Slide 1: Fourth Quarter 2020 Earnings Call
Fourth Quarter 2020 Earnings Call February 18, 2021 Nick Zarcone – President & Chief Executive Officer Varun Laroyia – Executive Vice President & Chief Financial Officer Joe Boutross – Vice President, 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: Q4 and Full Year 2020 Highlights
Q4 and Full Year 2020 Highlights • COVID-19 pandemic impact on operations ◦ Revenue declined in Q4 year-over-year as some mobility restrictions were put back into place in Europe and North America ◦ Ongoing cost actions and cash management delivering as planned ◦ Inventory availability improved thou
Slide 4: Consolidated Results - Continuing Operations
Consolidated Results - Continuing Operations Q4 2020 Revenue(1) Q4 2020 EPS(2) -1.9% +28.3% +27.8% $3,200 $0.70 $0.70 $0.69 $3,010 $3,000 $2,954 $0.69 $0.60 $0.59 $0.60 $2,800 $0.59 $0.54 $0.54 $0.50 $0.50 $2,600 $0.46 $0.46 $0.40 $0.40 $2,400 $2,200 $0.30 $0.30 Q4 2019 Q4 2020 Q4 2019 Q4 2020 Q4 20
Slide 5: Demand Impact
Demand Impact Organic Parts & Services Revenue Change (Per Day) 25% 23.8% 20% 17.7% 14.4% 15% 13.1% 10% 5% 1.1% 0% (1.4)% (1.0)% (1.0)% (5)% (2.9)% (4.5)% (5.6)% (6.3)% (6.9)% (7.1)% (10)% (11.3)% (10.9)% (15)% (12.8)% (13.6)% (14.3)% (16.6)% (20)% (22.5)% (25)% Q1 Q2 Q3 October November December Ja
Slide 6: Q4 2020 Revenue
Q4 2020 Revenue Revenue Changes by Source: Components of Revenue Acquisition 100.0% and Foreign 6.5% 5.1% Organic Divestiture Exchange Total(1) 10.0% North America (13.7)% 0.1% 0.1% (13.5)% 12.0% Europe (3.1)% (1.8)% 5.4% 0.5% 80.0% Specialty 16.6% 0.5% 0.1% 17.2% Parts and Services (5.2)% (0.8)% 2.
Slide 7: Gross Margin and Segment EBITDA Trends
Gross Margin and Segment EBITDA Trends Gross Margin(1) Segment EBITDA(1) (2) 12.8% 12.4% 40.4% 11.3% 39.7% 39.6% 10.9% 11.0%11.1% 10.7% 10.7% 39.3% 10.5% 10.4% 10.3% 39.0% 38.7% 38.7% 9.6% 38.5% 38.3% 38.4% 38.3% 38.1% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2018 2019 2020 2018 2019 2020 (1) Statistics are as a per
Slide 8: Cost Structure Actions
Cost Structure Actions Opex quarterly run rate(1) Key cost reductions Opex 18% Opex 10% Opex 0% Revenue 12% Revenue 16% Revenue 3% • Personnel costs down 11% – Headcount actions totaling ~5K FTEs include furlough, Other RIFs, decreased hours, reduction of overtime, temp workers and hiring freeze; le
Slide 9: Financial Results
Financial Results ( - -
Slide 10: Operating Results - Continuing Operations
Operating Results - Continuing Operations Fourth Quarter ($ in millions, except per share data) 2020 2019 Change Revenue $2,954 $3,010 (1.9)% Gross Margin 1,170 1,196 (2.2)% Operating Income 267 207 29.3% Pre-tax Income 247 190 30.2% Net income from continuing operations attributable to 180 140 28.6
Slide 11: North America – Q4 2020 Results
North America – Q4 2020 Results Change % of Revenue Gross Margin ($ in millions) 2020 2019 F/(U) 2020 2019 46.9% 47.4% Total Revenue $1,167 $1,283 (9.1)% 47.0% 46.0% 46.8% Gross Margin $546 $591 (7.5)% 46.8% 46.1% 46.0% 46.1% 45.9% Adjusted Gross Margin* $547 $591 (7.5)% 46.9% 46.1% 45.0% 45.2% 44.2
Slide 12: Europe – Q4 2020 Results
Europe – Q4 2020 Results Change % of Revenue Gross Margin ($ in millions) 2020 2019 F/(U) 2020 2019 Total Revenue $1,433 $1,425 0.6% 38.0% Gross Margin $527 $521 1.0% 36.7% 36.6% 37.2% 37.0% 37.1% 36.8% 36.8% Adjusted Gross Margin* $527 $524 0.4% 36.7% 36.8% 37.0% 36.7% 36.5% Operating Expenses $408
Slide 13: Specialty – Q4 2020 Results
