Slide 1: Third Quarter 2017 Earnings Call
Third Quarter 2017 Earnings Call October 26, 2017 Nick Zarcone – President & Chief Executive Officer Varun Laroyia- Executive Vice President & Chief Financial Officer Michael Clark – Vice President- Finance and Controller Joe Boutross – Director, 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: 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: Consolidated Results - Continuing operations
Consolidated Results - Continuing operations Q3 2017 Revenue* YTD 2017 Revenue* $2,600 $7,500 $7,267 $7,300 $2,500 $2,466 $7,100 $2,400 $6,900 .7% $2,300 11 $6,700 .0% 13 $2,207 $6,434 $6,500 $2,200 $6,300 $2,100 $6,100 $2,000 $5,900 Q3 2016 Q3 2017 YTD 2016 YTD 2017 • Organic growth of parts and se
Slide 5: Consolidated Results - Continuing operations
Consolidated Results - Continuing operations Q3 2017 EPS* YTD 2017 EPS* $0.50 $0.50 $1.60 $1.60 $0.45 $1.50 $1.50 $1.47 $0.41 $1.40 $0.40 $0.39 $0.40 $1.40 $1.33 $1.34 % $1.30 $0.35 9.8 $1.30 .4% $1.20 $1.16 11 7 % $0.30 .7% 9. $0.30 14 $1.20 $1.10 $1.10 $1.00 $0.20 $0.20 $0.90 $1.00 Q3 2016 Q3 2017
Slide 6: Q3 2017 Revenue Growth
Q3 2017 Revenue Growth Revenue Changes by Source: Organic Acquisition Foreign Exchange Total(1) North America 2.5% 1.6% 0.2% 4.3% Europe 4.4% 16.5% 3.0% 23.8% Specialty 2.7% 0.2% 0.5% 3.4% Parts and Services 3.2% 6.8% 1.3% 11.4% Other Revenue 17.5% 0.9% 0.1% 18.4% Total 4.0% 6.5% 1.2% 11.7% • Organi
Slide 7: YTD 2017 Revenue Growth
YTD 2017 Revenue Growth Revenue Changes by Source: Organic Acquisition Foreign Exchange Total(1) North America 2.4% 4.2% 0.1% 6.7% Europe 5.3% 22.9% (3.8)% 24.4% Specialty 5.0% 0.1% 0.1% 5.2% Parts and Services 3.8% 10.1% (1.3)% 12.7% Other Revenue 17.9% 0.5% (0.1)% 18.3% Total 4.5% 9.6% (1.2)% 13.0
Slide 8: Q3 2017 Operating Highlights
Q3 2017 Operating Highlights North America • Delivery route initiatives, including Roadnet, are ongoing • Continued to expand acreage for car holding and increased production which should allow us longer hold times of cars to improve margins • Consolidated 9 PGW autoglass locations into LKQ warehous
Slide 9: Inventory
Inventory Inventory Procurement: Q3 YTD ($ in millions, Vehicles purchased in 000s) 2017 2016 % Change 2017 2016 % Change Total aftermarket procurement $1,221 $1,117 9.3% $3,439 $3,053 12.6% Wholesale salvage cars and trucks 74 70 5.7% 226 214 5.6% Europe wholesale salvage cars and trucks 6 5 20.0%
Slide 10: Acquisition Activity
Acquisition Activity Number of Q3 Acquisitions TTM Revenue* Number of YTD Acquisitions TTM Revenue* North America 1 $1 million 4 $71 million Europe 8 $282 million 14 $336 million Specialty 2 $3 million 3 $4 million Total 11 $286 million 21 $411 million During the 3rd quarter of 2017, we acquired 11
Slide 11: Financial Results
Corporation Financial Results
Slide 12: Operating Results - Continuing Operations
Operating Results - Continuing Operations Third Quarter YTD ($ in millions,except per share data) 2017 2016 Change 2017 2016 Change Revenue $2,466 $2,207 11.7% $7,267 $6,434 13.0% Gross Margin 957 855 11.9% 2,852 2,522 13.1% Operating Income 199 183 8.6% 679 602 12.9% Pre-tax Income 178 160 11.4% 61
Slide 13: Q3 2017 Consolidated Margins - Continuing operations
