Lkq Corporation · NASDAQ:LKQ
Lkq — Q3 2023 Earnings Presentation
40 slides from Lkq's earnings presentation, Oct 26, 2023
Slide 1: Third Quarter 2023 Earnings Call Presentation
Third Quarter 2023 Earnings Call Presentation October 26, 2023
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: Q3 2023 Highlights
Q3 2023 Highlights • Organic revenue growth for parts and services of 3.0% (4.3% on a per day basis) ◦ Europe: 5.1% (6.2% on a per day basis) ◦ Wholesale - North America: 4.1% (5.8% on a per day basis) ◦ Specialty: (6.1)% ((4.6%) on a per day basis) • Segment EBITDA(1) of $422 million; Segment EBITD
Slide 4: Outlook 2023
Outlook 2023(1) (effective only on the date issued: October 26, 2023) Full Year 2023 2023 Full Year Outlook Previous Outlook(5) Updated Outlook Organic parts and services revenue growth 6.0% to 7.5% 4.75% to 5.75% Diluted EPS(2) $3.65 to $3.85 $3.41 to $3.55 Adjusted Diluted EPS(2)(3) $3.90 to $4.10
Slide 5: 2023 Adjusted EPS Guidance Walk
(1) 2023 Adjusted EPS Guidance Walk $4.50 (2) $4.00 $4.00 ($0.10) (2) ($0.05) $3.75 ($0.05) ($0.04) ($0.01) $3.50 $3.00 Previous Italy VAT Issue / Operating Results Uni-Select Scrap & Precious Metal FX Rates Updated Guidance Stahlgruber Strikes (primarily Specialty and Impact Prices Guidance Self Se
Slide 6: Q3 2023 Adjusted EPS Walk
(1) Q3 2023 Adjusted EPS Walk $1.50 $0.97 $1.00 $0.02 $0.02 $0.86 ($0.04) $0.02 ($0.04) (2) ($0.04) ($0.03) ($0.02) $0.50 $0.00 Q3 2022 Italy VAT Issue Scrap & Precious Interest Specialty - Stahlgruber Wholesale - Shares FX Rates Q3 2023 Metal Prices Operating Strikes North America - Results Operati
Slide 7: Consolidated Results Q3 2023
Consolidated Results Q3 2023 Revenue(1) EPS(2) • Organic growth: 2.0% +15.0% • Currency translation (18.9)% (11.3)% $4,000 effect: 3.4% $1.20 $1.20 • Acquisition and $3,800 divestiture: 9.6% $3,600 $3,568 $1.00 $1.00 $0.97 $0.95 $3,400 $0.86 $3,200 $3,104 $0.80 $0.77 $0.80 $3,000 $2,800 $2,600 $0.60
Slide 8: Q3 2023 Revenue
Q3 2023 Revenue Revenue Changes by Source: Components of Revenue Acquisition and Foreign Organic Divestiture Exchange Total(1) 100.0% 4.5% Wholesale - North America 4.1% 24.0% (0.2)% 28.0% 1.6% 6.3% 1.8% Europe 5.1% 1.9% 7.8% 14.8% 12.8% 14.6% Specialty (6.1)% 7.2% (0.2)% 0.9% 75.0% Self Service 5.1
Slide 9: Operating Results - Q3
Operating Results - Q3 Third Quarter ($ in millions, except per share data) 2023 2022 Change F/(U) Revenue $3,568 $3,104 15.0% Gross Margin 1,390 1,276 8.9% Operating Expenses 979 861 (13.7)% Operating Income 308 358 (14.0)% Income from continuing operations before provision for income taxes 263 347
Slide 10: Wholesale – North America – Q3
Wholesale – North America – Q3 Gross Margin Uni-Select Change % of Revenue Acquisition 56.0% impact of ($ in millions) 2023 2022 F/(U) 2023 2022 54.0% (3.9)% 52.0% 49.8% Total Revenue $1,387 $1,109 25.3% 48.3% 49.1% 49.0% 49.5% 50.0% Gross Margin $618 $544 13.8% 44.6% 49.1% 48.0% 46.0% 47.6% Operati
Slide 11: Europe – Q3
