Slide 1: Second Quarter 2022 Earnings Call Presentation
Second Quarter 2022 Earnings Call Presentation July 28, 2022 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: Q2 2022 Highlights
Q2 2022 Highlights • Organic revenue growth for parts and services of 3.8% (4.2% on a per day basis) ◦ Wholesale - North America organic revenue growth for parts and services of 10.7% • Strong results enabled by focusing on key operational excellence initiatives ◦ Net income from continuing operatio
Slide 4: Consolidated Results Q2 2022
Consolidated Results Q2 2022 Revenue(1) EPS(2) (2.7)% +47.5% (3.5)% • Currency translation $4,000 $1.80 $1.80 effect: (5.2%), or $178 million. $3,800 • Constant currency(5) revenue growth of $1.60 (4) $1.60 $1.49 $3,600 2.5% $3,435 $1.40 $1.40 $3,400 $3,341 $3,200 $1.20 $1.20 $1.13 $1.09 $3,000 $1.0
Slide 5: Q2 2022 Revenue
Q2 2022 Revenue Revenue Changes by Source: Components of Revenue Acquisition and Foreign 100.0% Organic Divestiture Exchange Total(1) 7.5% 7.5% Wholesale - North America 10.7% (8.0)% (0.2)% 2.5% 1.8% 1.5% Europe 4.2% 0.5% (11.0)% (6.4)% 15.3% 15.5% Specialty (11.5)% 8.2% (0.4)% (3.6)% 75.0% Self Ser
Slide 6: Financial Results Q2 2022
Financial Results Q2 2022 LKQ
Slide 7: Operating Results
Operating Results Second Quarter ($ in millions, except per share data) 2022 2021 Change F/(U) Revenue $3,341 $3,435 (2.7)% Gross Margin 1,367 1,415 (3.5)% Operating Expenses 898 901 (0.5)% Operating Income 559 445 25.8% Pre-tax Income 543 411 32.7% Net income from continuing operations attributable
Slide 8: Wholesale – North America – Q2 2022
Wholesale – North America – Q2 2022 Change % of Revenue Gross Margin ($ in millions) 2022 2021 F/(U) 2022 2021 50.0% 49.1% (1) Total Revenue $1,144 $1,119 2.3% 49.0% Gross Margin $553 $550 0.6% 48.3% 49.1% 48.0% 47.6% 47.5% 47.6% Operating Expenses $340 $333 (2.0)% 29.7% 29.8% 48.3% Segment EBITDA(2
Slide 9: Europe – Q2 2022
Europe – Q2 2022 Change % of Revenue Gross Margin ($ in millions) 2022 2021 F/(U) 2022 2021 41.0% Total Revenue (1) $1,477 $1,577 (6.3)% 39.6% 40.0% 39.2% Gross Margin $579 $605 (4.3)% 39.2% 38.4% 39.0% Operating Expenses $422 $442 4.6% 28.6% 28.0% 38.0% Segment EBITDA(2) $160 $168 (4.6)% 10.8% 10.7
Slide 10: Specialty – Q2 2022
Specialty – Q2 2022 Change % of Revenue Gross Margin ($ in millions) 2022 2021 F/(U) 2022 2021 29.9% 29.9% 29.7% Total Revenue $513 $532 (3.6)% 30.0% 28.8% Gross Margin $152 $159 (4.3)% 29.7% 29.9% Operating Expenses $84 $81 (4.0)% 16.4% 15.2% 28.0% 28.2% (1) Segment EBITDA $69 $80 (14.2)% 13.4% 14.
