LKQ Corporation · NASDAQ:LKQ
LKQ — Q3 2015 Earnings Presentation
35 slides from LKQ's earnings presentation, Nov 3, 2015
Slide 1: Third Quarter 2015 Investor Presentation
Third Quarter 2015 Investor Presentation Updated 11/3/2015
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-lo
Slide 3: Company Overview
Company Overview
Slide 4: 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 5: LKQ's Evolution
LKQ’s Evolution July 1998 February 2004 October 2007 November 2010 May 2013 January 2014 Wholesale Salvage Self Serve Keystone / Paint Reman EUROPE-Benelux Keystone Specialty February 2004 January 2006 March 2008 October 2011 August 2013 Aftermarket Collision Refurbished Wheels Heavy Duty EUROPE-UK
Slide 6: Market Leading Positions in Key Markets
Market Leading Positions in Key Markets 2014 LTM 5 Year CAGR* (as of 9/30/2015) Revenue (in millions) $6,740 $7,128 27% Net Income (in millions) $382 $409 25% Earnings Per Share $1.25 $1.33 23% #1 or #2 in Key Markets Alternative parts distributor to the collision repair industry in North America Di
Slide 7: Operating Unit Overview
Operating Unit Overview Operating Units* Total Revenue Other North America 7% Sell more than 101,000 SKUs of aftermarket automotive products Purchased 290,000 vehicles for dismantling Purchased 476,000 vehicles at 80 self service facilities in North America Parts & Services 93% Europe Sell more than
Slide 8: Segments Overview
Segments Overview
Slide 9: Clear Value Proposition
Clear Value Proposition High quality products at lower cost than OEM replacement products Recycled OEM Front Door Engine Rear Bumper New OEM $1,376 $3,458 $531 Recycled OEM $805 $1,125 $237 Savings 41% 67% 55% Aftermarket Fender Door Mirror Hood New OEM $209 $160 $446 Aftermarket $163 $92 $307 Savin
Slide 10: US Automotive Repair Industry
US Automotive Repair Industry Automotive Repair Market $213 bn Do It For Me (DIFM) DIY* $165 bn $48 bn Retail Collision Mechanical Price $40 bn $125 bn Parts & Collision Parts Labor Mechanical Parts Labor Labor $22 bn $18 bn $68 bn $57 bn Collision Markup Mechanical Markup (Wholesale) $7 bn (Wholesa
Slide 11: Collision Products, a $15 Billion Industry
Collision Products, a $15 Billion Industry Insurance Companies (Indirect Customers) New OEM Manufacturers Repair Shop 64% Refurbished & Recycled OEM Optional OE Products 12% Aftermarket 6% 18% Alternative parts = 36% of parts costs 10 Source: CCC Information Services –Crash Course 2015
Slide 12: Average Parts Replaced Per Claim by Part Type
Average Parts Replaced Per Claim by Part Type Over 19 million repairable claims 10.0 2009 2010 2011 2012 2013 2014 8.9 8.0 7.8 6.3 6.0 5.8 4.0 2.6 2.0 2.0 0.0 OEM Alternative Parts Total 11 Source: CCC Information Services Inc.
Slide 13: Regional Distribution Improves Fulfillment
Regional Distribution Improves Fulfillment Mid-Atlantic Region-Transfer Routes Salvage/AM Aftermarket Salvage Cross Dock 12
Slide 14: Locations Provide Strategic Advantage
Locations Provide Strategic Advantage Next day delivery leveraging regional distribution infrastructure 13
Slide 15: Age & Size of US Car Parc Improving
Age & Size of US Car Parc Improving 140 50 4 year time 120 114 115 117 119 118 117 113 horizon 45 112 Number of Vehicles (millions) 107 105 40 102 97 98 100 95 94 94 35 30 80 67 68 68 67 67 67 66 66 63 63 25 59 56 54 60 51 48 49 18 20 17 17 17 17 17 18 17 16 17 16 14 40 13 13 15 12 10 10 20 5 - - 20
Slide 16: Crash Avoidance Systems Growing, But Impact Will Be Very Slow
Crash Avoidance Systems Growing…. But Impact will Be Very Slow CCC estimates less than 4% impact to losses in next 10 years 15 Source: CCC Information Services Inc; Projections based on annual rate of change between 2010 & 2013 – Impact may increase on market adoption & system improvements .