Europe – Q3 Gross Margin 42.0% Change % of Revenue 41.0% 39.7% 40.0% 39.4% ($ in millions) 2023 2022 F/(U) 2023 2022 39.2% 39.0% Total Revenue(1) $1,584 $1,380 14.7% 38.0% Gross Margin $607 $548 10.7% 38.3% 39.7% 38.3% 37.0% 37.8% 37.8% 37.8% Operating Expenses $464 $395 (17.2)% 29.3% 28.7% 36.0% (2
Slide 12: Specialty – Q3
Specialty – Q3 Change % of Revenue Gross Margin ($ in millions) 2023 2022 F/(U) 2023 2022 32.0% 29.9% 29.7% Total Revenue $457 $452 0.9% 30.0% 28.7% Gross Margin $118 $130 (9.6)% 25.7% 28.7% 28.0% 26.7% Operating Expenses $80 $81 1.7% 17.6% 18.0% 27.7% 26.0% (1) 26.0% Segment EBITDA $40 $49 (19.5)%
Slide 13: Self Service – Q3
Self Service – Q3 Change % of Revenue Gross Margin ($ in millions) 2023 2022 F/(U) 2023 2022 48.0% Total Revenue(1) $141 $164 (14.4)% 45.0% 43.1% 41.3% 42.0% Gross Margin $47 $54 (13.2)% 33.4% 33.0% 39.5% 38.4% 39.0% Operating Expenses $48 $50 3.9% 34.3% 30.5% 36.0% Segment EBITDA(2) ($1) $4 n/m (0.
Slide 14: YTD 2023 Capital Allocation
YTD 2023 Capital Allocation $531 ($ in millions) $3,000 $1,394 $(233) $2,000 $1,144 $49 $1,000 $(2,199) $401 $278 $(249) $(222) $(32) $(60) $0 Beginning Operating Proceeds Proceeds Capex Acquisitions, Proceeds Other Debt Dividends Debt Issuance Other Ending Cash Cash Cash from issuance from net of c
Slide 15: Operating Cash Flow & Free Cash Flow
(1) Operating Cash Flow & Free Cash Flow (1) ($ in millions) ($ in millions) $1,600 100% $1,600 *Full Year Outlook $1,400 90% $1,400 Actual FCF $1,300* 80% conversion of $1,200 Adjusted EBITDA(2) $1,200 70% $1,000* $1,000 60% 60% Targeted annual $1,000 60% FCF conversion of Adjusted EBITDA $800 50%
Slide 16: Leverage & Liquidity
Leverage & Liquidity ($ in millions) ($ in millions) Total $4,369 Capacity(1) $4,000 $4,000 $3,500 $3,500 $3,150 $3,000 $3,000 $2,662 $2,500 $2,500 $2,500 $2,500 $1,295 2.3x(5) $645 $845 $2,000 $2,000 $69 $69 $1,500 $109 $1,500 1.5x $1,000 $1,000 $1,786 $1,786 $1,546 $500 $500 $0 $0 December 31, 202
Slide 17: Liquidity as of September 30, 2023
Liquidity as of September 30, 2023 • Rated Baa3 (investment grade) by Moody's; Outlook Neutral Credit Rating • Rated BBB- (investment grade) by S&P Global Ratings; Outlook Neutral • Rated BBB- (investment grade) by Fitch; Outlook Positive • Fixed Rate Instruments: ◦ $1.4 billion in aggregate ($800 m
Slide 18: Uni-Select Acquisition: Q3 Activity
Uni-Select Acquisition: Q3 Activity • On August 1, 2023, we acquired all of Uni-Select's issued and outstanding shares for Canadian dollar (“CAD”) 48.00 per share in cash, representing a total enterprise value of approximately CAD 2.8 billion ($2.1 billion) • Borrowed approximately $531 million (CAD
Slide 19: YTD Results and Supplementary Information
YTD Results and Supplementary Information
Slide 20: Consolidated Results YTD 2023
Consolidated Results YTD 2023 Revenue(1) EPS(2) • Organic growth: 3.8% (16.3)% (2.6)% $13,500 • Currency translation +5.8% effect: 0.3% • Acquisition and $12,000 divestiture: 1.8% $3.60 $3.60 (3) $3.37 $10,365 $10,500 $9,793 $3.30 $3.30 $3.06 $9,000 $2.98 $3.00 $3.00 $2.82 $7,500 $2.70 $2.70 $6,000