Slide 11: Self Service – Q2 2022
Self Service – Q2 2022 Change % of Revenue Gross Margin ($ in millions) 2022 2021 F/(U) 2022 2021 50.1% 51.0% (2) 48.6% Total Revenue $208 $209 (0.2)% 48.0% Gross Margin $82 $101 (18.9)% 39.5% 48.6% 45.0% 43.1% Operating Expenses $51 $45 (13.2)% 24.5% 21.6% 42.0% Segment EBITDA(1) $32 $56 (43.7)% 15
Slide 12: YTD 2022 Capital Allocation
YTD 2022 Capital Allocation ($ in millions) $1,500 $372 $(99) $737 $1,000 $(301) $500 $274 $(528) $265 $(142) $(22) $(26) $0 Beginning Cash Operating Cash Proceeds from Capex Debt Share Dividends Other Activity, FX Ending Cash 12/31/21 Flows disposal of Repayments, Repurchases net 6/30/22 businesses
Slide 13: Operating Cash Flow and Free Cash Flow
(1) Operating Cash Flow and Free Cash Flow (1) $1,600 ($ in millions) 100% 98% $1,400 90% Actual FCF 80% conversion of $1,200 EBITDA (2) 70%(3) 66% 70% $1,000 60% 60% Targeted annual FCF conversion of $800 50% EBITDA- 55%-60% $1,444 $1,367 $600 $1,271 40% $1,064 $1,074 30% $400 $798 $737 $638 20% $2
Slide 14: Leverage & Liquidity
Leverage & Liquidity ($ in millions) ($ in millions) Total $4,000 Capacity(1) $4,000 $3,500 $3,500 $3,150 $3,150 $3,000 $2,824 $3,000 $274 $2,500 $2,369 $2,500 $1,194 $2,550 $265 $1,587 $2,000 $2,104 $2,000 $69 $1,500 $69 $1,500 1.4x $1,000 1.2x $1,000 $1,887 $1,494 $500 $500 $0 $0 December 31, 2021
Slide 15: Share Repurchase Program
Share Repurchase Program # of Shares 6.2 4.3 5.3 2.7 8.1 2.0 Repurchased Million Million Million Million Million Million $404 M $304 M $297 M $219 M $49.63 $144 M $49.21 $56.57 $102 M $50.50 $53.20 $50.54 (1) (2) (3) Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Through July 22, 2022 Year to date through
Slide 16: Expanding Global ESG Programs
Expanding Global ESG Programs 16
Slide 17: Outlook 2022
Outlook 2022(1) (effective only on the date issued: July 28, 2022) Full Year 2022 Full Year 2022 Previous Outlook(6) Updated Outlook Organic parts and services revenue growth 4.5% to 6.5% 4.5% to 6.5% Diluted EPS(2) $3.57 to $3.87 $4.09 to $4.29 Adjusted diluted EPS(2)(3) $3.80 to $4.10 $3.85 to $4.
Slide 18: 2022 Adjusted EPS Guidance Walk
2022 Adjusted EPS Guidance Walk $4.5 $0.03 $0.11 (1) (1) $4 $3.95 ($0.06) $3.95 ($0.07) ($0.01) $3.5 Previous FY 2022 (2) Operating Results Share Repurchases Fx Rates Scrap & Precious Metal Tax Rate Current FY 2022 (2) Adjusted Adjusted EPS Prices EPS (1) The amounts represent the midpoint of our gu
Slide 19: YTD Results and Supplementary Information
YTD Results and Supplementary Information
Slide 20: Consolidated Results YTD 2022
Consolidated Results YTD 2022 Revenue(1) EPS(2) • Currency translation +28.0% +1.3% +1.0% effect: (3.9%), or $258 $9,000 million. $3.00 $3.00 • Constant currency(5) $8,000 revenue growth of 5.2% $2.70 $2.70 (4) $7,000 $6,606 $6,689 $2.42 $2.40 $2.40 $6,000 $2.07 $2.09 $2.10 $2.10 $5,000 $1.89 $1.80
Slide 21: YTD 2022 Revenue
YTD 2022 Revenue Revenue Changes by Source: Components of Revenue Acquisition and Foreign 100.0% 7.4% 7.5% (1) Organic Divestiture Exchange Total 1.7% 1.6% North America 12.1% (3.8)% (0.1)% 8.2% 14.5% 15.0% Europe 5.5% 0.4% (8.3)% (2.4)% 75.0% Specialty (10.0)% 8.5% (0.2)% (1.8)% Self Service 13.9%
Slide 22: Operating Results - Continuing Operations