Q3 2017 Consolidated Margins - Continuing operations Q3 Q3 Change (as a % of Revenue) 2017 2016 F/(U) QTD Commentary Revenue 100.0% 100.0% —% Cost of goods sold included a number of individually insignificant fluctuations as a percentage of revenue Gross Margin 38.8% 38.8% —% across all of our segme
Slide 14: YTD 2017 Consolidated Margins - Continuing operations
YTD 2017 Consolidated Margins - Continuing operations YTD YTD Change (as a % of Revenue) 2017 2016 F/(U) YTD Commentary Revenue 100.0% 100.0% —% Cost of goods sold decreased as a result of our North America segment, primarily related to our salvage Gross Margin 39.2% 39.2% —% operations. Offsetting
Slide 15: Components of Quarterly Revenue
Components of Quarterly Revenue $2.5B $2.2B $7.3B $6.4B • A portion of the change in margins on a 100.0% 5.4% 5.0% 5.5% 5.2% consolidated basis is attributable to change in 13.4% 14.4% 13.8% 14.9% revenue mix 80.0% • North America historically has highest gross margins and EBITDA margins 38.6% 34.9%
Slide 16: North America – Q3 2017 Results
North America – Q3 2017 Results % of Revenue Gross Margin ($ in millions) 2017 2016 Change 2017 2016 46.0% Total Revenue $1,182 $1,119 5.7% 44.4% 43.9% 44.0% 43.5% 43.4% 43.3% 43.6% Gross Margin $515 $485 6.1% 43.6% 43.4% Operating Expenses $367 $348 5.4% 31.0% 31.1% 42.0% 42.6% Segment EBITDA* $153
Slide 17: North America – YTD 2017 Results
North America – YTD 2017 Results % of Revenue ($ in millions) 2017 2016 Change 2017 2016 Total Revenue $3,597 $3,337 7.8% Gross Margin $1,581 $1,441 9.7% 43.9% 43.2% Operating Expenses $1,087 $999 8.8% 30.2% 29.9% Segment EBITDA* $502 $452 11.3% 14.0% 13.5% *Segment EBITDA is a non-GAAP measure. Ref
Slide 18: Scrap Steel Prices
Scrap Steel Prices $200 Q3 YoY scrap steel prices per ton up 37% $162 • Average price we received for scrap steel in Q3 $150 $144 increased by 37%, from $118 $150 per ton in Q3 2016 to $162 $138 per ton in Q3 2017 and YTD increased by 30% from $117 $118 $118 per ton in YTD 2016 to $152 per ton in YT
Slide 19: Europe – Q3 2017 Results
Europe – Q3 2017 Results % of Revenue Gross Margin ($ in millions) 2017 2016 Change 2017 2016 Total Revenue $955 $770 23.9% 40.0% 38.1% Gross Margin $347 $279 24.5% 36.4% 36.2% 38.0% 37.4% 37.0% 37.2% 36.4% Operating Expenses $270 $207 30.7% 28.3% 26.9% 36.1% 36.0% 36.2% Segment EBITDA* $79 $73 9.2%
Slide 20: Europe – YTD 2017 Results
Europe – YTD 2017 Results % of Revenue ($ in millions) 2017 2016 Change 2017 2016 Total Revenue $2,665 $2,141 24.5% Gross Margin $982 $796 23.4% 36.8% 37.2% Operating Expenses $745 $577 29.0% 28.0% 27.0% Segment EBITDA* $242 $220 9.8% 9.1% 10.3% ECP Branches** 248 210 38 Rhiag Branches*** 364 279 85
Slide 21: Foreign Exchange
Foreign Exchange $1.55 • £ flat Q3 2017 vs. Q3 2016 • € up 5% Q3 2017 vs. Q3 2016 $1.43 $1.44 $1.45 • Translation impact of weaker dollar on Europe revenue growth for QTD: $1.35 $1.31 $1.31 – Q3: $23 million $1.28 • Translation impact of stronger $1.25 $1.24 $1.24 dollar on Europe revenue growth for
Slide 22: Specialty – Q3 2017 Results
Specialty – Q3 2017 Results % of Revenue Gross Margin ($ in millions) 2017 2016 Change 2017 2016 32.0% 30.9% Total Revenue $331 $320 3.4% 29.8% 30.0% 28.9% 28.6% 28.5% 28.5% Gross Margin $95 $91 3.8% 28.6% 28.5% 28.0% Operating Expenses $59 $58 2.5% 17.9% 18.0% 26.2% 26.0% Segment EBITDA* $35 $34 2.