Slide 21: YTD 2023 Revenue
YTD 2023 Revenue Revenue Changes by Source: Components of Revenue Acquisition and Foreign (1) Organic Divestiture Exchange Total 100.0% 5.3% 7.0% Wholesale - North America 9.1% 3.7% (0.3)% 12.5% 1.7% 1.8% Europe 7.9% 1.2% 1.0% 10.0% 12.5% 14.5% Specialty (10.9)% 2.2% (0.4)% (9.1)% 75.0% Self Service
Slide 22: Operating Results - YTD
Operating Results - YTD YTD ($ in millions, except per share data) 2023 2022 Change F/(U) Revenue $10,365 $9,793 5.8% Gross Margin 4,176 4,000 4.4% Operating Expenses 2,848 2,683 (6.1)% Operating Income 1,080 1,288 (16.1)% Income from continuing operations before provision for income taxes 1,013 1,2
Slide 23: Wholesale – North America – YTD
Wholesale – North America – YTD Change % of Revenue ($ in millions) 2023 2022 F/(U) 2023 2022 Total Revenue $3,815 $3,454 10.5% Gross Margin $1,824 $1,669 9.3% 47.8% 48.3% Operating Expenses $1,105 $1,034 (7.0)% 29.0% 29.9% Segment EBITDA(1) $736 $648 13.7% 19.3% 18.7% (1) Segment EBITDA for each se
Slide 24: Europe – YTD
Europe – YTD Change % of Revenue ($ in millions) 2023 2022 F/(U) 2023 2022 (1) Total Revenue $4,777 $4,345 9.9% Gross Margin $1,840 $1,689 8.9% 38.5% 38.9% Operating Expenses $1,365 $1,256 (8.6)% 28.6% 28.9% Segment EBITDA(2) $486 $446 8.9% 10.2% 10.3% (1) The foreign currency impact on parts and se
Slide 25: Specialty – YTD
Specialty – YTD Change % of Revenue ($ in millions) 2023 2022 F/(U) 2023 2022 Total Revenue $1,297 $1,426 (9.1)% Gross Margin $339 $420 (19.4)% 26.1% 29.5% Operating Expenses $232 $246 5.8% 17.9% 17.3% Segment EBITDA(1) $113 $176 (35.9)% 8.7% 12.4% (1) Segment EBITDA for each segment is a GAAP measu
Slide 26: Self Service – YTD
Self Service – YTD Change % of Revenue ($ in millions) 2023 2022 F/(U) 2023 2022 (1) Total Revenue $479 $571 (16.2)% Gross Margin $173 $222 (22.1)% 36.1% 38.9% Operating Expenses $146 $147 1.0% 30.5% 25.8% Segment EBITDA(2) $28 $76 (62.5)% 6.0% 13.3% (1) Includes Other Revenue of $298 million and $3
Slide 27: Metals Prices and Foreign Exchange
Metals Prices and Foreign Exchange Q3 2023 vs Q3 2022 Segment EBITDA Impact Average Metals Prices Wholesale - North ($ in millions) Self Service America Total $300 $279 Scrap Steel $10 $5 $15 $265 $239 Precious Metals $(17) $(12) $(29) $227 $208 $213 Total $(7) $(7) $(14) $240 $196 $185 YTD 2023 vs
Slide 28: Inventory Procurement
Inventory Procurement ($ in millions, vehicles purchased in 000s) Q3 YTD 2023 2022 % Change 2023 2022 % Change Total aftermarket procurement $1,709 $1,439 18.8% $4,639 $4,646 (0.2)% Wholesale - North America salvage vehicles 60 63 (4.8)% 189 188 0.5% Europe wholesale salvage vehicles 7 7 —% 22 23 (4
Slide 29: 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. 29
Slide 30: 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 Nine Months Ended September 30, 2023 September 30, 2023 (in
Slide 31: Constant Currency Reconciliation (cont.)
