Slide 1: First Quarter 2016 Earnings Call
First Quarter 2016 Earnings Call April 28, 2016 Rob Wagman – President & Chief Executive Officer Nick Zarcone – Executive Vice President & Chief Financial Officer Joe Boutross – Director, Investor Relations
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: Consolidated Results
Consolidated Results Q1 2016 $1,950 $0.44 $1,921 $0.42 $0.42 $1,900 $0.40 % .5% $1,850 8.3 $0.38 10 $0.38 $1,800 $1,774 $0.36 $0.35 $0.35 $1,750 $0.34 $1,700 $0.32 Q1 2015 Q1 2016 Q1 2015 Q1 2016 Revenue* Diluted EPS Adjusted Diluted EPS • Organic growth of parts and services revenue of 6.3% • Segme
Slide 5: Q1 2016 Revenue Growth
Q1 2016 Revenue Growth Revenue Changes by Source: Organic Acquisition Foreign Exchange Total(1) North America 4.9% 3.1% (0.7)% 7.3% Europe 6.9% 9.9% (4.5)% 12.3% Specialty 10.8% 9.4% (0.8)% 19.5% Parts and Services 6.3% 6.0% (1.8)% 10.5% Other Revenue (25.1)% 5.3% (0.2)% (20.0)% Total 4.1% 6.0% (1.7
Slide 6: Q1 2016 Operating Highlights
Q1 2016 Operating Highlights North America • Roadnet routing software installed in 65% of North American fleet representing over 2,500 vehicles. Currently tracking over 140,000 miles and 22,000 deliveries daily. Software will be fully installed and utilized by year-end. • Sales responsibilities real
Slide 7: Inventory
Inventory Inventory Procurement: ($ in millions, Cars purchased in 000s) Q1 2016 Q1 2015 % Change Total aftermarket purchases $822 $690 19.0% Wholesale salvage cars and trucks 78 76 2.6% Self service and "crush only" cars 125 100 25.0% • Aftermarket inventory levels sufficient to achieve our growth
Slide 8: Acquisition Activity
Acquisition Activity Number of Q1 TTM Acquisitions Revenue* North America — — Europe 2 $1 billion Specialty — — Total 2 $1 billion Europe • In Q1, we acquired Rhiag which expands LKQ's geographic presence in continental Europe. We also expanded our European wholesale recycling operations through our
Slide 9: Financial Results
Corporation Financial Results
Slide 10: Operating Results
Operating Results First Quarter ($ in millions,except per share data) 2016 2015 Change Revenue $1,921 $1,774 8.3% Gross Margin 760 699 8.7% Segment EBITDA* 237 221 6.9% Operating Income 186 186 (0.1)% Pre-tax Income 166 169 (2.0)% Net Income 108 107 0.6% EPS - Diluted $0.35 $0.35 —% EPS - Adjusted**
Slide 11: Q1 2016 Consolidated Margins
Q1 2016 Consolidated Margins Q1 Q1 Change (as a % of Revenue) 2016 2015 F/(U) QTD Commentary Revenue 100.0% 100.0% —% Improvement in European and North American gross margins; partially offset by a decline Gross Margin 39.6% 39.4% 0.2% in our Specialty business as result of revenue mix The majority
Slide 12: Components of Quarterly Revenue
Components of Quarterly Revenue $1.77B $1.92B • Portion of change in margins on a consolidated 100.0% 7.2% 5.3% basis is attributable to change in revenue mix 13.6% 15.0% • North America historically has highest Gross 80.0% Margins and EBITDA margins 27.4% 28.4% • Increases in QTD revenue as a % of
Slide 13: North America – Q1 2016 Results
North America – Q1 2016 Results % of Revenue Gross Margin ($ in millions) 2016 2015 Change 2016 2015 44.0% 43.2% Total Revenue $1,088 $1,046 4.0% 42.7% 42.7% Gross Margin $465 $446 4.1% 42.7% 42.7% 42.0% 42.4% 42.2% Operating Expenses $320 $298 7.4% 29.4% 28.5% Segment EBITDA* $147 $149 (1.3)% 13.6%
Slide 14: Scrap Steel Prices
Scrap Steel Prices $200 • Decrease in other revenue primarily attributable to lower scrap steel prices YOY • Average price we received for $150 $141 $140 scrap steel was ~34% lower YOY, at $141 per ton for Q1 2015 vs. $123 $93 per ton in Q1 2016 • Estimated negative EPS impact of less than a half a
Slide 15: Europe – Q1 2016 Results
Europe – Q1 2016 Results % of Revenue Gross Margin ($ in millions) 2016 2015 Change 2016 2015 40.0% 38.9% Total Revenue $547 $487 12.2% 38.0% 38.1% Gross Margin $209 $181 15.5% 38.1% 37.0% 38.0% 38.3% Operating Expenses $152 $132 15.1% 27.9% 27.2% 37.0% 36.0% Segment EBITDA* $57 $47 23.6% 10.5% 9.5%
Slide 16: Foreign Exchange
Foreign Exchange $1.60 $1.55 $1.53 $1.52 $1.52 • £ down 6% Q1 2016 vs. Q1 2015 $1.50 $1.43 • € down 3% Q1 2016 vs. Q1 2015 $1.40 • Translation impact of stronger dollar on Europe revenue growth: $1.30 – $(22) million $1.20 • Europe constant currency parts and services revenue growth: $1.09 $1.10 $1.
