LKQ Corporation · NASDAQ:LKQ
LKQ — Investor Presentation (December 2020)
51 slides from LKQ's investor presentation, December 2020
Slide 1: Investor Presentation December 2020
Investor Presentation December 2020
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: Over 16 Years of Growth
Over 16 Years of Growth Wholesale Keystone/ Remanufactured Self Serve Europe-Sator Europe-Rhiag Salvage Paint US 1998 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Aftermarket Refurbished Keystone/ Europe – Heavy Duty Europe-ECP Services Collision Wheels Specialty S
Slide 6: Overview of LKQ
Overview of LKQ Company Overview Financial Performance LKQ is a global distributor of vehicle products, including replacement parts, components and systems used in repair and maintenance of vehicles and specialty Revenue ($mm) products and accessories Founded in 1998 through a combination of who
Slide 7: Performance During COVID-19 Reflects Resilience of Business Model
Performance During COVID-19 Reflects Resilience of Business Model and Clear Financial Priorities Revenue $ in M Adjusted Gross Margin1 in % SG&A $ in M -11.3% +60 BPS -13.4% $6,396 $5,674 38.5% 39.1% $1,790 $1,551 Q2-Q3 2019 Q2-Q3 2020 Q2-Q3 2019 Q2 -Q3 2020 Q2-Q3 2019 Q2-Q3 2020 Segment EBITDA1 in
Slide 8: Cost Structure Actions
Cost Structure Actions Opex quarterly run rate(1) Key cost reductions • In the third quarter brought back operating expenses as revenue activity improved, though costs remain at a lower level than pre-pandemic in Q1 owing to permanent Opex 10% cost reductions Opex 18% Revenue 16% Other Revenue 12% •
Slide 9: Liquidity as of September 30, 2020
Liquidity as of September 30, 2020 Credit Rating • Rated Ba2 / BB by Moody’s and S&P, respectively • Fixed Interest Rate Bonds: €1,500 million ($1,758 million) • Variable Interest Rate Bank Debt: $1,246 million ($935 million hedged to fixed rates) Debt Structure • Receivables Securitization Facility
Slide 10: Key Priorities
Key Priorities Profitable Growth Cash Flow Generation European Integration Talent Acquisition 10
Slide 11: 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 parts market in North America and develop scale in North America and mechanical parts in a
Slide 12: 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 12
Slide 13: LKQ's Operating Segments Demonstrate Attractive Growth and Margin Profiles
LKQ’s Operating Segments Demonstrate Attractive Growth and Margin Profiles Product Overview Financial Overview Collision 5.6% 2.9% 3.0% 5.7% 0.9% (12.7%) Aftermarket automotive products North America $4,800 $5,183 $5,209 Automotive glass distribution $4,119 $4,445 $3,466 Recycled & Refurbish
Slide 14: LKQ North America wins with industry leading fill-rates and partnerships
LKQ North America wins with industry leading fill-rates, strong value proposition and strategic partnerships High Fulfillment Rates Distribution & Wholesale North America Footprint Value Proposition • Highly fragmented space 2011 Chevrolet 2014 GMC Equinox 2017 Nissan Altima Sierra 1500 • Nationwide
Slide 15: 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 15 Source: CCC Information Services – Crash Course 2019.
Slide 16: Segment Overview: The Market Leader in Europe
Segment Overview: The Market Leader in Europe UK & ROI #1 Market Position in Top 6 Markets2 $5.8 B Netherlands, Belgium, and France Revenue 2019 Italy and Switzerland Germany and Austria Central and Eastern Europe Scandinavia Germany United Kingdom > 900,000 Unique SKUs ~ 1,000 Italy Czech Republic
Slide 17: Growing European Market with Aging Fleet
Growing European Market with Aging Fleet Europe Total Vehicles in Operation Expected Organic Growth for LKQ Europe 2020 — 2025 CAGR (in millions) 358 364 370 376 334 340 346 352 310 315 321 327 299 304 2.5% 1.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 LKQ Europe Footpri
Slide 18: Specialty Overview: Focused on Profitable Growth
Specialty Overview: Focused on Profitable Growth Key Facts Financial Performance $ in M 2019 Sales: ~$1.5B Employees: 2,500+ Significant Acquisitions since 2014: • Stag Parkway Inc Customers: 20,000+ • The Coast Distribution System Inc Suppliers: 1,000+ • Warn Industries $1,500 12% Stocking SKUs: 18
Slide 19: Q3 2020 Revenue
Q3 2020 Revenue Revenue Changes by Source: Components of Revenue Acquisition and Foreign Organic Divestiture Exchange Total(1) North America (11.3)% (0.7)% (0.1)% (12.1)% Europe (0.7)% (1.5)% 4.5% 2.3% Specialty 1.1% 0.3% (0.1)% 1.4% Parts and Services (4.5)% (1.0)% 2.1% (3.4)% Other Revenue (0.1)%
Slide 20: 2020 YTD Capital Allocation
2020 YTD Capital Allocation $ in millions $421 • YTD Operating cash flows: ▪ Operating cash flows of $1,135 million represent a $169 million (or 18%) year over year increase owing to cash inflows from inventory and net receivables, partially offset by cash outflows from accounts payable and income t
Slide 21: Free Cash Flow
Free Cash Flow* $ in millions $1,200 $1,135 120% $1,064 $1,025 108% 108% $1,000 100% $798 $800 $715 80% 66% 66% $600 $571 $544 $523 60% $465 42% 42% $400 $374 45% $388 45% 39% $347 40% 39% 31% 31% $200 20% $0 0% 2015 2016 2017 2018 2019 2020 Q3 YTD Free Cash Flow ("FCF")* Operating Cash Flow FCF/EBI
Slide 22: Leverage & Liquidity
Leverage & Liquidity ($ in millions ) ($ in millions ) Total Capacity(1) $4,072 $3,491 $3,478 $3,133 2.6x 2.0x Effective borrowing rate for Q3 2020 was 3.1% (2) 22 (1) Total capacity includes our term loans and revolving credit facilities (2) Including our interest rate swaps, approximately 90% of o
