Lkq Corporation · NASDAQ:LKQ
Lkq — Raymond James 37th Annual Institutional Investors Conference (March 2016)
42 slides from Lkq's conference presentation, Mar 8, 2016
Slide 1: Raymond James 37th Annual Institutional Investors Conference
Raymond James 37th Annual Institutional Investors Conference March 8, 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 July 1998 February 2004 October 2007 November 2010 May 2013 March/April 2016 Wholesale Salvage Self Serve Keystone / Paint Reman-US Europe-Benelux Europe-Italy/Other February 2004 January 2006 March 2008 October 2011 January 2014 Aftermarket Refurbished Wheels Heavy Duty Europe-UK Ke
Slide 5: Operating Unit Overview
Operating Unit Overview North America • Collision Total Revenue – Aftermarket automotive products Other – Recycled & Refurbished 7% • Mechanical – Recycled engines & transmissions – Remanufactured Engines Europe Parts & Services • Mechanical 93% – 175,000+ small part SKUs – Brakes, filters, hoses, b
Slide 6: North America
Corporation North America
Slide 7: Clear Value Proposition
Clear Value Proposition High quality products at a significantly 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 $16
Slide 8: 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 9: 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. 8
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: 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 12: Regional Distribution Improves Fulfillment
Regional Distribution Improves Fulfillment 11
Slide 13: Wholesale North America Footprint
Wholesale North America Footprint 12
Slide 14: The Evolving Automobile
The Evolving Automobile U.S. EIA Energy Outlook 2014 Light Duty Vehicle Sales by Energy Use -24.3% CY 2050 All Other -20.8% CY 2045 Conventional Gasoline Vehicles -17.3% CY 2040 -13.8% CY 2035 -10.3% CY 2030 22% -6.8% CY 2025 -3.3% CY 2020 -0.7% CY 2015 -0.4% CY 2014 78% -0.2% CY 2013 -0.2% CY 2012
Slide 15: Europe
Corporation Europe
Slide 16: 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 17: Large & Fragmented European Market
Large & Fragmented European Market Automotive Repair Market €198 bn Do It For Me (DIFM) DIY(1) €188 bn €10 bn Retail Collision Mechanical Price €30 bn €158 bn Parts & Collision Parts Labor Mechanical Parts Labor €22 bn €8 bn €120 bn €38 bn Labor Collision Markup Mechanical Markup (Wholesale) (Wholes
Slide 18: European Operations
European Operations • Leading distributor of automotive aftermarket mechanical parts • Leading distributor of automotive aftermarket mechanical parts in the UK in the Benelux • Nearly 55,000 commercial customers • Proprietary, best-in-class online ordering technology for local • 3 National Distribut
Slide 19: Rhiag Significantly Expands LKQ's Pan-European Footprint
Rhiag Significantly Expands LKQ’s Pan-European Footprint Italy • Sells exclusively to wholesalers/ jobbers which in turn, sell to LKQ Europe independent garages SWEDEN Rhiag Group • More than 5,700 wholesalers served NORWAY • Limited customer concentration – top 10 account for ~3% of total sales NOR
Slide 20: Specialty
Corporation Specialty
Slide 21: Specialty
Specialty Specialty Overview Specialty Directly Addressable Market (1) ($ in billions) • Leading distributor and marketer of specialty aftermarket equipment, accessories, and products in North America Wheels, Tires & Accessory and Suspension Appearance • Critical link between 800+ suppliers and appr
Slide 22: Pending Acquisition-PGW
Corporation Pending Acquisition-PGW
Slide 23: PGW
PGW Market Leading Auto Glass Select Automotive Glass Capabilities • Pittsburgh Glass Works LLC (“PGW” or the “Company”) is the leading North American manufacturer, supplier and Windshields Sidelites Backlites Roof Panels distributor of automotive glass products – #1 in OEM with approximately 20 glo
Slide 24: Consistent Segment Business Models