Operating Results - Continuing Operations YTD Change ($ in millions, except per share data) 2022 2021 F/(U) Revenue $6,689 $6,606 1.3% Gross Margin 2,724 2,709 0.5% Operating Expenses 1,822 1,750 (4.1)% Operating Income 930 816 14.0% Pre-tax Income 899 764 17.9% Net income from continuing operations
Slide 23: Wholesale – North America – YTD
Wholesale – North America – YTD Change % of Revenue ($ in millions) 2022 2021 F/(U) 2022 2021 Total Revenue $2,345 $2,170 8.1% Gross Margin $1,125 $1,049 7.2% 48.0% 48.4% Operating Expenses $699 $643 (8.8)% 29.8% 29.6% Segment EBITDA(1) $432 $413 4.6% 18.4% 19.0% (1) Segment EBITDA for each segment
Slide 24: Europe – YTD
Europe – YTD Change % of Revenue ($ in millions) 2022 2021 F/(U) 2022 2021 Total Revenue(1) $2,965 $3,040 (2.5)% Gross Margin $1,141 $1,167 (2.2)% 38.5% 38.4% Operating Expenses $861 $866 0.6% 29.0% 28.5% Segment EBITDA(2) $291 $309 (5.9)% 9.8% 10.2% (3) Transformation Expenses $5 $7 (2) (3) Segment
Slide 25: Specialty – YTD
Specialty – YTD Change % of Revenue ($ in millions) 2022 2021 F/(U) 2022 2021 Total Revenue $974 $991 (1.8)% Gross Margin $290 $291 (0.5)% 29.8% 29.4% Operating Expenses $165 $153 (8.0)% 16.9% 15.4% Segment EBITDA(1) $127 $141 (9.8)% 13.1% 14.2% (1) Segment EBITDA for each segment is a GAAP measure,
Slide 26: Self Service – YTD
Self Service – YTD Change % of Revenue ($ in millions) 2022 2021 F/(U) 2022 2021 (2) Total Revenue $407 $408 (0.1)% Gross Margin $168 $201 (16.5)% 41.3% 49.4% Operating Expenses $97 $90 (8.6)% 23.9% 22.0% Segment EBITDA(1) $72 $112 (36.2)% 17.6% 27.5% (1) Segment EBITDA for each segment is a GAAP me
Slide 27: Liquidity as of June 30, 2022
Liquidity as of June 30, 2022 • Rated Baa3 (investment grade) by Moody's (upgraded in May 2022) Credit Rating • Rated BBB- (investment grade) by S&P Global Ratings (upgraded in April 2022) • Rated BBB- (investment grade) by Fitch (initiated in May 2021) • Fixed Interest Rate Bonds: €750 million ($78
Slide 28: Metals Prices
Metals Prices Scrap steel impact Q2 scrap steel prices increased Q2 precious metal prices declined Sequential changes in scrap steel prices impact to Segment EBITDA: YoY and QoQ (sequential change YoY and sequentially Self Service: of 5% in 2022 vs. 18% in 2021) • Q2 2022 favorable by $3 million; YT
Slide 29: Foreign Exchange
Foreign Exchange $1.45 • £ down 10.1% Q2 2022 vs Q2 2021 $1.40 $1.40 $1.35 • € down 11.7% Q2 2022 vs Q2 2021 $1.35 $1.38 $1.38 • $173 million unfavorable impact $1.34 $1.30 GBP $1.26 of translation of weaker Q2 rates (10. 1%) relative to the US Dollar on $1.25 $1.21 European parts and services $1.20
Slide 30: Inventory Procurement
Inventory Procurement ($ in millions, vehicles purchased in 000s) Q2 YTD 2022 2021 % Change 2022 2021 % Change Total aftermarket procurement $1,532 $1,629 (6.0)% $3,207 $3,174 1.0% Wholesale - North America salvage vehicles 65 63 3.2% 125 113 10.6% Europe wholesale salvage vehicles 8 6 33.3% 16 13 2
Slide 31: Inventory Balances
Inventory Balances ($ in millions) Wholesale - North America Europe $1,600 $2,000 Q4 2021 to Q2 2022 2022 $1,400 $1,800 021 to Q2 build Total $106M inventory build Q4 2 M i n ventory 144 ($102M) Divestiture (Glass) Total $ FX ($119M) $1,200 $1,600 $1,000 $961 $1,402 $1,400 $1,352 $1,327 $796 $1,303
Slide 32: Inventory Balances (cont.)