Slide 23: 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 23
Slide 24: 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 Sator (Benelux & France) simplification through “1 LKQ Europe” Rhiag (Italy & 9 other European countries) Stahlgruber (Germany & Eastern Europe) Plan t
Slide 25: 1 LKQ Europe Project
1 LKQ Europe Project 22 Improved Customer … In the Hands of Maintain Strong Different Experience…. Local Managers Entrepreneurial Culture Countries Multiple ERP, financial, E-mail, Phone Transformation systems… Common ERP Platform Rationalized Product Portfolio … And Fragmented Procurement and LKQ E
Slide 26: 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% 8.3% 1.9% September 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 27: 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 Expansion of product offerings Revenue Growth Monitoring opportunity of ADAS and EV Aftermarket Salvage Glass Paint (PBE) Further optimizing af
Slide 28: 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 29: Financial Policy to Enhance Shareholder Value
Financial Policy to Enhance Shareholder Value Target organic growth greater than market comps Focus on Free Achieve 1 LKQ Europe program and NA margin expansion Cash Flow Generation Convert high levels of EBITDA to Free Cash Flow with a focus on trade working capital efficiencies Targeting i
Slide 30: Sustainable Business Practices
Sustainable Business Practices Environmental Q3 2020 Results(1) Social Governance • Our North American recycling 209,000 • We have shared with our • Experienced and diverse Board operations harvest vehicle Number of vehicles procured employees some of the of Directors components for reuse in the ben
Slide 31: 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 31
Slide 32: Corporate Governance Highlights
Corporate Governance Highlights Independent LKQ is governed by 12-member board of directors, 10 of whom are independent directors under NASDAQ Leadership & guidelines Oversight Separate Chairman / CEO roles Ongoing process to refresh and strengthen board composition with shareholder input; 6 n
Slide 33: 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 34: 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 35: 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 35
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: 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 38: 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. 38
Slide 39: 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 Nine Months Ended September 30, 2020 September 30, 2020 Consolidated Europe Consolidated Europe Pa
Slide 40: Appendix 2 – 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) 2020 revenue 2019 revenue 2020 revenue 2019 revenue Revenue North America $1,164 $1,302 $3,466 $3,926 Europe 1,484 1,451 4,059 4,413 Specialty 400
Slide 41: 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 September 30(1) Nine Months Ended September 30(1) (in millions) 2020 2019 2020 2019 Net income $194 $153 $459 $404 Subtract: Net income (loss) attributable to continuing noncontrolling interest 0 (0) 1 2 Net in
Slide 42: 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, December 31, (in millions) March 31, 2018 June 30, 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 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(1) September 30, December 31, (in millions) March 31, 2019 June 30, 2019 2019 2019 Net income $99 $152 $153 $141 Subtract: Net income attributable to continuing noncontrolling interest 1 1 (0) 0 Net income attr
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) (in millions) March 31, 2020 June 30, 2020 Net income $146 $119 Subtract: Net income (loss) attributable to continuing noncontrolling interest 1 (0) Net income attributable to discontinued noncontrolling int
Slide 45: 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 46: Appendix 4 – Reconciliation of Net Income and EPS to Adjusted Net Income
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) 2020 2019 2020 2019 Net income $194 $153 $459 $404 Subtract: Net income (loss
Slide 47: Appendix 4 – Reconciliation of Net Income and EPS to Adjusted Net Income
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 48: Appendix 5 – Reconciliation of Net Cash to Free Cash Flow
Appendix 5 – Reconciliation of Net Cash Provided by Operation Activities to Free Cash Flow Three Months Ended Nine Months Ended September 30(1) September 30(1) (in millions) 2020 2019 2020 2019 Net cash provided by operating activities $222 $327 $1,135 $965 Less: purchases of property, plant and equ
Slide 49: Appendix 6 – Reconciliation of Gross Margin to Adjusted Gross Margin
Appendix 6 – 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) 2020 2019 2020 2019 Gross margin $1,199 $1,200 $3,423 $3,656 Add: Restructuring exp
Slide 50: Appendix 6 – Reconciliation of Gross Margin to Adjusted Gross Margin
Appendix 6 – Reconciliation of Gross Margin to Adjusted Gross Margin North America Adjusted Gross Margin Three Months Ended(1) (in millions) June 30, 2020 Gross margin $454 Add: Restructuring expenses - cost of goods sold 3 Adjusted gross margin $457 Gross margin % 44.9% Adjusted gross margin % 45.2
Slide 51: Appendix 6 – Reconciliation of Gross Margin to Adjusted Gross Margin
Appendix 6 – 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