448 35.2% 38.4% 37.0% 38.0% 37.2% 37.0% 37.1% Operating Expenses $442 $3
Slide 12: Specialty – Q2 2021 Results
Specialty – Q2 2021 Results Change % of Revenue Gross Margin ($ in millions) 2021 2020 F/(U) 2021 2020 30.0% 29.9% 28.8% Total Revenue $532 $405 31.5% 28.5% Gross Margin $159 $112 42.1% 29.9% 27.7% 27.7% 28.0% 27.3% 27.2% Operating Expenses $81 $61 (33.8)% 15.2% 14.9% Segment EBITDA(1) $79 $52 52.0%
Slide 13: 2021 Capital Allocation
2021 Capital Allocation $ in millions $933 $(88) $1,000 $(347) $500 $312 $1 $329 $(344) $(89) $(51) $0 Beginning Cash Operating Cash Capex Net Repayments Share Derivative Other Investing FX Ending Cash 12/31/20 Flows of Repurchases* Settlement and Financing 6/30/2021 Credit Facilities Activity, net
Slide 14: Historical Capital Allocation
Historical Capital Allocation 3.7% 2.7% (1) 3-Year Capital Allocation Summary (7/1/18 - 6/30/21) ($ in millions) $ % 17.2% Cash and Cash Equivalents, 6/30/18 $345 Operating Cash Inflow 3,823 Capital Allocation: Net Repayments of Credit Facilities and Other Debt (2,121) 55.2% 55.2% Share Repurchases
Slide 15: Operating Cash Flow and Free Cash Flow
Operating Cash Flow and Free Cash Flow* $1,600 $1,400 $ in millions 98% 100% 86% $1,200 $1,000 75% 66% $800 $1,444 $1,271 50% $600 42% $1,064 $933 $400 $798 $845 $715 25% $465 42% $200 $0 0% 2018 2019 2020 YTD June 2021 Free Cash Flow ("FCF")* Operating Cash Flow FCF/EBITDA** Note: FCF amounts only
Slide 16: Leverage & Liquidity
Leverage & Liquidity ($ in millions ) ($ in millions ) Total Capacity(1) $3,500 $4,000 $3,000 $2,897 $3,500 $3,474 $312 $3,150 $2,500 $2,466 $3,000 $2,585 $329 $2,500 $2,000 $2,137 $1,644 $2,436 $2,000 $1,500 $71 $1,500 1.9x $1,000 $71 $1,000 1.2x $1,435 $500 $500 $967 $0 $0 December 31, 2020 June 3
Slide 17: Share Repurchase Program
Share Repurchase Program # of Shares 17.3 1.5 6.2 2.0 Repurchased Million Million Million Million • Repurchased 27.0 $469 M million shares through July 23, 2021 with an average purchase $27.09 price of $34.48 $304 M • Board of Directors has $49.21 authorized a $1 billion increase and two year extens
Slide 18: Enabling a Circular and Inclusive Economy
Enabling a Circular and Inclusive Economy Global Leader in Automobile Recycling Second Quarter 2021 Our North American ENVIRONMENTAL Our salvage operations recycle more than 90% of Recycling Achievements materials from end-of-life vehicles ◦ Focused on employee health & safety Number of 208,629 OSHA
Slide 19: Outlook 2021
Outlook 2021 (effective only on the date issued: July 29, 2021) 2021 outlook(1): • Diluted EPS attributable to LKQ stockholders in the range of $3.23 to $3.43 • Adjusted diluted EPS attributable to LKQ stockholders in the range of $3.55 to $3.75(2)(3) • Free cash flow in the range of $0.95 billion t
Slide 20: YTD Results and Supplementary Information
YTD Results and Supplementary Information
Slide 21: Consolidated Results - Continuing Operations (YTD)
Consolidated Results - Continuing Operations YTD 2021 Revenue(1) YTD 2021 EPS(2) +17.4% +117.2% +88.2% $2.00 $2.20 $1.89 $2.07 $6,800 $6,606 $1.80 $1.89 $2.00 $2.07 $6,400 $1.60 $1.80 $6,000 $1.40 $1.60 $5,627 $5,600 $1.20 $1.40 $5,200 $1.00 $1.20 $0.87 $1.10 $4,800 $0.80 $0.87 $1.00 $1.10 $0.39 $0.
Slide 22: YTD 2021 Revenue
YTD 2021 Revenue Revenue Changes by Source: Components of Revenue Acquisition 100.0% and Foreign 7.5% 5.5% (1) Organic Divestiture Exchange Total 13.4% North America 4.1% 0.1% 0.5% 4.8% 15.0% Europe 9.9% (1.2)% 9.2% 18.0% 75.0% Specialty 30.5% 0.4% 0.8% 31.7% Parts and Services 10.6% (0.5)% 4.8% 14.
