Lkq Corporation · NASDAQ:LKQ
Lkq — CL King's 13th Annual Best Ideas Conference 2015
41 slides from Lkq's conference presentation, Sep 10, 2015
Slide 1: CL King's 13th Annual Best Ideas Conference
CL King's 13th Annual Best Ideas Conference September 10, 2015 as of 9/08/15
Slide 2: Forward Looking Statement
Forward Looking Statement 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-look
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: Company Overview
Company Overview
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 6/30/2015) Revenue (in millions) $6,740 $7,018 27% Net Income (in millions) $382 $399 25% Earnings Per Share $1.25 $1.30 23% #1 or #2 in Key Markets Alternative parts distributor to the collision repair industry in North America Di
Slide 7: Consistent Segment Strategies
Consistent Segment Strategies Niche & Fragmented Markets Industry High Leading Fulfillment Management Rates Attractive Synergy & Adjacent Leverage Markets Opportunities Sustainable Growth & Margin Expansion 7
Slide 8: Operating Unit Overview
Operating Unit Overview Operating Units* Total Revenue Other North America 8% Sell more than 101,000 SKUs of aftermarket automotive products Purchased 290,000 vehicles for dismantling Includes aftermarket, recycled, refurbished, and remanufactured Parts & Services Purchased 482,000 vehicles at 73 se
Slide 9: North America
Corporation North America
Slide 10: 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 11: 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 12: 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 12 Source: CCC Information Services –Crash Course 2015
Slide 13: 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 Source: CCC Information Services Inc. 13
Slide 14: Regional Distribution Improves Fulfillment
Regional Distribution Improves Fulfillment Mid-Atlantic Region-Transfer Routes Salvage/AM Aftermarket Salvage Cross Dock 14
Slide 15: Locations Provide Strategic Advantage
Locations Provide Strategic Advantage Next day delivery leveraging regional distribution infrastructure 15
Slide 16: Age & Size of US Car Parc Improving
Age & Size of US Car Parc Improving 140 4 year time 50 horizon 117 119 118 117 45 114 115 113 112 Number of Vehicles (millions) 120 107 105 40 102 97 98 95 94 94 100 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 17: 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 Source: CCC Information Services Inc. Projections based on annual rate of change between 2010 & 2013 – Impact may increase on market adoption & system improvements 17
Slide 18: Europe
Corporation Europe ZLKQ Coatings “=
Slide 19: 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 20: 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 21: 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, 194 branches, 25 paint distribution locations Over 2,200 delivery routes Launched collision parts program in Ma
Slide 22: Benelux Markets-Sator
Benelux Markets-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 mo
Slide 23: Specialty
Corporation Specialty
Slide 24: Keystone Specialty
Keystone Specialty Keystone Overview Keystone’s Directly Addressable Market * Leading distributor and marketer of specialty Wheels & Tires $0.5 aftermarket equipment, accessories, and products in 8% North America RV ,Trailer & Performance Critical link between 800+ suppliers and approximately Other
Slide 25: Financial Overview
Financial Overview
Slide 26: 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 27: 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% 7.5% 7.4% 6.1% 4.0% 5% 0% 2009 2010 2011 2012 2013 2014 Q2-'15 Organic Revenue Growth Rates* Acquisition Revenue Growth Rates* * Parts and services only 27
Slide 28: Cash Flow & Leverage