Inventory Balances (cont.) ($ in millions) Self Service Specialty $100 $700 $90 Q4 2021 to Q2 2022 $600 No change 2 2022 $80 1 to Q Q4 202 entory build inv $10M $500 $70 $458 $458 $60 $60 $400 $380 $51 $50 $50 $323 $301 $300 $40 $38 $33 $236 $30 $30 $200 $20 $100 $10 $0 $0 0 0 1 0 1 1 2 2 9 9 0 0 c-
Slide 33: 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. 33
Slide 34: Constant Currency Reconciliation
Appendix 1 Constant Currency Reconciliation The following unaudited table reconciles revenue and revenue growth for parts & services and total revenue to constant currency revenue and revenue growth for the same measures: Three Months Ended Six Months Ended June 30, 2022 June 30, 2022 (in millions)
Slide 35: Constant Currency Reconciliation
Appendix 1(cont.) Constant Currency Reconciliation Three Months Ended Six Months Ended June 30, 2022 June 30, 2022 Consolidated Europe Consolidated Europe Parts & Services Revenue growth as reported (2.7)% (6.4)% 1.4% (2.4)% Less: Currency impact (5.6)% (11.0)% (4.2)% (8.3)% Revenue growth at consta
Slide 36: Revenue and Segment EBITDA by segment
Appendix 2 Revenue and Segment EBITDA by segment Three Months Ended June 30(1) Six Months Ended June 30(1) % of % of % of % of (in millions) 2022 revenue 2021 revenue 2022 revenue 2021 revenue Revenue Wholesale - North America $1,144 $1,119 $2,345 $2,170 Europe 1,477 1,577 2,965 3,040 Specialty 513
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 June 30(1) Six Months Ended June 30(1) (in millions) 2022 2021 2022 2021 Net income $420 $306 $693 $572 Subtract: Net income attributable to continuing noncontrolling interest — 1 — 1 Net income attributable to L
Slide 38: 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 net
Slide 39: Reconciliation of Net Income and Diluted EPS to Adjusted Net Income
Appendix 4 Reconciliation of Net Income and Diluted EPS to Adjusted Net Income from Continuing Operations Attributable to LKQ Stockholders and Adjusted EPS from Continuing Operations Attributable to LKQ Stockholders Three Months Ended June 30(1) Six Months Ended June 30(1) (in millions, except per s
Slide 40: Reconciliation of Net Income and Diluted EPS to Adjusted Net Income Attributable to LKQ
Appendix 4 Reconciliation of Net Income and Diluted EPS to Adjusted Net Income Attributable to LKQ Stockholders and Adjusted EPS from Continuing Operations Attributable to LKQ Stockholders We have presented Adjusted Net Income and Adjusted Diluted Earnings per Share from Continuing Operations Attrib
Slide 41: Forecasted EPS Reconciliation
Appendix 5 Forecasted EPS Reconciliation(1) Forecasted Fiscal Year 2022 (in millions, except per share data) Minimum Outlook Maximum Outlook Net income from continuing operations attributable to LKQ stockholders $1,144 $1,200 Adjustments: Amortization of acquired intangibles 61 61 Restructuring and
Slide 42: 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 June 30(1) Six Months Ended June 30(1) (in millions) 2022 2021 2022 2021 Net cash provided by operating activities $328 $410 $737 $933 Less: purchases of property, plant and equipment 40 46 99
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 We have presented free cash flow solely as a supplemental disclosure that offers investors, securities analysts and other interested parties useful information to evaluate our liquidity. We calculate free cash f
Slide 44: Reconciliation of Total Debt to Net Debt
Appendix 7 Reconciliation of Total Debt to Net Debt (in millions) June 30, 2022(1) December 31, 2021(1) Current portion of long-term obligations $47 $35 Long-term obligations, excluding current portion 2,313 2,777 Total debt, net of debt issuance costs $2,360 $2,812 Add: Debt issuance costs 9 12 Tot