Specialty – Q4 2020 Results Change % of Revenue Gross Margin ($ in millions) 2020 2019 F/(U) 2020 2019 30.0% 28.9% Total Revenue $355 $303 17.1% 28.5% 28.4% 28.2% Gross Margin $97 $84 15.4% 27.2% 27.6% 27.6% 27.7% 28.0% 27.3% Operating Expenses $68 $59 (13.9)% 19.1% 19.6% 27.2% (1) Segment EBITDA $3
Slide 14: 2020 Capital Allocation
2020 Capital Allocation $ in millions $2,500 $1,444 $2,000 $(173) $1,500 $1,000 $535 $500 $12 $312 $(1,365) $(117) $(24) $0 Beginning Cash, Operating Cash Capex Net Repayments Share Other Investing FX and Other Ending Cash DO Cash Flows of Repurchases and Financing 12/31/2020 and Restricted Credit F
Slide 15: Operating Cash Flow and Free Cash Flow
Operating Cash Flow and Free Cash Flow* 100% $ in millions 98% $1,400 $1,200 80% $1,000 66% 60% $800 45% $1,444 39% 42% $1,271 $600 40% 31% $1,064 $400 $798 $715 $544 $571 20% $523 $465 $200 $374 $388 $347 $0 0% 2015 2016 2017 2018 2019 2020 Free Cash Flow ("FCF")* Operating Cash Flow FCF/EBITDA** N
Slide 16: Leverage & Liquidity
Leverage & Liquidity ($ in millions ) ($ in millions ) Total Capacity(1) $4,500 $4,000 $4,072 $4,000 $3,491 $3,474 $3,500 $523 $3,500 $3,000 $3,549 $3,000 $2,897 $1,813 $2,500 $312 $2,436 $2,500 $2,585 $2,000 $69 $2,000 2.6x $1,500 $1,500 1.9x $71 $1,000 $1,000 $1,609 $500 $967 $500 $0 $0 December 3
Slide 17: LKQ plays an important role in enabling a circular and sustainable economy
LKQ plays an important role in enabling a circular and sustainable economy Environmental Social Governance • Our salvage operations • Focused on employee • Experienced and diverse recycle more than 90% of health & Safety Board of Directors materials from end-of-life – Led by a separate chair and veh
Slide 18: 2020 Performance Against Original (Pre-COVID) Guidance
2020 Performance Against Original (Pre-COVID) Guidance 2020 Original Full Year 2020 ($ in millions except for EPS) Guidance(1)(2) Actual(1) Organic Growth, Parts and Services 0.50% - 2.50% (7.6)% Net Income attributable to LKQ stockholders $678 - $714 $639 Adjusted Net Income attributable to LKQ $75
Slide 19: Outlook 2021
Outlook 2021 (effective only on the date issued: February 18, 2021) 2021 outlook(1): • Full year parts and services revenue growth expected ◦ Q1 decline year over year, Q2 growth on a light comparable period, followed by gradual recovery in the second half of the year ◦ Two fewer selling days in Nor
Slide 20: YTD Results and Supplementary Information
YTD Results and Supplementary Information
Slide 21: Consolidated Results - Continuing Operations
Consolidated Results - Continuing Operations 2020 Revenue(1) 2020 EPS(2) -7.0% +20.1% +7.6% $13,000 $2.60 $2.60 $2.55 $12,506 $12,500 $2.40 $2.40 $2.37 $12,000 $11,629 $2.20 $2.20 $2.09 $11,500 $2.00 $2.09 $2.00 $11,000 $1.80 $1.80 $10,500 $1.74 $1.74 $1.60 $1.60 $10,000 $9,500 $1.40 $1.40 $9,000 $1
Slide 22: 2020 Revenue
2020 Revenue Revenue Changes by Source: Components of Revenue Acquisition 100.0% and Foreign 5.7% 5.0% Organic Divestiture Exchange Total(1) 11.7% North America (12.9)% (0.3)% (0.1)% (13.3)% 13.0% Europe (6.1)% (0.9)% 1.1% (6.0)% 80.0% Specialty 3.0% 0.3% (0.1)% 3.1% Parts and Services (7.6)% (0.5)%
Slide 23: Operating Results - Continuing Operations
Operating Results - Continuing Operations Fiscal Year ($ in millions, except per share data) 2020 2019 Change Revenue $11,629 $12,506 (7.0)% Gross Margin 4,593 4,852 (5.3)% Operating Income 986 897 9.9% Pre-tax Income 885 791 11.9% Net income from continuing operations attributable to 639 541 18.1%
Slide 24: North America – 2020 Results
