Lkq Corporation · NASDAQ:LKQ
Lkq — Jefferies 2016 Global Automotive Aftermarket Investor Conference
39 slides from Lkq's conference presentation, May 25, 2016
Slide 1: Jefferies 2016 Global Automotive Aftermarket Investor Conference
Jefferies 2016 Global Automotive Aftermarket Investor Conference May 25, 2016
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-loo
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: LKQ’s Evolution
LKQ’s Evolution Wholesale Salvage Self Serve Keystone / Paint Reman-US Europe-Benelux Rhiag / PGW 1998 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Aftermarket Refurbished Wheels Heavy Duty Europe-UK Keystone Specialty Collision 2003 2007 2011 2016* Total Revenue Total Revenue To
Slide 5: Operating Unit Overview
Operating Unit Overview North America Revenue (1) • Collision Other – Aftermarket automotive products 6% – Recycled & Refurbished • Mechanical – Recycled engines & transmissions – Remanufactured Engines Parts & Services 94% Europe • Mechanical – 175,000+ small part SKUs – Brakes, filters, hoses, bel
Slide 6: Operating Segments
Corporation Operating Segments
Slide 7: Large & Fragmented US Market
Large & Fragmented US Market Automotive Repair Market $213 bn Do It For Me (DIFM) DIY(1) $165 bn $48 bn Retail Collision Mechanical Price $40 bn $125 bn Parts & Collision Parts Labor Mechanical Parts Labor $22 bn $18 bn $68 bn $57 bn Labor Collision Markup Mechanical Markup (Wholesale) (Wholesale) $
Slide 8: Collision Products, a $15 Billion Industry
Collision Products, a $15 Billion Industry Insurance Companies (Indirect Customers) New OEM Manufacturers 64% Repair Shop Refurbished & Recycled OEM Optional OE 12% Products Aftermarket 6% 18% Alternative parts = 36% of parts costs Source: CCC Information Services –Crash Course 2015. 7
Slide 9: Clear Value Proposition
Clear Value Proposition 2008 Chevrolet Corvette 2006 Chevrolet Silverado 2005 Honda Accord Wheel Engine Bumper Cover New OEM $995 $3,499 $610 Remanufactured $454 $2,454 $272 Recycled OEM $425 $1,450 $345 New A/M $354 N/A $231 Average Savings 55% 39% 49% …and Improved Cycle Time for Repairs Note: Par
Slide 10: Shift Toward Alternative Parts Usage
Shift Toward Alternative Parts Usage Average Parts Used Per Claim 2010 2011 2012 2013 2014 2015 10.0 9.2 7.9 8.0 6.4 6.0 5.8 4.0 2.8 2.1 2.0 0.0 OEM Alternative Parts Total Over 20 million vehicle claims Source: CCC Information Services Inc. 9
Slide 11: Regional Distribution Improves Fulfilment
Regional Distribution Improves Fulfilment • Highly fragmented space • 20X size of next competitor • Consistent nationwide coverage and warranty • Strong management team • Strong logistics & footprint • Industry leading fill-rates – Aftermarket: 95% – Salvage • Competitor: 25% • LKQ Single Site: 35%
Slide 12: Wholesale North America Footprint
Wholesale North America Footprint 11
Slide 13: LKQ’s “Sweet Spot” is Growing
LKQ’s “Sweet Spot” is Growing Age & size of US Car Parc 140 50 4 year time 117 119 118 45 120 114 115 117 113 horizon 114 107 106 40 102 97 98 Number of Vehicles (millions) 100 95 94 94 35 30 80 71 68 68 67 67 67 66 68 63 64 25 59 56 54 60 51 48 49 20 19 20 19 17 18 40 17 17 17 16 15 16 16 14 13 13
Slide 14: Crash Avoidance Systems Growing… But Impact will Be Very Slow
Crash Avoidance Systems Growing… But Impact will Be Very Slow (24.3%) CY 2050 U.S. EIA Energy Outlook 2014 Light Duty Vehicle Sales by Energy Use (20.8%) CY 2045 (17.3%) CY 2040 (13.8%) CY 2035 22% CCC estimates (10.3%) CY 2030 a 10.3% impact (6.8%) CY 2025 to losses in (3.3%) CY 2020 next 15 years