Consistent Segment Business Models Large & Fragmented Markets High Industry Leading Management Fulfillment Rates Attractive Tuck-in Acquisitions Adjacent Synergies & Leverage Markets Opportunities Sustainable Organic Growth & Margin Expansion 23
Slide 25: Financial Overview
Corporation Financial Overview
Slide 26: 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% 6.1% 6.0% 6.0% 4.0% 2.0% 0.0% 2009 2010 2011 2012 2013 2014 2015 (1) Parts and services only. 25
Slide 27: Acquisition Strategy
Acquisition Strategy Strong Brands • Markets where we can be #1 or #2 • Keep discipline on return metrics – IRR – ROIC • Criteria in new markets – Among the leaders in the market – High fulfillment rates – Ability to achieve synergies – Well run companies – Consistent with LKQ culture – Excellent ma
Slide 28: Historical Financial Performance
Historical Financial Performance Revenue(1) Adjusted EBITDA(1)(2) $8,000 $6,740 $7,193 $1,000 $855 $791 $6,000 $800 $5,063 $629 $4,123 $600 $515 $4,000 $3,270 $424 $2,470 $400 $341 $2,000 $200 $- $- 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 Cash Flow/Capex(1) Adjusted EPS $600 $530
Slide 29: 2015 Consolidated Results
2015 Consolidated Results Q4 2015 2015 • Organic growth of parts and services 6.2% • Organic growth of parts and services 7.0% • Segment EBITDA Margin 11.0% Q4 2015 vs. 10.8% Q4 • Segment EBITDA Margin 11.9% 2015 vs. 11.7% 2014 2014 • Adjusted diluted EPS of $1.42 2015 vs. $1.27 2014 • Adjusted dilu
Slide 30: 2015 Revenue Growth
2015 Revenue Growth Revenue Changes by Source: Foreign Organic Acquisition Exchange Total(1) North America 5.6% 2.2% (1.0)% 6.8% Europe 9.2% 8.5% (9.7)% 8.0% Specialty 7.8% 24.6% (1.9)% 30.6% Parts and Services 7.0% 7.1% (3.8)% 10.3% Other Revenue (28.6)% 2.2% (0.3)% (26.7)% Total 3.5% 6.6% (3.4)% 6
Slide 31: 2015 Capital Allocation
2015 Capital Allocation • Operating cash flows: - $588M of cash earnings(1) in 2015 compared to $524M in 2014 - $58M cash outflow from operating assets and liabilities mainly $83M of inventory cash outflow due to an inventory build to support growth • Investing activities include $71M of CapEx durin
Slide 32: Leverage & Liquidity
Leverage & Liquidity ($ in millions ) ($ in millions ) Revolver Availability(1) 2.0x 1.7x Effective borrowing rate for Q4 2015 was 3.3% (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 33: Key Return Metrics
Key Return Metrics Return on Equity Return on Invested Capital 32
Slide 34: Guidance 2016
Guidance 2016 (effective only on the date issued: February 25, 2016) Full Year 2015 Full Year 2016 ($ in millions excluding EPS) Actual Guidance(1)(2) Organic Revenue Growth, for parts and services 7.0% 6.0% to 8.0% Adjusted Net Income $459 $490 to $520 Adjusted Diluted EPS $1.49 $1.59 to $1.69 Cash
Slide 35: 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 36: Appendix
Corporation Appendix
Slide 37: 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 38: 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 Twelve Months, Ended December 31, 2015 December 31, 2015 Consolidated Europe Consolidated Europe
Slide 39: Appendix 2 - EBITDA and Segment EBITDA Reconciliation
Appendix 2- EBITDA and Segment EBITDA Reconciliation QTD** YTD** % of % of % of % of (in millions) Q4 2015 revenue Q4 2014 revenue Q4 2015 revenue Q4 2014 revenue Segment EBITDA North America $ 130.6 12.8% $ 128.8 12.8% $ 547.4 13.2% $ 543.9 13.3% Europe 47.4 9.7% 38.3 8.2% 200.6 10.1% 167.2 9.1% Sp
Slide 40: Appendix 3 - Adjusted Net Income and Adjusted EPS Reconciliation
Appendix 3- Adjusted Net Income and Adjusted EPS Reconciliation QTD* YTD* (in millions, except per share data) Q4 2015 Q4 2014 Q4 2015 Q4 2014 Net Income $95.1 $80.5 $423.2 $381.5 Adjustments: Restructuring and acquisition related expenses, net of tax 4.5 1.2 12.8 9.7 Change in fair value of conting
Slide 41: 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 42: 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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