North America – 2020 Results Change % of Revenue ($ in millions) 2020 2019 F/(U) 2020 2019 Total Revenue $4,632 $5,209 (11.1)% Gross Margin $2,146 $2,325 (7.7)% 46.3% 44.6% Adjusted Gross Margin* $2,151 $2,326 (7.5)% 46.4% 44.7% Operating Expenses $1,392 $1,638 15.0% 30.1% 31.4% Other Income, net(1)
Slide 25: Europe – 2020 Results
Europe – 2020 Results Change % of Revenue ($ in millions) 2020 2019 F/(U) 2020 2019 Total Revenue $5,492 $5,838 (5.9)% Gross Margin $2,029 $2,112 (3.9)% 36.9% 36.2% Adjusted Gross Margin* $2,032 $2,132 (4.7)% 37.0% 36.5% Operating Expenses $1,615 $1,685 4.1% 29.4% 28.9% Other (Expense), net $(2) $(1
Slide 26: Specialty – 2020 Results
Specialty – 2020 Results Change % of Revenue ($ in millions) 2020 2019 F/(U) 2020 2019 Total Revenue $1,509 $1,464 3.1% Gross Margin $418 $415 0.8% 27.7% 28.3% Operating Expenses $259 $257 (0.6)% 17.1% 17.6% Segment EBITDA(1) $163 $161 0.9% 10.8% 11.0% (1) Segment EBITDA for each respective segment
Slide 27: Liquidity as of December 31, 2020
Liquidity as of December 31, 2020 Credit Rating • Rated Ba2 / BB by Moody’s and S&P, respectively • Fixed Interest Rate Bonds: €1.50 billion ($1.83 billion) • Variable Interest Rate Bank Debt: $967 million ($839 million hedged to fixed rates - $689 million notional amount swaps Debt Structure mature
Slide 28: Scrap Steel Prices
Scrap Steel Prices Q4 scrap steel prices increase YoY and QoQ $175 • Average price for scrap steel $158 increased from from $104 per ton in Q4 2019 to $158 per ton in Q4 $150 $150 2020 $144 • Sequential change was positive $35 per ton, or up 29% $128 $125 • Sequential changes in scrap steel $124 $12
Slide 29: Foreign Exchange
Foreign Exchange • £ up 2.7% Q4 2020 vs Q4 2019 GBP 2.7% $1.35 • € up 7.7% Q4 2020 vs Q4 2019 $1.32 $1.30 • $77 million favorable impact of $1.29 $1.29 $1.29 $1.30 $1.28 translation of stronger Q4 rates relative to the US dollar on $1.24 European parts and services $1.25 $1.23 revenue growth $1.19 •
Slide 30: Inventory
Inventory Inventory Procurement: Q4 Fiscal Year ($ in millions, Vehicles purchased in 000s) 2020 2019 % Change 2020 2019 % Change Total aftermarket procurement $1,662 $1,684 (1.3)% $5,593 $6,446 (13.2)% Wholesale salvage cars and trucks 65 79 (17.7)% 230 309 (25.6)% Europe wholesale salvage cars and
Slide 31: 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. 31
Slide 32: 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 Year Ended December 31, 2020 December 31, 2020 Consolidated Europe Consolidated Europe Parts & Ser
Slide 33: Appendix 2 - Revenue and Segment EBITDA by segment
Appendix 2 - Revenue and Segment EBITDA by segment Three Months Ended Year Ended December 31(1) December 31(1) % of % of % of % of (in millions) 2020 revenue 2019 revenue 2020 revenue 2019 revenue Revenue North America $1,167 $1,283 $4,632 $5,209 Europe 1,433 1,425 5,492 5,838 Specialty 355 303 1,50
Slide 34: Reconciliation of Net Income to EBITDA and Segment EBITDA
Appendix 3 - Reconciliation of Net Income to EBITDA and Segment EBITDA Three Months Ended December 31(1) Year Ended December 31(1) (in millions) 2020 2019 2020 2019 Net income $182 $141 $640 $545 Subtract: Net income attributable to continuing noncontrolling interest 1 0 2 3 Net income attributable
Slide 35: Reconciliation of Net Income to EBITDA and Segment EBITDA
Appendix 3 - Reconciliation of Net Income to EBITDA and Segment EBITDA Three Months Ended(1) March 31, June 30, September 30, (in millions) 2020 2020 2020 Net income $146 $119 $194 Subtract: Net income (loss) attributable to continuing noncontrolling interest 1 (0) 0 Net income attributable to disco