Slide 15: Europe - Market Observations
Europe - Market Observations • Large car parc • Fragmented industry • Dominated by country champions • In transition from 3 step to 2 step Sweden distribution • Professional repairer focused U. K. • Segmented by the suppliers • Focused on mechanical parts • Low penetration of alternative collision p
Slide 16: Large European Market
Large European Market Automotive Repair Market €198B Do It For Me (DIFM) DIY (1) €188B €10B Retail Collision Mechanical Price €30B €158B Parts & Collision Parts Labor Mechanical Parts Labor €22B €8B €120B €38B Labor Collision Mechanical Markup Markup (Wholesale) €8B (Wholesale) €42B €14B €78B Market
Slide 17: European Operations
European Operations • Leading distributor of automotive • Leading distributor of automotive • Rhiag is the leading automotive aftermarket mechanical parts in the UK aftermarket mechanical parts in the aftermarket mechanical parts distributor • Nearly 55,000 commercial customers Benelux in Italy, The
Slide 18: Specialty
Specialty Specialty Overview Specialty Directly Addressable Market (1) ($ in billions) • Leading distributor and marketer of specialty aftermarket Wheels, Tires & Accessory and equipment, accessories, and products in North America Suspension Appearance • Critical link between 800+ suppliers and appr
Slide 19: Automotive Glass
Automotive Glass Market Leading Auto Glass Select Automotive Glass Capabilities • Pittsburgh Glass Works LLC (“PGW” or the “Company”) is the leading North American manufacturer, supplier and distributor Windshields Sidelites Backlites Roof Panels of automotive glass products – #1 in OEM with approxi
Slide 20: 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 19
Slide 21: Financial Overview
Corporation Financial Overview
Slide 22: History of Strong Organic Growth
History of Strong Organic Growth Organic Revenue Growth Rates(1) 12.0% 11.0% 10.0% 9.0% 7.9% 8.0% 7.0% 6.6% 6.3% 6.0% 6.0% 4.0% 2.0% 0.0% 2010 2011 2012 2013 2014 2015 Q1-2016 (1) Parts and services only. 21
Slide 23: LKQ’s Acquisition Philosophies
LKQ’s Acquisition Philosophies Strong Brands • Markets where we can be #1 or #2 • Strong and experienced management • Opportunities for growth & synergies • Financial returns – IRR (mid-teens over 10 years) – ROIC (10 years’ average >10%) • Integrity • Criteria in new markets – Among the leaders in
Slide 24: Historical Financial Performance
Historical Financial Performance Revenue(1)(3) Adjusted EBITDA(1)(2)(3) $10,000 $9,230 $1,066 $1,000 $855 $8,000 $6,740 $7,193 $800 $791 $629 $6,000 $5,063 $515 $4,123 $600 $424 $4,000 $3,270 $341 $2,470 $400 $2,000 $200 $- $- 2010 2011 2012 2013 2014 2015 PF 2015 2010 2011 2012 2013 2014 2015 PF 20
Slide 25: Q1 2016 Consolidated Results
Q1 2016 Consolidated Results Q1 2016 • Organic growth of parts and services revenue of 6.3% • Segment EBITDA Margin** 12.3% Q1 2016 vs. 12.5% Q1 2015 • Adjusted diluted EPS*** increased 10.5% over Q1 2015 * Revenue in millions ** Refer to Segment EBITDA reconciliation on page 26 *** Refer to Adjuste
Slide 26: Q1 2016 Revenue Growth
Q1 2016 Revenue Growth Revenue Changes by Source: Foreign Organic Acquisition Exchange Total(1) North America 4.9% 3.1% (0.7)% 7.3% Europe 6.9% 9.9% (4.5)% 12.3% Specialty 10.8% 9.4% (0.8)% 19.5% Parts and Services 6.3% 6.0% (1.8)% 10.5% Other Revenue (25.1)% 5.3% (0.2)% (20.0)% Total 4.1% 6.0% (1.7
Slide 27: Q1 2016 Operating Highlights