Cash Flow & Leverage Operating Cash Flow & CAPEX Debt & Leverage Multiple (a) Operating Cash Flow Capital Spending Debt Leverage $500 $2,000 $1,864 $428 $1,800 $1,692 $400 $371 $1,600 $1,400 $1,306 $300 $1,200 $1,118 $1,000 $956 $212 $206 $200 $800 $141 $600 $100 $86 $88 $90 $400 2.3x 2.4x 2.2x 2.1x
Slide 29: Q2 2015 Operating Highlights
Q2 2015 Operating Highlights North America • Cumulative miles driven witnessed a YOY increase of 3.4% through May; 12-month moving average for miles driven through May 2015 reached its highest level since 1990 • YTD average price of unleaded regular gas was $2.42 a gallon through May 2015 compared t
Slide 30: Consolidated Results
Consolidated Results Q2 2015 YTD 2015 $3,750 $0.90 $1,850 $1,838 $0.50 $0.74 $0.75 $0.39 $3,612 $0.69 $1,800 $0.40 $3,600 $0.34 $0.60 $1,750 $0.30 $3,450 $0.45 $1,709 $1,700 $0.20 $3,335 $0.30 $3,300 $1,650 $0.10 $0.15 $- $1,600 $- $3,150 YTD-2014 YTD-2015 Q2-2014 Q2-2015 Q2-2014 Q2-2015 YTD-2014 YT
Slide 31: Q2 2015 Revenue Growth
Q2 2015 Revenue Growth Q2 revenue changes by source: Foreign Organic Acquisition Exchange Total (1) North America 6.3% 0.9% (0.9%) 6.3% Europe 10.1% 11.1% (11.7%) 9.5% Specialty 6.6% 25.3% (1.9%) 30.0% Parts and services 7.5% 7.4% (4.3%) 10.6% Other Revenue (20.6%) 0.4% (0.4%) (20.5%) Total 4.7% 6.7
Slide 32: Capitalization
Capitalization Capitalization(a) Debt Maturity Profile (b) ($ in millions) Amount % Term Loan A Senior Notes Debt $ 1,692 36% Revolver ARS Facility Stockholders’ equity (book) 2,954 64% Other Debt Revolver Availability $2,500 Total capitalization $ 4,646 100% $2,124 $2,000 Liquidity (b) ($ in millio
Slide 33: Leverage & Liquidity
Leverage & Liquidity ($ in millions ) $2,000 $1,865 $2,370 $115 $1,691 $2,380 $2,400 $1,600 $143 $2,000 Revolver $1,239 $1,128 Availability* $1,200 $1,600 $1,750 $72 $1,200 $60 $800 $1,548 $800 2.4x $1,059 $400 $1,192 2.1x $400 $0 $0 12/31/2014 06/30/2015 12/31/2014 06/30/2015 Cash & equivalents Net
Slide 34: Key Return Metrics
Key Return Metrics Return on Equity* Return on Invested Capital* 12% 14% 10% 12% 10% 8% 8% 14.90% 6% 14.40% 14.50% 14.50% 13.70% 10.60% 10.60% 10.60% 13.10% 10.20% 10.20% 10.00% 6% 4% 4% 2% 2% 0% 0% 2010 2011 2012 2013 2014 Q2-'15 2010 2011 2012 2013 2014 Q2-'15 *Amounts above represent TTM ROE & RO
Slide 35: Guidance 2015
Guidance 2015 (effective only on the date issued: July 30, 2015) ($ in millions excluding EPS) Full Year Full Year 2014 2015 Actual Guidance (a) Organic revenue growth, for parts & services 9.0% 7.0% to 8.5% Net Income $382 $425 to $445 Diluted EPS $1.25 $1.38 to $1.45 Cash flow from operations $371
Slide 36: LKQ Investment Thesis
LKQ Investment Thesis Market Leadership Clear Value Proposition Largest participant in each market served Insurers focused on controlling repair Scale provides purchasing leverage and costs depth of inventory European & Specialty expansion drives Alternative products offer savings of 20% - 50% of OE
Slide 37: Appendix
Appendix Corporation
Slide 38: 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 39: EBITDA & Segment EBITDA Reconciliation
EBITDA & Segment EBITDA Reconciliation QTD YTD Q2-2015 Q2-2014 Q2-2015 Q2-2014 (in thousands) Segment EBITDA North America $ 138,880 $ 137,150 $ 288,268 $ 283,288 Europe 53,943 45,945 100,466 87,100 Specialty 40,198 28,356 65,602 46,160 Total Segment EBITDA 233,021 211,451 454,336 416,548 Deduct: Re
Slide 40: Adjusted Net Income & Adjusted EPS Reconciliation
Adjusted Net Income & Adjusted EPS Reconciliation QTD YTD Q2-2015 Q2-2014 YTD-2015 YTD-2014 (In thousands, except per share data) Net income $ 119,722 $ 104,882 $ 226,817 $ 209,535 Adjustments: Restructuring and acquisition related expenses, net of tax 1,079 3,895 5,290 6,087 Loss on debt extinguish
Slide 41: Constant Currency Reconciliation
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 June Six Months Ended June 30, 30, 2015 2015 Consolidated Europe Consolidated Europe Parts & Services Revenue gro
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