Lkq Corporation · NASDAQ:LKQ
Lkq — Q3 2021 Earnings Presentation
44 slides from Lkq's earnings presentation, Oct 28, 2021
Slide 1: Third Quarter 2021 Earnings Call
Third Quarter 2021 Earnings Call October 28, 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: Q3 2021 Highlights
Q3 2021 Highlights • Strong quarterly EPS, Segment EBITDA, and free cash flow • Total revenue growth of 8.2%; organic revenue growth for parts and services of 4.0%; year-over-year increases in scrap steel and precious metals prices generated 45.1% of organic growth for other revenue • Solid margin p
Slide 4: Consolidated Results Q3 2021
Consolidated Results Q3 2021 Revenue(1) EPS(2) +8.2% +50.0% +36.0% $3,600 $1.10 $1.20 $1.00 $0.96 $1.10 $3,400 $1.02 $3,297 $0.96 $1.00 $0.90 $1.02 $3,200 $3,048 $0.90 $0.80 $3,000 $0.80 $0.75 $0.70 $0.64 $2,800 $0.70 $0.75 $0.60 $0.64 $0.60 $2,600 $0.50 $0.50 $2,400 $0.40 $0.40 $2,200 $0.30 $0.30 Q
Slide 5: Demand Impact
Demand Impact Organic Parts & Services Revenue Change (Per Day) 40% 33.0% 30.1% 30% 19.7% 19.2% 20% 16.6% 13.7% 10% 5.9% 1.1% 1.8% 0.3% 0% (1.4)% (1.0)% (2.9)% (10)% (5.6)% (4.5)% (5.0)% (7.0)% (11.3)% (13.7)% (20)% (16.6)% (16.6)% (22.5)% (30)% Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 202
Slide 6: Q3 2021 Revenue
Q3 2021 Revenue Revenue Changes by Source: Components of Revenue Acquisition 100.0% and Foreign 7.1% 5.3% (1) Organic Divestiture Exchange Total 13.1% North America 5.9% 0.6% 0.4% 6.9% 14.1% Europe 0.1% (0.0)% 2.6% 2.7% 75.0% Specialty 13.7% 2.1% 0.6% 16.4% Parts and Services 4.0% 0.5% 1.5% 6.1% 48.
Slide 7: Sustained OpEx Savings
Sustained OpEx Savings 28.3% 28.3% 26.7% Other 3.2% 3.6% 3.1% Facilities 3.5% 3.7% 3.4% 4.5% Delivery(1) 4.6% 4.4% Personnel 17.1% 16.3% 15.8% September 2019 YTD September 2020 YTD September 2021 YTD Significant sustained savings from headcount actions, route optimization & other cost reduction effo
Slide 8: Financial Results
Financial Results a
Slide 9: Operating Results
Operating Results Third Quarter Change ($ in millions, except per share data) 2021 2020 F/(U) Revenue $3,297 $3,048 8.2% Gross Margin 1,343 1,199 12.1% Operating Expenses 898 814 (10.3)% Operating Income 378 296 27.8% Pre-tax Income 366 268 36.3% Net income from continuing operations attributable to
Slide 10: North America – Q3 2021 Results
North America – Q3 2021 Results Change % of Revenue Gross Margin ($ in millions) 2021 2020 F/(U) 2021 2020 50.0% 49.0% Total Revenue $1,307 $1,164 12.3% 49.0% 48.0% Gross Margin $608 $534 13.8% 46.5% 45.9% 47.4% 48.0% 46.9% Adjusted Gross Margin* $608 $535 13.6% 46.5% 46.0% 47.0% 46.0% Operating Exp
Slide 11: Europe – Q3 2021 Results
Europe – Q3 2021 Results Change % of Revenue Gross Margin ($ in millions) 2021 2020 F/(U) 2021 2020 41.0% Total Revenue $1,525 $1,484 2.8% 39.6% 40.0% Gross Margin $604 $550 9.8% 39.6% 37.1% 38.4% 38.4% 39.0% Adjusted Gross Margin* $604 $550 9.8% 39.6% 37.1% 37.2% 38.0% 37.0% 37.1% Operating Expense
Slide 12: Specialty – Q3 2021 Results
Specialty – Q3 2021 Results Change % of Revenue Gross Margin ($ in millions) 2021 2020 F/(U) 2021 2020 29.9% Total Revenue $466 $400 16.3% 30.0% 28.8% 28.5% Gross Margin $131 $114 15.1% 28.2% 28.5% 28.2% 27.7% Operating Expenses $81 $67 (20.9)% 17.3% 16.7% 28.0% 27.3% 27.2% (1) Segment EBITDA $52 $4
Slide 13: 2021 Capital Allocation
2021 Capital Allocation ($ in millions) $1,362 $1,500 $(133) $1,000 $(370) $500 $(575) $403 $312 $(89) $(67) $(34) $(5) $0 Beginning Cash Operating Cash Capex Net Repayments Share Derivative Acquisitions Other Investing FX Ending Cash 12/31/20 Flows of Repurchases Settlement and Financing 9/30/2021