Q1 2016 Operating Highlights North America • Roadnet routing software installed in 65% of North American fleet representing over 2,500 vehicles. Currently tracking over 140,000 miles and 22,000 deliveries daily. Software will be fully installed and utilized by year-end. • Sales responsibilities real
Slide 28: Q1 2016 Capital Allocation
Q1 2016 Capital Allocation • Operating cash flows: - $152M of cash earnings(1) in Q1 2016 compared to $141M in Q1 2015 - $22M cash outflow from operating assets and liabilities mainly $78M of receivables (seasonal build in Q1) outflow and $13M of Rhiag related interest payments due to paying off the
Slide 29: Leverage & Liquidity
Leverage & Liquidity ($ in millions ) ($ in millions ) Revolver Availability(1) 3.0x 1.7x Effective borrowing rate for Q1 2016 was 3.8% (1) Revolver availability includes our term loans and revolving credit facilities (*) Net leverage per bank covenants is defined as Net Debt/EBITDA. See the definit
Slide 30: Key Return Metrics
Key Return Metrics Return on Equity Return on Invested Capital 29
Slide 31: Guidance 2016
Guidance 2016 (effective only on the date issued: April 28, 2016) Full Year 2015 Full Year 2016 ($ in millions excluding EPS) Actual Guidance(1) Organic Revenue Growth, for parts and services 7.0% 6.0%-8.0% Adjusted Net Income $459 $545-$575 Adjusted Diluted EPS $1.49 $1.76-$1.86 Cash Flow from Oper
Slide 32: Why Invest in LKQ?
Why Invest in LKQ? Leading Positions Diversified Revenue Expanding Alternative Clear Value Proposition Solid Financial Metrics In Large Markets Stream Parts Usage • Largest participant in • Global balance with • Increasing availability • Insurers focused on • History of delivering each market served
Slide 33: Appendix
Corporation Appendix
Slide 34: 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 35: Appendix 1- Constant Currency Reconciliation
Appendix 1- 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 Ended March 31, 2016 Consolidate d Europe Parts and Services Revenue Growth as reported 10.5% 12.3% Les
Slide 36: Appendix 2- EBITDA and Segment EBITDA Reconciliation
Appendix 2- EBITDA and Segment EBITDA Reconciliation QTD** % of % of (in millions) Q1 2016 revenue Q1 2015 revenue Segment EBITDA North America $ 147.4 13.6% $ 149.4 14.3% Europe 57.5 10.5% 46.5 9.5% Specialty 31.7 11.0% 25.4 10.5% Total Segment EBITDA $ 236.6 12.3% $ 221.3 12.5% Deduct: Restructuri
Slide 37: Appendix 3- Adjusted Net Income and EPS Reconciliation
Appendix 3- Adjusted Net Income and EPS Reconciliation* (in millions, except per share data) Q1 2016* Q1 2015* Net Income $107.7 $107.1 Adjustments: Restructuring and acquisition related expenses, net of tax 9.7 4.2 Loss of debt extinguishment, net of tax 17.4 — Amortization of acquired intangibles,
Slide 38: Appendix 4- Adjusted Net Income and EPS Reconciliation
Appendix 4- Adjusted Net Income and EPS Reconciliation* (in millions, except per share data) 2015** 2014** 2013** 2012** 2011** Net Income $423.2 $381.5 $311.6 $261.2 $210.3 Adjustments: Restructuring and acquisition related expenses, net of tax 12.8 9.7 6.6 1.7 4.8 Loss on debt extinguishment, net
Slide 39: Appendix 5- 2015 Quarterly Adjusted Net Income and EPS Reconciliation
Appendix 5- 2015 Quarterly Adjusted Net Income and EPS Reconciliation* (in millions, except per share data) Q4** Q3** Q2** Q1** Net Income $95.1 $101.3 $119.7 $107.1 Adjustments: Restructuring and acquisition related expenses, net of tax 4.5 3.0 1.1 4.2 Change in fair value of contingent considerati
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