Slide 36: Reconciliation of Net Income to EBITDA and Segment EBITDA
Appendix 3 - Reconciliation of Net Income to EBITDA and Segment EBITDA Three Months Ended(1) March 31, June 30, September 30, (in millions) 2019 2019 2019 Net income $99 $152 $153 Subtract: Net income (loss) attributable to continuing noncontrolling interest 1 1 (0) Net income attributable to discon
Slide 37: Reconciliation of Net Income to EBITDA and Segment EBITDA
Appendix 3 - Reconciliation of Net Income to EBITDA and Segment EBITDA Three Months Ended(1) March 31, June 30, September 30, December 31, (in millions) 2018 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 38: Reconciliation of Net Income to EBITDA and Segment EBITDA
Appendix 3 - Reconciliation of Net Income to EBITDA and Segment EBITDA Year Ended December 31(1) (in millions) 2015 2016 2017 2018 Net income $423 $464 $530 $483 Subtract: Net (loss) income attributable to continuing noncontrolling interest — — (4) 3 Net income attributable to LKQ stockholders $423
Slide 39: 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 40: Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS
Appendix 4 - Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS from Continuing Operations Three Months Ended Year Ended December 31(1) December 31(1) (in millions, except per share data) 2020 2019 2020 2019 Net income $182 $141 $640 $545 Subtract: Net income attributable t
Slide 41: Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS
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 42: Appendix 5 - Forecasted EPS Reconciliation
Appendix 5 - Forecasted EPS Reconciliation(1) For the year ending December 31, 2021 (in millions, except per share data) Minimum Outlook Maximum Outlook Net income from continuing operations attributable to LKQ stockholders $731 $791 Adjustments: Amortization of acquired intangibles 77 77 Restructur
Slide 43: Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
Appendix 6 - Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Three Months Ended Year Ended December 31(1) December 31(1) (in millions) 2020 2019 2020 2019 Net cash provided by operating activities $309 $99 $1,444 $1,064 Less: purchases of property, plant and equipment 6
Slide 44: Reconciliation of Gross Margin to Adjusted Gross Margin
Appendix 7 - Reconciliation of Gross Margin to Adjusted Gross Margin Consolidated Adjusted Gross Margin Three Months Ended(1) Year Ended(1) December 31, December 31, December 31, December 31, (in millions) 2020 2019 2020 2019 Gross margin $1,170 $1,196 $4,593 $4,852 Add: Restructuring expenses - cos
Slide 45: Reconciliation of Gross Margin to Adjusted Gross Margin
Appendix 7 - Reconciliation of Gross Margin to Adjusted Gross Margin North America Adjusted Gross Margin Three Months Ended(1) (in millions) September 30, 2019 June 30, 2020 September 30, 2020 Gross margin $576 $454 $534 Add: Restructuring expenses - cost of goods sold 0 3 1 Adjusted gross margin $5
Slide 46: Reconciliation of Gross Margin to Adjusted Gross Margin
Appendix 7 - 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
Slide 47: Appendix 8 - Reconciliation of Total Debt to Net Debt
Appendix 8 - Reconciliation of Total Debt to Net Debt December 31, December 31, (in millions) 2020(1) 2019(1) Current portion of long-term obligations $58 $326 Long-term obligations, excluding current portion 2,813 3,715 Total debt, net of debt issuance costs $2,871 $4,042 Add: Debt issuance costs 2