Appendix 1(cont.) Constant Currency Reconciliation Three Months Ended Nine Months Ended September 30, 2023 September 30, 2023 Consolidated Europe Consolidated Europe Parts & Services Revenue growth as reported 17.1% 14.8% 7.8% 10.0% Less: Currency impact 3.6% 7.8% 0.3% 1.0% Revenue growth at constan
Slide 32: Revenue and Segment EBITDA by segment
Appendix 2 Revenue and Segment EBITDA by segment Three Months Ended September 30 Nine Months Ended September 30 % of % of % of % of (in millions) 2023 revenue 2022 revenue 2023 revenue 2022 revenue Revenue Wholesale - North America $1,387 $1,109 $3,815 $3,454 Europe 1,584 1,380 4,777 4,345 Specialty
Slide 33: Reconciliation of Net Income to Segment EBITDA
Appendix 3 Reconciliation of Net Income to Segment EBITDA Three Months Ended September 30 Nine Months Ended September 30 (in millions) 2023 2022 2023 2022 Net income $208 $262 $760 $955 Less: net income attributable to continuing noncontrolling interest — — 1 — Net income attributable to LKQ stockho
Slide 34: EBITDA and Segment EBITDA Reconciliation
Appendix 3 EBITDA and Segment EBITDA Reconciliation We have presented Segment EBITDA solely as a supplemental disclosure that offers investors, securities analysts and other interested parties useful information to evaluate our segment profit and loss and underlying trends in our ongoing operations.
Slide 35: Reconciliation of Net Income and Diluted EPS to Adjusted EPS
Appendix 4 Reconciliation of Net Income and Diluted EPS to Adjusted Net Income and Adjusted EPS from Continuing Operations Attributable to LKQ Stockholders Three Months Ended September 30 Nine Months Ended September 30 (in millions, except per share data) 2023 2022 2023 2022 Net income $208 $262 $76
Slide 36: Reconciliation of Net Income and Diluted EPS to Adjusted EPS
Appendix 4 Reconciliation of Net Income and Diluted EPS to Adjusted Net Income 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 Attributable to LKQ Stockholders as we
Slide 37: Forecasted EPS Reconciliation
Appendix 5 Forecasted EPS Reconciliation Forecasted Fiscal Year 2023 (in millions, except per share data) Minimum Outlook Maximum Outlook Net income from continuing operations attributable to LKQ stockholders $915 $952 Adjustments: Amortization of acquired intangibles 93 93 Restructuring and transac
Slide 38: Reconciliations to Free Cash Flow and Adjusted EBITDA
Appendix 6 Reconciliations of Net Cash Provided by Operating Activities to Free Cash Flow and Net Income to Adjusted EBITDA Three Months Ended September 30 Nine Months Ended September 30 (in millions) 2023 2022 2023 2022 Net cash provided by operating activities $441 $273 $1,144 $1,010 Less: purchas
Slide 39: Reconciliations to Free Cash Flow and Adjusted EBITDA
Appendix 6 Reconciliations of Net Cash Provided by Operating Activities to Free Cash Flow and Net Income to Adjusted EBITDA Year Ended December 31 (in millions) 2022 2021 Net cash provided by operating activities $1,250 $1,367 Less: purchases of property, plant and equipment 222 293 Free cash flow $
Slide 40: Reconciliations to Free Cash Flow and Adjusted EBITDA
Appendix 6 Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow and Net Income to Adjusted EBITDA 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 l