Slide 23: Specialty – YTD 2017 Results
Specialty – YTD 2017 Results % of Revenue ($ in millions) 2017 2016 Change 2017 2016 Total Revenue $1,009 $959 5.2% Gross Margin $289 $285 1.7% 28.7% 29.7% Operating Expenses $171 $176 (2.8)% 16.9% 18.3% Segment EBITDA* $119 $111 7.2% 11.8% 11.6% *Segment EBITDA is a non-GAAP measure. Refer to total
Slide 24: 2017 Capital Allocation - Continuing operations
2017 Capital Allocation - Continuing operations $ in millions $1,200 $301 $900 $453 $600 $(347) $(250) $23 $275 $300 $227 $(132) $0 Beginning Cash Operating Cash Net proceeds from Financing Acquisitions & Capex F/X and other Ending Cash 12/31/16 Flows disposal of Other Investing 9/30/17 business Act
Slide 25: Leverage & Liquidity
Leverage & Liquidity ($ in millions ) ($ in millions ) Total Capacity(1) $4,000 $3,600 8.0x $3,366 $227 $3,170 $3,500 $3,200 $3,139 $275 $3,183 $3,155 $2,800 $2,895 $3,000 6.0x $1,019 $2,400 $2,500 $1,337 $2,000 $73 $2,000 4.0x $71 $1,600 2.7x $1,500 2.5x $1,200 $1,000 $2,091 2.0x $1,747 $800 $500 $
Slide 26: Key Return Metrics
Key Return Metrics Return on Equity Return on Invested Capital* 14.0% 14.9% 15.0% 14.4% 14.5% 14.5% 13.8% 13.9% 12.0% 10.9% 10.8% 10.9% 10.5% 12.0% 10.0% 9.7% 10.0% 9.0% 8.0% 6.0% 6.0% 4.0% 3.0% 2.0% 0.0% 0.0% 2012 2013 2014 2015 2016 TTM Q3 2012 2013 2014 2015 2016 TTM Q3 2017 2017 * Amortization o
Slide 27: Guidance 2017
Guidance 2017 (effective only on the date issued: October 26, 2017) Full Year 2016 Full Year 2017 ($ in millions excluding EPS) Actual Guidance(1) Organic Growth, Parts and Services 4.8% 4.0% - 4.5% Income- continuing operations $456 $517 - $537 Adjusted Income- continuing operations(2) $522 $575 -
Slide 28: 2017 Adjusted Diluted EPS Guidance Bridge
2017 Adjusted Diluted EPS Guidance Bridge* $2.00 $0.02 $0.03 $0.03 $(0.01) $(0.02) $1.89 $1.90 $0.19 $(0.02) $(0.02) $1.80 $1.70 $1.69 $1.60 2016 Year over Full year Shared PGW Equity Shared PGW Impact of Tamworth 2 Incremental 2017 Actual year Rhiag & ARG Corporate method Corporate exchange rate in
Slide 29: Q3 2017 Key Takeaways
Q3 2017 Key Takeaways • Organic revenue growth of 3.2% and 3.8% for parts and services in Q3 and YTD, respectively • Per day organic revenue growth of 4.7% and 4.3% for parts and services in Q3 and YTD, respectively • Per day organic revenue growth in Q3 of 4.0%, 5.6% and 4.4% for our North America,
Slide 30: 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 30
Slide 31: Appendix 1 - Constant Currency Reconciliation
Appendix 1- Constant Currency Reconciliation • The following unaudited table reconciles consolidated revenue growth for Parts & Services to constant currency revenue growth for the same measure: Three Months Ended Nine Months Ended September 30, 2017 September 30, 2017 Consolidated Europe Consolidat
Slide 32: Appendix 2 - Revenue and Segment EBITDA by segment
Appendix 2 - Revenue and Segment EBITDA by segment Three Months Ended Nine Months Ended September 30* September 30* % of % of % of % of (in millions) 2017 revenue 2016 revenue 2017 revenue 2016 revenue Revenue North America $1,181.9 $1,118.6 $3,596.7 $3,336.8 Europe 954.5 770.2 2,665.2 2,141.2 Speci
Slide 33: 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 Nine Months Ended September 30** September 30** (in millions) 2017 2016 2017 2016 Net income $122.4 $122.7 $409.6 $377.6 Subtract: Income (Loss) from discontinued operations, net of tax — 12.8 (4.5) 17.8 Income
Slide 34: Appendix 3 - Reconciliation of Net Income to EBITDA and Segment EBITDA
Appendix 3- Reconciliation of Net Income to EBITDA and Segment EBITDA 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 calcul
Slide 35: 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* September 30* (in millions, except per share data) 2017 2016 2017 2016 Net income $122.4 $122.7 $409.6 $377.6 Subtract: Income (Loss
Slide 36: 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 as we believe these measures are useful for evaluating the core operating perf
Slide 37: Appendix 5 - Forecasted EPS reconciliation
Appendix 5 - Forecasted EPS reconciliation* For the year ending December 31, 2017 (in millions, except per share data) Minimum Guidance Maximum Guidance Income from continuing operations $517 $537 Adjustments: Amortization of acquired intangibles 95 95 Restructuring and acquisition related expenses