Slide 23: Operating Results - Continuing Operations (YTD)
Operating Results - Continuing Operations YTD Change ($ in millions, except per share data) 2021 2020 F/(U) Revenue $6,606 $5,627 17.4% Gross Margin 2,709 2,225 21.8% Operating Expenses 1,750 1,637 (6.9)% Operating Income 816 422 93.3% Pre-tax Income 763 370 106.3% Net income from continuing operati
Slide 24: North America – YTD 2021 Results
North America – YTD 2021 Results Change % of Revenue ($ in millions) 2021 2020 F/(U) 2021 2020 Total Revenue $2,577 $2,302 12.0% Gross Margin $1,251 $1,065 17.4% 48.5% 46.3% Adjusted Gross Margin* $1,251 $1,068 17.0% 48.5% 46.4% Operating Expenses $732 $721 (1.4)% 28.4% 31.3% Other Income, net $4 $1
Slide 25: Europe – YTD 2021 Results
Europe – YTD 2021 Results Change % of Revenue ($ in millions) 2021 2020 F/(U) 2021 2020 Total Revenue $3,040 $2,575 18.1% Gross Margin $1,167 $952 22.6% 38.4% 37.0% Adjusted Gross Margin* $1,167 $955 22.2% 38.4% 37.1% Operating Expenses $866 $792 (9.4)% 28.5% 30.7% Other Income (Expense), net $1 $(1
Slide 26: Specialty – YTD 2021 Results
Specialty – YTD 2021 Results Change % of Revenue ($ in millions) 2021 2020 F/(U) 2021 2020 Total Revenue $991 $753 31.6% Gross Margin $291 $207 40.7% 29.4% 27.5% Operating Expenses $153 $124 (22.9)% 15.4% 16.5% (1) Segment EBITDA $141 $84 66.8% 14.2% 11.2% (1) Segment EBITDA for each segment is a GA
Slide 27: Liquidity as of June 30, 2021
Liquidity as of June 30, 2021 • Rated Ba1 / BB+ by Moody's and S&P, respectively Credit Rating • Rated BBB- (investment grade) by Fitch (initiated in May 2021) • Fixed Interest Rate Bonds: €750 million ($889 million) in aggregate due in 2024 and 2028 • Variable Interest Rate Credit Facility Borrowin
Slide 28: Metal Prices
Metal Prices Q2 scrap steel prices increased YoY Q2 precious metal prices increased and QoQ YoY and were mixed QoQ • Average price for scrap steel increased from $108 per ton in Q2 2020 to $251 per ton in Q2 2021 $275 $2,440 $2,835 $251 • Sequential change was positive $38 per ton, or $250 $1,940 $2
Slide 29: Foreign Exchange
Foreign Exchange $1.45 • £ up 12.6% Q2 2021 vs Q2 2020 2.6% GBP 1 $1.40 $1.40 $1.38 • € up 9.4% Q2 2021 vs Q2 2020 • $124 million favorable impact of $1.35 $1.32 translation of stronger Q2 rates relative to the US dollar on European $1.30 parts and services revenue growth $1.29 $1.24 $1.25 $1.28 • E
Slide 30: Inventory
Inventory Inventory Procurement: Q2 YTD ($ in millions, Vehicles purchased in 000s) 2021 2020 % Change 2021 2020 % Change Total aftermarket procurement $1,629 $964 69.0% $3,174 $2,467 28.7% Wholesale salvage cars and trucks 63 36 75.0% 113 108 4.6% Europe wholesale salvage cars and trucks 6 5 20.0%
Slide 31: 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. 31
Slide 32: 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 Six Months Ended June 30, 2021 June 30, 2021 Consolidated Europe Consolidated Europe Parts & Service
Slide 33: Revenue and Segment EBITDA by segment
Appendix 2 Revenue and Segment EBITDA by segment Three Months Ended Six Months Ended June 30(1) June 30(1) % of % of % of % of (in millions) 2021 revenue 2020 revenue 2021 revenue 2020 revenue Revenue North America $1,328 $1,011 $2,577 $2,302 Europe 1,577 1,211 3,040 2,575 Specialty 532 405 991 753
Slide 34: Reconciliation of Net Income to EBITDA and Segment EBITDA
Appendix 3 Reconciliation of Net Income to EBITDA and Segment EBITDA Three Months Ended June 30(1) Six Months Ended June 30(1) (in millions) 2021 2020 2021 2020 Net income $305 $119 $571 $265 Subtract: Net income (loss) attributable to continuing noncontrolling interest 0 (0) 1 1 Net income attribut
Slide 35: 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 36: 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 Six Months Ended June 30(1) June 30(1) (in millions, except per share data) 2021 2020 2021 2020 Net income $305 $119 $571 $265 Subtract: Net income (loss) attributabl
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 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 38: 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 $967 $1,027 Adjustments: Amortization of acquired intangibles 77 77 Restructur
Slide 39: 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 Six Months Ended June 30(1) June 30(1) (in millions) 2021 2020 2021 2020 Net cash provided by operating activities $411 $718 $933 $913 Less: purchases of property, plant and equipment 46 33 88
Slide 40: 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 41: 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) Six Months Ended(1) (in millions) June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Gross margin $1,416 $1,011 $2,709 $2,225 Add: Restructuring expenses - cost of goods s
Slide 42: 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) December 31, September (in millions) March 31, 2021 2020 30, 2020 March 31, 2020 Gross margin $599 $546 $534 $612 Add: Restructuring expenses - cost of goods sold (0) 1 1 0 Ad
Slide 43: Reconciliation of Gross Margin to Adjusted Gross Margin
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 44: Reconciliation of Total Debt to Net Debt
Appendix 8 Reconciliation of Total Debt to Net Debt December 31, (in millions) June 30, 2021(1) 2020(1) Current portion of long-term obligations $91 $58 Long-term obligations, excluding current portion 2,361 2,813 Total debt, net of debt issuance costs $2,452 $2,871 Add: Debt issuance costs 15 26 To