Slide 17: European Automotive Repair Industry
European Automotive Repair Industry Automotive Repair Market €198 bn Do It For Me (DIFM) DIY* €188 bn €10 bn Retail Collision Mechanical Price €30 bn €158 bn Parts & Collision Parts Labor Mechanical Parts Labor Labor €22 bn €8 bn €120 bn €38 bn Collision Markup Mechanical Markup (Wholesale) €8 bn (W
Slide 18: Europe - Market Observations
Europe - Market Observations Large car parc Fragmented industry Dominated by country champions In transition from 3 step to 2 step distribution Professional repairer focused Segmented by the suppliers Focused on mechanical parts Low penetration of alternative collision parts with ~7% APU across Euro
Slide 19: Euro Car Parts
Euro Car Parts Leading distributor of automotive aftermarket parts in the UK Nearly 55,000 commercial customers 3 National Distribution Centers totaling 1.2MM square feet 13 regional hubs, 198 branches, 25 paint distribution locations Over 2,300 delivery routes Launched collision parts program in Ma
Slide 20: Sator
Sator Leading distributor of automotive aftermarket mechanical parts in the Benelux offering more than 171,000 SKUs Proprietary, best-in-class online ordering technology for local distributors & repair shops Opportunity for meaningful purchasing synergies with Euro Car Parts Serve more than 9,500 re
Slide 21: Specialty
Specialty Specialty Overview Specialty Directly Addressable Market * Leading distributor and marketer of specialty aftermarket equipment, accessories, and products in Wheels & Tires North America $0.5 8% Critical link between 800+ suppliers and approximately 17,000 customers selling over 235,000 tot
Slide 22: Financial Overview
Financial Overview
Slide 23: Unique Combination of Strong Organic & Acquisition Revenue Growth
Unique Combination of Strong Organic & Acquisition Revenue Growth 30% 27.8% 23.6% 25% 21.3% 20% 13.7% 15% 11.0% 9.0% 8.3% 7.9% 10% 6.6% 6.0% 8.1% 6.1% 6.8% 4.0% 5% 0% 2009 2010 2011 2012 2013 2014 Q3-2015 Organic Revenue Growth Rates* Acquisition Revenue Growth Rates* 22 * Parts and services only
Slide 24: Acquisition Strategy
Acquisition Strategy Strong Brands • Seek markets where we can be #1 or #2 • Keep discipline on return metrics • Criteria in new markets Among the leaders in the market Well run companies LKQ culture Ability to achieve synergies Attractive Returns of Capital High fulfillment rates • Criteria in exis
Slide 25: Historical Financial Performance
Historical Financial Performance Revenue* EBITDA* $8,000 $1,000 $7,128 $6,740 $823 $775 $800 $6,000 $5,063 $616 $4,123 $600 $511 $4,000 $3,270 $418 $2,470 $400 $340 $2,000 $200 $- $- 2010 2011 2012 2013 2014 LTM 2010 2011 2012 2013 2014 LTM Cash Flow/Capex* Leverage(a) $600 Operating Cash Flow Capit
Slide 26: Consolidated Results
Consolidated Results Q3 2015 YTD 2015 $1,850 $1,832 $0.35 $5,500 $1.10 $5,444 $1.07 $0.33 $5,400 $1,800 $0.33 $1.05 $5,300 $1,750 $0.31 $0.30 $5,200 $1,721 $1.00 $5,100 $0.98 $1,700 $0.29 $5,056 $5,000 $0.95 $1,650 $0.27 $4,900 $1,600 $0.25 $4,800 $0.90 Q3 2014 Q3 2015 Q3 2014 Q3 2015 YTD 2014 YTD 2
Slide 27: Q3 2015 Revenue Growth
Q3 2015 Revenue Growth Revenue Changes by Source: Organic Acquisition Foreign Exchange Total(1) North America 5.9% 3.3% (1.3%) 7.9% Europe 7.2% 5.7% (9.9%) 3.0% Specialty 10.0% 33.9% (2.5%) 41.4% Parts and Services 6.8% 8.1% (4.2%) 10.7% Other Revenue (33.7%) 3.4% (0.4%) (30.8%) Total 2.6% 7.6% (3.8
Slide 28: Q3 2015 Operating Highlights
Q3 2015 Operating Highlights North America • Cumulative miles driven witnessed a YOY increase of 4.2% through July; 12-month moving average for miles driven through July 2015 reached its highest level since 1990. • Q3 average price of unleaded regular was $2.60 a gallon compared to an average of $3.
Slide 29: YTD 2015 Capital Allocation
YTD 2015 Capital Allocation $800 $491 $600 ($100) $400 ($154) $200 $115 $137 ($213) ($2) $0 Beginning Cash Operating Cash Capex Acquisitions & Financing F/X Ending Cash 12/31/14 Flows Other Investing 9/30/15 Activities • Operating cash flows: – $432M of cash earnings(1) in YTD 2015 compared to $398M
Slide 30: Leverage & Liquidity
Leverage & Liquidity ($ in millions ) Revolver Availability* $2,500 $2,380 $2,363 $2,000 3.4x $1,865 $115 3.2x $1,750 $1,607 $1,600 $2,000 $137 3.0x $1,128 $1,470 $1,311 2.8x $1,200 $1,500 2.6x 2.4x $60 2.4x $800 $71 $1,000 2.2x 2.0x $1,192 $400 2.0x $500 $981 1.8x $0 1.6x 12/31/2014 9/30/2015 $0 12
Slide 31: Guidance 2015
Guidance 2015 (effective only on the date issued: October 29, 2015) Full Year Full Year ($ in millions excluding EPS) 2014 Actual 2015 Guidance(1) Organic Revenue Growth, for parts and services 9.0% 7.0% to 7.5% Adjusted Net Income $382 $428 to $442 Adjusted Diluted EPS $1.25 $1.39 to $1.44 Cash Flo
Slide 32: 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 33: EBITDA and Segment EBITDA Reconciliation
EBITDA and Segment EBITDA Reconciliation QTD YTD % of % of % of % of (in thousands) Q3 2015 revenue Q3 2014 revenue Q3 2015 revenue Q3 2014 revenue Segment EBITDA North America $128,506 12.4% $131,851 12.9% $416,774 13.3% $415,139 13.5% Europe 52,733 10.3% 41,726 8.4% 153,199 10.2% 128,826 9.3% Spec
Slide 34: Adjusted Net Income and Adjusted EPS Reconciliation
Adjusted Net Income and Adjusted EPS Reconciliation QTD YTD (in thousands) Q3 2015 Q3 2014 Q3 2015 Q3 2014 Net Income $101,346 $91,515 $328,163 $301,050 Adjustments: Restructuring and acquisition related expenses, net 3,016 2,372 8,306 8,459 of tax Loss on debt extinguishment, net of tax — — — 214 C
Slide 35: Constant Currency Reconciliation
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, Nine Months, Ended September 30, 2015 Ended September 30, 2015 Consolidated Europe Consolidated Europe Parts and S