Slide 14: Operating Cash Flow and Free Cash Flow
Operating Cash Flow and Free Cash Flow* $1,600 98% $1,400 86% ($ in millions) 100% $1,200 66% $1,000 75% $800 42% $1,444 $1,271 $1,362 50% $600 $1,229 $1,064 $400 $715 $798 25% $200 $465 42% $0 0% 2018 2019 2020 YTD September 2021 Free Cash Flow ("FCF")* Operating Cash Flow FCF/EBITDA** Note: FCF am
Slide 15: Leverage & Liquidity
Leverage & Liquidity ($ in millions) ($ in millions) Total Capacity(1) $3,500 $4,000 $3,000 $2,897 $3,500 $3,474 $312 $3,150 $2,500 $2,399 $3,000 $2,585 $403 $2,500 $2,000 $1,638 $2,436 $1,996 $2,000 $1,500 $69 $1,500 1.9x $1,000 $71 $1,000 1.1x $1,443 $500 $500 $967 $0 $0 December 31, 2020 Septembe
Slide 16: Share Repurchase Program
Share Repurchase Program # of Shares 17.3 1.5 6.2 4.3 Repurchased • On July 28, 2021 the Million Million Million Million Board of Directors authorized a $1 billion $469 M increase to the share repurchase program through October 25, $27.09 2024 $304 M • We have $951 million $49.21 $219 M of capacity
Slide 17: Enabling a Circular and Inclusive Economy
Enabling a Circular and Inclusive Economy Global Leader in Automobile Recycling Third 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 200,154 OSHA
Slide 18: Outlook 2021
Outlook 2021 (effective only on the date issued: October 28, 2021) 2021 outlook(1): • Diluted EPS attributable to LKQ stockholders in the range of $3.48 to $3.58 • Adjusted diluted EPS attributable to LKQ stockholders in the range of $3.78 to $3.88(2)(3) • Free cash flow in the range of $1.15 billio
Slide 19: YTD Results and Supplementary Information
YTD Results and Supplementary Information
Slide 20: Consolidated Results YTD 2021
Consolidated Results YTD 2021 Revenue(1) EPS(2) +14.2% +90.0% +67.0% $2.85 $3.09 $9,903 $2.00 $2.20 $10,000 $2.85 $3.09 $1.80 $2.00 $9,600 $1.85 $1.60 $1.80 $1.50 $1.85 $9,200 $1.40 $1.50 $1.60 $8,800 $8,675 $1.20 $1.40 $8,400 $1.00 $1.20 $8,000 $0.80 $1.00 $0.39 $7,600 $0.60 $0.80 $7,200 $0.40 $0.6
Slide 21: YTD 2021 Revenue
YTD 2021 Revenue Revenue Changes by Source: Components of Revenue Acquisition and Foreign 100.0% 5.4% Organic Divestiture Exchange Total(1) 7.4% North America 4.7% 0.3% 0.5% 5.5% 14.7% 13.3% Europe 6.3% (0.7)% 6.8% 12.4% 75.0% Specialty 24.6% 1.0% 0.7% 26.4% Parts and Services 8.3% (0.1)% 3.6% 11.8%
Slide 22: Operating Results
Operating Results YTD Change ($ in millions, except per share data) 2021 2020 F/(U) Revenue $9,903 $8,675 14.2% Gross Margin 4,053 3,423 18.4% Operating Expenses 2,648 2,451 (8.0)% Operating Income 1,194 718 66.3% Pre-tax Income 1,128 638 76.8% Net income from continuing operations attributable to L
Slide 23: North America – YTD 2021 Results
North America – YTD 2021 Results Change % of Revenue ($ in millions) 2021 2020 F/(U) 2021 2020 Total Revenue $3,884 $3,466 12.1% Gross Margin $1,859 $1,600 16.2% 47.9% 46.2% Adjusted Gross Margin* $1,859 $1,604 15.9% 47.8% 46.3% Operating Expenses $1,117 $1,053 (6.1)% 28.8% 30.4% Other Income, net $
Slide 24: Europe – YTD 2021 Results
Europe – YTD 2021 Results Change % of Revenue ($ in millions) 2021 2020 F/(U) 2021 2020 Total Revenue $4,565 $4,059 12.5% Gross Margin $1,771 $1,502 17.9% 38.8% 37.0% Adjusted Gross Margin* $1,771 $1,505 17.7% 38.8% 37.1% Operating Expenses $1,298 $1,207 (7.5)% 28.4% 29.7% Other Income (Expense), ne
Slide 25: Specialty – YTD 2021 Results
Specialty – YTD 2021 Results Change % of Revenue ($ in millions) 2021 2020 F/(U) 2021 2020 Total Revenue $1,457 $1,154 26.3% Gross Margin $423 $321 31.6% 29.0% 27.8% Operating Expenses $233 $191 (22.2)% 16.0% 16.5% (1) Segment EBITDA $193 $133 45.0% 13.2% 11.5% (1) Segment EBITDA for each segment is