Slide 17: Specialty – Q1 2016 Results
Specialty – Q1 2016 Results % of Revenue Gross Margin ($ in millions) 2016 2015 Change 2016 2015 32.0% 30.8% Total Revenue $288 $241 19.5% 30.3% 30.0% Gross Margin $87 $73 20.3% 30.3% 30.1% 30.1% Operating Expenses $56 $47 18.3% 19.4% 19.6% 28.0% 27.9% 27.7% Segment EBITDA* $32 $25 24.9% 11.0% 10.5%
Slide 18: 2016 Capital Allocation
2016 Capital Allocation $1,000 638 $800 (50) $600 $400 130 229 $200 87 (575) (1) $0 Beginning Cash Operating Cash Financing Capex Acquisitions & F/X and other Ending Cash 12/31/15 Flows Other Investing 3/31/16 Activities • Operating cash flows: - $152M of cash earnings(1) in Q1 2016 compared to $141
Slide 19: Leverage & Liquidity
Leverage & Liquidity ($ in millions ) ($ in millions ) Revolver Availability(1) $3,600 $3,477 8.0x $4,000 $190 $3,200 $3,287 $3,500 $2,836 $3,212 $3,212 $2,800 $229 6.0x $3,000 $2,607 $2,400 $1,021 $1,093 $2,500 $2,000 $2,261 4.0x $66 $66 $1,600 $2,000 $1,600 3.0x $87 $1,513 $1,500 $1,304 $1,200 2.0
Slide 20: Euro Notes Issuance
Euro Notes Issuance Summary of Key Terms • €500 Million Senior Unsecured Notes offering completed on April 14, 2016 • Issued at 3.875% annual interest rate (payable semi-annually) • Due April 1, 2024 (Bullet maturity) • Issued by LKQ Italia BondCo S.p.A • Guaranteed by LKQ Corporation, guarantors of
Slide 21: Key Return Metrics
Key Return Metrics Return on Equity Return on Invested Capital 16.0% 14.0% 14.9% 15.0% 12.0% 14.4% 14.5% 14.5% 10.6% 10.6% 10.2% 10.2% 10.4% 10.2% 14.0% 10.0% 14.0% 13.7% 8.0% 13.0% 6.0% 12.0% 4.0% 11.0% 2.0% 10.0% 0.0% 2011 2012 2013 2014 2015 TTM Q1 2011 2012 2013 2014 2015 TTM Q1 2016 2016 20
Slide 22: Guidance 2016
Guidance 2016 (effective only on the date issued: April 28, 2016) Full Year 2015 Full Year 2016 ($ in millions excluding EPS) Actual Guidance(1) Organic Revenue Growth, for parts and services 7.0% 6.0%-8.0% Adjusted Net Income $459 $545-$575 Adjusted Diluted EPS $1.49 $1.76-$1.86 Cash Flow from Oper
Slide 23: Q1 2016 Key Takeaways
Q1 2016 Key Takeaways • Solid organic revenue growth of 6.3% for parts and services in Q1 2016 despite mild winter weather conditions • Constant currency revenue growth of 12.3% for parts and services in Q1 2016 • Segment EBITDA margin improvement from 9.5% in Q1 2015 vs. 10.5% in Q1 2016 for our Eu
Slide 24: 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 23
Slide 25: 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 26: 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 March 31, 2016 Consolidated Europe Parts and Services Revenue Growth as reported 10.5% 12.3% Less
Slide 27: Appendix 2- EBITDA and Segment EBITDA Reconciliation
Appendix 2- EBITDA and Segment EBITDA Reconciliation QTD** % of % of (in millions) Q1 2016 revenue Q1 2015 revenue Segment EBITDA North America $ 147.4 13.6% $ 149.4 14.3% Europe 57.5 10.5% 46.5 9.5% Specialty 31.7 11.0% 25.4 10.5% Total Segment EBITDA $ 236.6 12.3% $ 221.3 12.5% Deduct: Restructuri
Slide 28: Appendix 3- Adjusted Net Income and EPS Reconciliation
Appendix 3- Adjusted Net Income and EPS Reconciliation* (in millions, except per share data) Q1 2016* Q1 2015* Net Income $107.7 $107.1 Adjustments: Restructuring and acquisition related expenses, net of tax 9.7 4.2 Loss of debt extinguishment, net of tax 17.4 — Amortization of acquired intangibles,
Slide 29: 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 30: 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