Slide 26: Liquidity as of September 30, 2021
Liquidity as of September 30, 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 ($869 million) in aggregate due in
Slide 27: Metals Prices
Metals Prices Q3 scrap steel prices increased YoY Q3 precious metal prices increased and were flat QoQ YoY and declined QoQ • Average price for scrap steel increased from $123 per ton in Q3 2020 to $250 per ton in Q3 $2,440 2021 $275 $2,333 $2,835 $250 $1,940 • Sequential changes in scrap steel pric
Slide 28: Foreign Exchange
Foreign Exchange $1.45 • £ up 6.7% Q3 2021 vs Q3 2020 .7% GBP 6 $1.40 $1.40 $1.38 $1.38 • € up 0.8% Q3 2021 vs Q3 2020 • $39 million favorable impact of $1.35 $1.32 translation of stronger Q3 rates relative to the US dollar on European $1.30 parts and services revenue growth $1.29 $1.28 $1.24 $1.25
Slide 29: Inventory
Inventory Inventory Procurement: Q3 YTD ($ in millions, Vehicles purchased in 000s) 2021 2020 % Change 2021 2020 % Change Total aftermarket procurement $1,590 $1,463 8.7% $4,764 $3,931 21.2% Wholesale salvage cars and trucks 61 57 7.0% 174 165 5.5% Europe wholesale salvage cars and trucks 6 6 —% 19
Slide 30: Inventory Balances
Inventory Balances ($ in millions) North America Europe Specialty $1,402 $1,400 $1,400 $1,400 $1,303 $1,262 $1,228 $1,200 $1,200 $1,200 $991 $1,000 $1,000 $1,000 $806 $811 $800 $800 $800 $800 $600 $600 $600 $380 $362 $400 $400 $400 $301 $212 $200 $200 $200 $0 $0 $0 9 9 1 1 0 0 0 0 9 1 0 0 c-1 c-1 p-
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 Nine Months Ended September 30, 2021 September 30, 2021 Consolidated Europe Consolidated Europe Part
Slide 33: Revenue and Segment EBITDA by segment
Appendix 2 Revenue and Segment EBITDA by segment Three Months Ended Nine Months Ended September 30(1) September 30(1) % of % of % of % of (in millions) 2021 revenue 2020 revenue 2021 revenue 2020 revenue Revenue North America $1,307 $1,164 $3,884 $3,466 Europe 1,525 1,484 4,565 4,059 Specialty 466 4
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 September 30(1) Nine Months Ended September 30(1) (in millions) 2021 2020 2021 2020 Net income $284 $194 $855 $459 Subtract: Net (loss) income attributable to continuing noncontrolling interest (0) 0 1 1 Net inco
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 Nine Months Ended September 30(1) September 30(1) (in millions, except per share data) 2021 2020 2021 2020 Net income $284 $194 $855 $459 Subtract: Net (loss) income
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 $1,038 $1,068 Adjustments: Amortization of acquired intangibles 77 77 Restruct
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 Nine Months Ended September 30(1) September 30(1) (in millions) 2021 2020 2021 2020 Net cash provided by operating activities $429 $222 $1,362 $1,135 Less: purchases of property, plant and equ
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) Nine Months Ended(1) September 30, September 30, September 30, September 30, (in millions) 2021 2020 2021 2020 Gross margin $1,343 $1,199 $4,053 $3,423 Add: Restructuring expen
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, (in millions) June 30, 2021 March 31, 2021 2020 June 30, 2020 March 31, 2020 Gross margin $651 $599 $546 $454 $612 Add: Restructuring expenses - cost of goods sol
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 September 30, December 31, (in millions) 2021(1) 2020(1) Current portion of long-term obligations $37 $58 Long-term obligations, excluding current portion 2,348 2,813 Total debt, net of debt issuance costs $2,385 $2,871 Add: Debt issuance costs 13